[Federal Register Volume 67, Number 72 (Monday, April 15, 2002)]
[Notices]
[Pages 18261-18272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9089]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25518; File No. 812-12776]


American Enterprise Life Insurance Company, et al.; Notice of 
Application

April 10, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order pursuant to section 26(c) of 
the Investment Company Act of 1940 (the ``Act'') approving certain 
substitutions of securities.

-----------------------------------------------------------------------

APPLICANTS:  The American Enterprise Life Insurance Company (``American 
Enterprise''), Kemper Investors Life Insurance Company (``KILICO''), 
MetLife Investors Insurance Company (``MetLife''), MetLife Investors 
Insurance Company of California (``MetLife California''), First MetLife 
Investors Insurance Company (``First MetLife''), Sun Life Assurance 
Company of Canada (U.S.) (``Sun Life Canada''), and Sun Life Insurance 
and Annuity Company of New York (``Sun Life New York'') (collectively, 
``Insurance Company Applicants''), American Enterprise Variable Annuity 
Account (``AE Annuity Account''), American Enterprise Variable Life 
Account (``AE Life Account''), KILICO Variable Separate Account-2 
(``KILICO Account 2''), KILICO Variable Series II Separate Account 
(``KILICO Account II''), KILICO Variable Series III Separate Account 
(``KILICO Account III''), KILICO Variable Series VI Separate Account 
(``KILICO Account VI''), MetLife Investors Variable Annuity Account One 
(``ML Annuity Account One''), MetLife Investors Variable Annuity 
Account Five (``ML Annuity Account Five''), MetLife Investors Variable 
Life Account One (``ML Life Account One''), MetLife Investors Variable 
Annuity Account Five (``ML Life Account Five''), First MetLife 
Investors Variable Annuity Account One (``First ML Annuity Account 
One''), Sun Life of Canada (U.S.) Variable Account F (``SL Account 
F''), Sun Life of Canada (U.S.) Variable Account G (``SL Account G''), 
Sun Life of Canada (U.S.) Variable Account I (``SL Account I''), and 
Sun Life (N.Y.) Variable Account C (``SL Account C'').

FILING DATE:  The application was filed on February 5, 2002, and 
amended and restated on April 9, 2002. Applicants represent that they 
will file an amendment to the application during the notice period to 
conform to the representations set forth herein.

SUMMARY OF APPLICATION:  Applicants request an order to permit the 
substitutions by American Enterprise, KILICO, MetLife, MetLife 
California, First MetLife, Sun Life Canada, or Sun Life New York of 
shares of one or more investment portfolios (each, a ``Portfolio'' or a 
``Fund'') held by one or more of AE Annuity Account, AE Life Account, 
KILICO Account 2, KILICO Account II, KILICO Account III, KILICO Account 
VI, ML Annuity Account One, ML Annuity Account Five, ML Life Account 
One, ML Life Account Five, First ML Annuity Account One, SL Account F, 
SL Account G, SL Account I, or SL Account C (each an ``Account,'' 
together, the ``Accounts'') to support variable annuity or variable 
life insurance contracts issued by the Insurance Company Applicants 
(the ``Contracts'') as follows: (1) Shares of GSVIT CORE U.S. Equity 
Fund for shares of GSVIT Internet Tollkeeper Fund, (2) shares of 
Templeton Global Income Securities Fund for shares of GSVIT Global 
Income Fund, (3) shares of SVS Growth Portfolio for shares of GSVIT 
CORE Large Cap Growth Fund, (4) shares of MFSVIT Global Governments 
Series for shares of GSVIT Global Income Fund, (5) shares of AIMVIF 
Capital Appreciation Fund for shares of GSVIT Internet Tollkeeper

[[Page 18262]]

Fund, (6) shares of SVS Government Securities Portfolio for shares of 
GSVIT Global Income Fund, (7) shares of AIMVIF Growth Fund for shares 
of GSVIT Internet Tollkeeper Fund, and (8) shares of AIMVIF Growth Fund 
for shares of GSVIT CORE Large Cap Growth Fund.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
person 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 should be received by the 
Commission by 5:30 p.m. on April 30, 2002, and should be accompanied by 
proof of service on the Applicants, in the form of an affidavit or, for 
lawyers, a certificate of service. Hearing requests should state the 
nature of the writer's interest, the reason for the request, and the 
issues contested. Persons 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, c/o James M. 
Odland, Esq., American Enterprise Life Insurance Company, 50607 AXP 
Financial Center, Minneapolis, Minnesota 55474; Maura A. Murphy, Esq., 
Senior Counsel, Sun Life Assurance Company of Canada (U.S.), One Sun 
Life Executive Park SC: 1335, Wellesley Hills, Massachusetts 22481; 
Richard Pearson, Esq., Executive Vice President, MetLife Investors 
Insurance Company, 22 Corporate Plaza Drive, Newport Beach, California 
92660; Juanita M. Thomas, Esq., Vice President & Assistant General 
Counsel, Kemper Investors Life Insurance Company, 1600 McConner 
Parkway, Schaumburg, Illinois 60196. Copy to David S. Goldstein, Esq., 
Sutherland Asbill & Brennan LLP, 1275 Pennsylvania Avenue, NW, 
Washington, DC 20004-2415.

FOR FURTHER INFORMATION CONTACT:  Zandra Bailes, Senior Counsel, or 
Lorna MacLeod, Branch Chief, Office of Insurance Products, Division of 
Investment Management, at (202) 942-0670.

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application; the complete application may be obtained for a fee from 
the Public Reference Branch of the Commission, 450 5th Street, NW, 
Washington, DC 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. American Enterprise is a stock life insurance company organized 
under the laws of Indiana in 1981. It conducts a conventional life 
insurance business and is licensed to conduct life insurance business 
in all states other than New Hampshire and New York, and in the 
District of Columbia. American Enterprise is an indirect wholly-owned 
subsidiary of American Express Financial Corporation which is a wholly-
owned subsidiary of American Express Company. As of December 31, 2001, 
American Enterprise had assets of approximately $4.9 billion. American 
Enterprise is the depositor and sponsor of the AE Annuity Account and 
AE Life Account.
    2. KILICO is a stock life insurance company organized under the 
laws of Illinois in 1947. KILICO offers life insurance and annuity 
contracts and is licensed to do business in the District of Columbia 
and all states of the United States except New York. KILICO is a 
wholly-owned subsidiary of Kemper Corporation, a non-operating holding 
company subsidiary of Zurich Group Holding, a Swiss holding company. 
Zurich Group Holding is wholly-owned by Zurich Financial Services, 
another Swiss holding company. As of December 31, 2001, KILICO had 
assets of approximately $18 billion. KILICO is the depositor and 
sponsor of KILICO Account 2, KILICO Account II, KILICO Account III, and 
KILICO Account VI.
    3. MetLife is a stock life insurance company organized in Missouri 
in 1981 as Assurance Life Company. It changed its name to Xerox 
Financial Services Life Insurance Company in 1985 and to Cova Financial 
Services Life Insurance Company in 1995 when it was acquired by General 
American Life Insurance Company. Metropolitan Life Insurance Company 
indirectly acquired it in January 2000 and changed its name to MetLife 
Investors Insurance Company in February 2002. Metropolitan Life 
Insurance Company, headquartered in New York City since 1868, is a 
leading provider of insurance and financial products and services to 
individuals and groups. MetLife is licensed to conduct business in the 
District of Columbia and all states except California, Maine, New 
Hampshire, New York and Vermont. As of December 31, 2001, MetLife had 
assets of approximately $5.3 billion. MetLife is the depositor and 
sponsor of ML Annuity Account One and ML Life Account One.
    4. MetLife California is a stock life insurance company organized 
in California in 1972 as Industrial Indemnity Life Company. It changed 
its name to Xerox Financial Life Insurance Company in 1986 and to Cova 
Financial Life Insurance Company in 1995 when it was acquired by 
General American Life Insurance Company. Metropolitan Life Insurance 
Company indirectly acquired it in January 2000 and changed its name to 
MetLife Investors Insurance Company of California in February 2002. 
Metropolitan Life Insurance Company, headquartered in New York City 
since 1868, is a leading provider of insurance and financial products 
and services to individuals and groups. MetLife California is licensed 
to do business only in the state of California. As of December 31, 
2001, MetLife California had assets of approximately $400 million. 
MetLife California is the depositor and sponsor of ML Annuity Account 
Five and ML Life Account Five.
    5. First MetLife is a stock life insurance company organized in New 
York in 1992 as First Xerox Life Insurance Company. It changed its name 
to First COVA Life Insurance Company in 1995 when it was acquired by 
General American Life Insurance Company. Metropolitan Life Insurance 
Company indirectly acquired it in January 2000 and changed its name to 
First MetLife Investors Insurance Company in February 2002. 
Metropolitan Life Insurance Company, headquartered in New York City 
since 1868, is a leading provider of insurance and financial products 
and services to individuals and groups. First MetLife is licensed to do 
business only in the state of New York. As of December 31, 2001, First 
MetLife had assets of approximately $300 million. First MetLife is the 
depositor and sponsor of First ML Annuity Account One.
    6. Sun Life Canada is a stock life insurance company organized 
under the laws of Delaware on January 12, 1970. Sun Life Canada is 
principally engaged in the business of offering insurance policies and 
annuity contracts. It is licensed in all states of the United States 
except New York and in the District of Columbia and Puerto Rico. Sun 
Life Canada is an indirect wholly-owned subsidiary of Sun Life 
Assurance Company of Canada, a Canadian insurance company, which is a 
wholly-owned subsidiary of Sun Life Financial Services of Canada, Inc., 
a Canadian insurance holding company. As of December 31, 2001, Sun Life 
Canada had assets of approximately $22 billion. Sun Life Canada is the 
depositor and sponsor of SL Account F, SL Account G, and SL Account I.
    7. Sun Life New York is a stock life insurance company organized 
under the

[[Page 18263]]

laws of New York in 1983. It is engaged in the business of offering 
life insurance policies and annuity contracts in New York. Sun Life New 
York is a wholly-owned subsidiary of Sun Life Canada. As of December 
31, 2001, Sun Life New York had assets of approximately $620 million. 
Sun Life New York is the depositor and sponsor of SL Account C.
    8. Under the insurance law of its depositor's domicile, the assets 
of each respective Account attributable to the Contracts are owned by 
its depositor, but are held separately from the other assets of the 
depositor for the benefit of the owners of, and the persons entitled to 
payment under, those Contracts. If, and to the extent so provided under 
the applicable Contracts, that portion of the assets of any Account 
equal to the reserves and other contract liabilities with respect to 
that Account are not chargeable with liabilities arising out of any 
other business its depositor may conduct. Income, gains and losses, 
realized or unrealized, from the assets of each Account are credited to 
or charged against that Account without regard to the other income, 
gains, or losses of the Account's depositor. Each Account is a 
``separate account'' as defined by Rule 0-1(e) under the Act. Each 
Account, other than KILICO Account II, KILICO Account III and KILICO 
Account VI, is registered with the Commission as a unit investment 
trust. Each Account is comprised of a number of subaccounts and each 
subaccount invests exclusively in a Portfolio or Fund.
    9. AE Annuity Account is divided into 562 subaccounts. The assets 
of AE Annuity Account support variable annuity contracts, and interests 
in the Account offered through such contracts have been registered 
under the Securities Act of 1933, as amended, (the ``1933 Act'') on 
Form N-4.
    10. AE Life Account is divided into 42 subaccounts. The assets of 
AE Life Account support variable life insurance contracts, and 
interests in the Account offered through such contracts have been 
registered under the 1933 Act on Form S-6.
    11. KILICO Account 2 is divided into 17 subaccounts. The assets of 
KILICO Account 2 support variable life insurance contracts, and 
interests in the Account offered through such contracts have been 
registered under the 1933 Act on Form S-6.
    12. KILICO Account II is divided into 33 subaccounts; KILICO 
Account III into 40 subaccounts; and KILICO Account VI into 38 
subaccounts. The assets of each of KILICO Account II, KILICO Account 
III and KILICO Account VI support variable life insurance contracts, 
and interests in the Accounts offered through such Contracts have not 
been registered under the 1933 Act in reliance on the exemption 
therefrom in Section 4(2) thereof. KILICO Account II is not registered 
as an investment company under the Act in reliance upon the exclusion 
from the definition of an investment company in Section 3(c)(7) of the 
Act. KILICO Account III and KILICO Account VI are not registered as an 
investment companies under the Act in reliance upon the exclusion from 
the definition of an investment company in Section 3(c)(1) of the Act.
    13. ML Annuity Account One is divided into 128 subaccounts. The 
assets of ML Annuity Account One support variable annuity contracts, 
and interests in the Account offered through such contracts have been 
registered under the 1933 Act on Form N-4.
    14. ML Annuity Account Five is divided into 125 subaccounts. The 
assets of ML Annuity Account Five support variable annuity contracts, 
and interests in the Account offered through such contracts have been 
registered under the 1933 Act on Form N-4.
    15. ML Life Account One is divided into 51 subaccounts. The assets 
of ML Life Account One support variable annuity contracts, and 
interests in the Account offered through such contracts have been 
registered under the 1933 Act on Form S-6.
    16. ML Life Account Five is divided into 51 subaccounts. The assets 
of ML Life Account Five support variable annuity contracts, and 
interests in the Account offered through such contracts have been 
registered under the 1933 Act on Form S-6.
    17. First ML Annuity Account One is divided into 101 subaccounts. 
The assets of First ML Annuity Account One support variable annuity 
contracts, and interests in the Account offered through such contracts 
have been registered under the 1933 Act on Form N-4.
    18. SL Account F is divided into 144 subaccounts. The assets of SL 
Account F support variable annuity contracts, and interests in the 
Account offered through such contracts have been registered under the 
1933 Act on Form N-4.
    19. SL Account G is divided into 82 subaccounts. The assets of SL 
Account G support variable life insurance contracts, and interests in 
the Account offered through such contracts have been registered under 
the 1933 Act on Form S-6.
    20. SL Account I is divided into 49 subaccounts. The assets of SL 
Account I support variable life insurance contracts, and interests in 
the Account offered through such contracts have been registered under 
the 1933 Act on Form S-6.
    21. SL Account C is divided into 125 subaccounts. The assets of SL 
Account C support variable annuity contracts, and interests in the 
Account offered through such contracts have been registered under the 
1933 Act on Form N-4.
    22. Each management investment company is registered as an open-end 
management investment company under the Act. Further, each is a series 
investment company as defined by Rule 18f-2 under the Act and issues 
separate series of shares of beneficial interest in connection with 
each Fund or Portfolio. The shares of each Fund or Portfolio are 
registered under the 1933 Act on Form N-1A.

----------------------------------------------------------------------------------------------------------------
                                                                       Total #
              Trust                  Entity (date)     1940 Act file      of      Involved funds or    1933 Act
                                                            No.        fund(s)       portfolios        file No.
----------------------------------------------------------------------------------------------------------------
Goldman Sachs Variable Insurance  DE business trust        811-08361          9  Goldman Sachs CORE    333-35883
 Trust (``GSVIT'').                (9/16/97).                                     Large Cap Growth
                                                                                  Fund.
                                                                                 Goldman Sachs
                                                                                  Global Income
                                                                                  Fund.
                                                                                 Goldman Sachs
                                                                                  Internet
                                                                                  Tollkeeper Fund.
                                                                                 CORE U.S. Equity
                                                                                  Fund.
MFS Variable Insurance Trust      MA business trust         811-8326         16  MFS Global             33-43618
 (``MFSVIT'').                     (1/28/94).                                     Governments
                                                                                  Series.
AIM Variable Insurance Funds      DE business trust        811-07452         16  Capital                33-57340
 (``AIMVIF'').                     (5/1/00).                                      Appreciation Fund.
                                                                                 Growth Fund.......
Scudder Variable Series II        MA business trust         811-5002         27  Growth Portfolio..     33-11802
 (``SVS'').                        (1/22/87).                                    Government
                                                                                  Securities
                                                                                  Portfolio.

[[Page 18264]]

 
Franklin Templeton Variable       MA business trust        811-05583         27  Templeton Global       33-23493
 Insurance Products Trust          (4/26/88).                                     Income Securities
 (``Templeton'').                                                                 Fund.
----------------------------------------------------------------------------------------------------------------

    23. Goldman Sachs Asset Management (``GSAM'') is a business unit of 
the Investment Management Division of Goldman, Sachs & Co. Goldman, 
Sachs & Co. has been a registered investment adviser since 1981. 
Goldman Sachs Asset Management International (``GSAMI''), a member of 
the Investment Management Regulatory Organization, Limited since 1990 
and a registered investment adviser since 1991, is an affiliate of 
Goldman, Sachs & Co. As of December 31, 2001, GSAM and GSAMI, along 
with other units of the Investment Management Division, managed assets 
of approximately $296 billion.
    24. The Contracts are flexible premium variable annuity and 
variable life insurance contracts. The variable annuity Contracts 
provide for the accumulation of values on a variable basis, fixed 
basis, or both, during the accumulation period, and provide settlement 
or annuity payment options on a variable or fixed basis. The variable 
life insurance Contracts provide for the accumulation of values on a 
variable basis, fixed basis, or both throughout the insured's life, and 
for a substantial death benefit upon the death of the insured. Under 
each of the Contracts, the issuing insurance company reserves the right 
to substitute shares of one Fund or Portfolio for shares of another, 
including a Fund or Portfolio of a different management investment 
company.
    25. For as long as a variable life insurance Contract remains in 
force or a variable annuity contract has not yet been annuitized, a 
Contract owner may transfer all or any part of the Contract value from 
one subaccount to any other subaccount or a fixed account. Many of the 
Contracts either limit the number of transfers of Contract value to 
twelve per year or reserve to the issuer the right to limit the number 
of transfers to twelve per year.
    26. Many of the Contracts either assess a transfer charge (in no 
case more than $35.00) on transfers in excess of a certain number per 
year (usually twelve) or reserve to the issuer the right to assess such 
a charge.
    27. Applicants state that, in November of 2001, American 
Enterprise, KILICO, MetLife, MetLife California, First MetLife, Sun 
Life Canada, and Sun Life New York were informed by GSAM and GSAMI that 
the latter intended to take steps to close three Funds of the Goldman 
Sachs Variable Insurance Trust: CORE Large Cap Growth Fund, Global 
Income Fund and Internet Tollkeeper Fund. In keeping with the 
participation agreements between GSVIT and each of the foregoing 
insurance companies, GSAM and GSAMI encouraged the insurance companies 
to help facilitate an orderly closure of the Funds by filing an 
application with the Commission.
    28. Applicants state that the principal reason cited by GSAM and 
GSAMI for closing the Funds is that they have not attracted sufficient 
assets to obtain the economies of scale necessary to be viable in 
today's competitive marketplace. In order to maintain reasonable 
expense ratios for the three Funds, GSAM or GSAMI have reimbursed a 
considerable amount of the expenses of each since its inception. GSAM 
and GSAMI do not believe that any of the three Funds will grow to an 
economically viable size in the foreseeable future and therefore desire 
to close them and avoid future subsidies. The board of trustees of 
GSVIT has been consulted and agrees that this is an appropriate course 
of action for the Funds. At a meeting held on January 30, 2002, the 
board of trustees voted to authorize GSVIT's officers to liquidate each 
of the Funds at a reasonable date in the future. Commission orders 
approving the proposed substitutions would be part of the liquidation 
process.
    29. American Enterprise, KILICO, MetLife, MetLife California, First 
MetLife, Sun Life Canada, and Sun Life New York, on behalf of 
themselves and their Accounts propose a series of substitutions of 
shares held in those Accounts. The substitutions would be carried out 
by American Enterprise, KILICO, MetLife, MetLife California, First 
MetLife, Sun Life Canada, and Sun Life New York redeeming the shares of 
GSVIT Funds held by their separate accounts for cash and reinvesting 
the cash in shares of substitute Funds or Portfolios. The table below 
summarizes the proposed substitutions. Numbers in parentheses next to 
each Contract type indicate the number of investment options currently 
available under such Contract.

------------------------------------------------------------------------
           Contract(s)             Replaced fund(s)    Replacing fund(s)
------------------------------------------------------------------------
                           AE Annuity Account
------------------------------------------------------------------------
American Express Signature VA     GSVIT Internet      GSVIT CORE U.S.
 (48).                             Tollkeeper Fund.    Equity Fund.
American Express Signature One
 VA (46).
------------------------------------------------------------------------
                             AE Life Account
------------------------------------------------------------------------
American Express Signature        GSVIT Internet      GSVIT CORE U.S.
 Variable Universal Life (42).     Tollkeeper Fund.    Equity Fund.
------------------------------------------------------------------------
                            KILICO Account 2
------------------------------------------------------------------------
First Foundation Variable Life    GSVIT Global        Templeton Global
 Insurance (17).                   Income Fund.        Income Securities
                                                       Fund.
------------------------------------------------------------------------
                            KILICO Account II
------------------------------------------------------------------------
Series QP-I single life private   GSVIT Global        Templeton Global
 placement VLI (27).               Income Fund.        Income Securities
                                                       Fund.

[[Page 18265]]

 
Series QP-S joint & survivor      GSVIT CORE Large    SVS Growth
 private placement VLI (27).       Cap Growth Fund.    Portfolio.
------------------------------------------------------------------------
                           KILICO Account III
------------------------------------------------------------------------
Series IV single life private     GSVIT Global        Templeton Global
 placement VLI (39).               Income Fund.        Income Securities
                                                       Fund.
                                  GSVIT CORE Large    SVS Growth
                                   Cap Growth Fund.    Portfolio.
------------------------------------------------------------------------
                            KILICO Account VI
------------------------------------------------------------------------
Series VII joint & survivor       GSVIT Global        Templeton Global
 private placement VLI (39).       Income Fund.        Income Securities
                                                       Fund.
                                  GSVIT CORE Large    SVS Growth
                                   Cap Growth Fund.    Portfolio.
------------------------------------------------------------------------
                         ML Annuity Account One
------------------------------------------------------------------------
Custom VA (40)..................  GSVIT Global        MFSVIT Global
                                   Income Fund.        Governments
                                                       Series.
Navigator VA (55)...............  GSVIT Internet      AIMVIF Capital
                                   Tollkeeper Fund.    Appreciation
                                                       Fund.
------------------------------------------------------------------------
                         ML Annuity Account Five
------------------------------------------------------------------------
Custom VA (40)..................  GSVIT Global        MSFVIT Global
                                   Income Fund.        Governments
                                                       Series.
Navigator VA (55)...............  GSVIT Internet      AIMVIF Capital
                                   Tollkeeper Fund.    Appreciation
                                                       Fund.
------------------------------------------------------------------------
                         ML Annuity Account One
------------------------------------------------------------------------
7-year Class AA (55)............  GSVIT Global        SVS Government
                                   Income Fund.        Securities
                                                       Portfolio
                                  GSVIT Internet      AIMVIF Capital
                                   Tollkeeper Fund.    Appreciation Fund
                                                       .
------------------------------------------------------------------------
                         ML Annuity Account Five
------------------------------------------------------------------------
7-year Class AA (55)............  GSVIT Global        SVS Government
                                   Income Fund.        Securities
                                                       Porfolio.
                                  GSVIT Internet      AIMVIF Capital
                                   Tollkeeper Fund.    Appreciation
                                                       Fund.
------------------------------------------------------------------------
                           ML Life Account One
------------------------------------------------------------------------
Custom Flex VUL (single life)     GSVIT Global        MFSVIT Global
 (37).                             Income Fund.        Governments
                                                       Series.
Custom Flex VUL (joint &          GSVIT Internet      AIMVIF Capital
 survivor) (37).                   Tollkeeper Fund.    Appreciation
                                                       Fund.
------------------------------------------------------------------------
                          ML Life Account Five
------------------------------------------------------------------------
Custom Flex VUL (single life)     GSVIT Global        MFSVIT Global
 (37).                             Income Fund.        Governments
                                                       Series.
Custom Flex VUL (joint &          GSVIT Internet      AIMVIF Capital
 survivor) (37).                   Tollkeeper Fund.    Appreciation
                                                       Fund.
------------------------------------------------------------------------
                      First ML Annuity Account One
------------------------------------------------------------------------
Class AA VA (55)................  GSVIT Global        SVS Government
                                   Income Fund.        Securities
                                                       Portfolio.
                                  GSVIT Internet      AIMVIF Capital
                                   Tollkeeper Fund.    Appreciation
                                                       Fund.
------------------------------------------------------------------------
                              SL Account F
------------------------------------------------------------------------
Futurity VA (34), Futurity II VA  GSVIT Internet      AIMVIF Growth
 (67), Futurity III VA(60),        Tollkeeper Fund.    Fund.
 Futurity Focus VA (41),          GSVIT CORE Large
 Futurity Focus II VA (60),        Cap Growth Fund.
 Futurity Accolade VA (64), and
 Futurity Select Four VA (60).
------------------------------------------------------------------------
                              SL Account G
------------------------------------------------------------------------
Futurity Corporate VUL (55).....  GSVIT Internet      AIMVIF Growth
                                   Tollkeeper Fund.    Fund.
                                  GSVIT CORE Large
                                   Cap Growth Fund.
------------------------------------------------------------------------
                              SL Account I
------------------------------------------------------------------------
Futurity VUL (31), Futurity       GSVIT Internet      AIMVIF Growth Fund
 Protector VUL (41), Futurity      Tollkeeper Fund.
 Survivorship VUL (31), Futurity  GSVIT CORE Large
 Survivorship II VUL (41),         Cap Growth Fund.
 Futurity Accumulator VUL (41).
                              SL Account C
------------------------------------------------------------------------
Futurity N.Y. VA (35)...........  GSVIT Internet      AIMVIF Growth
Futurity Accolade N.Y. VA (60)..   Tollkeeper Fund.    Fund.
                                  GSVIT CORE Large
                                   Cap Growth Fund.
------------------------------------------------------------------------


[[Page 18266]]

    30. Applicants believe that for each proposed substitution, the 
investment objectives and policies of the replacing Fund(s) or 
Portfolio(s) are sufficiently similar to those of the replaced Fund(s) 
or Portfolio(s) that Contract owners will have reasonable continuity in 
investment expectations. Applicants also believe that the proposed 
substitutions will better serve the interests of Contract owners 
because, generally, the replacing Fund or Portfolio has lower fees or 
expenses, superior or comparable performance, and a larger or growing 
asset base in the Contract than the replaced Fund or Portfolio.
    31. The investment objective, principal investment strategies or 
key investments, investment advisers, and management fees for each 
Portfolio or Fund are described below. The Funds and Portfolios are 
grouped together by the proposed replaced GSVIT Fund.
    32. In each group, the first set of accompanying charts shows the 
approximate year-end size (in net assets), expense ratio (ratio of 
operating expenses as a percentage of average net assets), and annual 
total returns for each of the past three years for each of the Funds 
and Portfolios involved in the proposed substitutions.
    33. In each group, the second set of charts shows the annual 
management fees, other expenses, and total expenses of each of the 
Funds or Portfolios involved in the proposed substitutions both before 
and after any expense reimbursement or fee waivers. The management fees 
and expenses shown are those for the 2001 fiscal year.
    34. GSVIT Global Income Fund. The investment objective of the Fund 
is to seek a high total return, emphasizing current income, and, to a 
lesser extent, providing opportunities for capital appreciation. The 
Fund invests primarily in high quality fixed-income securities of U.S. 
and foreign issuers and enters into foreign currency transactions to 
enhance returns and hedge its portfolio against currency exchange rate 
fluctuations. Under normal market conditions, the Fund holds at least 
30% of its total assets (taking into account currency positions) in 
U.S. dollar denominated securities and holds securities of issuers in 
at least three countries. The Fund may invest more than 25% of its 
total assets in the securities of corporate and government issuers 
located in each of: Canada, Germany, Japan, and the United Kingdom as 
well as in the securities of U.S. issuers. The Fund does not invest 
more than 25% of its total assets in securities of issuers in any other 
single country. The Fund also may invest up to 10% of its total assets 
in securities of issuers in emerging markets. The Fund is non-
diversified. GSAMI is the Fund's investment adviser. The Fund pays a 
monthly investment management fee based on an annual rate of 0.90% of 
its average daily net assets.
    35. Templeton Global Income Securities Fund. The investment 
objective of the Fund is high current income, consistent with 
preservation of capital. Capital appreciation is a secondary 
consideration. Under normal circumstances, the Fund invests at least 
65% of its total assets in the debt securities of governments and their 
political subdivisions and agencies, supranational organizations, and 
companies located anywhere in the world, including emerging markets. 
This Fund may invest up to 30% of net assets in below investment grade 
debt. Average weighted maturity of the Fund's debt securities is 
generally 5 to 15 years. Franklin Advisers, Inc. serves as the 
investment adviser to the Fund and Templeton Investment Counsel, LLC 
serves as subadviser. Templeton Global Income Securities Fund pays a 
monthly investment management fee based on a maximum annual rate of 
0.625% of the average daily net assets of the Fund.
    36. MSVIT Global Government Series. The Fund's investment objective 
is to provide income and capital appreciation. Under normal market 
conditions, the Fund invests at least 65% of its total assets in U.S. 
Government securities and securities of foreign governments. The Fund 
also may invest in debt securities of foreign and domestic corporations 
and in non-government mortgage-backed and asset-backed securities. U.S. 
Government securities are debt obligations issued by, or the principal 
or interest of which are guaranteed or supported by, the U.S. 
Government or one of its agencies or instrumentalities (including 
mortgage-backed securities). Securities of foreign governments include 
(1) securities issued, guaranteed or supported as to payment of 
principal and interest by foreign governments, foreign government 
agencies, foreign semi-government entities or supra-national entities; 
(2) interests issued by entities organized and operated for the purpose 
of restructuring the investment characteristics of foreign government 
securities; and (3) ``Brady'' bonds--bonds issued as part of a 
restructuring of defaulted commercial loans to emerging market 
countries. Massachusetts Financial Services Company serves as 
investment adviser to the Fund. The Fund pays a monthly investment 
management fee based on an annual rate of 0.75% of the average daily 
net assets of the Fund.
    37. SVS Government Securities Portfolio. The Portfolio's investment 
objective is to provide high current income consistent with 
preservation of capital. The Portfolio normally invests at least 65% of 
its total assets in U.S. Government Securities and repurchase 
agreements of U.S. Government Securities. U.S. Government Securities in 
which the Portfolio may invest include direct obligations of the U.S. 
Treasury and securities issued or guaranteed, as to their payment of 
principal and interest, by U.S. Government agencies or sponsored 
entities. Zurich Scudder Investments, Inc. serves as the Portfolio's 
investment adviser. The Portfolio pays a monthly investment management 
fee based on an annual rate of 0.55% of its average daily net assets.

------------------------------------------------------------------------
                                    Net assets
                                   at year-end    Expense       Total
               Fund                     (in      ratio  (in  return  (in
                                    millions)     percent)     percent)
------------------------------------------------------------------------
GSVIT Global Income Fund:
  1999...........................           $7         1.05        -1.01
  2000...........................           10         1.14         9.05
  2001...........................         15.5         1.15         4.80
Templeton Global Income
 Securities Fund:
  1999...........................           91         0.65        -5.79
  2000...........................           81         0.72         4.32
  2001...........................           64         0.71         2.55
MFSVIT Global Governments Series:
  1999...........................           45         1.01        -2.50
  2000...........................           50         0.96         4.90

[[Page 18267]]

 
  2001...........................           47         0.92         4.48
SVS Government Securities
 Portfolio:
  1999...........................          146         0.63         0.68
  2000...........................          152         0.60        10.93
  2001...........................          305         0.60         7.48
------------------------------------------------------------------------


 
                                                Before         After
                   Fund                     reimbursement  reimbursement
                                            or fee waiver  or fee waiver
------------------------------------------------------------------------
GSVIT Global Income Fund..................          0.90           0.90
                                                    1.50           0.25
                                                ________       ________
                                                    2.40           1.15
Templeton Global Income Securities Fund...          0.60           0.60
                                                    0.11           0.11
                                                ________       ________
                                                    0.71           0.71
MFSVIT Global Government Series...........          0.75           0.75
                                                    0.37           0.17
                                                ________       ________
                                                    1.12           0.92
SVS Government Securities Portfolio.......          0.55           0.55
                                                    0.05           0.05
                                                ________       ________
                                                    0.60           0.60
------------------------------------------------------------------------

    38. GSVIT Internet Tollkeeper Fund. The investment objective of the 
Fund is long-term growth of capital. Under normal circumstances, the 
Fund invests 90% of its total assets in equity securities and 65% of 
its total assets in securities of ``internet tollkeeper'' companies, 
which are companies in the media, telecommunications, technology and 
internet sectors which provide access, infrastructure, content and 
services to internet companies or internet users. Internet tollkeeper 
companies are ones with predictable, sustainable or recurring revenue 
streams that, like a toll collector for a highway or bridge, grow 
revenue by increasing ``traffic,'' or customers and sales, and raising 
``tolls,'' or prices. The Fund also may invest up to 35% of its total 
assets in securities of companies whose rapid adoption of an internet 
strategy is expected to improve their cost structure, revenue 
opportunities or competitive advantage or internet-based companies that 
exhibit a sustainable business model. The Fund may invest up to 25% of 
its total assets in foreign securities including securities of issuers 
in emerging markets or countries. GSAM serves as the Fund's investment 
adviser. The Fund pays a monthly investment management fee based on an 
annual rate of 1.00% of its average daily net assets.
    39. GSVIT CORE U.S. Equity Fund. The Fund's investment objective is 
long-term growth of capital and dividend income. The Fund seeks this 
objective through a broadly diversified portfolio of large-cap and blue 
chip equity securities representing all major sectors of the U.S. 
economy. Under normal circumstances, the Fund invests 90% of its total 
assets in equity securities of U.S. issuers, including securities of 
foreign issuers traded in the U.S. The Fund also seeks to maximize its 
expected return while maintaining a risk, style, capitalization and 
industry characteristics similar to the S&P 500 Index. GSAM serves as 
the Fund's investment adviser. The Fund pays a monthly investment 
management fee based on an annual rate of 0.70% of its average daily 
net assets.
    40. AIMVIF Capital Appreciation Fund. The Fund's investment 
objective is growth of capital. The Fund seeks its objective by 
investing principally in common stocks of companies that the investment 
adviser believes are likely to benefit from new or innovative products, 
services or processes as well as those that have experienced above-
average long-term growth in earnings and have excellent prospects for 
future growth. The Fund may invest up to 25% of its assets in foreign 
securities. AIM Advisors, Inc. serves as the Fund's investment adviser. 
The Fund pays a monthly investment management fee based on an annual 
rate of 0.65% of the first $250 million of average daily net assets and 
0.60% of average daily net assets in excess of $250 million.
    41. AIMVIF Growth Fund. The Fund's investment objective is growth 
of capital. The Fund seeks its objective by investing principally in 
securities of seasoned and better capitalized companies with strong 
earnings momentum. The Fund may invest up to 25% of its assets in 
foreign securities. AIM Advisors, Inc. serves as the Fund's investment 
adviser. The Fund pays a monthly investment management fee based on an 
annual rate of 0.65% of the first $250 million of average daily net 
assets and 0.60% of average daily net assets in excess of $250 million.

------------------------------------------------------------------------
                                    Net assets
                                   at year-end    Expense       Total
               Fund                     (in      ratio  (in  return  (in
                                    millions)     percent)     percent)
------------------------------------------------------------------------
GSVIT Internet Tollkeeper Fund:
  1999...........................          N/A          N/A          N/A
  2000...........................           $5         1.25       -32.00
  2001...........................          4.3         1.25       -33.68

[[Page 18268]]

 
GSVIT CORE U.S. Equity Fund:
  1999...........................           52         0.80        24.30
  2000...........................          139         0.85        -9.62
  2001...........................          164         0.81        11.94
AIMVIF Capital Appreciation Fund:
  1999...........................        1,131         0.73        44.61
  2000...........................        1,534         0.82       -10.91
  2001...........................        1,160         0.85       -23.28
AIMVIF Growth Fund:
  1999...........................          704         0.73        35.24
  2000...........................          879         0.83       -20.49
  2001...........................          601         0.88       -33.86
------------------------------------------------------------------------


 
                                                Before         After
                                            reimbursement  reimbursement
                   Fund                     or fee waiver  or fee waiver
                                             (in percent)   (in percent)
------------------------------------------------------------------------
GSVIT Internet Tollkeeper Fund............          1.00           1.00
                                                    2.47           0.25
                                                ________       ________
                                                    3.47           1.25
GSVIT CORE U.S. Equity Fund...............          0.70           0.70
                                                    0.12           0.11
                                                ________       ________
                                                    0.82           0.81
AIMVIF Capital Appreciation Fund..........          0.61           0.61
                                                    0.24           0.24
                                                ________       ________
                                                    0.85           0.85
AIMVIF Growth Fund........................          0.62           0.62
                                                    0.26           0.26
                                                ________       ________
                                                    0.88           0.88
------------------------------------------------------------------------

    42. GSVIT CORE Large Cap Growth Fund. The Fund's investment 
objective is long-term growth of capital with dividend income as a 
secondary consideration. The Fund seeks its primary objective through a 
broadly diversified portfolio of equity securities of large-cap U.S. 
issuers that are expected to have better prospects for earnings growth 
than the growth rate of the general domestic economy. Under normal 
circumstances, the Fund invests 90% of its total assets in equity 
securities of U.S. issuers, including securities of foreign issuers 
traded in the U.S. The Fund also seeks to maximize its expected return 
while maintaining a risk, style, capitalization and industry 
characteristics similar to the Russell 1,000 Growth Index. GSAM serves 
as the Fund's investment adviser. The Fund pays a monthly investment 
management fee based on an annual rate of 0.70% of its average daily 
net assets.
    43. SVS Growth Portfolio. The Portfolio's investment objective is 
maximum appreciation of capital. The Portfolio normally invests at 
least 65% of its total assets in common stocks of large (market 
capitalization over $1 billion) U.S. companies. The Portfolio tries to 
maintain holdings diversified across industries and companies and 
generally tries to keep its sector weightings similar to those of the 
Russell 1000 Growth Index. The Portfolio typically invests at least 70% 
of its total assets in securities of ``stable growth'' companies (ones 
with strong business lines and potentially sustainable earnings 
growth), up to 25% of its total assets in securities of ``accelerating 
growth'' companies (those with a history of strong earnings growth and 
potential for continued growth), and up to 15% of its total assets in 
securities of ``special situation'' companies (ones that appear likely 
to become stable growth companies or accelerating growth companies 
through new products, restructuring, change in management or other 
catalysts. The Portfolio also may invest up to 25% of its total assets 
in foreign securities. Zurich Scudder Investments, Inc. serves as the 
Portfolio's investment adviser. The Portfolio pays a monthly investment 
management fee based on an annual rate of 0.60% of its average daily 
net assets.
    44. AIMVIF Growth Fund. The Fund's investment objective is growth 
of capital. The Fund seeks its objective by investing principally in 
securities of seasoned and better capitalized companies with strong 
earnings momentum. The Fund may invest up to 25% of its assets in 
foreign securities. AIM Advisors, Inc. serves as the Fund's investment 
adviser. The Fund pays a monthly investment management fee based on an 
annual rate of 0.65% of the first $250 million of average daily net 
assets and 0.60% of average daily net assets in excess of $250 million.

------------------------------------------------------------------------
                                    Net assets
                                   at year-end    Expense       Total
               Fund                     (in      ratio  (in  return  (in
                                    millions)     percent)     percent)
------------------------------------------------------------------------
GSVIT CORE Large Cap Growth Fund:

[[Page 18269]]

 
  1999...........................          $24         0.80        35.42
  2000...........................           26         0.89       -22.48
  2001...........................           22         0.90       -20.76
SVS Growth Portfolio:
  1999...........................          738         0.66        37.12
  2000...........................          583         0.65       -19.06
  2001...........................          420         0.63       -22.34
AIMVIF Growth Fund:
  1999...........................          704         0.73        35.24
  2000...........................          879         0.83       -20.49
  2001...........................          601         0.88       -33.86
------------------------------------------------------------------------


 
                                                Before         After
                                            reimbursement  reimbursement
                   Fund                     or fee waiver  or fee waiver
                                             (in percent)   (in percent)
------------------------------------------------------------------------
GSVIT CORE Large Cap Growth Fund..........          0.70           0.70
                                                    0.69           0.20
                                                ________       ________
                                                    1.39           0.90
SVS Growth Portfolio......................          0.60           0.60
                                                    0.03           0.03
                                                ________       ________
                                                    0.63           0.63
AIMVIF Growth Fund........................          0.62           0.62
                                                    0.26           0.26
                                                ________       ________
                                                    0.88           0.88
------------------------------------------------------------------------

    45. Each Applicant believes that it has selected an appropriate 
Fund or Portfolio available under each Contract to replace the GSVIT 
CORE Large Cap Growth Fund, GSVIT Global Income Fund or GSVIT Internet 
Tollkeeper Fund. For all of the proposed substitutions, the replacing 
Funds or Portfolios are substantially larger and have lower expense 
ratios than the Funds they would replace. Likewise, each of the 
replacing Funds or Portfolios have significantly better prospects for 
future growth and increasing economies of scale than the Funds they 
would replace. No class of replacing Fund or Portfolio shares proposed 
for use in the proposed substitutions is subject to a distribution or 
shareholder service plan adopted under Rule 12b-1 of the Act and no 
replacing Fund or Portfolio is operated by its investment manager or 
adviser under a ``manager of managers'' exemption from certain 
requirements of Section 15 of the Act.
    46. No class of replacing Fund or Portfolio shares proposed for use 
in the proposed substitutions is subject to a distribution or 
shareholder service plan adopted under Rule 12b-1 of the Act and no 
replacing Fund or Portfolio is operated by its investment manager or 
adviser under a ``manager of managers'' exemption from certain 
requirements of Section 15 of the Act. American Enterprise, KILICO, 
MetLife, MetLife California, First MetLife, Sun Life Canada and Sun 
Life New York will not receive, for three years from the date of the 
substitutions, any direct or indirect benefits from the replacing Funds 
or Portfolios, their advisers or underwriters, or from affiliates of 
the replacing Funds or Portfolios, their advisers or underwriters, in 
connection with assets attributable to the Contracts affected by the 
substitutions, at a higher rate than each received from the replaced 
Funds or Portfolios, their advisers or underwriters, or from affiliates 
of the replaced Funds or Portfolios, their advisers or underwriters, 
including without limitation Rule 12b-1 fees, shareholder service or 
administrative or other service fees, revenue-sharing or other 
arrangements. American Enterprise, KILICO, MetLife, MetLife California, 
First MetLife, Sun Life Canada and Sun Life New York each represent 
that the substitutions it carries out and its selection of replacing 
Funds or Portfolios was not motivated by any financial consideration 
paid or to be paid to it or to any of its affiliates by any of the 
replacing Funds or Portfolios, their advisers or underwriters, or by 
the affiliates of the replacing Funds or Portfolios, their advisers or 
underwriters.
    47. Where a Contract does not offer a Fund or Portfolio comparable 
to the Fund being replaced, each Applicant proposes as an alternative 
replacement, a Fund or Portfolio which either (1) invests in 
substantially similar types of securities, but has broader investment 
objective(s) and investment strategies than the one it would replace, 
or (2) invests in higher grade debt securities than the one it would 
replace. Applicants state that although Templeton Global Income 
Securities Fund may invest in below investment grade debt securities 
and GSVIT Global Income Fund may not, investment in such securities has 
only modest potential to make the overall risk of the Templeton Global 
Income Securities Fund's portfolio greater than that of GSVIT Global 
Income Fund. In light of how few global or international debt mutual 
funds exist in the underlying insurance fund universe, very few 
substitution candidates exist for GSVIT Global Income Fund. Applicants 
believe that, under the circumstances, Templeton Global Income 
Securities Fund offers the greatest available continuity in investment 
objectives and strategies and therefore is most likely to meet the 
expectations of Contract owners and that the differences between these 
two Funds does not justify moving Contract owners Contract values to a 
Fund or Portfolio with investment objective(s) or strategies 
substantially

[[Page 18270]]

different from those of GSVIT Global Income Fund.
    48. Proposed substitution of shares of Templeton Global Income 
Securities Fund, MFSVIT Global Governments Series, or SVS Government 
Securities Portfolio for shares of GSVIT Global Income Fund. Two of the 
three replacement Funds have substantially identical investment 
objectives as the replaced Fund and both pursue their objective by 
investing primarily in debt securities of issuers around the world. The 
third replacement Fund has the substantially identical investment 
objective, but pursues it by investing primarily in U.S. Government 
debt securities. There are some distinctions between the strategies 
pursued by the replacement Funds and those pursued by the replaced 
Fund.
    49. GSVIT Global Income Fund may emphasize corporate issuers over 
government issuers and invest more of its assets in the United States 
and Western Europe than do the replacement Funds. In contrast, MFSVIT 
Global Government Series may invest a substantial majority of its 
assets in securities of government issuers and both it and Templeton 
Global Income Securities Fund may invest a greater portion of their 
assets than GSVIT Global Income Fund in securities of issuers located 
outside the U.S. or Western Europe. Nevertheless, these two proposed 
substitutions offer the greatest available continuity in investment 
objectives and strategies and therefore are most likely to meet the 
expectations of Contract owners. At the end of 2001, more than 50% of 
GSVIT Global Income Fund's total assets were invested in securities of 
government issuers in the U.S. and abroad.
    50. SVS Government Securities Portfolio differs from GSVIT Global 
Income Fund in that it invests primarily in U.S. Government Securities. 
Thus, this replacement Portfolio is more conservative and entails 
considerably less investment risk than the Fund it would replace. At 
the end of 2001, more than 25% of GSVIT Global Income Fund's total 
assets were invested in U.S. Government securities. For Contracts as to 
which SVS Government Securities Portfolio is the proposed replacement, 
it represents the closest match of investment objective and strategies 
of the alternatives that do not have 12b-1 plans or are otherwise 
unsuitable for a substitution.
    51. Proposed substitution of shares of GSVIT CORE U.S. Equity Fund, 
AIMVIF Capital Appreciation Fund or AIMVIF Growth Fund for shares of 
GSVIT Internet Tollkeeper Fund. All three replacement Funds have 
substantially the same investment objectives as the replaced Fund 
except that GSVIT CORE U.S. Equity Fund also has dividend income as a 
secondary objective. The replacement Funds' investment strategies are 
somewhat different from those of the replaced Fund in that each invests 
in equity securities of issuers representing a broad range industry 
sectors and does not focus on ``internet tollkeeper'' issuers as 
defined by GSVIT Internet Tollkeeper Fund. Also, one of the replacement 
Funds has a more limited ability to invest in foreign securities than 
do the other two or the replaced Fund. Nevertheless, these proposed 
substitutions will not frustrate Contract owners ability to pursue 
their investment goals by investing in a portfolio having as its 
principal objective, capital appreciation. As with the prior group of 
proposed substitutions, these substitutions offer the greatest 
continuity in investment objectives and strategies available from Funds 
or Portfolios that do not have 12b-1 plans or investment advisers that 
rely on ``manager of managers'' exemptions and therefore are most 
likely to meet the expectations of Contract owners.
    52. Proposed substitution of shares of SVS Growth Portfolio or 
shares of AIMVIF Growth Fund for shares of GSVIT CORE Large Cap Growth 
Fund. Although the replacement Funds do not share the replaced Fund's 
secondary investment objective of seeking dividend income and may 
invest a greater portion of their assets in foreign securities (25% as 
opposed to 10%), they pursue their objectives with similar strategies 
and offer investors a portfolio of substantially the same large 
capitalization equity securities diversified across economic and 
industry sectors. In fact, SVS Growth Portfolio and GSVIT CORE Large 
Cap Growth Fund both try to maintain industry sector weightings similar 
to those of the Russell 1000 Growth Index. These proposed substitutions 
will not frustrate Contract owners ability to pursue their investment 
goals by investing in a portfolio of securities managed using a growth 
orientation.
    53. By supplements to the various May 1, 2001 prospectuses for the 
Contracts (or by letter to owners of unregistered Contracts) and the 
Accounts (substantially in the form attached as Exhibit C to the 
initial application), American Enterprise, KILICO, MetLife, MetLife 
California, First MetLife, Sun Life Canada, and Sun Life New York will 
notify owners of their Contracts of their intention to take the 
necessary actions, including seeking the order requested by this 
application, to substitute shares of the Funds and Portfolios as 
described herein.
    54. The supplements (or letters) about the proposed substitutions 
will advise (or have advised) Contract owners that, from the date of 
the supplement (or letter) until the date of the proposed substitution, 
American Enterprise, KILICO, MetLife, MetLife California, First 
MetLife, Sun Life Canada, and Sun Life New York will not exercise any 
rights reserved under any Contract to impose additional restrictions on 
transfers until at least 30 days after the proposed substitutions, with 
the exception that an Insurance Company Applicant may impose 
restrictions to prevent or restrict ``market timing'' activities by 
Contract owners or their agents. Similarly, the supplements (or 
letters) will disclose (or have disclosed) that, from the date of the 
supplement (or letter) until the date of the substitutions, American 
Enterprise, KILICO, MetLife, MetLife California, First MetLife, Sun 
Life Canada, and Sun Life New York will permit Contract owners to make 
one transfer of Contract value out of a subaccount to be affected by 
the proposed substitutions to another subaccount without the transfer 
being treated as one of a limited number of permitted transfers or a 
limited number of transfers permitted without a transfer charge. The 
supplements (or letters) also will advise Contract owners that if the 
proposed substitutions are carried out, then each Contract owner 
affected by a substitution will be sent a written notice (described 
below) informing them of the fact and details of the substitutions.
    55. Applicants state that the proposed substitutions will take 
place at relative net asset value with no change in the amount of any 
Contract owner's account value or death benefit or in the dollar value 
of his or her investment in any of the Accounts. Contract owners will 
not incur any fees or charges as a result of the proposed 
substitutions, nor will their rights or American Enterprise's, 
KILICO's, MetLife's, MetLife California's, First MetLife's, Sun Life 
Canada's, and Sun Life New York's obligations under the Contracts be 
altered in any way. All expenses incurred in connection with the 
proposed substitutions, including brokerage commissions, legal, 
accounting, and other fees and expenses, will be paid by American 
Enterprise, KILICO, MetLife, MetLife California, First MetLife, Sun 
Life Canada, and Sun Life New York, or by GSAM or GSAMI. In addition, 
the proposed substitutions will not impose any tax liability on 
Contract owners. The proposed substitutions will not cause the Contract 
fees and charges

[[Page 18271]]

currently being paid by existing Contract owners to be greater after 
the proposed substitutions than before the proposed substitutions.
    56. Applicants state that the proposed substitutions will not be 
treated as a transfer for the purpose of assessing transfer charges or 
for determining the number of remaining permissible transfers in a 
Contract year. American Enterprise, KILICO, MetLife, MetLife 
California, First MetLife, Sun Life Canada, and Sun Life New York will 
not exercise any right it may have under the Contracts to impose 
additional restrictions on transfers under any of the Contracts for a 
period of at least 30 days following the substitutions. Similarly, (1) 
prior to the substitutions, American Enterprise, KILICO, MetLife, 
MetLife California, First MetLife, Sun Life Canada, and Sun Life New 
York will permit Contract owners to make one transfer of Contract value 
out of a subaccount to be affected by the proposed substitutions to 
another subaccount without the transfer being treated as one of a 
limited number of permitted transfers or a limited number of transfers 
permitted without a transfer charge, and (2) for at least 30 days 
following the substitutions, American Enterprise, KILICO, MetLife, 
MetLife California, First MetLife, Sun Life Canada, and Sun Life New 
York will permit Contract owners affected by the substitutions to make 
one transfer of Contract value out of a subaccount affected by the 
substitutions to another subaccount without the transfer being treated 
as one of a limited number of permitted transfers or a limited number 
of transfers permitted without a transfer charge.
    57. Applicants state that in addition to the supplements (or 
letters) distributed to owners of Contracts, within five days after the 
proposed substitutions, any Contract owners who are affected by a 
substitution will be sent a written notice informing them that the 
substitutions were carried out. The notice also will reiterate the 
facts that American Enterprise, KILICO, MetLife, MetLife California, 
First MetLife, Sun Life Canada, and Sun Life New York: (1) will not 
exercise any rights reserved by it under any of the Contracts to impose 
additional restrictions on transfers until at least 30 days after the 
proposed substitutions, and (2) will, for at least 30 days following 
the substitutions, permit such Contract owners to make one transfer of 
Contract value out of an affected subaccount to another subaccount 
without the transfer being treated as one of a limited number of 
permitted transfers or a limited number of transfers permitted without 
a transfer charge. Current prospectuses for the new Funds or Portfolios 
will be sent to Contract owners on or before the time the notices are 
sent. The notice as delivered in certain jurisdictions also may explain 
that, under insurance regulations in those jurisdictions, Contract 
owners affected by the substitutions may exchange their Contract for a 
fixed-benefit life insurance contract or fixed-benefit annuity contract 
during the 60 days following the substitutions.
    58. American Enterprise, KILICO, MetLife, MetLife California, First 
MetLife, Sun Life Canada, and Sun Life New York are also seeking 
approval of the proposed substitutions from any state insurance 
regulators whose approval may be necessary or appropriate.

Legal Analysis

    1. Section 26(c) of the Act requires the depositor of a registered 
unit investment trust holding the securities of a single issuer to 
receive Commission approval before substituting the securities held by 
the trust. Specifically, Section 26(c) states:

    It shall be unlawful for any depositor or trustee of a 
registered unit investment trust holding the security of a single 
issuer to substitute another security for such security unless the 
Commission shall have approved such substitution. The Commission 
shall issue an order approving such substitution if the evidence 
establishes that it is consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of 
this title.

    2. Section 26(c) was added to the Act by the Investment Company 
Amendments of 1970 (``1970 Amendments''). Prior to the enactment of the 
1970 Amendments, a depositor of a unit investment trust could 
substitute new securities for those held by the trust by notifying the 
trust's security holders of the substitution within five days of the 
substitution. In 1966, the Commission, concerned with the high sales 
charges then common to most unit investment trusts and the 
disadvantageous position in which such charges placed investors who did 
not want to remain invested in the substituted fund, recommended that 
Section 26 be amended to require that a proposed substitution of the 
underlying investments of a trust receive prior Commission approval.
    3. Congress responded to the Commission's concerns by enacting 
Section 26(c) to require that the Commission approve all substitutions 
by the depositor of investments held by unit investment trusts. The 
Senate Report on the bill explained the purpose of the amendment as 
follows:

    The proposed amendment recognizes that in the case of the unit 
investment trust holding the securities of a single issuer 
notification to shareholders does not provide adequate protection 
since the only relief available to shareholders, if dissatisfied, 
would be to redeem their shares. A shareholder who redeems and 
reinvests the proceeds in another unit investment trust or in an 
open-end company would under most circumstances be subject to a new 
sales load. The proposed amendment would close this gap in 
shareholder protection by providing for Commission approval of the 
substitution. The Commission would be required to issue an order 
approving the substitution if it finds the substitution consistent 
with the protection of investors and provisions of the Act.

    4. Applicants state that the proposed substitutions appear to 
involve substitutions of securities within the meaning of Section 26(c) 
of the Act. Applicants therefore request orders from the Commission 
pursuant to Section 26(c) approving the proposed substitutions.
    5. Applicants state that all the Contracts expressly reserve for 
American Enterprise, KILICO, MetLife, MetLife California, First 
MetLife, Sun Life Canada, or Sun Life New York, as applicable, the 
right, subject to compliance with applicable law, to substitute shares 
of one Fund or Portfolio held by subaccount of an Account for another. 
The prospectuses (or private placement memoranda) for the Contracts and 
the Accounts contain appropriate disclosure of this right.
    6. American Enterprise, KILICO, MetLife, MetLife California, First 
MetLife, Sun Life Canada, and Sun Life New York reserved this right of 
substitution both to protect themselves and their Contract owners in 
situations where they believe a Fund or Portfolio is no longer 
appropriate for Contract owners or where either might be harmed or 
disadvantaged by circumstances surrounding the issuer of the shares 
held by one or more of their separate accounts and to afford the 
opportunity to replace such shares where to do so could benefit itself 
and Contract owners.
    7. Applicants maintain that Contract owners will be better served 
by the proposed substitutions. The substitutions proposed are the most 
appropriate ones given the Funds and Portfolios available under the 
various Contracts. In addition, each new Portfolio or Fund has had 
lower expenses in recent years than the Portfolios or Funds that it 
would replace.
    8. For each of the proposed substitutions, Applicants believe that

[[Page 18272]]

the new Portfolios or Funds are either substantially the same or more 
conservative in their investment objective(s) or strategies or both, 
than the Portfolios or Funds that they would replace. Likewise, 
Applicants believe that a majority of the new Portfolios or Funds have 
a substantially similar or lower investment risk profile than the 
Portfolios or Funds each would replace.
    9. In addition to the foregoing, Applicants generally submit that 
the proposed substitutions meet the standards that the Commission and 
its staff have applied to similar substitutions that have been approved 
in the past.
    10. Applicants believe that Contract owners will be at least as 
well off with the proposed array of subaccounts to be offered under 
each Contract after the proposed substitutions as they have been with 
the array of subaccounts offered before the substitutions. The proposed 
substitutions retain for Contract owners the investment flexibility, 
which is a central feature of the Contracts. If the proposed 
substitutions are carried out, all Contract owners will be permitted to 
allocate purchase payments and transfer Contract values between and 
among the remaining subaccounts as they could before the proposed 
substitutions.
    11. Applicants assert that each of the proposed substitutions is 
not the type of substitution Section 26(c) was designed to prevent. 
Unlike traditional unit investment trusts where a depositor could only 
substitute an investment security in a manner which permanently 
affected all the investors in the trust, the Contracts provide each 
Contract owner with the right to exercise his or her own judgment and 
transfer Contract values into other subaccounts. Moreover, the 
Contracts will offer Contract owners the opportunity to transfer 
amounts out of the affected subaccounts into any of the remaining 
subaccounts without cost or other disadvantage. The proposed 
substitutions, therefore, will not result in the type of costly forced 
redemption Section 26(c) was designed to prevent.
    12. Applicants further assert that the proposed substitutions are 
unlike the type of substitution Section 26(c) was designed to prevent 
in that by purchasing a Contract, Contract owners select much more than 
a particular investment company in which to invest their Contract 
values. They also select the specific type of insurance coverage 
offered by American Enterprise, KILICO, MetLife, MetLife California, 
First MetLife, Sun Life Canada, or Sun Life New York under their 
Contract as well as numerous other rights and privileges set forth in 
the Contract. Contract owners may also have considered the size, 
financial condition, type, and reputation for service of the Applicant 
from whom they purchased their Contract. These factors will not change 
because of the proposed substitutions.

Conclusion

    Applicants request orders of the Commission pursuant to Section 
26(c) of the Act approving the proposed substitutions by American 
Enterprise, KILICO, MetLife, MetLife California, First MetLife, Sun 
Life Canada, and Sun Life New York. Applicants submit that, for all the 
reasons stated above, the proposed substitutions are consistent with 
the protection of investors and the purposes fairly intended by the 
policy and provisions of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-9089 Filed 4-12-02; 8:45 am]
BILLING CODE 8010-01-P