100 CenturyTel Drive
Monroe, LA 71203
January 7, 2002
Jonathan G. Katz VIA E-MAIL
Secretary (to email@example.com)
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
RE: Comments to SEC Concept Release No. IC-25258
File No. S7-20-01
Ladies and Gentlemen:
This letter is written in response to your request for comments on various issues relating to actively managed exchange-traded funds ("ETFs"). As explained further below, we object to the burdens imposed on issuers by Merrill Lynch's HOLDRs (holding company depository receipts), and hope that you will focus on this issue as you review future ETF products.
We are an NYSE-listed company with a market capitalization of approximately $4.6 billion. For several years, Merrill Lynch has included shares of our common stock in its telecommunications HOLDRs product. This product was marketed to investors beginning in 1999 following the SEC's approval of amendments to AMEX Rules 1200 through 1202 to permit the offering of HOLDRs. In connection with authorizing these rule changes, the SEC made it clear that HOLDRs investors will be entitled to "receive reports, proxies and other information distributed by the issuers of deposited securities to their security holders." 64 Fed. Reg. 52559, 52560 (Sept. 29, 1999). As a result of Merrill Lynch marketing its telecommunications HOLDRs product, a large number of new shareholders have become beneficial owners of our stock, typically in very small lot sizes. As a result, over the last three years we estimate that we have incurred additional printing and mailing costs of in excess of $100,000, representing a substantial increase over the amounts that we would have incurred absent these additional costs.
For several reasons, we believe that firms marketing HOLDRs or similar types of products should be obligated to bear the cost associated with sending reports to the holders of these securities. After all, the firms marketing these products derive the primary benefit through their receipt of higher fees. Mature issuers of deposited securities, such as CenturyTel, derive very little benefit from these arrangements (and are currently bearing all of the costs). Moreover, it is questionable whether investors are being well served by these arrangements. Most HOLDRs investors are not seeking investment and voting positions in individual companies, but are instead seeking a risk-diversification product similar to a segment mutual fund (the holders of which do not receive Exchange Act reports). As such, HOLDRs investors will typically have no interest in receiving information on the specific companies included in the pooled trust (or otherwise they presumably would invest directly in these individual companies). Instead, these investors are being forced to indirectly bear the cost of receiving a large number of unwanted and unnecessary reports.
In connection with your future consideration of products similar to HOLDRs, we respectfully request that you consider conditioning your approval upon receipt of an undertaking that the sponsoring firm will reimburse companies for their incremental costs associated with complying with their Exchange Act obligations.
We appreciate the opportunity to comment. If you have any questions regarding the foregoing, please contact Stacey W. Goff at (318)-388-9539 or Kenneth J. Najder at (504)-582-8386.
Stacey W. Goff, Vice President &
Assistant General Counsel