[Federal Register Volume 64, Number 114 (Tuesday, June 15, 1999)]
[Notices]
[Pages 32073-32074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15094]
[[Page 32073]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23867; 812-11528]
Mercury Asset Management International Ltd. and Mercury Asset
Management V.I. Funds, Inc.; Notice of Application
June 9, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order under (a) sections 6(c),
17(b) and 10(f) of the Investment Company Act of 1940 (the ``Act'')
granting relief from sections 17(a), 17(e) and 10(f) of the Act, and
rules 17e-1 and 10f-3 under the Act; and (b) under section 6(c) of the
Act granting relief from sections 9(a), 13(a), 15(a) and 15(b) of the
Act, and rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the Act.
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Summary of the Application: Applicants seek to amend two existing
orders to permit additional entities to rely on the orders.\1\
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\1\ Merrill Lynch Asset Management, L.P., et al., Investment
Company Act Release Nos. 22616 (April 14, 1997) (notice) and 22659
(May 12, 1997) (order); Hotchkis and Wiley Variable Trust, et al.,
Investment Company Act Release Nos. 22749 (July 14, 1997) (notice)
and 22786 (August 13, 1997) (order).
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Applicants: Mercury Asset Management International Ltd. (``MAM'')
and Mercury Asset Management V.I. Funds, Inc. (``Mercury V.I. Fund'').
Filing Dates: The application was filed on March 3, 1999.
Applicants have agreed to file an amendment during the notice period,
the substance of which is reflected in this notice.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the SEC orders a hearing. Interested
persons may request a hearing by writing to the SEC's Secretary and
serving applicants with a copy of the request, personally or by mail.
Hearing requests should be received by the SEC by 5:30 p.m. on June 30,
1999, 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 writer's interest, the
reason for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC 450 Fifth Street, N.W., Washington, D.C.
20549-0609. Applicants, 800 Scudders Mill Road, Plainsboro, New Jersey
08536.
FOR FURTHER INFORMATION CONTACT: Susan K. Pascocello, Senior Counsel,
at (202) 942-0674, Michael W. Mundt, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation), or Kevin Kirchoff, Branch Chief, at (202) 942-0670
(Division of Investment Management, Office of Insurance Products).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC
20549-0102 (tel. (202) 942-8090).
Applicants' Representations
1. MAM is registered as an investment adviser under the Investment
Advisers Act of 1940 and is a wholly owned subsidiary of Mercury Asset
Management Group plc (``Mercury''), which was acquired by Merrill Lynch
& Co. Inc. (``Merrill Lynch'') in January, 1998. MAM serves as
subadviser to a portfolio of TIFF International Equity Fund, a series
of TIFF Investment Program, an open-end investment company registered
under the Act.\2\ MAM also will serve as investment adviser to Mercury
V.I. Fund, an open-end investment company registered under the Act and
currently consisting of two series. Mercury V.I. Fund would offer
shares representing interests in its current and future series to
separate accounts of affiliated and unaffiliated insurance companies to
serve as the investment vehicle for variable annuity contracts and
variable life insurance contracts, as well as directly to qualified
pension and retirement plans (``Qualified Plans'') outside of the
separate account context. Mercury V.I. Fund has not yet commenced
operations.
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\2\ Such portfolio together with any other portfolio advised by
MAM and at least one other investment adviser that has no
affiliation with Merrill Lynch is referred to as a ``Multi-Managed
Portfolio.'' The potion of a Multi-Managed Portfolio advised by an
investment adviser that has no affiliation with Merrill Lynch is an
``Unaffiliated Portion.''
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2. Merrill Lynch Asset Management, L.P. (``MLAM''), on behalf of
its separate operating division Hotchkis and Wiley (``H&W''), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (``MLPF&S'')
previously obtained an order to permit certain principal and brokerage
transactions with ``multi-manager'' investment companies advised by H&W
and at least one other investment adviser that has no affiliation with
Merrill Lynch (``Brokerage Order''). The transactions are between
MLPF&S and those portions of the Multi-Managed Portfolios that are not
subadvised by H&W.
3. The requested order would amend the Brokerage Order so that it
would apply to both the Unaffiliated Portion of the portfolio of TIFF
International Equity Fund for which MAM currently serves as subadviser,
as well as to any other Multi-Managed Portfolios to which MAM or other
entities that are controlled by, in control of, or under common control
with MLPF&S (each an ``Affiliate'') may in the future provide
investment advisory services (MAM and the Affiliates each an
``Affiliated Subadviser'') and which is operated in a manner consistent
with the terms and conditions of the application relating to the
Brokerage Order (the ``Brokerage Application''). Specifically, the
order sought would exempt MAM, MLPF&S and Affiliates from certain
provisions of the Act in order to permit, subject to the conditions set
forth below, (i) MLPF&S and Affiliates to engage in principal
transactions with the Unaffiliated Portion of each of the Multi-Managed
Portfolios; (ii) MLPF&S and Affiliates to provide brokerage services to
the Unaffiliated Portion of each of the Multi-Managed Portfolios, and
the Unaffiliated Portion of each of the Multi-Managed Portfolios to
utilize such brokerage services; and (iii) the Unaffiliated Portion of
each of the Multi-Managed Portfolios to purchase securities during the
existence of an underwriting syndicate, a principal underwriter of
which is MLPF&S or an Affiliate. In addition, the amended Brokerage
Order would permit a portion of a Multi-Managed Portfolio advised by an
Affiliated Subadviser to make purchases from certain underwritings in
reliance on rule 10f-3 without aggregating the purchases with purchases
made by an Unaffiliated Portion for purposes of determining compliance
with rule 10f-3(b)(7) under the Act. MAM states that , under the
amended Brokerage Order, an Affiliated Subadviser will be subject to
all of the terms and conditions of the Brokerage Application applicable
to H&W.
4. MLAM and MLPF&S previously obtained an order to allow shares of
Hotchkis and Wiley Variable Trust and any investment company or
portfolio designed to fund insurance products and for which H&W may
serve as investment adviser, administrator, manager, principal
underwriter, or sponsor to be sold to and held by variable annuity and
variable life insurance separate accounts (``Separate Accounts'') of
both affiliated and unaffiliated life insurance companies
(``Participating Insurance Companies'') and by Qualified Plans outside
of the
[[Page 32074]]
separate account context (``Mixed and Shared Funding Order''). The
requested order would amend the Mixed and Shared Funding Order to apply
to MAM and any Affiliate; any investment company or separate series of
the investment company that is designed to fund insurance products for
which MAM or any Affiliate serves or may in the future serve as
investment adviser, administrator, manager, principal underwriter or
sponsor (each, including Mercury V.I. Fund, a ``Trust''); any insurance
company and insurance company separate account supporting variable
annuity or variable life insurance contracts which currently invest or
may invest in a Trust; and any Qualified Plan to which a Trust may
offer and sell shares representing interests in its portfolios.
Specifically, applicants seek an amended order to the extent necessary
to permit shares of a Trust to be offered and sold to, and held by: (i)
both variable annuity and variable life insurance separate accounts of
the same life insurance company or of any affiliated life insurance
company; (ii) separate accounts of unaffiliated life insurance
companies (including both variable annuity separate accounts and
variable life insurance separate accounts); and (iii) trustees of
Qualified Plans.
Applicants' Legal Analysis
A. Brokerage Order
1. MAM seeks an exemption, pursuant to Sections 6(c), 17(b) and
10(f) of the Act, from the provisions of sections 17(a), 17(e) and
10(f) of the Act and rules 17e-1 and 10f-3 under the Act. MAM states
that all of the terms and representations of the Brokerage Application
are equally applicable with respect to this application and are
incorporated by reference, with the exception of the discussion
relating to rule 10f-3(d). Rule 10f-3(d) has been deleted since the
filing of the Brokerage Application and replaced by rule 10f-3(b)(7).
2. Rule 10f-3(b)(7) generally limits the securities purchased by an
investment company in reliance on rule 10f-3 to 25% of the principal
amount of the offering of the class of securities. Applicants seek
relief from this provision so that investments by an Affiliated
Subadviser will not be aggregated with investments by Unaffiliated
Portions. Applicants submit that the legal discussion and analysis in
the Brokerage Application relating to relief from rule 10f-3(d) are
equally relevant to rule 10f-3(b)(7).
B. Mixed and Shared Funding Order
As in the application relating to the Mixed and Shared Funding
Order (the ``Mixed and Shared Funding Application''), applicants seek
an exemption, pursuant to section 6(c) of the Act, from the provisions
of sections 9(a), 13(a), 15(a) and 15(b) of the Act and rules 6e-
2(b)(15) and 63-3(T)(15) under the Act. Applicants state that all of
the terms and representations of the Mixed and Shared Funding
Application are equally applicable with respect to this application and
are incorporated by reference.
Applicants' Conditions
1. MAM agrees that MAM and any Affiliate relying on the amended
Brokerage Order will be subject to the terms and conditions contained
in the Brokerage Application and Brokerage Order.
2. Applicants agree that: (1) MAM and any Affiliate; (2) any Trust;
(3) any insurance company and insurance company separate account
supporting variable annuity or variable life insurance contracts which
currently invest or may invest in a Trust; and (4) any Qualified Plan
to which a Trust may offer and sell shares representing interests in
its portfolios will be subject to the terms and conditions provided in
the Mixed and Shared Funding Application applicable to H&W, Trusts,
Participating Insurance Companies and their Separate Accounts, and
Qualified Plans, respectively.\3\
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\3\ The Applicants agree that in the event the Mercury V.I.
Fund, or any other Trust, operates as a ``feeder'' fund in a
``master/feeder'' fund structure, such Trust shall ensure that, to
the extent necessary, the ``master,'' as well as such Trust, will
comply with the conditions to the application.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15094 Filed 6-14-99; 8:45 am]
BILLING CODE 8010-01-M