[Federal Register Volume 67, Number 211 (Thursday, October 31, 2002)]
[Notices]
[Pages 66432-66433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27662]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-25785; 812-12824]


MLIG Variable Insurance Trust, et al.; Notice of Application

October 24, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') for an exemption from 
section 15(a) of the Act and rule 18-2 under the Act.

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SUMMARY OF APPLICATION: Applicants request an order that would permit 
them to enter into and materially amend subadvisory agreements without 
shareholder approval.

APPLICANTS: MLIG Variable Insurance Trust (the ``Trust'') and Roszel 
Advisors, LLC (the ``Adviser'').

FILING DATES: The application was filed on May 15, 2002 and amended on 
October 23, 2002.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary 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 November 18, 2002 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 who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, Barry G. Skolnick, Esq., Merrill Lynch 
Insurance Group, Inc., 7 Roszel Road, Princeton, NJ 08540.

FOR FURTHER INFORMATION CONTACT; Jaea F. Hahn, Senior Counsel, at (202) 
942-0614, or Todd F. Kuehl, Branch Chief, at (202) 942-0564 (Office of 
Investment Company Regulation, Division of Investment Management).

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

Applicants' Representations

    1. The Trust is a Delaware business trust registered under the Act 
as an open-end management investment company. The Trust is comprised of 
twenty-seven separate series (each a ``Portfolio'', and collectively, 
the ``Portfolios''), each with its own investment objectives and 
policies.\1\ Shares representing interests in each Portfolio are 
offered solely to separate accounts of Merrill Lynch Life Insurance 
Company (``MLLIC'') and Merrill Lynch Life Insurance Company of New 
York (``MLLICNY'') as funding vehicles for certain variable annuity 
insurance contracts issued by them, and may, in the future, be offered 
as funding vehicles to separate accounts for variable annuity contracts 
or variable life insurance contracts issued by MLLIC, MLLICNY or other 
insurance companies.
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to future Portfolios of the Trust, and any 
other registered open-end management investment company or series 
thereof that: (a) is advised by the Adviser or a person controlling, 
controlled by, or under common control with the Adviser; (b) is 
managed in a manner consistent with the application; and (c) 
complies with the terms and conditions of the requested order 
(``Future Portfolios'', included in the term ``Portfolios''). All 
entities that currently intend to rely on the requested relief are 
named as applicants. If the name of any Portfolio should, at any 
time, contain the name of a Subadviser (as defined below), it will 
also contain the name of the Adviser, which will appear before the 
name of the Subadviser.
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    2. The Adviser, a Delaware limited liability company, is registered 
as an investment adviser under the Investment Advisers Act of 1940 
(``Advisers Act''). The Trust has entered into an investment advisory 
agreement with the Adviser with respect to each of the Portfolios (the 
``Management Agreement''), which was approved by the board of trustees 
of the Trust (``Board''), including a majority of the trustees who are 
not ``interested persons'' as defined in section 2(a)(19) of the Act 
(the ``Independent Trustees''), and by each Portfolio's shareholders. 
Under the terms of the Management Agreement, the Adviser manages the 
assets of the Portfolios and may hire one or more subadvisers 
(``Subadvisers'') to exercise day-to-day portfolio management of each 
of the Portfolios pursuant to separate investment advisory agreements 
(``Subadvisory Agreements''). All current and future Subadvisers will 
be registered or exempt from registration under the Advisers Act. The 
Adviser selects each Subadviser, subject to approval by the respective 
Board, and compensates each Subadviser out of the fees paid to the 
Adviser by the Portfolio.
    3. The Adviser monitors the performance of each Subadviser and the 
Portfolio as a whole and makes recommendations to the Board regarding 
allocation, and reallocation, of assets between Subadvisers. The 
Adviser also is responsible for recommending the hiring, termination 
and replacement of Subadvisers. The Adviser recommends Subadvisers 
based on a number of factors used to evaluate their skills in managing 
assets pursuant to particular investment objectives.
    4. Applicants request an order to permit the Adviser, subject to 
the oversight of the Board, to enter into and materially amend 
Subadvisory Agreements without shareholder approval. The requested 
relief will not extend to a Subadviser that is an ``affiliated person'' 
(as defined in section 2(a)(3) of the Act) of the Trust or the Adviser, 
other than by reason of serving as a Subadviser to one or more of the 
Portfolios (``Affiliated Subadviser'').

Applicants' Legal Analysis

    1. Section 15(a) of the Act provides, in relevant part, that it is 
unlawful for any person to act as an investment adviser to a registered 
investment company except under a written contract that has been 
approved by the vote of a majority of the company's outstanding voting 
securities. Rule 18f-2 under the Act provides that each series or class 
of stock in a series company affected by a matter must approve such 
matter if the Act requires shareholder approval.
    2. Section 6(c) of the Act provides that the Commission may exempt 
any person, security, or transaction or any class or classes of 
persons, securities, or transactions from any provision of the Act, or 
from any rule thereunder, if such exemption is necessary or appropriate 
in the public interest and consistent with the protection of investors 
and the purposes fairly intended by the policy and provisions of the 
Act. Applicants believe the requested relief meets this standard for 
the reasons discussed below.
    3. Applicants assert that each Portfolio's shareholders are relying 
on the Adviser's experience to select, monitor and replace Subadvisers. 
Applicants assert that, from the perspective of the shareholder, the 
role of the Subadvisers is comparable to that of individual portfolio 
managers employed by other investment advisory firms. Applicants 
contend that requiring shareholder approval of Subadvisory Agreements 
would impose costs and unnecessary delays on the Portfolios, and may 
preclude the Adviser from

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acting promptly in a manner considered advisable by the Board. 
Applicants note that the Management Agreement will remain subject to 
the shareholder approval requirements of section 15(a) of the Act and 
rule 18f-2 under the Act.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Before a Portfolio may rely on the requested order, the 
operation of the Portfolio in the manner described in the application 
will be approved by a majority of the Portfolio's outstanding voting 
securities (or, if the Portfolio serves as a funding medium for any 
sub-account of a registered separate account, pursuant to voting 
instructions provided by the owners of variable annuity and variable 
life insurance contracts (``Owners'') who have allocated assets to that 
sub-account), or in the case of a Portfolio whose public shareholders 
(or Owners through a sub-account of a registered separate account) 
purchase shares on the basis of a prospectus containing the disclosure 
contemplated by condition 2 below, by the sole initial shareholder(s) 
before the shares of such Portfolio are offered to the public (or to 
Owners through a sub-account of a registered separate account).
    2. Each Portfolio relying on the requested order will hold itself 
out to the public as employing the management structure described in 
the application. In addition, each Portfolio will disclose in its 
prospectus the existence, substance and effect of any order granted 
pursuant to the application. The prospectus will prominently disclose 
that the Adviser has ultimate responsibility (subject to oversight by 
the Board) to oversee the Subadvisers and recommend their hiring, 
termination and replacement.
    3. Within 90 days of the hiring of any new Subadviser, the Adviser 
will furnish the shareholders of the relevant Portfolio (or, if the 
Portfolio serves as a funding medium for a sub-account of a registered 
separate account, the Owners who have allocated assets to that sub-
account) all information about the new Subadviser that would be 
included in a proxy statement. To meet this condition, the Adviser will 
provide the shareholders (or Owners, if the Portfolio serves as a 
funding medium for any sub-account of a registered separate account) 
with an information statement meeting the requirements of Regulation 
14C and Schedule 14C under the Securities Exchange Act of 1934, as well 
as the requirements of Item 22 of Schedule 14A under that Act.
    4. The Adviser will not enter into a Subadvisory Agreement with an 
Affiliated Subadviser without such Subadvisory Agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Portfolio (or, if the Portfolio serves as a funding 
medium for any sub-account of a registered separate account, then 
pursuant to voting instructions of the Owners who have allocated assets 
to that sub-account).
    5. At all times, a majority of the Board will be Independent 
Trustees, and the nomination of new or additional Independent Trustees 
will be placed within the discretion of the then existing Independent 
Trustees.
    6. When a change of Subadviser is proposed for a Portfolio with an 
Affiliated Subadviser, the Board, including a majority of the 
Independent Trustees, will make a separate finding, reflected in the 
Board minutes, that such change of Subadviser is in the best interests 
of the Portfolio and its shareholders (or, if the Portfolio serves as a 
funding medium for any sub-account of a registered separate account, in 
the best interests of the Portfolio and the Owners who have allocated 
assets to the sub-account) and that the change does not involve a 
conflict of interest from which the Adviser or the Affiliated 
Subadviser derives an inappropriate advantage.
    7. The Adviser will provide general management services to each 
Portfolio, including overall supervisory responsibility for the general 
management and investment of each Portfolio's assets, and, subject to 
review and approval by the Board, will: (a) Set each Portfolio's 
overall investment strategies; (b) evaluate, select and recommend 
Subadvisers to manage all or a part of a Portfolio's assets; (c) when 
appropriate, allocate and reallocate a Portfolio's assets among 
multiple Subadvisers; (d) monitor and evaluate the performance of 
Subadvisers; and (e) implement procedures reasonably designed to ensure 
Subadvisers comply with the related Portfolio's investment objectives, 
policies and restrictions.
    8. No trustee or officer of the Trust or director or officer of the 
Adviser will own directly or indirectly (other than through a pooled 
investment vehicle that is not controlled by such director, trustee or 
officer) any interest in a Subadviser except for ownership of (a) 
interests in the Adviser or any entity that controls, is controlled by, 
or is under common control with the Adviser; or (b) less than 1% of the 
outstanding securities of any class of equity or debt of a publicly-
traded company that is either a Subadviser or an entity that controls, 
is controlled by, or is under common control with a Subadviser.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-27662 Filed 10-30-02; 8:45 am]
BILLING CODE 8010-01-P