MLIG Variable Insurance Trust and Roszel Advisors, LLC; Notice of Application, 7012-7016 [E8-2120]

Download as PDF 7012 Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28139; 812–13436] MLIG Variable Insurance Trust and Roszel Advisors, LLC; Notice of Application January 31, 2008. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act. pwalker on PROD1PC71 with NOTICES AGENCY: 551–6876, or Nadya Roytblat, Assistant Director, at (202) 551–6821 (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 Desk, 100 F Street, NE., Washington, DC 20549–0102 (telephone (202) 551–5850). Applicants’ Representations 1. The Trust, organized as a Delaware statutory trust, is registered under the Act as an open-end management investment company. The Trust is currently comprised of twenty-four separate Portfolios (as defined below), each of which pursues a distinct investment objective(s).1 The shares of the Portfolios currently are offered and SUMMARY OF THE APPLICATION: sold through registered separate Applicants request an order that would accounts (‘‘Registered Separate permit certain registered open-end Accounts’’) of Merrill Lynch Life management investment companies to Insurance Company and ML Life acquire shares of other registered openend management investment companies Insurance Company of New York, both insurance companies that are and unit investment trusts that are unaffiliated with Roszel Advisors. In the within and outside the same group of future, shares of the Portfolios may be investment companies. offered and sold through Registered Applicants: MLIG Variable Insurance Trust (the ‘‘Trust’’) and Roszel Advisors, Separate Accounts of insurance companies that are affiliates of Roszel LLC (‘‘Roszel Advisors’’) (together, the Advisors and may be offered and sold ‘‘Applicants’’). through unregistered separate accounts Filing Dates: The application was of insurance companies that either are filed on October 9, 2007. Applicants or are not affiliates of Roszel Advisors have agreed to file an amendment (‘‘Unregistered Separate Accounts,’’ and during the notice period, the substance together with the Registered Separate of which is reflected in this notice. Hearing or Notification of Hearing: An Accounts, the ‘‘Separate Accounts’’). 2. Roszel Advisors is a Delaware order granting the application will be limited liability company that is issued unless the Commission orders a hearing. Interested persons may request registered as an investment adviser under the Investment Advisers Act of a hearing by writing to the 1940 (‘‘Advisers Act’’). Roszel Advisors Commission’s Secretary and serving is a wholly-owned indirect subsidiary of applicants with a copy of the request, Merrill Lynch & Co., Inc. Pursuant to an personally or by mail. Hearing requests investment management agreement and should be received by the Commission subject to the authority of the Trust’s by 5:30 p.m. on February 25, 2008, and board of trustees, Roszel Advisors serves should be accompanied by proof of as the Trusts’ investment adviser and service on applicants in the form of an conducts the business and affairs of the affidavit or, for lawyers, a certificate of Trust. Roszel Advisors has engaged at service. Hearing requests should state least one subadviser for each Portfolio the nature of the writer’s interest, the (each a ‘‘Subadviser’’) to act as that reason for the request, and the issues contested. Persons who wish to be 1 Applicants request that the order also extend to notified of a hearing may request any future series of the Trust, and any other existing notification by writing to the or future registered open-end management investment companies and any series thereof that Commission’s Secretary. are part of the same group of investment companies, ADDRESSES: Secretary, Securities and as defined in section 12(d)(1)(G)(ii) of the Act, as Exchange Commission, 100 F Street, the Trust and are, or may in the future be, advised by Roszel Advisors or any other investment adviser NE., Washington, DC 20549–1090; controlling, controlled by, or under common Applicants: c/o Barry G. Skolnick, control with Roszel Advisors (together with the Secretary, MLIG Variable Insurance existing series of the Trust, the ‘‘Portfolios’’). The Trust is the only registered investment company Trust, 1700 Merrill Lynch Drive, that currently intends to rely on the requested Pennington, NJ 08534. order. Any other entity that relies on the order in FOR FURTHER INFORMATION CONTACT: the future will comply with the terms and conditions of the application. Deepak T. Pai, Senior Counsel, at (202) VerDate Aug<31>2005 18:21 Feb 05, 2008 Jkt 214001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 Portfolio’s investment adviser to provide day-to-day portfolio management. Each Subadviser is and any future Subadviser will be registered under the Advisers Act.2 3. Applicants request relief to permit: (a) The Portfolios to acquire shares of registered open-end management investment companies that are not part of the same group of investment companies, as defined in Section 12(A)(i)(G)(ii) of the Act, as the Portfolios (the ‘‘Unaffiliated Underlying Funds’’); (b) the Portfolios to acquire shares of unit investment trusts (‘‘UITs’’) that are not part of the same group of investment companies as the Portfolios (‘‘Unaffiliated Underlying Trusts’’); (c) the Unaffiliated Underlying Funds and Trusts (collectively, the ‘‘Unaffiliated Funds’’) to sell their shares to the Portfolios; (d) the Portfolios to acquire shares of other registered open-end investment companies in the same group of investment companies as the Portfolios (the ‘‘Affiliated Funds,’’ and together with the Unaffiliated Funds, the ‘‘Underlying Funds’’) and (e) the Affiliated Funds to sell their shares to the Portfolios. Unaffiliated Underlying Trusts or Unaffiliated Underlying Funds may be registered under the Act as either UITs or open-end management investment companies and that have obtained exemptions from the Commission necessary to permit their shares to be listed and traded on a national securities exchange at negotiated prices (‘‘ETFs’’). Currently, the Portfolios invest in various types of securities that are not issued by registered investment companies and other financial instruments. Applicants are seeking to provide the Portfolios with the ability to invest in Underlying Funds for broader diversification and the ability to gain exposure to types of securities in which they would otherwise be unable to invest because of inadequate trade size or lack of liquidity. Applicants’ Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act prohibits a registered investment company from acquiring shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total 2 Any investment adviser to the Portfolios that meets the definition of section 2(a)(20)(A) of the Act is referred to as Roszel Advisors. Any investment adviser to the Portfolios that meets the definition in section 2(a)(20)(B) of the Act is referred to as the Subadviser. E:\FR\FM\06FEN1.SGM 06FEN1 pwalker on PROD1PC71 with NOTICES Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter and any broker or dealer from selling the shares of the investment company to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company’s voting stock, or if the sale will cause more than 10% of the acquired company’s voting stock to be owned by investment companies generally. 2. Section 12(d)(1)(J) 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 section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Applicants seek an exemption under section 12(d)(1)(J) of the Act from the limitations of sections 12(d)(1)(A) and (B) to the extent necessary to permit the Portfolios to acquire shares of the Underlying Funds in excess of the limits set forth in section 12(d)(1)(A) of the Act and to permit the Underlying Funds, their principal underwriters and any broker or dealer to sell their shares to the Portfolios in excess of the limits set forth in section 12(d)(1)(B) of the Act. 3. Applicants state that the proposed arrangement will not give rise to the policy concerns underlying sections 12(d)(1)(A) and (B) which include concerns about undue influence by a fund of funds or its affiliated persons over underlying funds, excessive layering of fees, and overly complex fund structures. Accordingly, Applicants believe that the requested exemptions are consistent with the public interest and the protection of investors. 4. Applicants state that the proposed arrangement will not result in undue influence by the Portfolios or their affiliated persons over the Underlying Funds. The concern about undue influence does not arise in connection with the Portfolios’ investment in the Affiliated Funds, since they are part of the same group of investment companies. Applicants further propose condition 1 which provides that: (a) Roszel Advisors and any person controlling, controlled by or under common control with Roszel Advisors, any investment company and any issuer that would be an investment company but for section 3(c)(1) or section 3(c)(7) of the Act advised or sponsored by Roszel Advisors or any person VerDate Aug<31>2005 18:21 Feb 05, 2008 Jkt 214001 controlling, controlled by or under common control with Roszel Advisors (collectively, the ‘‘Group’’), and (b) any Subadviser to the Portfolios and any person controlling, controlled by or under common control with the Subadviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised by the Subadviser or any person and any person controlling, controlled by or under common control with the Subadviser (collectively, the ‘‘Subadviser Group’’) will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. 5. Applicants further state that condition 2 precludes the Portfolios or Roszel Advisors, any Subadviser, promoter or principal underwriter of the Portfolios, as well as any person controlling, controlled by or under common control with any of those entities (each, a ‘‘Portfolio Affiliate’’) from taking advantage of an Unaffiliated Fund, with respect to transactions between the Portfolios or a Portfolio Affiliate and the Unaffiliated Fund or the Unaffiliated Fund’s investment adviser(s), sponsor, promoter, and principal underwriter and any person controlling, controlled by or under common control with any of those entities (each, an ‘‘Unaffiliated Fund Affiliate’’). No Portfolio or Portfolio Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying Trust) will cause an Unaffiliated Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, trustee, advisory board member, investment adviser, Subadviser, or employee of the Portfolio, or a person of which any such officer, director, trustee, investment adviser, Subadviser, member of an advisory board, or employee is an affiliated person (each, an ‘‘Underwriting Affiliate,’’ except any person whose relationship to the Unaffiliated Fund is covered by section 10(f) of the Act is not an Underwriting Affiliate). An offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate is an ‘‘Affiliated Underwriting.’’ 6. To further assure that an Unaffiliated Underlying Fund understands the implications of an investment by a Portfolio under the PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 7013 requested order, prior to the Portfolios’ investment in the shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i) of the Act, the Portfolio and the Unaffiliated Underlying Fund will execute an agreement stating, without limitation, that their boards of directors or trustees (‘‘Boards’’) and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order (‘‘Participation Agreement’’). Applicants note that an Unaffiliated Fund (other than an ETF whose shares are purchased by a Portfolio in the secondary market) will retain its right at all times to reject any investment by the Portfolio.3 7. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. To assure that the investment advisory or management fees are not duplicative, Applicants state that, prior to the approval of any investment advisory or management contract under section 15 of the Act, the Board of each Portfolio, including a majority of the Disinterested Trustees will find that the management or advisory fees charged under the Portfolio’s advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Underlying Fund’s advisory contract(s). Applicants further state that Roszel Advisors will waive fees otherwise payable to them by a Portfolio in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Underlying Fund pursuant to rule 12b–1 under the Act) received from an Unaffiliated Fund by Roszel Advisors, or an affiliated person of Roszel Advisors, other than any advisory fees paid to Roszel Advisors or an affiliated person of Roszel Advisors by the Unaffiliated Fund, in connection with the investment by the Portfolio in the Unaffiliated Fund. 8. Applicants state that with respect to Registered Separate Accounts that invest in the Portfolios, no sales load will be charged at the Portfolios’ level or at the Underlying Fund level. Other sales charges and service fees, as defined in Rule 2830 of the Conduct Rules of the NASD (‘‘NASD Conduct Rule 2830’’), will only be charged at the Portfolio level or at the Underlying 3 An Unaffiliated Fund, including an ETF, would retain its right to reject any initial investment by a Portfolio in excess of the limit in section 12(d)(1)(A)(i) of the Act by declining to execute the Participation Agreement with the Portfolio. E:\FR\FM\06FEN1.SGM 06FEN1 7014 Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices Fund level, not both.4 With respect to other investments in the Portfolios, any sales charges and/or service fees charged with respect to shares of the Portfolios will not exceed the limits applicable to a fund of funds set forth in NASD Conduct Rule 2830. 9. Applicants state that the proposed arrangement will not create an overly complex fund structure because no Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund: (a) Receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) Acquire securities of one or more affiliated investment companies for short-term cash management purposes, or (ii) engage in interfund borrowing and lending transactions. Applicants also represent that the Portfolios’ prospectus and sales literature will contain clear, concise, ‘‘plain English’’ disclosure designed to inform investors about the unique characteristics of the proposed arrangement, including, but not limited to, the expense structure and the additional expenses of investing in Underlying Funds. pwalker on PROD1PC71 with NOTICES B. Section 17(a) 1. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated persons of the company. Section 2(a)(3) of the Act defines an ‘‘affiliated person’’ of another person to include (a) any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person; (b) any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power 4 Applicants represent that each Portfolio will represent in the Participation Agreement that no insurance company sponsoring a Registered Separate Account funding variable insurance contracts will be permitted to invest in the Portfolio unless the insurance company has certified to the Portfolio that the aggregate of all fees and charges associated with each contract that invests in the Portfolio, including fees and charges at the separate account, Portfolio, and Underlying Fund levels, will be reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the insurance company. VerDate Aug<31>2005 18:21 Feb 05, 2008 Jkt 214001 to vote by the other person; and (c) any person directly or indirectly controlling, controlled by, or under common control with the other person. 2. Applicants state that the Portfolios and the Affiliated Funds might be deemed to be under common control of Roszel Advisors and therefore affiliated persons of one another. Applicants also state that the Portfolios and the Underlying Funds might be deemed affiliated persons of one another if the Portfolios acquire 5% or more of an Underlying Fund’s outstanding voting securities. In light of these possible affiliations, section 17(a) could prevent an Underlying Fund from selling shares to and redeeming shares from the Portfolios. 3. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that (a) the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned; (b) the proposed transaction is consistent with the policies of each registered investment company involved; and (c) the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provision of the Act 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. 4. Applicants believe that the proposed transactions satisfy the requirements for relief under sections 17(b) and 6(c) of the Act, as the terms are fair and reasonable and do not involve overreaching.5 Applicants state that the terms upon which an Underlying Fund will sell its shares to or purchase its shares from the Portfolios will be based on the net asset value of each Underlying Fund.6 5 Applicants acknowledge that receipt of compensation by (a) an affiliated person of the Portfolios, or an affiliated person of such person, for the purchase by the Portfolios of shares of an Underlying Fund or (b) an affiliated person of an Underlying Fund, or an affiliated person of such person, for the sale by the Underlying Fund of its shares to the Portfolios is subject to section 17(e)(1) of the Act. The Participation Agreement also will include this acknowledgement. 6 Applicants note that the Portfolios generally would purchase and sell shares of an Underlying Fund that operates as an ETF through secondary market transactions at market prices rather than through principal transactions with the Underlying Fund at net asset value. Applicants would not rely on the requested relief from section 17(a) for such secondary market transactions. The Portfolios could seek to transact in ‘‘Creation Units’’ directly with PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 Applicants also state that the proposed transactions will be consistent with the policies of the Portfolios and Underlying Fund, and with the general purposes of the Act. Applicants’ Conditions Applicants agree that the order granting the requested relief shall be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The members of the Subadviser Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding voting securities of an Unaffiliated Fund, the Group or a Subadviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Fund, then the Group or the Subadviser Group (except for any member of the Group or the Subadviser Group that is a Separate Account) will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares. This Condition 1 will not apply to a Subadviser Group with respect to an Unaffiliated Fund for which the Subadviser or a person controlling, controlled by, or under common control with the Subadviser acts as the investment adviser within the meaning section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Underlying Fund) or as the sponsor (in the case of an Unaffiliated Trust). A Registered Separate Account will seek voting instructions from its contract holders and will vote its shares of an Unaffiliated Fund in accordance with the instructions received and will vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. An Unregistered Separate Account will either: (i) Vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund’s shares; or (ii) seek voting instructions from its contract holders and vote its shares in accordance with the instructions received and vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. 2. No Portfolio or Portfolio Affiliate will cause any existing or potential an ETF pursuant to the requested section 17(a) relief. E:\FR\FM\06FEN1.SGM 06FEN1 pwalker on PROD1PC71 with NOTICES Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices investment by the Portfolio in an Unaffiliated Fund to influence the terms of any services or transactions between the Portfolio or a Portfolio Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate. 3. The Board of each Portfolio, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to assure that Roszel Advisors and any Subadviser are conducting the investment program of the Portfolio without taking into account any consideration received by the Portfolio or Portfolio Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Portfolio in the securities of an Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Underlying Fund, including a majority of the Disinterested Trustees, will determine that any consideration paid by the Unaffiliated Underlying Fund to the Portfolio or a Portfolio Affiliate in connection with any services or transactions: (a) Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Unaffiliated Underlying Fund; (b) is within the range of consideration that the Unaffiliated Underlying Fund would be required to pay to another unaffiliated entity in connection with the same services or transactions; and (c) does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Unaffiliated Underlying Fund and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s). 5. No Portfolio or Portfolio Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying Trust) will cause an Unaffiliated Fund to purchase a security in any Affiliated Underwriting. 6. The Board of an Unaffiliated Underlying Fund, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Underlying Fund in an Affiliated Underwriting once an investment by a Portfolio in the securities of the Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board of the Unaffiliated Underlying Fund will VerDate Aug<31>2005 18:21 Feb 05, 2008 Jkt 214001 review these purchases periodically, but no less frequently than annually, to determine whether or not the purchases were influenced by the investment by the Portfolio in the Unaffiliated Underlying Fund. The Board of the Unaffiliated Underlying Fund will consider, among other things: (a) Whether or not the purchases were consistent with the investment objectives and policies of the Unaffiliated Underlying Fund; (b) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (c) whether or not the amount of securities purchased by the Unaffiliated Underlying Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of an Unaffiliated Underlying Fund will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interests of shareholders. 7. Each Unaffiliated Underlying Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase from an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in an Affiliated Underwriting once an investment by a Portfolio in the securities of an Unaffiliated Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth the: (a) Party from whom the securities were acquired, (b) identity of the underwriting syndicate’s members, (c) terms of the purchase, and (d) information or materials upon which the determinations of the Board of the Unaffiliated Underlying Fund were made. 8. Prior to its investment in shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i) of the Act, the Portfolio and the Unaffiliated Underlying Fund will execute a Participation Agreement stating, without limitation, that their Boards and their investment advisers PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 7015 understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Unaffiliated Underlying Fund in excess of the limit in section 12(d)(1)(A)(i), the Portfolio will notify the Unaffiliated Underlying Fund of the investment. At such time, the Portfolio will also transmit to the Unaffiliated Underlying Fund a list of the names of each Portfolio Affiliate and Underwriting Affiliate. The Portfolio will notify the Unaffiliated Underlying Fund of any changes to the list as soon as reasonably practicable after a change occurs. The Unaffiliated Underlying Fund and the Portfolio will maintain and preserve a copy of the order, the Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 9. Before approving any advisory contract under section 15 of the Act, the Board of each Portfolio, including a majority of the Disinterested Trustees, shall find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided under the advisory contract(s) of any Underlying Fund in which the Portfolio may invest. Such finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the appropriate Portfolio. 10. Roszel Advisors will waive fees otherwise payable to it by a Portfolio in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Underlying Fund pursuant to rule 12b–1 under the Act) received from an Unaffiliated Fund by Roszel Advisors, or an affiliated person of Roszel Advisors, other than any advisory fees paid to Roszel Advisors or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Portfolio in the Unaffiliated Fund. Any Subadviser will waive fees otherwise payable to the Subadviser, directly or indirectly, by the Portfolio in an amount at least equal to any compensation received by the Subadviser, or an affiliated person of the Subadviser, from an Unaffiliated Fund, other than any advisory fees paid to the Subadviser or its affiliated person by the Unaffiliated Underlying Fund, in connection with the investment by the Portfolio in the Unaffiliated Underlying Fund made at the direction of the Subadviser. In the event that the Subadviser waives fees, the benefit of E:\FR\FM\06FEN1.SGM 06FEN1 7016 Federal Register / Vol. 73, No. 25 / Wednesday, February 6, 2008 / Notices the waiver will be passed through to the Portfolio. 11. With respect to Registered Separate Accounts that invest in a Portfolio, no sales load will be charged at the Portfolio level or at the Underlying Fund level. Other sales charges and service fees, as defined in NASD Conduct Rule 2830, if any, will only be charged at the Portfolio level or at the Underlying Fund level, not both. With respect to other investment in a Portfolio, any sales charges and/or service fees charged with respect to shares of the Portfolio will not exceed the limits applicable to a funds of funds set forth in NASD Conduct Rule 2830. 12. No Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund: (a) Receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to: (i) Acquire securities of one or more affiliated investment companies for short-term cash management purposes, or (ii) engage in interfund borrowing and lending transactions. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E8–2120 Filed 2–5–08; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57248; File No. SR–Amex– 2007–25] Self-Regulatory Organizations; American Stock Exchange, LLC; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, to Allow Register Options Traders to Submit Electronic Quotations and Orders From Off the Amex’s Trading Floor on a Limited Basis pwalker on PROD1PC71 with NOTICES January 31, 2008. I. Introduction On February 27, 2007, the American Stock Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission VerDate Aug<31>2005 18:21 Feb 05, 2008 Jkt 214001 (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposal to amend its rules to allow registered options traders to submit electronic quotations and orders from off the Amex’s trading floor on a limited basis. The Amex filed Amendment No. 1 to the proposal on December 13, 2007.3 The proposed rule change, as modified by Amendment No. 1, was published for comment in the Federal Register on December 28, 2007.4 The Commission received no comments regarding the proposed rule change, as amended. This order approves the proposed rule change, as modified by Amendment No. 1. II. Description of the Proposal The Amex proposes to amend Amex Rule 958–ANTE, ‘‘Options Transactions of Registered Options Traders and Supplemental Registered Options Traders and Remote Registered Options Traders,’’ to allow registered options traders to submit electronic quotations and orders from off the Amex’s trading floor on a temporary basis for a maximum of 20 days during a calendar year.5 According to the Amex, the proposal is designed to accommodate registered options traders when they are temporarily unable to be present on the Amex’s physical trading floor. For purposes of the ‘‘in-person’’ requirements set forth in Amex Rule 958–ANTE, a registered options trader’s transactions through this limited remote quoting program will be deemed to occur on the floor. A registered options trader must notify the Amex’s Division of Regulation and Compliance immediately following the day or days during which he or she submits quotes from off the floor.6 The Amex notes that it has an independent means to monitor when a register options trader is off the floor because all members must scan in. The Amex states that it will use its existing surveillance procedures to monitor registered options traders’ temporary off-floor trading. In addition, the Amex represents that it will be able to monitor for compliance with the Amex’s trading rules and the federal U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Amendment No. 1 supersedes and replaces the original filing in its entirety. 4 See Securities Exchange Act Release No. 57011 (December 20, 2007), 72 FR 73910. 5 See Amex Rule 958–ANTE, Commentary .01(c). Under the proposal, quoting and submitting orders from off the trading floor for less than an entire day would qualify as one day. 6 See Amex Rule 958–ANTE, Commentary .01(c). securities laws and the rules and regulations thereunder. III. Discussion The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.7 In particular, the Commission finds that the proposal is consistent with section 6(b)(5) of the Act,8 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission believes that the proposal is designed to provide registered options traders with the flexibility to trade from off the Amex’s floor on a limited basis when they are temporarily unable to be present on the floor. The Commission notes that the Amex has stated that it will use its existing surveillance procedures to monitor the off-floor trading permitted under the proposal, and that the Amex has represented that it will be able to monitor for compliance with the Amex’s trading rules and the federal securities laws and the rules and regulations thereunder. IV. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,9 that the proposed rule change (SR–Amex–2007– 25), as modified by Amendment No. 1, is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E8–2139 Filed 2–5–08; 8:45 am] BILLING CODE 8011–01–P 1 15 2 17 PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 7 In approving the proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 8 15 U.S.C. 78f(b)(5). 9 15 U.S.C. 78s(b)(2). 10 17 CFR 200.30–3(a)(12). E:\FR\FM\06FEN1.SGM 06FEN1

Agencies

[Federal Register Volume 73, Number 25 (Wednesday, February 6, 2008)]
[Notices]
[Pages 7012-7016]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2120]



[[Page 7012]]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 28139; 812-13436]


MLIG Variable Insurance Trust and Roszel Advisors, LLC; Notice of 
Application

January 31, 2008.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 12(d)(1)(J) of 
the Investment Company Act of 1940 (``Act'') for an exemption from 
sections 12(d)(1)(A) and (B) of the Act, and under sections 6(c) and 
17(b) of the Act for an exemption from section 17(a) of the Act.

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Summary of the Application: Applicants request an order that would 
permit certain registered open-end management investment companies to 
acquire shares of other registered open-end management investment 
companies and unit investment trusts that are within and outside the 
same group of investment companies.
    Applicants: MLIG Variable Insurance Trust (the ``Trust'') and 
Roszel Advisors, LLC (``Roszel Advisors'') (together, the 
``Applicants'').
    Filing Dates: The application was filed on October 9, 2007. 
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 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 February 25, 2008, 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, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC 20549-1090; Applicants: c/o Barry G. Skolnick, 
Secretary, MLIG Variable Insurance Trust, 1700 Merrill Lynch Drive, 
Pennington, NJ 08534.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 551-6876, or Nadya Roytblat, Assistant Director, at (202) 551-
6821 (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 Desk, 100 F Street, NE., Washington, DC 
20549-0102 (telephone (202) 551-5850).

Applicants' Representations

    1. The Trust, organized as a Delaware statutory trust, is 
registered under the Act as an open-end management investment company. 
The Trust is currently comprised of twenty-four separate Portfolios (as 
defined below), each of which pursues a distinct investment 
objective(s).\1\ The shares of the Portfolios currently are offered and 
sold through registered separate accounts (``Registered Separate 
Accounts'') of Merrill Lynch Life Insurance Company and ML Life 
Insurance Company of New York, both insurance companies that are 
unaffiliated with Roszel Advisors. In the future, shares of the 
Portfolios may be offered and sold through Registered Separate Accounts 
of insurance companies that are affiliates of Roszel Advisors and may 
be offered and sold through unregistered separate accounts of insurance 
companies that either are or are not affiliates of Roszel Advisors 
(``Unregistered Separate Accounts,'' and together with the Registered 
Separate Accounts, the ``Separate Accounts'').
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    \1\ Applicants request that the order also extend to any future 
series of the Trust, and any other existing or future registered 
open-end management investment companies and any series thereof that 
are part of the same group of investment companies, as defined in 
section 12(d)(1)(G)(ii) of the Act, as the Trust and are, or may in 
the future be, advised by Roszel Advisors or any other investment 
adviser controlling, controlled by, or under common control with 
Roszel Advisors (together with the existing series of the Trust, the 
``Portfolios''). The Trust is the only registered investment company 
that currently intends to rely on the requested order. Any other 
entity that relies on the order in the future will comply with the 
terms and conditions of the application.
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    2. Roszel Advisors is a Delaware limited liability company that is 
registered as an investment adviser under the Investment Advisers Act 
of 1940 (``Advisers Act''). Roszel Advisors is a wholly-owned indirect 
subsidiary of Merrill Lynch & Co., Inc. Pursuant to an investment 
management agreement and subject to the authority of the Trust's board 
of trustees, Roszel Advisors serves as the Trusts' investment adviser 
and conducts the business and affairs of the Trust. Roszel Advisors has 
engaged at least one subadviser for each Portfolio (each a 
``Subadviser'') to act as that Portfolio's investment adviser to 
provide day-to-day portfolio management. Each Subadviser is and any 
future Subadviser will be registered under the Advisers Act.\2\
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    \2\ Any investment adviser to the Portfolios that meets the 
definition of section 2(a)(20)(A) of the Act is referred to as 
Roszel Advisors. Any investment adviser to the Portfolios that meets 
the definition in section 2(a)(20)(B) of the Act is referred to as 
the Subadviser.
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    3. Applicants request relief to permit: (a) The Portfolios to 
acquire shares of registered open-end management investment companies 
that are not part of the same group of investment companies, as defined 
in Section 12(A)(i)(G)(ii) of the Act, as the Portfolios (the 
``Unaffiliated Underlying Funds''); (b) the Portfolios to acquire 
shares of unit investment trusts (``UITs'') that are not part of the 
same group of investment companies as the Portfolios (``Unaffiliated 
Underlying Trusts''); (c) the Unaffiliated Underlying Funds and Trusts 
(collectively, the ``Unaffiliated Funds'') to sell their shares to the 
Portfolios; (d) the Portfolios to acquire shares of other registered 
open-end investment companies in the same group of investment companies 
as the Portfolios (the ``Affiliated Funds,'' and together with the 
Unaffiliated Funds, the ``Underlying Funds'') and (e) the Affiliated 
Funds to sell their shares to the Portfolios. Unaffiliated Underlying 
Trusts or Unaffiliated Underlying Funds may be registered under the Act 
as either UITs or open-end management investment companies and that 
have obtained exemptions from the Commission necessary to permit their 
shares to be listed and traded on a national securities exchange at 
negotiated prices (``ETFs''). Currently, the Portfolios invest in 
various types of securities that are not issued by registered 
investment companies and other financial instruments. Applicants are 
seeking to provide the Portfolios with the ability to invest in 
Underlying Funds for broader diversification and the ability to gain 
exposure to types of securities in which they would otherwise be unable 
to invest because of inadequate trade size or lack of liquidity.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act prohibits a registered investment 
company from acquiring shares of an investment company if the 
securities represent more than 3% of the total outstanding voting stock 
of the acquired company, more than 5% of the total

[[Page 7013]]

assets of the acquiring company, or, together with the securities of 
any other investment companies, more than 10% of the total assets of 
the acquiring company. Section 12(d)(1)(B) of the Act prohibits a 
registered open-end investment company, its principal underwriter and 
any broker or dealer from selling the shares of the investment company 
to another investment company if the sale will cause the acquiring 
company to own more than 3% of the acquired company's voting stock, or 
if the sale will cause more than 10% of the acquired company's voting 
stock to be owned by investment companies generally.
    2. Section 12(d)(1)(J) 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 section 
12(d)(1) if the exemption is consistent with the public interest and 
the protection of investors. Applicants seek an exemption under section 
12(d)(1)(J) of the Act from the limitations of sections 12(d)(1)(A) and 
(B) to the extent necessary to permit the Portfolios to acquire shares 
of the Underlying Funds in excess of the limits set forth in section 
12(d)(1)(A) of the Act and to permit the Underlying Funds, their 
principal underwriters and any broker or dealer to sell their shares to 
the Portfolios in excess of the limits set forth in section 12(d)(1)(B) 
of the Act.
    3. Applicants state that the proposed arrangement will not give 
rise to the policy concerns underlying sections 12(d)(1)(A) and (B) 
which include concerns about undue influence by a fund of funds or its 
affiliated persons over underlying funds, excessive layering of fees, 
and overly complex fund structures. Accordingly, Applicants believe 
that the requested exemptions are consistent with the public interest 
and the protection of investors.
    4. Applicants state that the proposed arrangement will not result 
in undue influence by the Portfolios or their affiliated persons over 
the Underlying Funds. The concern about undue influence does not arise 
in connection with the Portfolios' investment in the Affiliated Funds, 
since they are part of the same group of investment companies. 
Applicants further propose condition 1 which provides that: (a) Roszel 
Advisors and any person controlling, controlled by or under common 
control with Roszel Advisors, any investment company and any issuer 
that would be an investment company but for section 3(c)(1) or section 
3(c)(7) of the Act advised or sponsored by Roszel Advisors or any 
person controlling, controlled by or under common control with Roszel 
Advisors (collectively, the ``Group''), and (b) any Subadviser to the 
Portfolios and any person controlling, controlled by or under common 
control with the Subadviser, and any investment company or issuer that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act (or portion of such investment company or issuer) advised by 
the Subadviser or any person and any person controlling, controlled by 
or under common control with the Subadviser (collectively, the 
``Subadviser Group'') will not control (individually or in the 
aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) 
of the Act.
    5. Applicants further state that condition 2 precludes the 
Portfolios or Roszel Advisors, any Subadviser, promoter or principal 
underwriter of the Portfolios, as well as any person controlling, 
controlled by or under common control with any of those entities (each, 
a ``Portfolio Affiliate'') from taking advantage of an Unaffiliated 
Fund, with respect to transactions between the Portfolios or a 
Portfolio Affiliate and the Unaffiliated Fund or the Unaffiliated 
Fund's investment adviser(s), sponsor, promoter, and principal 
underwriter and any person controlling, controlled by or under common 
control with any of those entities (each, an ``Unaffiliated Fund 
Affiliate''). No Portfolio or Portfolio Affiliate (except to the extent 
it is acting in its capacity as an investment adviser to an 
Unaffiliated Underlying Fund or sponsor to an Unaffiliated Underlying 
Trust) will cause an Unaffiliated Fund to purchase a security in an 
offering of securities during the existence of any underwriting or 
selling syndicate of which a principal underwriter is an officer, 
director, trustee, advisory board member, investment adviser, 
Subadviser, or employee of the Portfolio, or a person of which any such 
officer, director, trustee, investment adviser, Subadviser, member of 
an advisory board, or employee is an affiliated person (each, an 
``Underwriting Affiliate,'' except any person whose relationship to the 
Unaffiliated Fund is covered by section 10(f) of the Act is not an 
Underwriting Affiliate). An offering of securities during the existence 
of any underwriting or selling syndicate of which a principal 
underwriter is an Underwriting Affiliate is an ``Affiliated 
Underwriting.''
    6. To further assure that an Unaffiliated Underlying Fund 
understands the implications of an investment by a Portfolio under the 
requested order, prior to the Portfolios' investment in the shares of 
an Unaffiliated Underlying Fund in excess of the limit in section 
12(d)(1)(A)(i) of the Act, the Portfolio and the Unaffiliated 
Underlying Fund will execute an agreement stating, without limitation, 
that their boards of directors or trustees (``Boards'') and their 
investment advisers understand the terms and conditions of the order 
and agree to fulfill their responsibilities under the order 
(``Participation Agreement''). Applicants note that an Unaffiliated 
Fund (other than an ETF whose shares are purchased by a Portfolio in 
the secondary market) will retain its right at all times to reject any 
investment by the Portfolio.\3\
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    \3\ An Unaffiliated Fund, including an ETF, would retain its 
right to reject any initial investment by a Portfolio in excess of 
the limit in section 12(d)(1)(A)(i) of the Act by declining to 
execute the Participation Agreement with the Portfolio.
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    7. Applicants do not believe that the proposed arrangement will 
involve excessive layering of fees. To assure that the investment 
advisory or management fees are not duplicative, Applicants state that, 
prior to the approval of any investment advisory or management contract 
under section 15 of the Act, the Board of each Portfolio, including a 
majority of the Disinterested Trustees will find that the management or 
advisory fees charged under the Portfolio's advisory contract are based 
on services provided that are in addition to, rather than duplicative 
of, services provided pursuant to any Underlying Fund's advisory 
contract(s). Applicants further state that Roszel Advisors will waive 
fees otherwise payable to them by a Portfolio in an amount at least 
equal to any compensation (including fees received pursuant to any plan 
adopted by an Unaffiliated Underlying Fund pursuant to rule 12b-1 under 
the Act) received from an Unaffiliated Fund by Roszel Advisors, or an 
affiliated person of Roszel Advisors, other than any advisory fees paid 
to Roszel Advisors or an affiliated person of Roszel Advisors by the 
Unaffiliated Fund, in connection with the investment by the Portfolio 
in the Unaffiliated Fund.
    8. Applicants state that with respect to Registered Separate 
Accounts that invest in the Portfolios, no sales load will be charged 
at the Portfolios' level or at the Underlying Fund level. Other sales 
charges and service fees, as defined in Rule 2830 of the Conduct Rules 
of the NASD (``NASD Conduct Rule 2830''), will only be charged at the 
Portfolio level or at the Underlying

[[Page 7014]]

Fund level, not both.\4\ With respect to other investments in the 
Portfolios, any sales charges and/or service fees charged with respect 
to shares of the Portfolios will not exceed the limits applicable to a 
fund of funds set forth in NASD Conduct Rule 2830.
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    \4\ Applicants represent that each Portfolio will represent in 
the Participation Agreement that no insurance company sponsoring a 
Registered Separate Account funding variable insurance contracts 
will be permitted to invest in the Portfolio unless the insurance 
company has certified to the Portfolio that the aggregate of all 
fees and charges associated with each contract that invests in the 
Portfolio, including fees and charges at the separate account, 
Portfolio, and Underlying Fund levels, will be reasonable in 
relation to the services rendered, the expenses expected to be 
incurred, and the risks assumed by the insurance company.
---------------------------------------------------------------------------

    9. Applicants state that the proposed arrangement will not create 
an overly complex fund structure because no Underlying Fund will 
acquire securities of any other investment company or company relying 
on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits 
contained in section 12(d)(1)(A) of the Act, except to the extent that 
such Underlying Fund: (a) Receives securities of another investment 
company as a dividend or as a result of a plan of reorganization of a 
company (other than a plan devised for the purpose of evading section 
12(d)(1) of the Act); or (b) acquires (or is deemed to have acquired) 
securities of another investment company pursuant to exemptive relief 
from the Commission permitting such Underlying Fund to: (i) Acquire 
securities of one or more affiliated investment companies for short-
term cash management purposes, or (ii) engage in interfund borrowing 
and lending transactions. Applicants also represent that the 
Portfolios' prospectus and sales literature will contain clear, 
concise, ``plain English'' disclosure designed to inform investors 
about the unique characteristics of the proposed arrangement, 
including, but not limited to, the expense structure and the additional 
expenses of investing in Underlying Funds.

B. Section 17(a)

    1. Section 17(a) of the Act generally prohibits sales or purchases 
of securities between a registered investment company and any 
affiliated persons of the company. Section 2(a)(3) of the Act defines 
an ``affiliated person'' of another person to include (a) any person 
directly or indirectly owning, controlling, or holding with power to 
vote, 5% or more of the outstanding voting securities of the other 
person; (b) any person 5% or more of whose outstanding voting 
securities are directly or indirectly owned, controlled, or held with 
power to vote by the other person; and (c) any person directly or 
indirectly controlling, controlled by, or under common control with the 
other person.
    2. Applicants state that the Portfolios and the Affiliated Funds 
might be deemed to be under common control of Roszel Advisors and 
therefore affiliated persons of one another. Applicants also state that 
the Portfolios and the Underlying Funds might be deemed affiliated 
persons of one another if the Portfolios acquire 5% or more of an 
Underlying Fund's outstanding voting securities. In light of these 
possible affiliations, section 17(a) could prevent an Underlying Fund 
from selling shares to and redeeming shares from the Portfolios.
    3. Section 17(b) of the Act authorizes the Commission to grant an 
order permitting a transaction otherwise prohibited by section 17(a) if 
it finds that (a) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policies 
of each registered investment company involved; and (c) the proposed 
transaction is consistent with the general purposes of the Act. Section 
6(c) of the Act permits the Commission to exempt any person or 
transactions from any provision of the Act 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.
    4. Applicants believe that the proposed transactions satisfy the 
requirements for relief under sections 17(b) and 6(c) of the Act, as 
the terms are fair and reasonable and do not involve overreaching.\5\ 
Applicants state that the terms upon which an Underlying Fund will sell 
its shares to or purchase its shares from the Portfolios will be based 
on the net asset value of each Underlying Fund.\6\ Applicants also 
state that the proposed transactions will be consistent with the 
policies of the Portfolios and Underlying Fund, and with the general 
purposes of the Act.
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    \5\ Applicants acknowledge that receipt of compensation by (a) 
an affiliated person of the Portfolios, or an affiliated person of 
such person, for the purchase by the Portfolios of shares of an 
Underlying Fund or (b) an affiliated person of an Underlying Fund, 
or an affiliated person of such person, for the sale by the 
Underlying Fund of its shares to the Portfolios is subject to 
section 17(e)(1) of the Act. The Participation Agreement also will 
include this acknowledgement.
    \6\ Applicants note that the Portfolios generally would purchase 
and sell shares of an Underlying Fund that operates as an ETF 
through secondary market transactions at market prices rather than 
through principal transactions with the Underlying Fund at net asset 
value. Applicants would not rely on the requested relief from 
section 17(a) for such secondary market transactions. The Portfolios 
could seek to transact in ``Creation Units'' directly with an ETF 
pursuant to the requested section 17(a) relief.
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Applicants' Conditions

    Applicants agree that the order granting the requested relief shall 
be subject to the following conditions:
    1. The members of the Group will not control (individually or in 
the aggregate) an Unaffiliated Fund within the meaning of section 
2(a)(9) of the Act. The members of the Subadviser Group will not 
control (individually or in the aggregate) an Unaffiliated Fund within 
the meaning of section 2(a)(9) of the Act. If, as a result of a 
decrease in the outstanding voting securities of an Unaffiliated Fund, 
the Group or a Subadviser Group, each in the aggregate, becomes a 
holder of more than 25% of the outstanding voting securities of the 
Unaffiliated Fund, then the Group or the Subadviser Group (except for 
any member of the Group or the Subadviser Group that is a Separate 
Account) will vote its shares of the Unaffiliated Fund in the same 
proportion as the vote of all other holders of the Unaffiliated Fund's 
shares. This Condition 1 will not apply to a Subadviser Group with 
respect to an Unaffiliated Fund for which the Subadviser or a person 
controlling, controlled by, or under common control with the Subadviser 
acts as the investment adviser within the meaning section 2(a)(20)(A) 
of the Act (in the case of an Unaffiliated Underlying Fund) or as the 
sponsor (in the case of an Unaffiliated Trust).
    A Registered Separate Account will seek voting instructions from 
its contract holders and will vote its shares of an Unaffiliated Fund 
in accordance with the instructions received and will vote those shares 
for which no instructions were received in the same proportion as the 
shares for which instructions were received. An Unregistered Separate 
Account will either: (i) Vote its shares of the Unaffiliated Fund in 
the same proportion as the vote of all other holders of the 
Unaffiliated Fund's shares; or (ii) seek voting instructions from its 
contract holders and vote its shares in accordance with the 
instructions received and vote those shares for which no instructions 
were received in the same proportion as the shares for which 
instructions were received.
    2. No Portfolio or Portfolio Affiliate will cause any existing or 
potential

[[Page 7015]]

investment by the Portfolio in an Unaffiliated Fund to influence the 
terms of any services or transactions between the Portfolio or a 
Portfolio Affiliate and the Unaffiliated Fund or an Unaffiliated Fund 
Affiliate.
    3. The Board of each Portfolio, including a majority of the 
Disinterested Trustees, will adopt procedures reasonably designed to 
assure that Roszel Advisors and any Subadviser are conducting the 
investment program of the Portfolio without taking into account any 
consideration received by the Portfolio or Portfolio Affiliate from an 
Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with 
any services or transactions.
    4. Once an investment by a Portfolio in the securities of an 
Unaffiliated Underlying Fund exceeds the limit of section 
12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Underlying 
Fund, including a majority of the Disinterested Trustees, will 
determine that any consideration paid by the Unaffiliated Underlying 
Fund to the Portfolio or a Portfolio Affiliate in connection with any 
services or transactions: (a) Is fair and reasonable in relation to the 
nature and quality of the services and benefits received by the 
Unaffiliated Underlying Fund; (b) is within the range of consideration 
that the Unaffiliated Underlying Fund would be required to pay to 
another unaffiliated entity in connection with the same services or 
transactions; and (c) does not involve overreaching on the part of any 
person concerned. This condition does not apply with respect to any 
services or transactions between an Unaffiliated Underlying Fund and 
its investment adviser(s), or any person controlling, controlled by, or 
under common control with such investment adviser(s).
    5. No Portfolio or Portfolio Affiliate (except to the extent it is 
acting in its capacity as an investment adviser to an Unaffiliated 
Underlying Fund or sponsor to an Unaffiliated Underlying Trust) will 
cause an Unaffiliated Fund to purchase a security in any Affiliated 
Underwriting.
    6. The Board of an Unaffiliated Underlying Fund, including a 
majority of the Disinterested Trustees, will adopt procedures 
reasonably designed to monitor any purchases of securities by the 
Unaffiliated Underlying Fund in an Affiliated Underwriting once an 
investment by a Portfolio in the securities of the Unaffiliated 
Underlying Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, 
including any purchases made directly from an Underwriting Affiliate. 
The Board of the Unaffiliated Underlying Fund will review these 
purchases periodically, but no less frequently than annually, to 
determine whether or not the purchases were influenced by the 
investment by the Portfolio in the Unaffiliated Underlying Fund. The 
Board of the Unaffiliated Underlying Fund will consider, among other 
things: (a) Whether or not the purchases were consistent with the 
investment objectives and policies of the Unaffiliated Underlying Fund; 
(b) how the performance of securities purchased in an Affiliated 
Underwriting compares to the performance of comparable securities 
purchased during a comparable period of time in underwritings other 
than Affiliated Underwritings or to a benchmark such as a comparable 
market index; and (c) whether or not the amount of securities purchased 
by the Unaffiliated Underlying Fund in Affiliated Underwritings and the 
amount purchased directly from an Underwriting Affiliate have changed 
significantly from prior years. The Board of an Unaffiliated Underlying 
Fund will take any appropriate actions based on its review, including, 
if appropriate, the institution of procedures designed to assure that 
purchases of securities in Affiliated Underwritings are in the best 
interests of shareholders.
    7. Each Unaffiliated Underlying Fund will maintain and preserve 
permanently in an easily accessible place a written copy of the 
procedures described in the preceding condition, and any modifications 
to such procedures, and will maintain and preserve for a period of not 
less than six years from the end of the fiscal year in which any 
purchase from an Affiliated Underwriting occurred, the first two years 
in an easily accessible place, a written record of each purchase of 
securities in an Affiliated Underwriting once an investment by a 
Portfolio in the securities of an Unaffiliated Underlying Fund exceeds 
the limit of section 12(d)(1)(A)(i) of the Act, setting forth the: (a) 
Party from whom the securities were acquired, (b) identity of the 
underwriting syndicate's members, (c) terms of the purchase, and (d) 
information or materials upon which the determinations of the Board of 
the Unaffiliated Underlying Fund were made.
    8. Prior to its investment in shares of an Unaffiliated Underlying 
Fund in excess of the limit in section 12(d)(1)(A)(i) of the Act, the 
Portfolio and the Unaffiliated Underlying Fund will execute a 
Participation Agreement stating, without limitation, that their Boards 
and their investment advisers understand the terms and conditions of 
the order and agree to fulfill their responsibilities under the order. 
At the time of its investment in shares of an Unaffiliated Underlying 
Fund in excess of the limit in section 12(d)(1)(A)(i), the Portfolio 
will notify the Unaffiliated Underlying Fund of the investment. At such 
time, the Portfolio will also transmit to the Unaffiliated Underlying 
Fund a list of the names of each Portfolio Affiliate and Underwriting 
Affiliate. The Portfolio will notify the Unaffiliated Underlying Fund 
of any changes to the list as soon as reasonably practicable after a 
change occurs. The Unaffiliated Underlying Fund and the Portfolio will 
maintain and preserve a copy of the order, the Participation Agreement, 
and the list with any updated information for the duration of the 
investment and for a period of not less than six years thereafter, the 
first two years in an easily accessible place.
    9. Before approving any advisory contract under section 15 of the 
Act, the Board of each Portfolio, including a majority of the 
Disinterested Trustees, shall find that the advisory fees charged under 
the advisory contract are based on services provided that are in 
addition to, rather than duplicative of, services provided under the 
advisory contract(s) of any Underlying Fund in which the Portfolio may 
invest. Such finding, and the basis upon which the finding was made, 
will be recorded fully in the minute books of the appropriate 
Portfolio.
    10. Roszel Advisors will waive fees otherwise payable to it by a 
Portfolio in an amount at least equal to any compensation (including 
fees received pursuant to any plan adopted by an Unaffiliated 
Underlying Fund pursuant to rule 12b-1 under the Act) received from an 
Unaffiliated Fund by Roszel Advisors, or an affiliated person of Roszel 
Advisors, other than any advisory fees paid to Roszel Advisors or its 
affiliated person by the Unaffiliated Fund, in connection with the 
investment by the Portfolio in the Unaffiliated Fund. Any Subadviser 
will waive fees otherwise payable to the Subadviser, directly or 
indirectly, by the Portfolio in an amount at least equal to any 
compensation received by the Subadviser, or an affiliated person of the 
Subadviser, from an Unaffiliated Fund, other than any advisory fees 
paid to the Subadviser or its affiliated person by the Unaffiliated 
Underlying Fund, in connection with the investment by the Portfolio in 
the Unaffiliated Underlying Fund made at the direction of the 
Subadviser. In the event that the Subadviser waives fees, the benefit 
of

[[Page 7016]]

the waiver will be passed through to the Portfolio.
    11. With respect to Registered Separate Accounts that invest in a 
Portfolio, no sales load will be charged at the Portfolio level or at 
the Underlying Fund level. Other sales charges and service fees, as 
defined in NASD Conduct Rule 2830, if any, will only be charged at the 
Portfolio level or at the Underlying Fund level, not both. With respect 
to other investment in a Portfolio, any sales charges and/or service 
fees charged with respect to shares of the Portfolio will not exceed 
the limits applicable to a funds of funds set forth in NASD Conduct 
Rule 2830.
    12. No Underlying Fund will acquire securities of any other 
investment company or company relying on section 3(c)(1) or 3(c)(7) of 
the Act in excess of the limits contained in section 12(d)(1)(A) of the 
Act, except to the extent that such Underlying Fund: (a) Receives 
securities of another investment company as a dividend or as a result 
of a plan of reorganization of a company (other than a plan devised for 
the purpose of evading section 12(d)(1) of the Act); or (b) acquires 
(or is deemed to have acquired) securities of another investment 
company pursuant to exemptive relief from the Commission permitting 
such Underlying Fund to: (i) Acquire securities of one or more 
affiliated investment companies for short-term cash management 
purposes, or (ii) engage in interfund borrowing and lending 
transactions.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-2120 Filed 2-5-08; 8:45 am]
BILLING CODE 8011-01-P
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