[Federal Register Volume 63, Number 32 (Wednesday, February 18, 1998)]
[Notices]
[Pages 8227-8229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3929]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23024; 812-10928]
Nationwide Investing Foundation III, et al.; Notice of
Application
February 10, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application under section 17(b) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from section 17(a)
of the Act.
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SUMMARY OF APPLICATION: Order requested to allow certain series of a
registered open-end management investment company to acquire all of the
assets of certain series of three registered open-end management
investment companies. Because of certain affiliations, applicants may
not rely on Rule 17a-8 under the Act.
APPLICANTS: Nationwide Investing Foundation III (``NIF III''),
Nationwide Investing Foundation (``NIF''), Nationwide Investing
Foundation II (``NIF II''), Financial Horizons Investment Trust
(``FHIT''), and Nationwide Advisory Services, Inc. (``NAS'').
FILING DATES: The application was filed on December 24, 1997, and
amended on February 6, 1998.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
persons 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 March 5,
1998, 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
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street NW., Washington, DC 20549.
Applicants, Three Nationwide Plaza, Columbus, OH 43215.
FOR FURTHER INFORMATION CONTACT:
Lisa McCrea, Attorney Adviser, at (202) 942-0562, or Nadya B. Roytblat,
Assistant Director, 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
SEC's Public Reference Branch, 450 5th Street NW., Washington, DC 20549
(tel. 202-942-8090).
Applicants' Representations
1. NIF III, an Ohio business trust, is an open-end management
investment company registered under the Act. NIF III consists of nine
series: Nationwide Growth Fund, Nationwide Fund, Nationwide Bond Fund,
Nationwide Money Market Fund, Nationwide Intermediate U.S. Government
Bond Fund, Nationwide Mid Cap Growth Fund, (the ``NIF III Acquiring
Series''), Nationwide Tax-Free Income Fund, Nationwide Long-Term U.S.
[[Page 8228]]
Government Bond Fund, and Nationwide S&P 500 Index Fund.\1\ NIF III
plans to offer initially one class of shares, class D that carries a
front-end sales charge, for each of its series, other than the
Nationwide Money Market Fund, which will issue shares without class
designation or sales charge.
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\1\ NIF III's Nationwide Tax-Free Income Fund, Nationwide Long-
Term U.S. Government Bond Fund, and Nationwide S&P 500 Index Fund
are not applicants for the relief requested.
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2. NIF, a Michigan business trust, is an open-end management
investment company registered under the Act. NIF currently offers four
series: Nationwide Growth Fund, Nationwide Fund, Nationwide Bond Fund,
and Nationwide Money Market Fund (the ``NIF Acquired Series''). Shares
of Nationwide Growth Fund, Nationwide Fund, and Nationwide Bond Fund
are subject to a front-end sales charge. NIF II, a Massachusetts
business trust, is an open-end management investment company registered
under the Act, and currently offers two series, Nationwide U.S.
Government Income Fund (the ``NIF II Acquired Series''), and Nationwide
Tax-Free Income Fund.\2\ Shares of the Nationwide U.S. Government
Income Fund are subject to a contingent deferred sales charge. FHIT, a
Massachusetts business trust, is an open-end management investment
company registered under the Act. FHIT currently offers four series:
Growth Fund, Cash Reserve Fund (the ``FHIT Acquired Series''),
Municipal Bond Fund, and Government Bond Fund.\3\ Shares of the Growth
Fund are subject to a contingent deferred sales charge. The NIF
Acquired Series, NIF II Acquired Series, and FHIT Acquired Series
together are the ``Acquired Series''.
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\2\ NIF II's Nationwide Tax-Free Income Fund is not an applicant
for the relief requested.
\3\ FHIT's Municipal Bond Fund and Government Bond Fund are not
applicants for the relief requested.
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3. NAS is registered as an investment adviser under the Investment
Advisers Act of 1940. NAS serves as investment adviser for NIF III and
the Acquiring Series, and for NIF, NIF II, FHIT, and the Acquired
Series. NAS is a wholly-owned subsidiary of Nationwide Life Insurance
Company, which, in turn, is wholly-owned by Nationwide Financial
Services, Inc. (``NFS''). NFS is controlled by the Nationwide
Corporation, which is controlled by Nationwide Mutual Insurance
Company.
4. As of December 18, 1997, Nationwide Life Insurance Company,
directly or indirectly owned, controlled or held the power to vote 31%
of the outstanding shares of NIF's Nationwide Growth Fund, 24.1% of
NIF's Nationwide Fund, 16.8% of NIF's Nationwide Bond Fund, 54.4% of
NIF's Nationwide Money Market Fund, 15.8% of NIF II's Nationwide U.S.
Government Income Fund, and 5.3% of FHIT's Growth Fund, and 73.5% of
FHIT's Cash Reserve Fund. These shares of NIF, NIF II, and FHIT are
owned by separate accounts of Nationwide Life Insurance Company, which
vote these shares in accordance with instructions received from the
underlying variable annuity contract owners. If no instructions are
received from the underlying variable annuity contract owners, the
separate accounts vote the shares in the same proportion as the votes
cast on behalf of variable annuity contract owners who submit timely
instructions.
5. On November 7, 1997, the boards of trustees of NIF III, NIF, NIF
II and FHIT (the ``Boards''), including the disinterested trustees,
considered and unanimously approved Agreements and Plans of
Reorganization between NIF III, NIF, NIF II and FHIT (the
``Reorganization''). In the Reorganization, each of NIF, NIF II, and
FHIT has agreed to sell all of its assets to the Acquiring Series, in
exchange for assumption of the Acquired Series' liabilities and the
issuance and delivery of class D shares of the corresponding Acquiring
Series of NIF III (the NIF III Money Market Fund will issue and deliver
shares without any class designation) equal in net asset value at the
close of business at the Valuation Time (defined below) to the value of
the shares of the corresponding Acquired Series. The Valuation Time is
intended to be 4:00 p.m., Eastern Standard Time, on the day before the
assets and liabilities of the Acquired Series are transferred to the
corresponding Acquired Series.
6. No sales charge will be incurred by shareholders of the Acquired
Series in connection with their acquisition of corresponding Acquiring
Series shares. Applicants state that the investment objectives,
policies and restrictions of the Acquiring Series are substantially
similar to those of the corresponding Acquired Series.
7. The Boards determined that the Reorganization is in the best
interests of NIF III, NIF, NIF II, and FHIT, and of the shareholders of
the Acquired Series and the corresponding Acquiring Series, and that
the interests of shareholders would not be diluted as a result of the
Reorganization. In assessing the Reorganization, the factors considered
by the Boards included: (a) The business objectives and purposes of the
Reorganization, namely, becoming three separate business entities of
NIF, NIF II, and FHIT into one business entity, NIF III; (b) the
compatibility of the investment objectives, polices and restrictions
between the respective Acquired Series and the corresponding Acquiring
Series; (c) the terms and conditions, including the allocation of
expenses of the Reorganization; (d) the tax-free nature of the
Reorganization; and (e) the expense ratios of the Acquiring Series and
the corresponding Acquired Series.
8. NAS has agreed to pay for 50% of the Reorganization fees and
expenses of NIF III, NIF, NIF II, and FHIT. NAS also has agreed to pay
for 50% of proxy solicitation and other costs associated with the
special meeting of shareholders of NIF, NIF II, and FHIT. NIF III bears
its own organizational costs.
9. On November 26, 1997, NIF III filed with the SEC its
registration statement on Form N-14, containing a preliminary combined
prospectus/proxy statement, which became effective on January 8, 1998.
Applicants sent the prospectus/proxy statement to Acquired Series
shareholders on or about January 12, 1998, for their approval at a
special shareholder meeting to be held on February 16, 1988.
10. The Reorganization is subject to the following conditions
precedent: (a) That the shareholders of the Acquired Series approve the
Agreement; (b) that the Acquired Series and the Acquiring Series
receive opinions of counsel to the effect that the Reorganization will
be tax-free for the Acquiring Series, the Acquired Series, and their
shareholders; and (c) that applicants will receive from the SEC and
exemption from section 17(a) of the Act for the Reorganization.
Applicants agree not to make any material changes to the Agreement
without prior SEC approval.
Applicants' Legal Analysis
1. Section 17(a) of the Act, in relevant part, prohibits an
affiliated person of a registered investment company, or any affiliated
person of such a person, acting as principal, from knowingly selling
any security or other property to the company, or purchasing from the
company and security or other property.
2. Section 2(a)(3) of the Act defines the term ``affiliated person
of another person'' to include, in pertinent part, any person directly
or indirectly owning, controlling, or holding with power to vote, 5% or
more of the outstanding voting securities of such other person, and any
person directly or indirectly controlling, controlled by, or under
common control with such other person, and if such other person is an
[[Page 8229]]
investment company, any investment adviser thereof.
3. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) mergers, consolidations, or purchases or sales of
substantially all of the assets of registered investment companies that
are affiliated persons solely by reason of having a common investment
adviser, common directors/trustees, and/or common officers, provided
that certain conditions are satisfied.
4. Applicants believe that they may not rely on rule 17a-8 in
connection with the Reorganization, because an affiliate of NAS,
Nationwide Life Insurance Company, directly or through its separate
accounts, owns, controls or holds the power to vote 5% or more of the
outstanding voting securities of each of NIF's Nationwide Growth Fund,
Nationwide Fund, Nationwide Bond Fund, Nationwide Money Market Fund,
and NIF II's Nationwide U.S. Government Income Fund, and FHIT's Growth
fund and Cash Reserve Fund. Applicants assert that NIF, NIF II, FHIT
and each of the respective Acquired Series may be an affiliated person
of Nationwide Life Insurance Company under section 2(a((3)(B) of the
Act.
5. Section 17(b) of the Act provides that the SEC may exempt a
transaction from the provisions of section 17(a) if the terms of the
proposed transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching on
the part of any person concerned; the proposed transaction is
consistent with the policy of each registered investment company
concerned; and the proposed transaction is consistent with the general
purposes of the Act.
6. Applicants submit that the Reorganization satisfies the
standards of section 17(b). Applicants believe the terms of the
Reorganization are fair and reasonable and do not involve overreaching.
Applicants state that the exchange is based on the relative net asset
values of the relevant Funds' shares, and no sales charge will be
incurred by shareholders of the Acquired Series in connection with
their acquisition of corresponding Acquiring Series Shares. Applicants
assert that the Reorganization is consistent with the investment
objectives of the Acquired Series and the corresponding Acquiring
Series.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-3929 Filed 2-17-98; 8:45 am]
BILLING CODE 8010-01-M
