[Federal Register Volume 63, Number 70 (Monday, April 13, 1998)]
[Notices]
[Pages 18052-18054]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9596]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-23104; 812-10764]
Nationwide Investing Foundation, et al.; Notice of Application
April 6, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') granting an exemption from
section 15(a) of the Act and rule 18f-2 under the Act.
SUMMARY OF APPLICATION: Applicants request an order permitting existing
and future series of Nationwide Investing Foundation (``NIF''),
Nationwide Investing Foundation II (``NIF II''), Nationwide Investing
Foundation III (``NIF III''), and Nationwide Separate Account Trust
(``NSAT'') to enter into and amend advisory agreements with certain
subadvisers without obtaining shareholder approval.
APPLICANTS: NIF, NIF II, NIF III, NSAT, and Nationwide Advisory
Services, Inc. (the ``Adviser'').
FILING DATES: The application was filed on August 20, 1997, and amended
on March 19, 1998. Applicants have agreed to file an amendment during
the notice period, the substance of which is incorporated in this
notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on April 27, 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 may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, Three Nationwide Plaza, Columbus, Ohio 43215.
FOR FURTHER INFORMATION CONTACT: H.R. Hallock, Jr., Senior Counsel, at
(202) 942-0568 or Edward P. Macdonald, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application is available for a fee by writing
the SEC's Public Reference Branch at 450 Fifth Street, N.W.,
Washington, D.C. 20549, or by telephone at (202) 942-8090.
Applicants' Representations
1. Each of NIF, NIF II, NIF III, and NSAT (collectively, the
``Trusts) is a registered open-end management investment company
offering multiple series (the ``Funds'') with different investment
objectives and policies. NIF and NIF II presently offer to the public
four and two Funds, respectively. NIF III, which presently consists of
nine inactive Funds, was created primarily to acquire all the Funds of
NIF, NIF II and one other trust pursuant to a plan of reorganization to
be effected in May 1998. NSAT, which presently consists of fifteen
series (fourteen of which are covered by the application),\1\ offers
shares to life insurance company separate accounts to fund the benefits
of variable insurance and annuity policies, and to other open-end
management investment companies created by the Adviser. The Trusts may
each create additional Funds in the future
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\1\ Applicants are not seeking relief for the Nationwide
Strategic Value Fund, a series of NSAT. Accordingly, that series is
excluded from the definition of the term ``Fund.''
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2. The Adviser, an investment adviser registered under the
Investment Advisers Act of 1940 (``Advisers Act'') and a wholly-owned
subsidiary of Nationwide Life Insurance Company, serves as the
investment adviser for each Trust. The Adviser provides general
investment management services for each Fund under an investment
advisory agreement (collectively, ``Investment Advisory
[[Page 18053]]
Agreements''). The Investment Advisory Agreements meet the requirements
of section 15(a) of the Act and have been approved for each Fund by the
Board of Trustees of the respective Trust (the ``Board'') and the
shareholders of the Fund.
3. Specific portfolio management for the Funds is provided by the
Adviser and/or one or more subadvisers (the ``Subadvisers''). At
present, only three Funds, each a series of NSAT, have engaged more
than one Subadviser: Nationwide Small Company Fund has engaged six
Subadvisers, Nationwide Income Fund has engaged two Subadvisers, and
Nationwide Select Advisers Mid Cap Fund has engaged three Subadvisers.
Each Subadviser is registered under the Advisers Act and performs
services pursuant to a written subadvisory agreement (``Subadvisory
Agreement''). Each Fund pays an investment advisory fee to the Adviser,
out of which the Adviser pays the Subadvisers.
4. For the Funds employing Subadvisers, the Adviser seeks to
enhance performance and reduce market risk by allocating assets among
one or more Subadvisers (a ``Multiple Adviser Arrangement''). The
Adviser evaluates prospective Subadvisers and then monitors their
performance. The Adviser also recommends to the Trust's Board whether a
Subadviser's contract should be renewed, modified or terminated.
5. Applicants request an order under section 6(c) of the Act
granting relief from section 15(a) of the Act and rule 18f-2 thereunder
to permit them to enter into and materially amend, and the Subadvisers
to act pursuant to, written advisory contracts without approval by a
majority of the outstanding voting securities of each Fund. Applicants
request that such exemptive relief apply to any other open-end
management investment company or series thereof that in the future is
advised by the Adviser, or by a person controlling, controlled by or
under common control with, the Adviser (a ``Future Fund''), provided
such Future Fund operates in substantially the same manner as the Funds
and complies with the terms and conditions of the application.
Applicants' Legal Analysis
1. Section 15(a) of the Act and rule 18f-2 thereunder provide,
together and in substance, that it is unlawful for any person to act as
an investment adviser to a Fund except pursuant to a written contract
which has been submitted to and approved by the vote of a majority of
the outstanding voting securities of the Fund.
2. Section 6(c) of the Act authorizes the SEC to exempt any person
or transaction or any class or classes of persons or transactions from
any provision of the Act or rules under the Act, if such exemption is
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 that the section 6(c)
standards for an exemption have been met.
3. Applicants state that the Trusts' investment management
structure under a Multiple Adviser Arrangement differs from that of
traditional investment companies. For Funds with one Subadviser, the
Adviser has overall oversight responsibility so that additional or new
Subadvisers can be retained to improve the Fund's overall performance.
For Funds with more than one Subadviser, the Adviser has overall
oversight responsibility so that assets can be reallocated or new
Subadvisers retained. Applicants believe that investors in a Fund with
a Multiple Adviser Arrangement are, in effect, electing to have the
Adviser select one or more Subadvisers to achieve that Fund's
investment objectives. Subadvisers are engaged solely for selection of
portfolio investments, and do not have broader management or
administrative responsibilities with respect to a Fund or the Trusts.
Applicants submit that shareholders will continue to vote on the
Investment Advisory Agreements, and that requiring shareholder approval
of the Subadvisory Agreements would increase a Trust's expenses and
delay the prompt implementation of actions deemed advisable by the
Adviser and the Trust's Board.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Adviser will not enter into a Subadvisory Agreement with any
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 Funds or by reason of
controlling, being controlled by, or under common control with another
Subadviser (other than the Adviser) (an ``Affiliated Subadviser'')
without such agreement, including the compensation to be paid
thereunder, being approved by the shareholders of the applicable Fund,
or in the case of a Fund offered by NSAT, by the unit holders of any
separate account for which that Fund serves as a funding medium.
2. At all times, a majority of each Trust's trustees will be
persons each of whom is not an ``interested person'' of that Trust as
defined in section 2(a)(19) of the Act (``Independent Trustees''), and
the nomination of new or additional Independent Trustees will be placed
with the discretion of the then existing Independent.
3. When a Subadviser change is proposed for a Fund with an
Affiliated Subadviser, the Trust's trustees, including a majority of
the Independent Trustees, will make a separate finding, reflected in
the Trust's board minutes, that such change is in the best interests of
the Fund and its shareholders (or, in the case of a Fund offered by
NSAT, the unit holders of any separate account for which that Fund
serves as a funding medium) and does not involve a conflict of interest
from which the Adviser or the Affiliated Subadviser derives an
inappropriate advantage.
4. With respect to Multiple Adviser Arrangements, the Adviser will
provide general management services to each such Fund, including
overall supervisory responsibility for the general management and
investment of such Funds' securities portfolios, and, subject to review
and approval by the applicable Trust's Board, will: (i) Set the Funds'
overall investment strategies; (ii) select Subadvisers; (iii) allocate
and, when appropriate, reallocate a Fund's assets among the Adviser and
one or more Subadvisers; (iv) monitor and evaluate the performance of
the Subadvisers; and (v) implement procedures reasonably designed to
ensure that the Subadvisers comply with the relevant Fund's investment
objectives, policies, and restrictions.
5. Within 90 days of the hiring of any new Subadviser, the Adviser
will furnish shareholders (or, in the case of a Fund offered by NSAT,
the unit holders of any separate account for which that Fund serves as
a funding medium) all information about the new Subadviser that would
be included in a proxy statement.
Such information will include any change in such disclosure caused
by the addition of a new Subadviser. The Adviser will meet this
condition by providing shareholders (or, in the case of a Fund offered
by NSAT, the unit holders of any separate account for which the Fund
serves as a funding medium) with an information statement which meets
the requirements of Regulation 14C and Schedule 14C under the
Securities Exchange Act of 1934 (the ``1934 Act''). The information
statement
[[Page 18054]]
will also meet the requirements of Item 22 of Schedule 14A under the
1934 Act.
6. Each Fund, and any Future Fund, will disclose in its respective
prospectus the existence, substance, and effect of any order granted
pursuant to the application. In addition, each Fund will hold itself
out to the public as employing the management structure described in
the application. The prospectus relating to a Fund will prominently
disclose that the Adviser has the ultimate responsibility to oversee
Subadvisers and recommend their hiring, termination and replacement.
7. Before a Fund may rely on the order requested by applicants, the
operations of the Fund in the manner described in the application will
have been or will be approved by a majority of that Fund's outstanding
voting securities (or, in the case of a Fund offered by NSAT, the
unitholders of any separate account for which that Fund serves as a
funding medium), as defined in the Act. In the case of a Future Fund
whose public shareholders (or separate account in the case of a Future
Fund offered by NSAT) purchase shares on the basis of a prospectus
containing the disclosure contemplated by condition 6 above, by the
sole initial shareholder before offering shares of such Future Fund
(or, in the case of a Future Fund offered by NSAT, units of the
separate account for which that Fund serves as a funding medium) to the
public.
8. No Trustee of officer of the Trusts or director or officer of
the Adviser will own directly or indirectly (other than through a
pooled investment vehicle that is not controlled by any such trustee,
director or officer) any interest in a Subadviser except for: (i)
Ownership of interests in the Adviser or any entity that controls, is
controlled by or is under common control with the Adviser; or (ii)
ownership of 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. 98-9596 Filed 4-10-98; 8:45 am]
BILLING CODE 8010-01-M
