[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