[Federal Register Volume 67, Number 114 (Thursday, June 13, 2002)]
[Notices]
[Pages 40755-40757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14945]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-25606 ; 812-12766]


Touchstone Investment Trust, et al.; Notice of Application

June 6, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

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

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    Summary of Application: Applicants request an order that would 
permit them to enter into and materially amend subadvisory agreements 
without shareholder approval. Applicants: Touchstone Investment Trust 
(``TINT''), Touchstone Strategic Trust (``TST''), Touchstone Tax-Free 
Trust (``TTFT'') and Touchstone Variable Series Trust (``TVST'') (TINT, 
TST, TTFT and TVST each a ``Trust'', and collectively, the ``Trusts'') 
and Touchstone Advisors, Inc. (the ``Adviser'').
    Filing Dates: The application was filed on January 29, 2002 and 
amended on June 5, 2002.
    Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on July 1, 2002 and should be accompanied by proof of service 
on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service.

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Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, Jill T. McGruder, Touchstone Advisors, Inc., 
221 E. 4th Street, Suite 300, Cincinnati, OH 45202.

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

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

Applicants' Representations

    1. Each Trust is a Massachusetts business trust registered under 
the Act as an open-end management investment company. Each Trust is 
comprised of one or more series (each a ``Fund'', and collectively, the 
``Funds''), each with its own investment objectives and policies.\1\ 
Shares of TVST Funds are offered solely to separate accounts 
established by The Western and Southern Life Insurance Company and its 
life insurance affiliates.
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    \1\ Applicants request that any relief granted pursuant to the 
application also apply to future series of the Trust and any other 
registered open-end management investment company or series thereof 
the Trust and any other registered open-end management investment 
company or series thereof that: (a) Are advised by the Adviser or a 
person controlling, controlled by, or under common control with the 
Adviser (included in the term ``Adviser''); (b) uses the multi-
manager structure described in the application; and (c) complies 
with the terms and conditions of the application (together, ``Future 
Funds'', included in the term ``Funds''). All entities that 
currently intend to rely on the requested relief are named as 
applicants. If the name of any Fund should, at any time, contain the 
name of a Subadviser, it will also contain the name of the Adviser, 
which will appear before the name of the Subadviser.
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    2. The Adviser, an Ohio corporation, is registered as an investment 
adviser under the Investment Advisers Act of 1940 (``Advisers Act''). 
Each Trust has entered into an investment advisory agreement with the 
Adviser with respect to each of the Funds of such Trust (each, an 
``Advisory Agreement''), which was approved by the board of trustees of 
the Trust (``Board''), including a majority of the trustees who are not 
``interested persons'' as defined in section 2(a)(19) of the Act (the 
``Independent Trustees''), and by each Fund's shareholders. Under the 
terms of the Advisory Agreement, the Adviser manages the assets of the 
Funds and may hire one or more subadvisers (``Subadvisers'') to 
exercise day-to-day portfolio management of each of the Funds pursuant 
to separate investment advisory agreements (``Subadvisory 
Agreements''). All current and future Subadvisers will be registered or 
exempt from registration under the Advisers Act. Subadvisers are 
recommended to the Board by the Adviser and selected and approved by 
the Board, including a majority of the Independent Trustees. The 
Adviser compensates each Subadviser out of the fees paid to the Adviser 
by the applicable Fund.
    3. The Adviser monitors the Funds and the Subadvisers and makes 
recommendations to the Board regarding allocation, and reallocation, of 
assets between Subadvisers and is responsible for recommending the 
hiring, termination and replacement of Subadvisers. The Adviser 
recommends Subadvisers based on a number of factors used to evaluate 
their skills in managing assets pursuant to particular investment 
objectives.
    4. Applicants request an order to permit the Adviser, subject to 
the oversight of the Board, to enter into and materially amend 
Subadvisory Agreements without shareholder approval. The requested 
relief will not extend to a Subadviser that is an ``affiliated person'' 
(as defined in section 2(a)(3) of the Act) of the Trust or the Adviser, 
other than by reason of serving as a Subadviser to one or more of the 
Funds (``Affiliated Subadviser'').\2\
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    \2\ Two of the current Subadvisers, Fort Washington Investment 
Advisors, Inc. and Todd Investment Advisors, Inc., are Affilated 
Subadvisers.
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Applicants' Legal Analysis

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

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Before a Fund may rely on the requested order, the operation of 
the Fund in the manner described in the application will be approved by 
a majority of the outstanding voting securities of the Fund (or, if the 
Fund serves as a funding medium for any sub-account of a registered 
separate account, pursuant to voting instructions provided by the 
unitholders of the sub-account), as defined in the Act, or in the case 
of a Fund whose public shareholders (or variable contract owners 
through a separate account) purchased shares on the basis of a 
prospectus containing the disclosure contemplated by condition 2 below, 
by the initial shareholders prior to the offering of shares of the Fund 
to the public (or the variable contract owners through a separate 
account).
    2. Each Fund's prospectus will disclose the existence, substance 
and effect of any order granted pursuant to the application. In 
addition, each Fund relying on the requested order will hold itself out 
to the public as employing the management structure described in the 
application. The prospectus with respect to each Fund will prominently 
disclose that the Adviser has ultimate responsibility (subject to 
oversight by the Board) to oversee each Subadviser to the Fund and 
recommend their hiring, termination and replacement.
    3. Within 90 days of the hiring of any new Subadviser, the Adviser 
will

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furnish the shareholders of the applicable Fund (or, if the Fund serves 
as a funding medium for a sub-account of a registered separate account, 
the unitholders of the sub-account who have allocated assets to that 
sub-account) all the information about the new Subadviser that would be 
included in a proxy statement. Such information will include any 
changes in such information caused by the addition of a new Subadviser. 
To meet this obligation, the Adviser will provide the shareholders of 
the applicable Funds (or, if the Fund serves as a funding medium for 
any sub-account of a registered separate account, the unitholders of 
the sub-account) with an information statement meeting the requirements 
of Regulation 14C and Schedule 14C under the Securities Exchange Act of 
1934, as well as the requirements of Item 22 of Schedule 14A under that 
Act.
    4. The Adviser will not enter into a Subadvisory Agreement with any 
Affiliated Subadviser without such Subadvisory Agreement, including the 
compensation to be paid thereunder, being approved by the shareholders 
of the applicable Fund (or, if the Fund serves as a funding medium for 
any sub-account of a registered separate account, pursuant to voting 
instructions provided by the unitholders of the sub-account).
    5. At all times, a majority of each Board will be Independent 
Trustees, and the nomination of new or additional Independent Trustees 
will be placed within the discretion of the then existing Independent 
Trustees.
    6. When a Subadviser change is proposed for a Fund with an 
Affiliated Subadviser, the applicable Board, including a majority of 
the Independent Trustees, will make a separate finding, reflected in 
such Board's minutes, that the change is in the best interests of the 
applicable Fund and its shareholders (or, if the Fund serves as a 
funding medium for any sub-account of a registered separate account, in 
the best interests of the Fund and unitholders of any sub-account) and 
does not involve a conflict of interest from which the Adviser or the 
Affiliated Subadviser derives an inappropriate advantage.
    7. The Adviser will provide general management services to each of 
the Funds relying on the requested order, including overall supervisory 
responsibility for the general management and investment of each Fund's 
securities portfolio, and, subject to Board review and approval, will: 
(a) Set each Fund's overall investment strategies; (b) recommend and 
select Subadvisers; (c) when appropriate, allocate and reallocate each 
Fund's assets among Subadvisers; (d) monitor and evaluate Subadviser 
performance; and (e) implement procedures reasonably designed to ensure 
Subadvisers comply with the related Fund's investment objectives, 
policies and restrictions.
    8. No director, trustee or officer of a Fund or director or officer 
of the Adviser will own directly or indirectly (other than through a 
pooled investment vehicle that is not controlled by the director, 
trustee or officer) any interest in a Subadviser except for ownership 
of (a) interests in the Adviser or any entity that controls, is 
controlled by, or is under common control with the Adviser; or (b) less 
than 1% of the outstanding securities of any class of equity or debt of 
a publicly-traded company that is either a Subadviser or an entity that 
controls, is controlled by, or is under common control with a 
Subadviser.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14945 Filed 6-12-02; 8:45 am]
BILLING CODE 8010-01-P