67580 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

6Each Partnership will preserve the accounts,

books, and other documents required to be

maintained in an easily accessible place for the first

two years.

1Applicants also request relief with respect to all

registered open-end investment companies and

an ‘‘affiliated person’’ (as such term is

defined in the Act) of the Partnership

(other than a Third Party Fund), (b)

Citigroup, (c) an officer or director of

Citigroup or (d) an entity (other than a

Third Party Fund) in which the General

Partner acts as a general partner or has

a similar capacity to control the sale or

other disposition of the entity’s

securities. The restrictions contained in

this condition, however, shall not be

deemed to limit or prevent the

disposition of an investment by an

Affiliated Co-Investor (a) to its direct or

indirect wholly owned subsidiary, to

any company (a ‘‘Parent’’) of which the

Affiliated Co-Investor is a direct or

indirect wholly owned subsidiary, or to

a direct or indirect wholly owned

subsidiary of its Parent, (b) to immediate

family members of the Affiliated CoInvestor or a trust or other investment

vehicle established for any Affiliated

Co-Investor or any such family member

or (c) when the investment comprises

securities that are (i) listed on a national

securities exchange registered under

section 6 of the Exchange Act, (ii)

national market system securities

pursuant to section 11A(a)(2) of the

Exchange Act and rule 11Aa2–1

thereunder, (iii) government securities

as defined in section 2(a)(16) of the Act

or other money market instruments or

(iv) listed or traded on any foreign

securities exchange or board of trade

that satisfies regulatory requirements

under the law of the jurisdiction in

which such foreign securities exchange

or board of trade is organized similar to

those that apply to a national securities

exchange or a national market system

for securities.

4. Each Partnership and its General

Partner will maintain and preserve, for

the life of the Partnership and at least

two years thereafter, such accounts,

books and other documents constituting

the record forming the basis for the

audited financial statements that are to

be provided to the Limited Partners in

the Partnership, and each annual report

of the Partnership required to be sent to

the Limited Partners, and agree that all

such records will be subject to

examination by the Commission and its

staff.6

5. The General Partner of each

Partnership will send to each Limited

Partner having an interest in any capital

account of the Partnership, at any time

during the fiscal year then ended,

Partnership financial statements audited

by the Partnership’s independent

accountants. At the end of each fiscal

year, the General Partner will make or

cause to be made a valuation of all of

the assets of the Partnership as of such

fiscal year end in a manner consistent

with customary practice with respect to

the valuation of assets of the kind held

by the Partnership. In addition, as soon

as practicable after the end of each fiscal

year of the Partnership, the General

Partner will send a report to each person

who was a Limited Partner at any time

during the fiscal year then ended,

setting forth such tax information as

shall be necessary for the preparation by

the Limited Partner of his, her or its

federal and state income tax returns and

a report of the investment activities of

the Partnership during that fiscal year.

6. Whenever a Partnership makes a

purchase from or sale to an entity

affiliated with the Partnership by reason

of a 5% or more investment in the entity

by a Citigroup director, officer or

employee, such individual will not

participate in the General Partner’s

determination of whether or not to effect

such purchase or sale.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–32075 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

25325; 812–12288]

One Fund, Inc., Ohio National Fund,

Inc., Dow Target Variable Fund LLC,

and Ohio National Investments, Inc.;

Notice of Application

December 21, 2001.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of an 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.

SUMMARY OF APPLICATION: Applicants,

ONE Fund, Inc. (‘‘ONE Fund’’) (each a

‘‘Fund’’ and, collectively, the ‘‘Funds’’),

and Ohio National Investments, Inc. (the

‘‘Adviser’’), request an order that would

permit applicants to enter into and

materially amend subadvisory

agreements without shareholder

approval.

FILING DATES: The application was filed

on September 29, 2000, and amended

on December 14, 2001.

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 January 15, 2002, 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, Commission, 450

Fifth Street, NW., Washington, DC

20549–0609; Applicants, One Financial

Way, Montgomery, Ohio 45242.

FOR FURTHER INFORMATION CONTACT:

Deepak T. Pai, Senior Counsel, at (202)

942–0574 or Mary Kay Frech, 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

may be obtained for a fee at the

Commission’s Public Reference Branch,

450 Fifth Street, NW., Washington, DC

20549–0102 (telephone (202) 942–8090).

Applicants’ Representations

1. ONE Fund and ON Fund are

Maryland corporations registered under

the Act as open-end management

investment companies. ON Fund offers

its shares only to separate accounts of

The Ohio National Life Insurance

Company (‘‘ONLI’’) and Ohio National

Life Assurance Corporation (‘‘ONLAC’’),

as the underlying investments for

variable annuities issued by ONLI and

variable life insurance contracts issued

by ONLAC. Dow Fund is an Ohio

limited liability company registered

under the act as an open-end

management investment company. Dow

Fund presently sells its interests only to

separate accounts of ONLI as a funding

option to support certain benefits under

variable annuity contracts issued by

ONLI. Each Fund is comprised of

multiple series (‘‘Portfolios’’), each with

its own investment objectives and

policies.1

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67581

their series that in the future are advised by the

Adviser or any entity controlling, controlled by, or

under common control (within the meaning of

section 2(a)(9) of the Act) with the Adviser that are

managed in a manner consistent with the

application, and comply with the terms and

conditions in the application (‘‘Future Funds’’). All

registered open-end management investment

companies that currently intend to rely on the

requested order are named as applicants. If the

name of any Portfolio contains the name of a

manager, as defined below, the Manager’s name

will be preceded by the name of the Adviser.

2. The Adviser, an Ohio corporation,

serves as investment adviser to each of

the Portfolios, and is registered under

the Investment Advisers Act of 1940

(the ‘‘Advisers Act’’). The Adviser is a

wholly-owned subsidiary of ONLI.

3. The Adviser serves as investment

adviser to the Portfolios pursuant to

investment advisory agreements

between the Adviser and the Funds that

were approved by each Fund’s board of

directors (‘‘Board’’), including a

majority of the Directors who are not

‘‘interested persons,’’ as defined in

section 2(a)(19) of the Act, of the Fund

or the Adviser (‘‘Independent

Directors’’), and by the shareholders of

each Fund (the ‘‘Investment Advisory

Agreements’’). Under the terms of the

Investment Advisory Agreements, the

Adviser administers the business and

affairs of the Funds. The Adviser has

overall general supervisory

responsibility for the investment

program of the Portfolios. The Adviser

also selects, contracts with, and

compensates subadvisers (‘‘Managers’’)

to manage the investment and reinvestment of the assets of the

Portfolios. Each Manager is an

investment adviser registered under the

Advisers Act, or exempt from

registration under the Advisers Act, and

performs services pursuant to a written

agreement with the Adviser (‘‘Portfolio

Management Agreement’’). As

compensation for its services, the

Adviser receives a fee from the Funds

computed separately for each of the

Portfolios. Managers’ fees are paid by

the Adviser out of these fees from the

Portfolios.

4. The Adviser selects Managers based

on the continuing quantitative and

qualitative evaluation of their skills and

proven abilities in managing assets

pursuant to a specific investment style.

The Adviser monitors the compliance of

Managers with the investment

objectives and related policies of each

Portfolio and reviews the performance

of each Manager in order to assure

continuing quality of performance. The

Adviser may recommend to the Board

reallocation of Portfolio assets among

Managers, if necessary, or recommend

that the Fund employ or terminate

particular Managers, to the extent the

Adviser deems appropriate to achieve

the overall objectives of a particular

Portfolio.

5. Applicants request relief to permit

the Adviser subject to the oversight of

the Board to enter into and materially

amend Portfolio Management

Agreements without shareholder

approval. The requested relief will not

extend to a Manager that is an affiliated

person, as defined in section 2(a)(3) of

the Act, of the Fund or the Adviser,

other than by reason of serving as a

Manager to one or more of the Portfolios

(an ‘‘Affiliated Manager’’.)

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 pursuant to a written

contract that has been approved by the

vote 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 transactions 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

request an exemption under section 6(c)

of the Act from section 15(a) of the Act

and rule 18f–2 under the Act to permit

them to enter into and materially amend

Portfolio Management Agreements

without shareholder approval.

3. Applicants state that investment

companies such as the Funds that use

an adviser/subadviser structure divide

responsibility for general management

and investment advice between the

Adviser and one or more Managers.

Applicants assert that shareholders rely

on the Adviser to select and monitor

Managers best suited to achieve a

Portfolio’s investment objectives.

Applicants content that from the

perspective of the investor, the role of

the Managers is comparable to that of

individual portfolio managers employed

by other investment advisory firms.

Applicants contend that requiring

shareholder approval of Portfolio

Management Agreements would impose

expenses and unnecessary delays on the

Portfolios, and may preclude the

Adviser from promptly acting in a

manner considered advisable by the

Board. Applicants note that the

Investment Advisory Agreements will

remain fully subject to the requirements

of section 15(a) of the Act and rule 18f–

2 under the Act, including the

requirements for shareholder approval.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. No Portfolio will enter into a

Portfolio Management Agreement with

an Affiliated Manager without such

agreement, including the compensation

to be paid thereunder, being approved

by the shareholders of the Portfolio (or,

if the Portfolio serves as an investment

medium for any sub-account of a

registered separate account, pursuant to

voting instructions by the unitholders of

the sub-account.)

2. At all times, a majority of the Board

will be Independent Directors, and the

nomination of new or additional

Independent Directors will be at the

discretion of the then existing

Independent Directors.

3. When a Manager change is

proposed for a Portfolio with an

Affiliated Manager, the Board, including

a majority of the Independent Directors,

will make a separate finding, reflected

in the Fund’s Board minutes, that the

change is in the best interests of the

Portfolio and its shareholders (or, if the

Portfolio serves as a funding medium for

any sub-account of a registered separate

account, in the best interests of the

Portfolio and the unitholders of any subaccount) and that the change does not

involve a conflict of interests from

which the Adviser or Affiliated Manager

derives an inappropriate advantage.

4. Before a Portfolio may rely on the

order, the operation of the Portfolio in

the manner described in the application

will be approved by a majority of the

Portfolio’s outstanding voting securities

(or, if the Portfolio 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

Portfolio or Future Fund whose public

shareholders (or variable contract

owners through a separate account)

purchased shares on the basis of a

prospectus(es) containing the disclosure

contemplated by Condition 6 below, by

the sole initial shareholder(s) before the

shares of such Portfolio or Future Fund

are offered to the public (or the variable

contract owners through a separate

account.)

5. The Adviser will provide general

management services to the Funds and

their Portfolios, including overall

67582 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3 17 CFR 240.19b–4(f)(6).

4See Securities Exchange Act Release No. 44449

(June 19, 2001), 66FR 33724 (June 25, 2001)(‘‘June

Release’’), approving File No. SR–Amex–2001–29.

supervisory responsibility for the

general management and investment of

each Portfolio’s securities portfolio, and

subject to review and approval by the

Board, will (a) set the Portfolio’s overall

investment strategies; (b) evaluate,

select, and recommend Managers to

manage all or part of a Portfolios assets;

(c) when appropriate, allocate and

reallocate a Portfolio’s assets among

multiple Managers; (d) monitor and

evaluate the performance of Managers;

and (e) implement procedures

reasonably designed to ensure that the

Managers comply with the relevant

Portfolio’s investment objectives,

policies, and restrictions.

6. Each Portfolio relying on the

requested relief will disclose in its

prospectus the existence, substance, and

effect of any order granted pursuant to

the application. In addition, any such

Portfolio will hold itself out as

employing the Adviser/Manager

structure described in the application.

The prospectus will prominently

disclose that the Adviser has ultimate

responsibility to oversee the Managers

and recommend their hiring,

termination and replacement.

7. No Director or officer of the Funds

or officer or director of the Adviser will

own directly or indirectly (other than

through a pooled investment vehicle

that is not controlled by that director or

officer) any interest in a Manager except

for (a) ownership of interests in the

Adviser or any entity that controls, is

controlled by, or is under common

control with the Adviser; or (b)

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 Manager or an

entity that controls, is controlled by or

is under common control with a

Manager.

8. Within 90 days of the hiring of any

new Manager, the Adviser will furnish

shareholders (or, if the Portfolio serves

as a funding medium for any subaccount of a registered separate account,

the Adviser will furnish the unitholders

of the sub-account) with respect to the

appropriate Portfolio all information

about the new Manager that would be

included in a proxy statement. Such

information will include any changes

caused by an addition of a new

Manager. To meet this condition, the

Adviser will provide shareholders (or, if

the Portfolio serves as a funding

medium for any sub-account) with an

information statement meeting the

requirements of Regulation 14C,

Schedule 14C, and Item 22 of Schedule

14A under the Securities Exchange Act

of 1934.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–32076 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–45176; File No. SR–Amex–

2001–105]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

American Stock Exchange LLC,

Relating to a Six-Month Extension of

Automatic Execution for Exchange

Traded Funds

December 20, 2001.

Pursuant to section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 and rule 19b–4 thereunder,2

notice is hereby given that on December

13, 2001, the American Stock Exchange

LLC (‘‘Amex’’ or ‘‘Exchange’’), filed

with the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change as described in

Items I, II, and III below, which Items

have been prepared by the Amex. The

proposed rule change has been filed by

the Amex as a ‘‘non-controversial’’ rule

change under rule 19b–4(f)(6)3 under

the Act. The Commission is publishing

this notice to solicit comments on the

proposed rule change from interested

persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The Amex seeks a six-month

extension of Amex Rule 128A to

continue its pilot program for the

automatic execution of orders for

Exchange Traded Funds (‘‘ETFs’’). The

text of the proposed rule change is

available at the Office of the Secretary,

the Amex, and at the Commission.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

Amex included statements concerning

the purpose of and basis for the

proposed rule change and discussed any

comments it received on the proposed

rule change. The text of these statements

may be examined at the places specified

in Item IV below. The Amex has

prepared summaries, set forth in

Sections A, B, and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

On June 19, 2001, the Commission

approved the Exchange’s proposal,

adopted as Amex Rule 128A, to permit

the automatic execution of orders for

Exchange Traded Funds (‘‘ETFs’’) on a

six-month pilot program basis.4 The

Exchange now seeks to extend the pilot

program for another six months.

Since 1986, the Exchange has had an

automatic order execution feature

(‘‘Auto-Ex’’) for eligible orders in listed

options. The Chicago Board Options

Exchange, Philadelphia Stock Exchange,

and Pacific Exchange established

similar automatic option order

execution features at about the same

time as the Amex, and the newest

options exchange, the International

Securities Exchange, also features

automatic order execution. Auto-Ex,

accordingly, has been a standard feature

of the options markets for a number of

years.

In 1993, the Amex commenced

trading Standard and Poor’s Depositary

Receipts (‘‘SPDRs’’), the first ETF to

be listed and traded on the Exchange.

ETFs are individual securities that

represent a fractional, undivided

interest in a portfolio of securities.

Currently, approximately 100 ETFs are

listed on the Amex. Like an option, an

ETF is a derivative security, and,

according to the Amex, its price is a

function of the value of the portfolio of

securities underlying the ETF. Thus, as

is the case with options, the Exchange

asserts that it is not the price discovery

market for ETFs, and that the price

discovery market is the market or

markets where the underlying securities

trade.

The Exchange is now proposing to

extend its current Auto-Ex technology to

ETFs listed under Amex Rules 1002,

1002A, and 1202 for an additional six

months. The Amex represents that this

will provide investors that send eligible

orders to the Exchange with faster

executions than they otherwise would

receive. The Exchange believes that

many investors desire rapid executions

in trading securities that are priced

derivative since the value of the

underlying instruments may fluctuate

during order processing. The Amex,