[Federal Register Volume 66, Number 250 (Monday, December 31, 2001)]
[Notices]
[Pages 67580-67582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-32076]


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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.

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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\
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    \1\ Applicants also request relief with respect to all 
registered open-end investment companies and 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.

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[[Page 67581]]

    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 re-investment 
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 sub-account) 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

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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 sub-account 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