[Federal Register Volume 64, Number 111 (Thursday, June 10, 1999)]
[Notices]
[Pages 31330-31331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14680]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23857; 812-11622]
Norwest Advantage Funds, et al.; Notice of Application
June 3, 1999.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 17(b) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from section 17(a)
of the Act.
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SUMMARY OF APPLICATION: Applicants, Norwest Advantage Funds (``NAF''),
Core Trust (Delaware) (``Core Trust'') (each, a ``Trust''), Norwest
Corporation Master Savings Trust (the ``NW Plan''), Norwest Bank
Minnesota, N.A. (``Norwest Bank''), and Norwest Investment Management,
Inc. (``NIM'') seek an order to permit an in-kind redemption of shares
of the Fund by an affiliated person of the Fund.
FILING DATE: The application was filed on May 28, 1999. Applicants have
agreed to file an amendment during the notice period, the substance of
which is reflected in this notice.
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 June 28, 1999, 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, Two Portland Square, Portland, ME 04101 and
Norwest Center, Sixth and Marquette, Minneapolis, MN 55490-1026.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 942-0574 or Nadya Roytblat, Assistant Director, 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. NAF is organized as a Delaware business trust and is registered
under the Act as an open-end management investment company. NAF offers
shares in 39 separate series, including the Index Fund (``Fund''). As a
feeder fund in a master-feeder structure, the Fund seeks to achieve its
investment objective by investing all of its assets in the Index
Portfolio of Core Trust (``Portfolio''). The investment objective of
the Portfolio is to replicate the return of the S&P 500 Index. Core
Trust is organized as a Delaware business trust and is registered under
the Act as an open-end management investment company. Core Trust offers
shares in 21 separate series, including the Portfolio.
2. Norwest Bank is a national bank and is a wholly-owned subsidiary
of Wells Fargo & Company, a bank holding company. NIM is a wholly-owned
subsidiary of Norwest Bank and is registered under the Investment
Advisers Act of 1940 (``Advisers Act''). NIM serves as investment
adviser to the Portfolio. The NW Plan is an employee benefit plan for
affiliates of the Norwest Corporation, the parent corporation of
Norwest Bank. The NW Plan owns approximately 29% of the Fund's
outstanding voting securities.
3. Wells Fargo has determined to combine a number of existing
employee benefit plans, including the NW Plan into a single plan (``New
Plan''). The New Plan will not offer the Fund as an investment option
for plan participants and will instead offer an index investment option
in an index collective trust fund (``CTF'') managed by Barclays Global
Investors, N.A., which is not affiliated with any participant in the
Transaction. The New Plan would redeem in-kind its interest in the Fund
and ultimately reinvest the proceeds of the redemption in the CTF
(``Transaction''). The Transaction is expected to take place on or
about June 30, 1999.
4. The Fund's prospectus and statement of additional information
[[Page 31331]]
provide that, under certain circumstances, the Fund may satisfy a
request for redemption in-kind with portfolio securities. The
Transaction will be completed only if each Trust's board of trustees
(``Board''), including the trustees who are not ``interested persons''
as that term is defined in Section 2(a)(19) of the Act (``Independent
Trustees'') approves the redemption in-kind.
Applicants' Legal Analysis
1. Section 17(a)(2) of the Act generally prohibits an affiliated
person of a registered investment company or an affiliated person of
such person, acting as principal, from knowingly purchasing any
security or other property (except securities of which the seller is
the issuer) from the company. Section 2(a)(3) of the Act defines
``affiliated person'' of another person to include, among others, any
person owning 5% or more of the outstanding voting securities of the
other person and any person controlling, controlled by or under common
control with the other person. Under section 2(a)(9) of the Act, a
person that owns beneficially more than 25% of the voting securities of
a company is presumed to control the company.
2. Applicants state that Norwest Bank, as the record holder on
behalf of the NW Plan of 29% of the outstanding voting securities of
the Fund, would be an affiliated person of the Fund. Applicants also
state that because the Fund holds greater than 5% of the outstanding
voting securities of the Portfolio, the Fund would be an affiliated
person of the Portfolio, and Norwest Bank, through its subsidiary, NIM,
could be viewed as an affiliated person of an affiliated person of the
Portfilio. Applicants state that to the extent that an in-kind
redemption could be viewed as involving the sale of portfolio
securities from the Fund to the NW Plan, section 17a(a)(2) may prohibit
the Transaction.
3. Section 17(b) of the Act provides that, notwithstanding section
17(a) of the Act, the Commission shall exempt a proposed transaction
from section 17(a) of the Act if evidence establishes that: (a) The
terms of the proposed transaction are reasonable and fair and do not
involve overreaching; (b) the proposed transaction is consistent with
the policy of each registered investment company involved; and (c) the
proposed transaction is consistent with the general purposes of the
Act.
4. Applicants submit that the terms of the Transaction meet the
standards set forth in section 17(b) of the Act. Applicants contend
that the potential conflicts of interest posed by an in-kind redemption
are that the portfolio securities redeemed would be selected or priced
in a way that would be unfair to either the redeeming fund or the
remaining shareholders. Applicants state that the redemption in-kind
will not involve any choice as to the securities to be distributed.
Applicants also submit that the portfolio securities to be distributed
in-kind will be valued in the same manner as they would be valued for
purposes of determining the Fund's net asset value.
Applicants' Conditions
Applicants agree that any order granting the requested relief will
be subject to the following conditions:
1. The Fund will distribute to the NW Plan pursuant to an in-kind
redemption a pro rata share of each portfolio security held by the
Portfolio (``In-Kind Securities''), provided that the Fund may
distribute cash (i) in lieu of odd lot securities, fractional shares
and accruals on such securities, and (ii) as proceeds from the
liquidation of S&P 500 Index futures contracts held by the Portfolio.
2. The In-Kind Securities distributed to the NW Plan will be valued
in the same manner as they would be valued for purposes of computing
the Fund's net asset value.
3. The Fund will maintain and preserve for a period of not less
than six years from the end of the fiscal year in which the proposed
in-kind redemption occurs, the first two years in an easily accessible
place, a written record of the redemption setting forth a description
of each security distributed in-kind, the terms of the in-kind
distribution and the information or materials upon which the valuation
was made.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-14680 Filed 6-9-99; 8:45 am]
BILLING CODE 8010-01-M
