[Federal Register Volume 61, Number 113 (Tuesday, June 11, 1996)]
[Notices]
[Pages 29580-29582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14712]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22004; 812-10014]
Norwest Funds, et al.; Notice of Application
June 4, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption Under the Investment
Company Act of 1940 (the ``Act'').
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applicants: Norwest Advantage Funds, Norwest Select Funds, Core Trusts
(collectively, the ``Trusts'') and Norwest Bank Minnesota, N.A.
(``Norwest'').
relevant act section: Order requested under rule 17d-1 to permit
certain transactions in accordance with section 17(d) of the Act and
rule 17d-1 thereunder.
summary of application: Applicants request an order to permit the
series of certain investment companies and certain private accounts to
deposit daily cash balances in one or more joint accounts to be used to
enter into short-term investments.
filing dates: The application was filed on February 26, 1996 and
amended on May 16, 1996.
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 July 1, 1996,
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 SEC's
Secretary.
addresses: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicants, Forum Financial Services, Inc., Two Portland Square,
Portland, Maine 04101; Norwest Bank Minnesota, N.A., Norwest Center,
Sixth and Marquette, Minneapolis, Minnesota 55479-1026.
for further information contact: Suzanne Krudys, Senior Counsel, at
(202) 942-0641, or Alison E. Baur, Branch Chief, (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
SEC's Public Reference Branch.
Applicants' Representations
1. The Trusts, organized as Delaware business trusts, are
registered open-end management investment companies comprised of
multiple series (the ``Series''). Existing and future series of the
Trusts and other registered investment companies or Series thereof that
are advised by Norwest are collectively referred to as the ``Funds''
and individually as a ``Fund.'' Norwest, a national bank, serves as
investment adviser to each Fund. Norwest also serves as transfer agent,
custodian, shareholder servicing and dividend paying agent of each
Trust. The term ``Norwest'' shall include, in addition to the company
itself, any other entity controlling, controlled by or under common
control with Norwest that acts in the future as investment adviser for
the Trusts or other investment companies.
2. Applicants request relief on behalf of themselves and also any
present or future Series and Funds that are advised by Norwest, or any
entity controlling, controlled by, or under common control with Norwest
and any individual corporate, charitable, endowment, common and
collective trust fund, public entity, individual and retirement
accounts for which Norwest serves as investment adviser (the ``Private
Accounts''). All Funds that currently intend to rely on the requested
order are named as applicants.
3. All of the Funds are authorized to invest at least a portion of
their uninvested cash balances in short-term liquid assets. Private
Accounts are invested by Norwest in accordance with each Private
Accounts' investment objectives, policies and restrictions. Assets of
the Funds and Private Accounts are held by Norwest as custodian (the
``Custodian'').
4. The Funds and Private Accounts have uninvested cash balances in
their accounts at the Custodian that are not otherwise invested in
portfolio securities. Generally, such cash balances are invested in
short-term liquid assets, such as commercial paper or U.S. Treasury
bills. Cash balances may also be invested in shares of the money market
series of the Trusts.\1\
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\1\ An SEC exemptive order permits Funds advised by Norwest to
invest their cash balances in shares of certain affiliated money
market series. See Norwest Funds, Investment Company Act Release
Nos. 20940 (Mar. 6, 1995) (notice) and 20983 (Apr. 3, 1995) (order).
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5. Applicants propose to deposit daily cash balances of the Funds
and Private Accounts into one or more joint accounts (the ``Joint
Accounts'') established at the Custodian and to invest the daily
balance of the Joint Account in: (a) Repurchase agreements
``collateralized fully'' (as defined in rule 2a-7 under the Act); (b)
interest-bearing or discounted commercial paper, including dollar
denominated commercial paper of foreign issuers; and (c) any other
short-term money market instruments, including variable rate demand
notes and other tax exempt money market instruments, that constitute
``Eligible Securities'' (as defined in rule 2a-7 under the Act)
(collectively, ``Short-Term Investments''). The Funds and Private
Accounts that are eligible to participate in a Joint Account and that
elect to
[[Page 29581]]
participate in such Account are collectively referred to as
``Participants.''
6. A Participant's decision to use a Joint Account will be based on
the same factors as its decision to make any other short-term liquid
investment. The sole purpose of the Joint Accounts is to provide a
convenient means of aggregating what otherwise would be one or more
daily transactions for some or all Participants necessary to manage
their respective daily account balances.
7. Norwest would be responsible for investing funds held by the
Joint Accounts, establishing accounting and control procedures, and
ensuring fair treatment of Participants. Norwest would manage
investments in the Joint Accounts in essentially the same manner as if
it had invested in such instruments on an individual basis for each
Fund or Private Account. A Participant will be able to transfer a
portion of its cash balances to more than one Joint Account and a Joint
Account would be permitted to invest in more than one Short-Term
Investment.
8. Any repurchase agreements entered into through the Joint Account
will comply with the terms of Investment Company Act Release No. 13005
(February 2, 1983). Applicants acknowledge that they have a continuing
obligation to monitor the SEC's published statements on repurchase
agreements, and represent that repurchase agreement transactions will
comply with future positions of the SEC to the extent that such
positions set forth different or additional requirements regarding
repurchase agreements. In the event that the SEC sets forth guidelines
with respect to other Short-Term Investments, all such investments made
through the Joint Account will comply with those guidelines.
Applicants' Legal Analysis
1. Section 17(d) of the Act and rule 17d-1 thereunder prohibit an
affiliated person of a registered investment company, or an affiliated
person of such a person, from participating in any joint enterprise or
arrangement in which such investment company is a participant, without
an SEC order. The applicants believe that granting the requested order
is consistent with the provisions, policies, and purposes of the Act
and the Funds would participate in the Joint Account on a basis no
different from or less advantageous than that of any other Participant.
2. The Participants, by participating in the proposed Joint
Accounts, and Norwest, by managing the proposed Joint Accounts, could
be deemed to be ``joint participants'' in a transaction within the
meaning of section 17(d) of the Act. In addition, the proposed Joint
Accounts could be deemed to be a ``joint enterprise or other joint
arrangement'' within the meaning of rule 17d-1.
3. Applicants state that the Participants may earn a higher rate of
return on investments through the Joint Accounts relative to the
returns they could earn individually. Under most market conditions, it
is generally possible to negotiate a rate of return on larger Short-
Term Investments that is higher than the rate available on smaller
Short-Term Investments. The Joint Accounts also may increase the number
of dealers and issuers willing to enter into Short-Term Investments
with the Participants and may reduce the possibility that their cash
balances remain uninvested.
4. Applicants believe that no Participant would be in a less
favorable position as a result of the Joint Accounts. Each
Participant's investment in a Joint Account would not be subject to the
claims of creditors, whether brought in bankruptcy, insolvency, or
other legal proceeding, of any other Participant. Each Participant's
liability on any Short-Term Investment would be limited to its interest
in such investment; no Participant would be jointly liable for the
investments of any other Participant.
Applicants state that the Joint Accounts may result in certain
administrative efficiencies and a reduction of the potential for errors
by reducing the number of trade tickets and cash wires that must be
processed by the counterparties to the transactions, the Custodian and
Norwest's trading department.
6. Applicants believe that the proposed operation of the Joint
Account would not result in any conflicts of interest between any of
the Participants and Norwest. When making investments, Norwest would
take into account each Participant's investment objective, policies and
restrictions, its obligation to fairly allocate investment
opportunities among participants, the need for diversification and the
time that cash becomes available.
7. The Boards will have determined, prior to participation by any
Fund, that the procedures for operating the Joint Accounts are
reasonably designed to ensure (i) that the Joint Accounts are not
inherently biased in favor of one Participant over another and should
eliminate any bias due to size or lack thereof in any transaction; and
(ii) that the anticipated benefits to each Participant would be within
an acceptable range of fairness.
8. For the reasons set forth above, applicants believe that
granting the requested order is consistent with the provisions,
policies and purpose of the Act and intention of rule 17d-1.
Applicants' Conditions
Applicants would comply with the following as conditions to any
order granted by the SEC:
1. The Joint Accounts would not be distinguishable from any other
accounts maintained by Participants at the Custodian except that monies
from Participants would be deposited in a Joint Account on a commingled
basis. The Joint Accounts would not have a separate existence and would
not have indicia of a separate legal entity. The sole function of the
Joint Accounts would be to provide a convenient way of aggregating
individual transactions which would otherwise require daily management
by Norwest of uninvested cash balances.
2. Cash in the Joint Accounts would be invested in one or more of
the following, as directed by Norwest: (a) Repurchase agreements
``collateralized fully'' as defined in rule 2a-7 under the Act; (b)
interest-bearing or discounted commercial paper, including dollar
denominated commercial paper of foreign issuers; and (c) any other
short-term money market instruments, including variable rate demand
notes and other tax-exempt money market instruments, that constitute
``Eligible Securities'' (as defined in rule 2a-7 under the Act)
(collectively, ``Short-Term Investments''). Short-Term Investments that
are repurchase agreements would have a remaining maturity of 60 days or
less and other Short-Term Investments would have a remaining maturity
of 90 days or less, each as calculated in accordance with rule 2a-7
under the Act.
3. All assets held in the Joint Accounts would be valued on an
amortized cost basis to the extent permitted by applicable SEC
releases, rules or orders.
4. Each Participant that is a registered investment company valuing
its net assets in reliance on rule 2a-7 under the Act would use the
average maturity of the instruments in the Joint Account in which such
Participant has an interest (determined on a dollar weighted basis) for
the purpose of computing its average portfolio maturity with respect to
its portion of the assets held in a Joint Account on that day.
5. In order to assure that there will be no opportunity for any
Participant to use any part of a balance of a Joint Account credited to
another Participant, no Participant will be allowed to create
[[Page 29582]]
a negative balance in any Joint Account for any reason, although each
Participant will be permitted to draw down its entire balance at any
time. Each Participant's decision to invest in a Joint Account would be
solely at its option, and no Participant would be obligated to invest
in the Joint Account or to maintain any minimum balance in the Joint
Account. In addition, each Participant would retain the sole rights of
ownership to any of its assets invested in the Joint Account, including
interest payable on such assets invested in the Joint Account.
6. Norwest would administer the investment of cash balances in and
operation of the Joint Accounts as part of its general duties under its
advisory agreements with Participants and would not collect any
additional or separate fees for advising any Joint Account.
7. The administration of the Joint Account would be within the
fidelity bond coverage required by section 17(g) of the Act and rule
17g-1 thereunder.
8. The Board of Trustees of each Trust (each a ``Board'') would
adopt procedures pursuant to which the Joint Accounts would operate,
which will be reasonably designed to provide that the requirements of
this application will be met. Each Board will make and approve such
changes as they deem necessary to ensure that such procedures are
followed. In addition, the Board of each Fund would determine, no less
frequently than annually, that the Joint Accounts have been operated in
accordance with the proposed procedures and would permit a Fund to
continue to participate therein only if it determines that there is a
reasonable likelihood that the Fund and its shareholders would benefit
from the Fund's participation.
9. Any Short-Term Investments made through the Joint Accounts would
satisfy the investment criteria of all Participants in that investment.
10. Each Participant and the Custodian would maintain records (in
conformity with Section 31 of the Act and the rules thereunder)
documenting for any given day, the Participant's aggregate investment
in a Joint Account and the Participant's pro rata share of each Short-
Term Investment made through such Joint Account. Each Participant that
is not a registered investment company or registered investment adviser
would make available to the Commission, upon request, such books and
records with respect to its participation in a Joint Account.
11. Short-Term Investments held in a Joint Account generally would
not be sold prior to maturity except if: (a) Norwest believes the
investment no longer presents minimal credit risks; (b) the investment
no longer satisfies the investment criteria of all Participants in the
investment because of a downgrading or otherwise; or (c) in the case of
a repurchase agreement, the counterparty defaults. Norwest may,
however, sell any Short-Term Investment (or any fractional portion
thereof) on behalf of some or all Participants prior to the maturity of
the investment if the cost of such transactions will be borne solely by
the selling Participants and the transaction would not adversely affect
other Participants. In no case would a sale prior to maturity of a
Short-Term Investment on behalf of less than all Participants be
permitted if it would reduce the principal amount or yield to be
received by other Participants in the Short-Term Investment or
otherwise adversely affect the other Participants. Each Participant of
a Joint Account will be deemed to have consented to such sale and
partition of the investments in the Joint Account.
12. Short-Term Investments held through a Joint Account with a
remaining maturity of more than seven days, as calculated pursuant to
rule 2a-7 under the Act, will be considered illiquid and, for any
Participant that is an open-end investment company registered under the
Act, will be subject to the restriction that the Fund may not invest
more than 10%, in the case of a money market fund, and 15%, in the case
of a non-money market fund, (or such other percentage as set forth by
the SEC from time to time) of its net assets in illiquid securities, if
Norwest cannot sell the instrument, or the Fund's fractional interest
in such instrument, pursuant to the preceding condition.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-14712 Filed 6-10-96; 8:45 am]
BILLING CODE 8010-01-M
