[Federal Register Volume 64, Number 111 (Thursday, June 10, 1999)]
[Pages 31330-31331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14680]



[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.


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 

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 
    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]