[Federal Register Volume 60, Number 47 (Friday, March 10, 1995)]
[Notices]
[Pages 13194-13196]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5965]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20940/812-9396]
Norwest Funds, et al.; Notice of Application
March 6, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
-----------------------------------------------------------------------
Applicants: Norwest Funds, Norwest Select Funds, Core Trust (Delaware),
Forum Funds, Inc. (collectively, the ``Funds''), Norwest Bank
Minnesota, N.A. (``Norwest''), Forum Advisors, Inc. (``FAI''), and H.M.
Payson & Co., Inc. (``Payson'') (collectively, the ``Advisers'').
Relevant Act Sections: Order requested under sections 6(c) and 17(b) to
exempt applicants from section 17(a), and under rule 17d-1 to permit
certain transactions in accordance with section 17(d) and rule 17d-1.
Summary of Application: Applicants request an order that would permit
certain money market funds to sell their shares to affiliated
investment companies.
Filing Date: The application was filed on December 21, 1994 and amended
on February 24, 1995.
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 March 31, 1995,
and should be accompanied by proof of service on applicant, 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 Fifth Street, NW., Washington, DC 20549.
Applicants, Norwest Funds, Norwest Select Funds, 61 Broadway, New York,
New York 10006; Core Trust, Forum Funds, Inc., Forum Advisors, Inc.,
Two Portland Square, Portland, Maine 04101; H.M. Payson & Co., Inc.,
One Portland Square; Portland, Maine 04101.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Staff Attorney, at
(202) 942-0574, or Robert A. Robertson, 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
SEC's Public Reference Branch.
Applicants' Representations
1. Each Fund is registered under the Act as an open-end management
investment company and is comprised of multiple series. Norwest Funds
and Forum Funds offer both non-money market series and money market
series. Norwest Select Funds and Core Trust offer only non-money market
series. All existing and future non-money market series of the Funds
relying on the relief granted are hereinafter referred to as ``Non-
Money Market Series.'' The existing and future money market series of
the Funds relying on the relief granted are hereinafter referred to as
``Money Market Series.'' Applicants request relief on behalf of any
future series or registered investment company advised by the Advisers
or any investment adviser controlling, controlled by or under common
control with the Advisers.
2. Norwest is the investment adviser for each series of Norwest
Funds and Norwest Select Funds, and for two series of Core Trust. FAI
serves as investment adviser for each of the Forum Funds series, except
for the Payson Balanced Fund and Payson Value Fund, which are advised
by Payson. Each of the Advisers is [[Page 13195]] registered under the
Investment Advisers Act of 1940. Applicants request relief on behalf of
any investment adviser controlling, controlled by, or under common
control with the Advisers. Forum Financial Services, Inc. is the
principal underwriter and manager for each series of Norwest Funds, the
Norwest Select Funds, and Forum Funds.
3. Each Non-Money Market Series will hold a portion of its net
assets in cash or short-term investments (``Uninvested Cash'') pending
investment in portfolio securities, or for meeting expected redemptions
or other purposes. Applicants propose that: (a) each Non-Money Market
Series advised by Norwest would be permitted to invest its Uninvested
Cash in shares of one or more Money Market Series advised by Norwest;
and (b) Non-Money Market Series advised by FAI or Payson would be
permitted to invest in shares of one or more Money Market Series
advised by FAI or Payson. Where a Non-Money Market Series would have
more than one Money Market Series available for investment, the
decision as to which Money Market Series in which it would invest (if
any) will be made by the investment adviser of the Non-Money Market
Series solely on the basis of the investment adviser's view as to the
suitability and investment merits of the respective Money Market Series
as compared to all available, competitive short-term instruments. Where
a Money Market Series offers more than one class of securities, each
Non-Money Market Series would invest only in the class with the lowest
expense ratio at the time of investment.
Applicants' Legal Analysis
1. Applicants request an order under sections 6(c) and 17(b) of the
Act granting an exemption from section 17(a) of the Act and under rule
17d-1 thereunder permitting certain joint transactions in accordance
with section 17(d) of the Act and rule 17d-1. The order would permit:
(a) the Non-Money Market Series to purchase, utilizing Uninvested Cash,
and to redeem shares of the Money Market Series; (b) the Money Market
Series to sell and redeem their shares to and from the Non-Money Market
Series; and (c) the advisers to effect such purchases and redemptions
of shares of the Money Market Series as investment adviser to the
Funds.\1\
\1\Applicants will comply with the percentage limitations set
forth in section 12(d)(1) of the Act.
---------------------------------------------------------------------------
2. Section 17(a) of the Act provides, in pertinent part, that it is
unlawful for any affiliated person of a registered investment company,
acting as principal, to sell any security to, or purchase any security
from, such investment company. Since the series of Norwest Funds and
Norwest Select Funds share a common board of trustees and the series of
Forum Funds share a common board of trustees, the series of each such
Fund may be ``affiliated persons'' of each other under section
2(a)(3)(C) of the Act by virtue of the possibility that they may be
deemed under common control with each other. Additionally, since the
series of Norwest Funds, Norwest Select Funds, and Core Trust have the
same investment adviser, they also may be ``affiliated persons'' of
each other under section 2(a)(3)(C). Because of these potential
affiliations, the sale of shares of the Money Market Series to the Non-
Money Series, and the redemption of such shares from the Money Market
Series, could be prohibited under section 17(a).
3. Section 17(b) of the Act provides that the SEC may, upon
application, grant an order exempting applicants from section 17(a) if
evidence establishes that: (a) the terms of the proposed transaction,
including the consideration to be paid or received, are reasonable and
fair and do not involve overreaching on the part of any persons
concerned; (b) the proposed transaction is consistent with the policy
of each investment company concerned; and (c) the proposed transaction
is consistent with the general purposes of the Act. Under section 6(c)
of the Act, the SEC may exempt transactions from any provision of the
Act or any rule or regulations thereunder ``if and to the extent that
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
relief under sections 6(c) and 17(b) because they wish to engage in a
series of transactions, rather than a single transaction.
4. Under the proposed transactions, the Non-Money Market Series
will retain their ability to invest their cash balances directly in
money market instruments as authorized by their respective investment
objectives and policies. Under the proposal, shares of the Money Market
Series will be purchased and redeemed at their net asset value, which
is the same consideration paid and received for these shares by any
other shareholder. These shares will be purchased and sold by the Non-
Money Market Series on the same terms and on the same basis as shares
are purchased and sold to all other shareholders.
5. On the other side of the proposed transactions, each Money
Market Series reserves the right to discontinue selling shares to any
Non-Money Market Series if the board of trustees of such applicants
determine, based on then current facts and circumstances, that such
sales would adversely affect its portfolio management and operations.
In order to ensure that the Non-Money Market Series will not exert any
undue influence on the voting process for any matter submitted to a
vote by the shareholders of the Money Market Series, the Non-Money
Market Series will vote their shares of each of the Money Market Series
in proportion to the vote by all other shareholders of such Money
Market Series. Based on the above, applicants believe that the proposed
transactions satisfy the standards of sections 6(c) and 17(b).
6. Section 17(d) of the Act and rule 17d-1 thereunder provide that
it is unlawful for an affiliated person of a registered investment
company, acting as principal, to participate in any joint enterprise or
other joint arrangement in which any such registered company is a
participant. Rule 17d-1 provides that the SEC may issue an order
permitting applicants to participate in a joint transaction after
considering certain factors. The Money Market Series would purchase and
redeem shares from the Non-Money Market Series. In addition, the
Advisers manage assets of the Money Market and Non-Money Market Series.
Due to the relationships between the Advisers and the Money Market and
Non-Money Market Series, the proposed transactions between the Money
Market and Non-Money Market Series could be deemed a joint enterprise
or other joint arrangement.
7. The investment by the Non-Money Market Series in shares of the
Money Market Series would be on the same basis and would be
indistinguishable from any other shareholder account maintained by the
Money Market Series. To the extent that any of the Non-Money Market
Series invest in the Money Market Series as proposed, applicants
believe that the Non-Money Market Series will participate on a fair and
reasonable basis in the returns and expenses of the Money Market
Series. Thus, applicants believe that relief is appropriate.
Applicants' Conditions
Applicants agree that the order granting the requested relief will
be subject to the following conditions:
1. The shares of the Money Market Series sold to and redeemed from
the Non-Money Market Series will not be subject to a sales load,
redemption fee, [[Page 13196]] or distribution fee under a plan adopted
in accordance with rule 12b-1 under the Act.
2. The investment advisers and their respective affiliates, in
their capacities as service providers for the Money Market Series, will
remit to the respective Non-Money Market Series, or waive their fees
with respect to the Non-Money Market Series, in an amount equal to all
fees received by them or their affiliates under their respective
agreements with the Money Market Series to the extent such fees are
based upon the Non-Money Market Series' assets invested in shares of
the Money Market Series. Any of these fees remitted or waived will not
be subject to recoupment by the Series' investment advisers or their
affiliates at a later date.
3. For the purpose of determining any amount to be waived and/or
expenses to be borne to comply with an Expense Waiver, the adjusted
fees for a Non-Money Market Series (gross fees minus Expense Waiver)
will be calculated without reference to the amounts waived or remitted
pursuant to condition 2. Adjusted fees then will be reduced by the
amount waived pursuant to condition 2. If the amount waived pursuant to
condition 2 exceeds adjusted fees, the Non-Money Market Series'
investment adviser also will reimburse the Non-Money Market Series in
an amount equal to such excess.
4. The Non-Money Market Series will vote their shares of each of
the Money Market Series in the same proportion as the votes of all
other shareholders in such Money Market Series.
5. The Non-Money Market Series will receive dividends and bear
their proportionate share of expenses on the same basis as other
shareholders of such Money Market Series. A separate account will be
established in the shareholder records of each of the Money Market
Series for each of the acquiring Non-Money Market Series.
For the Commission, by the Division of Investment Management,
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 95-5965 Filed 3-9-95; 8:45 am]
BILLING CODE 8010-01-M