[Federal Register Volume 62, Number 87 (Tuesday, May 6, 1997)]
[Notices]
[Pages 24673-24675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11739]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-22646; 812-10594]


Core Trust (Delaware), et al.; Notice of Application

April 30, 1997.
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: Core Trust (Delaware) (``Core Trust''), Norwest Advantage 
Funds (the ``Trust''), and Norwest Bank Minnesota, N.A. (``Norwest'').

RELEVANT 1940 ACT SECTIONS: Exemption requested under section 17(b) of 
the Act granting an exemption from section 17(a).

SUMMARY OF APPLICATION: Applicants seek an order under section 17(b) 
granting an exemption from section 17 (a) of the Act to permit: (a) A 
series of Core Trust to acquire all of the assets and assume all of the 
liabilities of another series of Core Trust; and (b) a series of the 
Trust to transfer all of its assets to a series of Core Trust in 
exchange for an interest in that series of Core Trust.

FILING DATE: The application was filed on March 26, 1997.

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 May 27, 1997, 
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, NW., Washington, DC 20549. 
Applicants: Core Trust (Delaware) and Norwest Advantage Funds, Two 
Portland Square, Portland, Maine 04101, and Norwest Bank Minnesota, 
N.A., Norwest Center, Sixth and Marquette, Minneapolis, Minnesota 
55479-1026.

FOR FURTHER INFORMATION CONTACT:
Joseph B. McDonald, Jr., Senior Counsel, at (202) 942-0533, 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 
SEC's Public Reference Branch.

Applicants' Representations

    1. Core Trust, organized as a Delaware business trust, is 
registered under the Act as an open-end management investment company. 
Core Trust does not offer the securities of its various

[[Page 24674]]

series to the public; its securities are offered only in private 
placement transactions to institutional investors. Five series of Core 
Trust, including International Portfolio (the ``Target Portfolio''), 
operate as master funds pursuant to master-feeder arrangements under 
section 12(d)(1)(E) of the Act. Three other series of Core Trust, 
including International Portfolio II (the ``Acquiror Portfolio'') and 
Index Portfolio, are portfolios in which two or more investment 
companies invest in a fund-of-funds structure established pursuant to 
an exemptive order issued by the SEC.\1\ Schroder Capital Management 
International Inc. (``Schroder'') serves as investment adviser to both 
Target Portfolio and Acquiror Portfolio. Norwest, a subsidiary of 
Norwest Corporation, serves as investment adviser to Index Portfolio. 
Target Portfolio and Acquiror Portfolio have the same investment 
objectives and policies.
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    \1\ See Norwest Bank Minnesota, N.A., et al., Investment Company 
Act Release Nos. 20640 (Oct. 19, 1994) (notice) and 20697 (Nov. 10, 
1994) (order) (``Original Order''), superseded by Norwest Bank 
Minnesota, N.A., et al., Investment Company Act Release Nos. 22056 
(July 9, 1996) (notice) and 22120 (Aug. 6, 1996) (order) (the ``1996 
Order'').
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    2. The Trust, organized as a Delaware business trust, is registered 
under the Act as an open-end management investment company. The Trust 
offers securities to the public in various series, including 
Conservative Balanced Fund, Moderate Balanced Fund, Growth Balanced 
Fund, Diversified Equity Fund and Growth Equity Fund (the ``Blended 
Funds''), Index Fund, and International fund. In accordance with the 
1996 Order, each Blended Fund operates in a fund-of-funds structure and 
invests that portion of its assets that are allocated to an 
international style in Acquiror Portfolio and invests that portion of 
its assets that are allocated to an index style in Index Portfolio. The 
Blended funds are the only interestholders of Acquiror Portfolio and 
Index Portfolio.
    3. International Fund operates in a master-feeder structure and 
invests all its investable assets in Target Portfolio. Other than a 
nominal interest held by Forum Financial Services, Inc., the 
administrator and placement agent of Core Trust and manager and 
distributor of the Trust, all of the outstanding interests in Target 
Portfolio are owned by International Fund.
    4. Norwest serves as investment adviser to each series of the 
Trust. Schroder serves as subadviser to each Blended Fund with respect 
to that portion of a Blended Fund's assets, if any, that are allocated 
to an international style but are not invested in Acquiror Portfolio. 
Schroder also serves as subadviser to International Fund. Norwest and 
Schroder will provide their services to International Fund only in the 
event that the Fund's assets are withdrawn from Target Portfolio and 
invested directly in portfolio securities.
    5. Norwest holds approximately 23 percent of the outstanding shares 
of Growth Equity Fund on behalf of the Norwest Corporation Savings 
Investment Plan, a defined contribution plan (the ``Norwest Defined 
Contribution Plan''), which represents an indirect interest in 
approximately 11 percent of the outstanding voting securities of 
Acquiror Portfolio and more than 10 percent of the outstanding voting 
securities of Index Portfolio. Norwest votes those shares of Growth 
Equity Fund held on behalf of the Norwest Defined Contribution Plan in 
proportion to the votes cast by other shareholders of the Growth Equity 
Fund.
    6. Norwest owns approximately 68 percent of the total outstanding 
shares of the International Fund and more than 25 percent of the total 
outstanding shares of Index Fund on behalf of the Norwest Corporation 
Pension Plan, the Retirement Income Plan of the United Banks of 
Colorado, Inc. and the First Minnesota Employer's Pension Plan 
(collectively, the ``Norwest Pension Plans''). The Norwest Pension 
Plans are defined benefit plans sponsored by Norwest. Norwest also 
holds more than 10 percent of the outstanding voting securities of 
Index Fund on behalf of the Norwest Defined Contribution Plan. Norwest 
votes those shares of Index Fund held on behalf of the Norwest Defined 
Contribution Plan in proportion to the votes cast by other shareholders 
of the Index Fund.
    7. As a result of its interests in Growth Equity Fund and 
International Fund, Norwest indirectly holds with power to vote more 
than 5 percent of the outstanding voting securities of Acquiror 
Portfolio in a fiduciary or representative capacity and owns more than 
25 percent of the outstanding voting securities of Target Portfolio. In 
addition, Norwest indirectly holds with power to vote more than 5 
percent of the outstanding voting securities of Index Portfolio and 
owns more than 25 percent of the outstanding voting securities of Index 
Fund.
    8. On March 13, 1997, the Board of Trustees of Core Trust (``Core 
Board'') unanimously approved the combination of Target Portfolio and 
Acquiror Portfolio (the ``Reorganization'') to eliminate the 
duplicative functions and costs associated with operating two separate 
series of Core Trust that conduct business in substantially the same 
manner.\2\
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    \2\ Prior to being superseded by the 1996 Order, the Original 
Order prohibited a fund operating as a feeder fund in a master-
feeder structure (such as International Fund) from investing its 
assets in a series of Core Trust in which any assets of a Blended 
Fund were invested. The 1996 Order now permits the combination of 
those assets.
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    9. The Core Board concluded that the Reorganization is in the best 
interests of the interestholders of Target Portfolio and Acquiror 
Portfolio and will not result in the dilution of the interests of any 
of the existing interestholders of Target Portfolio and Acquiror 
Portfolio. In approving the Reorganization, the Core Board noted that 
Target Portfolio and Acquiror Portfolio have the same investment 
objective, investment policies, associated risk profiles, service 
providers, advisory fees and expense ratios. The Core Board reviewed 
the annualized expense ratios of Target Portfolio and Acquiror 
Portfolio and noted that the expense ratio of the pro forma combined 
portfolio following the Reorganization would be likely to be less than 
the expense ratio of Target Portfolio prior to the Reorganization. In 
addition, The Core Board noted Norwest's interests in Target Portfolio 
and Acquiror Portfolio described above. The Core Board approved the 
Reorganization based on: (a) The similarities of Target Portfolio and 
Acquiror Portfolio; (b) the benefits that would accrue to the 
shareholders of Target Portfolio and Acquiror Portfolio after the 
Reorganization; (c) the tax-free nature of the Reorganization; (d) the 
terms and conditions of the Reorganization and the nondilutive effect 
of the Reorganization; and (e) the costs of the Reorganization.
    10. The Plan of Reorganization and Liquidation (the 
``Reorganization Agreement'') provides that Target Portfolio will 
transfer all of its assets and liabilities to Acquiror Portfolio in 
exchange for an interest in Acquiror Portfolio (the ``Interest''). The 
Interest will be equal in value to the net value of Target Portfolio's 
assets computed as of 4:00 p.m. on the date of the closing (as defined 
in the Reorganization Agreement). Target Portfolio will constructively 
distribute the Interest to its interestholders of record pro rata in 
exchange for their interests in Target Portfolio. The distribution will 
be accomplished by opening a capital account on Acquiror Portfolio's 
books in each interestholder's name, crediting thereto the 
interestholder's proportionate share of the Interest, and thereafter 
treating the interestholders for

[[Page 24675]]

all purposes as interestholders of record in Acquiror Portfolio.
    11. The Board of Trustees of the Trust (``Trust Board'') and the 
Core Board unanimously approved, on January 25, 1997 and March 13, 
1997, respectively, the investment of all of the investable assets of 
Index Fund in Index Portfolio (the ``Transfer'') in order to obtain 
economies of scale and eliminate duplicative functions and costs 
associated with operating two separate funds that conduct business in 
the same manner.
    12. Each Board concluded that the Transfer is in the best interests 
of the shareholders of Index Portfolio and Index Fund and will not 
result in the dilution of the interests of any of the existing 
shareholders of Index Portfolio or Index Fund. Portfolio and Index Fund 
have the same investment objective, investment policies, associated 
risk profiles, service procedures, advisory fees and expense ratios. 
Each Board reviewed the annualized expense ratios of Index Portfolio 
and Index fund and the estimated expense ratios of each of Index 
Portfolio and Index Fund following the Transfer and noted that the 
estimated expense ratios would be the same as the expense ratios of 
each of Index Portfolio and Index Fund prior to the Transfer. In 
addition, each Board noted Norwest's interests in Index Fund and Index 
Portfolio. Each Board approved the Transfer based on: (a) The 
similarities of Index Portfolio and Index Fund; (b) the benefits that 
would accrue to the interestholders of Index Portfolio and Index Fund 
after the Transfer; (c) the tax-free nature of the Transfer; (d) the 
terms and conditions of the Transfer and the nondilutive effect of the 
Transfer; and (e) the costs of the Transfer.
    13. The Plan of Division and Liquidation (the ``Transfer 
Agreement'') provides that Index Fund will transfer all of its assets 
to Index Portfolio in exchange for an interest in Index Portfolio (the 
``Transfer Interest''). The Transfer Interest will be equal in value to 
the net value of Index Fund's assets computed as of 4:00 p.m. on May 
30, 1997. The value of the assets transferred will be determined in 
accordance with the standard valuation procedures of Index Portfolio.
    14. The expenses of the Reorganization, including all expenses 
related to obtaining exemptive relief from the SEC, will be borne pro 
rata by Target Portfolio and Acquiror Portfolio on the basis of their 
respective net assets. The expenses of the Transfer, including all 
expenses related to obtaining exemptive relief from the SEC, will be 
borne pro rata by Index Portfolio and Index Fund on the basis of their 
respective net assets.
    15. Applicants state that no material change that would affect the 
application will be made to either the Reorganization Agreement or the 
Transfer Agreement without prior SEC approval.

Applicants' Legal Analysis

    1. Section 17(a) of the Act, in relevant part, prohibits an 
affiliated person of a registered investment company, or any affiliated 
person of such a person, acting as principal, from selling to or 
purchasing from such registered company, or any company controlled by 
such registered company, any security or other property.
    2. Section 2(a)(3) of the Act defines an ``affiliated person'' of 
another person to include any person directly or indirectly owning, 
controlling, or holding with power to vote, 5% or more of the 
outstanding voting securities of such other person, and any person 
directly or indirectly controlling, controlled by, or under common 
control with such other person, and if such other person is an 
investment company, any investment adviser thereof. Section 2(a)(9) of 
the Act defines ``control'' to mean the power to exercise a controlling 
influence over the management or policies of a company, unless such 
power is solely the result of an official position with such company. 
Under section 2(a)(9), a person who owns 25% or more of the voting 
securities of a company is presumed to control such company.
    3. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) mergers, consolidations, or purchases or sales of 
substantially all of the assets of registered investment companies that 
are affiliated persons solely by reason of having a common investment 
adviser, common directors, and/or common officers, provided that 
certain conditions set forth in the rule are satisfied.
    4. Applicants may not rely on rule 17a-8 in connection with the 
Reorganization because Target Portfolio and Acquiror Portfolio may be 
deemed to be affiliated in ways other than as permitted in the rule. 
Norwest controls or holds with power to vote more than 5% of the 
outstanding shares of Acquiror Portfolio and more than 25% of the 
outstanding voting securities of Target Portfolio.
    5. Applicants may not rely on rule 17a-8 in connection with the 
Transfer because Index Fund and Index Portfolio may be deemed to be 
affiliated in ways other than as permitted in the rule. Norwest 
controls or holds with power to vote more than 25% of the outstanding 
voting securities of Index Fund and more than 5% of the outstanding 
shares of Index Portfolio.
    6. Section 17(b) of the Act provides that the SEC may exempt a 
transaction from section 17(a) if evidence establishes that the terms 
of the proposed transaction, including the consideration to be paid, 
are reasonable and fair and do not involve overreaching on the part of 
any person concerned, and that the proposed transaction is consistent 
with the policy of the registered investment company concerned and with 
the general purposes of the Act.
    7. Applicants submit that the terms of the Reorganization satisfy 
the standards set forth in section 17(b) of the Act in that they are 
fair and reasonable and do not involve overreaching on the part of any 
party concerned, and that the Reorganization is consistent with both 
the policies of Target Portfolio and Acquiring Portfolio. In addition, 
applicants submit that the terms of the Transfer satisfy the standards 
set forth in section 17(b) in that they are fair and reasonable and do 
not involve overreaching on the part of any party concerned, and that 
the Transfer is consistent with both the policies of Index Fund and 
Index Portfolio.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-11739 Filed 5-5-97; 8:45 am]
BILLING CODE 8010-01-M