[Federal Register Volume 62, Number 168 (Friday, August 29, 1997)]
[Notices]
[Pages 45884-45886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-23006]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22795; 812-10718]
First American Investment Funds, Inc., et al.; Notice of
Application
August 22, 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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SUMMARY OF APPLICATION: Applicants request an order under sections 6(c)
and 17(b) of the Act for an exemption from section 17(a) to permit a
common trust fund sponsored by U.S. Bank National Association (``U.S.
Bank'') to transfer securities to a series of First American Investment
Funds, Inc. (``FAIF''), in exchange for shares of the series.
APPLICANTS: FAIF, Large Companies Value Trust Fund (``LCVT''), and U.S.
Bank.
FILING DATE: The application was filed on July 11, 1997. Applicants
have agreed to file an amendment during the notice period, the
substance of which is included in this notice.
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 September 17,
1997, and should be accompanied by proof of service on the 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 Fifth Street, N.W., Washington, D.C.
20549. Applicants c/o James D. Alt, Esq., Dorsey & Whitney LLP, 220
South Sixth Street, Minneapolis, Minnesota 55402.
FOR FURTHER INFORMATION CONTACT:
John K. Forst, Attorney Advisory, at (202) 942-0569, 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, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. 202-942-8090).
Applicants' Representations
1. U.S. Bank is a national banking association and a wholly-owned
subsidiary of U.S. Bancorp. (``USB''), a publicly held bank holding
company. U.S. Bank, through its First Asset Management group, acts as
investment adviser to each series of FAIF. USB maintains a defined
benefit pension plan (``Parent Company Plan'') for the benefit of
employees of USB and its subsidiaries. The Parent Company Plan owns
more than 5% of the outstanding voting shares of the Stock Fund series
of FAIF (the ``Fund''). The Fund is a multiple class fund.
2. FAIF is a Maryland corporation registered under the Act as an
open-end management investment company. FAIF currently offers its
shares to the public in several series with varying investment
objectives and policies.
3. LCVT is a common trust fund as defines in Section 584(a) of the
Internal Revenue Code of 1986, as amended. LCVT is maintained by U.S.
Bank exclusively for the collective investment and reinvestment of
moneys contributed by U.S. Bank in its capacity as a trustee, executor,
administrator, or guardian. The persons and entities for which U.S.
Bank acts in such capacity are referred to as ``Participants'' in LCVT.
LCVT is excluded from the definition of investment company under
section 3(c)(3) of the Act.
4. Applicants propose to transfer to transfer the assets held by
LCVT to the Fund in exchange for Class C shares of the Fund. Class C
shares are offered without a front-end or deferred sales charge, are
not subject to any redemption fees, and do not bear any rule 12b-1
distribution fees or any shareholder servicing fees. LCVT assets to be
transferred to the Fund will be valued in accordance with the
provisions of rule 71a-7(b), and the Fund's shares issued will have an
aggregate net asset value equal to the value of the LCVT assets
transferred. Following the proposed transaction, LCVT will be
terminated, and the Fund shares issued will be held by U.S. Bank
directly as trustee, executor, administrator, or guardian. The Fund
shares held by U.S. Bank, as fiduciary, will be credited to the benefit
of each Participant, pro rata, according to each Participant's interest
in LCVT immediately prior to the transfer.
5. The proposed transaction will be carried out in accordance with
procedures previously adopted by FAIF's board of directors pursuant to
rule 17a-7(e), and the provisions of rule
[[Page 45885]]
17a-7(c), (d), and (f) will be satisfied with respect to FAIF. FAIF's
board of directors was advised by U.S. Bank that the investment
objectives and policies of LCVT and the Fund, and the securities they
hold, are generally similar. In addition, FAIF's board of directors,
including a majority of the directors of FAIF who are not interested
persons, has determined that participation by the Fund in the proposed
transaction is in the best interests of the Fund and the interests of
existing Fund shareholders will not be diluted as a result of the
transaction. These findings, and the basis upon which they were made,
will be recorded fully in the minute books of the Fund.
6. U.S. Bank, as LCVT's trustee, will determine in accordance with
its fiduciary duties that the proposed transaction is in the best
interests of Participants in LCVT. In making this determination, U.S.
Bank will consider the anticipated benefits which are expected to flow
to Participants, including increased liquidity, the availability of
daily pricing, the accessibility of performance and other information
concerning the Fund, the similarity of LCVT's and the Fund's investment
objectives an policies, the anticipated tax treatment of the proposed
transaction, and the aggregate fee levels experienced and expected to
be experienced by Participants before and after the proposed
transaction.
7. In some instances, U.S. Bank will be required to obtain the
consent or direction of the party having investment discretion
regarding a Participant's inclusion in the transaction. In those
instances where an account party of the Participant does not exercise
investment discretion but can terminate of transfer the fiduciary
relationship with U.S. Bank, such account party can direct U.S. Bank to
withdraw the Participant's investment from LCVT before the proposed
transaction takes place. In all instances, detailed information
concerning the terms of the proposed transaction, the Fund, applicable
fee schedules, and other related information will be provided to
Participants before the proposed transaction takes place.
8. Applicants also request relief for any future transactions in
which a common or collective trust fund for which U.S. Bank, or another
bank under common control with U.S. bank, acts as trustee, proposes to
transfer all of its assets to a registered investment company (or
series thereof) that is (a) advised by U.S. Bank, or by any entity
controlling, controlled by, or under common control with U.S. Bank; and
(b) 5% or more owned by a defined benefit pension plan or other
employee benefit plan sponsored by U.S. Bank or by an entity
controlling, controlled by or under common control with U.S. bank (the
``Future Transactions''). Applicants state that they will rely on the
requested relief for Future Transactions only in accordance with the
terms and conditions contained in the application.
Applicants' Legal Analysis
1. Section 17(a) of the Act provides that it is unlawful for any
affiliated person of a registered investment company, or any affiliated
person of such person, acting as principal, knowingly (a) to sell any
security or other property to such registered company, or (b) to
purchase from such registered company any security or other property.
Section 2(a)(3) of the Act defines the term ``affiliated person'' of
another person to include (a) any person owning, controlling, or
holding with power to vote, 5% or more of the outstanding voting
securities of such other person; (b) any person controlling, controlled
by, or under common control with, such other person; and (c) if such
other person is an investment company, any investment adviser thereof.
2. Because LCVT might be viewed as acting as principal in the
proposed transaction, and because LCVT and the Fund might be viewed as
being under common control of U.S. Bank within the meaning of section
2(a)(3) of the Act, the proposed transaction may be subject to the
prohibitions of section 17(a). Accordingly, applicants request an order
from the SEC pursuant to sections 6(c) and 17(b) exempting them from
section 17(a) of the Act on the terms and subject to the conditions set
forth in the application.
3. Section 17(b) provides that the SEC shall exempt a transaction
from section 17(a) if evidence establishes that (a) the terms of the
proposed transaction, including the consideration to be paid, are
reasonable and fair and do not involve overreaching; (b) the proposed
transaction is consistent with the policy of each registered investment
company concerned; and (c) the proposed transaction is consistent with
the general purposes of the Act. Rule 17a-7 exempts certain purchase
and sale transactions otherwise prohibited by section 17(a) if, among
other requirements, the transactions are effected at an ``independent
market price'' and the investment company's board of directors reviews
the transactions for fairness. Rule 17a-8 exempts certain mergers and
consolidations from section 17(a) if, among other requirements, the
investment company's board of directors determines that the
transactions are fair.
4. Applicants will comply with rules 17a-7 and 17a-8 to the extent
possible, as stated in the conditions to the requested order. The
proposed transaction contemplates in-kind transfers from LCVT to the
Fund, rather than cash transactions. Applicants assert that if the
proposed transaction were effected in cash instead of through an in-
kind transfer of assets, LCVT and the Participants would have to bear
unnecessary expense and inconvenience in transferring assets to the
Fund.
5. Section 6(c) provides that the SEC may exempt any person or
transaction from any provision of the Act or any rule thereunder 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.
6. Applicants submit that the proposed transaction meets the
standards for relief under sections 6(c) and 17(b). Applicants assert
that the terms of the transaction, including the consideration to be
paid or received, are reasonable and fair and do not involve
overreaching on the part of any party; the investment objectives,
policies, and restrictions of LCVT are compatible with and
substantially similar to the Fund's investment objectives, policies,
and restrictions; and, the transaction and the requested exemption are
in the public interest, consistent with the protection of investors and
the purposes fairly intended by the policies and provisions of the Act.
Applicants' Conditions
1. The proposed transaction will comply with the terms of rule 17a-
7 (b) through (f).
2. The proposed transaction will not occur unless and until the
board of directors of the Fund (including a majority of the board's
disinterested members) find that participation by the Fund in the
proposed transaction is in the best interests of such Fund and that the
interests of existing shareholders of such Fund will not be diluted as
a result of the transaction. These findings, and the bases upon which
they are made, will be recorded fully in the minute books of the Fund.
3. The proposed transaction will not occur unless and until U.S.
Bank, as trustee, has determined in accordance with its fiduciary
duties as trustee for LCVT and fiduciary for the Participants, that the
proposed transactions is in the best interests of the Participants.
[[Page 45886]]
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-23006 Filed 8-28-97; 8:45 am]
BILLING CODE 8010-01-M