[Federal Register Volume 67, Number 82 (Monday, April 29, 2002)]
[Notices]
[Pages 21005-21007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10463]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25532; 812-12783]


Wells Fargo Funds Trust and Wells Fargo Funds Management LLC; 
Notice of Application

April 23, 2002.
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.

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SUMMARY OF APPLICATION: Applicants request an order to permit certain 
series of a registered open-end management investment company to 
acquire all of the assets, subject to the liabilities, of certain other 
series of the investment company (the ``Reorganization''). Because of 
certain affiliations, applicants may not rely on rule 17a-8 under the 
Act.

APPLICANTS: Wells Fargo Funds Trust (``Funds Trust'') and Wells Fargo 
Funds Management, LLC (``Funds Management'').

FILING DATES:  The application was filed on February 15, 2002, and 
amended on April 16, 2002. Applicants have agreed to file another 
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 May 16, 2002, 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: C. David Messman, Esq., Wells Fargo Funds 
Trust, Wells Fargo Funds Management LLC, 525 Market Street, San 
Francisco, California 94105; Marco E. Adelfio, Esq., Eileen M. Smiley, 
Esq., Morrison & Foerster LLP, 2000 Pennsylvania Avenue NW, Suite 5500, 
Washington, DC 20006.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at 
(202) 942-0574 or Todd Kuehl, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. Funds Trust, a Delaware business trust is registered under the 
Act as an open-end management investment company. Funds Trust is 
comprised of seventy-two series, four of which are involved in the 
proposed Reorganization. International Equity Fund and the Small Cap 
Opportunities Fund are the ``Acquiring Funds'' and International Fund 
and the Small Cap Value Fund are the ``Target Funds'', and together 
with the Acquiring Funds, the ``Funds.'' The Target Funds are feeder 
funds that do not invest directly in portfolio securities. Rather, each 
Target Fund invests in a corresponding core portfolio (each a ``Core 
Portfolio'' and collectively the ``Core Portfolios,'') of Wells Fargo 
Core Trust (``Core Trust'') that has the same investment objectives and 
strategies as the corresponding Target Fund. Core Trust, a Delaware 
business trust, is registered under the Act as an open-end management 
investment company.
    2. Funds Management serves directly as the investment adviser to 
each of the Acquiring Funds and serves indirectly as the investment 
adviser to each of the Target Funds. Funds Management serves as the 
investment adviser for each of the Core Portfolios of Core Trust in 
which the Target Funds invest. Funds Management is registered as an 
investment adviser under the Investment Advisers Act of 1940, as 
amended (the ``Advisers Act''). Funds Management is an indirect wholly-
owned subsidiary of Wells Fargo & Company. As of December 27, 2001, 
Wells Fargo Bank Minnesota, N.A. (``Wells Fargo, MN''), a wholly-owned 
subsidiary of Wells Fargo & Company, held of record with sole or shared 
power to vote, more than 25% of the

[[Page 21006]]

outstanding voting securities of each Target Fund.
    3. On November 6, 2001, the board of trustees of Funds Trust 
(``Board''), including all of the trustees who are not ``interested 
persons'' within the meaning of section (2)(a)(19) of the Act (the 
``Independent Trustees''), unanimously approved an Agreement and Plan 
of Reorganization (the ``Reorganization Agreement'') on behalf of the 
Target Funds and the Acquiring Funds. Pursuant to the Reorganization 
Agreement, at the Effective Time (defined below) of the Reorganization, 
each class of each Target Fund will transfer all of its assets to a 
corresponding class of the Acquiring Fund, subject to the assumption by 
such class of the Acquiring Fund of all the liabilities of the 
corresponding class of the Target Fund, in exchange for shares of the 
designated class of such Acquiring Fund that have an aggregate net 
asset value equal to the value of the Target Fund's shares. The Target 
Fund would then distribute to its shareholders the corresponding 
Acquiring Fund shares in liquidation of the Target Fund. The Funds will 
determine the value of their net assets as of the Valuation Time 
(defined below) in accordance with Funds Trust's then current valuation 
procedures as described in its prospectus and statement of additional 
information. The Valuation Time is the close of regular trading on the 
New York Stock Exchange, as of which time the net asset value of each 
class of shares of each of the Funds is determined for purposes of the 
Reorganization. Under the terms of the Reorganization Agreement, unless 
the parties agree differently, the Valuation Time will occur on the 
Closing Date. The Effective Time of the Reorganization is the date and 
time on which the delivery of the Target Funds' assets and the 
Acquiring Funds' shares occurs, which will be the first business day 
following the Closing Date.
    4. Applicants state that the Board has determined that each 
Acquiring Fund and its corresponding Target Fund have compatible 
investment objectives and strategies. Each of the Funds offers 
Institutional Class shares and the International Fund and the 
International Equity Fund each also offer Class A and Class B shares. 
Applicants state that the rights and obligations of each class of each 
Acquiring Fund are identical to those of the corresponding share class 
of the corresponding Target Fund. For purposes of calculating any 
contingent deferred sales charge (``CDSC''), shareholders of Class A 
and B Shares of a Target Fund will be deemed to have held the Class A 
and Class B Shares of the corresponding Acquiring Fund since the date 
the shareholders initially purchased the shares of that Target Fund. No 
front-end sales load or CDSC will be imposed on the exchange of shares 
occurring as part of the Reorganization. Funds Management and/or its 
affiliated persons will bear all expenses related to the 
Reorganization.
    5. The Board, including all the Independent Trustees, found on 
behalf of each of the Target and Acquiring Funds, that participation in 
the Reorganization, as contemplated by the Reorganization Agreement, is 
in the best interests of each Fund and its shareholders, and that the 
interests of the existing shareholders of each Fund would not be 
diluted as a result of the Reorganization. The Board considered among 
other things: (a) The Reorganization Agreement; (b) the compatibility 
of each Target Fund's investment objective, principal investment 
strategies, and investment policies with those of the corresponding 
Acquiring Fund; (c) the benefits associated with increased asset 
levels, including greater purchasing power and the ability to diversify 
more broadly, and the enhanced viability of the combined Funds; and (d) 
the fact that all of the expenses associated with the Reorganization 
would be borne by Funds Management and not Fund shareholders.
    6. The Reorganization is subject to a number of conditions 
precedent including: (a) That a registration statement under the 
Securities Act of 1933 on Form N-14 shall have become effective; (b) 
that shareholders of the Target Funds shall have approved the 
Reorganization Agreement; (c) that if necessary, the Target Funds shall 
have declared a dividend that, together with all previous dividends, 
shall have the effect of distributing to such Target Fund's 
shareholders all of its previously undistributed investment company 
taxable income and net capital gain; (d) the Funds will have received 
opinions of counsel that the Reorganization will be tax-free for 
federal income tax purposes to the Target Fund, the corresponding 
Acquiring Fund and their respective shareholders; and (e) applicants 
will have received exemptive relief from the Commission to permit the 
Reorganization. Pursuant to a vote of a majority of the Board, Funds 
Trust may terminate the Reorganization Agreement with respect to either 
or both sets of Funds any time prior to the Effective Time of the 
Reorganization. Applicants represent that they will not amend the 
Reorganization Agreement in any manner that materially affects the 
application without prior approval of the Commission staff.
    7. The Combined Proxy Statement / Prospectus relating to the 
Reorganization of the Funds was initially filed with the Commission on 
December 6, 2001, and became automatically effective on January 6, 
2002. The final Combined Proxy Statement/ Prospectus was filed with the 
Commission on January 25, 2002, in final form and became automatically 
effective on the same day. Finally, a supplement to the Combined Proxy 
Statement/ Prospectus was filed with the Commission on February 14, 
2002. The Combined Proxy Statement / Prospectus was mailed to 
shareholders of the Target Funds beginning on January 31, 2002, and the 
supplement was mailed to shareholders on March 1, 2002. Shareholders of 
the Target Funds will vote on the proposed Reorganization at special 
meetings of shareholders expected to occur on April 26, 2002, and the 
Closing Date is expected to be May 17, 2002.

Applicants' Legal Analysis

    1. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or an affiliated person of 
such a person, acting as principal, from selling any security to, or 
purchasing any security from, the company. Section 2(a)(3) of the Act 
defines an ``affiliated person'' of another person to include (a) any 
person directly or indirectly owning, controlling, or holding with 
power to vote 5% or more of the outstanding voting securities of the 
other person; (b) any person 5% or more of whose securities are 
directly or indirectly owned, controlled, or held with power to vote by 
the other person; (c) any person directly or indirectly controlling, 
controlled by, or under common control with the other person; and (d) 
if the other person is an investment company, any investment adviser of 
that company. Applicants state that the Funds may be deemed affiliated 
persons and thus the Reorganization may be prohibited by section 17(a).
    2. 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, or affiliated persons of an affiliated person, 
solely by reason of having a common investment adviser, common 
directors, and/or common officers, provided that certain conditions are 
satisfied.
    3. Applicants state that they may not rely on rule 17a-8 because 
the Funds may be deemed to be affiliated persons

[[Page 21007]]

for reasons other than those set forth in the rule. Wells Fargo, MN 
currently holds of record in its name more than 25% of the outstanding 
voting securities of each Target Fund. Specifically, Wells Fargo, MN 
holds more than 25% of the outstanding voting securities of the 
International Fund for the benefit of the Cash Balance Pension Plan 
(``CBPP'') and also holds more than 5% of the outstanding voting 
securities of the Small Cap Value Fund for the benefit of the Voluntary 
Employee's Beneficiary Association (``VEBA''), a trust that is used to 
fund employee benefits for employees of Wells Fargo & Company and its 
subsidiaries. (CBPP and VEBA are collectively referred to as the 
``Affiliated Accounts.'') Applicants state that by virtue of the 
Affiliated Accounts' ownership and Wells Fargo, MN's voting control and 
economic interest in the Affiliated Accounts, each Target Fund may be 
deemed to be an affiliated person of an affiliated person of its 
corresponding Acquiring Fund, and vice versa, for reasons not based 
solely on their common adviser, common directors/trustees and/or common 
officers. Wells Fargo, MN intends to engage an independent fiduciary to 
vote the shares of the Affiliated Accounts.
    4. Section 17(b) of the Act provides that the Commission may exempt 
a transaction from the provisions of section 17(a) if the 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 each registered investment 
company concerned and with the general purposes of the Act.
    5. Applicants request an order under section 17(b) of the Act 
exempting them from section 17(a) of the Act to the extent necessary to 
complete the Reorganization. Applicants submit that the Reorganization 
satisfies the standards of section 17(b) of the Act. Applicants state 
that the Board, including all of the Independent Trustees, has 
determined that participation in the Reorganization is in the best 
interests of each Fund, and that the interests of the Funds' 
shareholders will not be diluted as a result of the Reorganization. The 
applicants also state that the Reorganization will be based on the 
Funds' relative net asset values.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-10463 Filed 4-26-02; 8:45 am]
BILLING CODE 8010-01-P