[Federal Register Volume 67, Number 90 (Thursday, May 9, 2002)]
[Notices]
[Pages 31393-31394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11616]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25568; 812-12802 ]


New York State College Choice Tuition Savings Program Trust Fund, 
et al.; Notice of Application

May 3, 2002.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application under section 17(b) of the Investment 
Company Act of 1940 (the ``Act'') requesting an exemption from section 
17(a) of the Act.

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Summary of the Application:  Applicants request an order to permit New 
York State College Choice Tuition Savings Program Trust Fund (the 
``Trust'') to purchase shares of certain series of TIAA-CREF 
Institutional Mutual Funds (``TIAA-CREF Funds'') in-kind.

Applicants:  The Trust and TIAA-CREF Funds.

Filing Date:  The application was filed on April 4, 2002.

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 28, 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 SEC's 
Secretary.

Addresses: Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549-
0609. Applicants, 730 Third Avenue, New York, NY 10017.

For Further Information Contact: Bruce R. MacNeil, Senior Counsel, at 
(202) 942-0634, or Nadya B. Roytblat, Assistant Director, at (202) 942-
0564 (Office of Investment Company Regulation, Division of Investment 
Management).

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, NW, Washington, DC 
20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. The Trust was created by legislation enacted by New York and 
serves as a vehicle in which participant contributions from a qualified 
tuition program created pursuant to New York law and section 529 of the 
Internal Revenue Code of 1986, as amended (``New York Program''), are 
deposited into New York State College Choice Tuition LLC (the ``LLC''). 
Applicants state that as a state instrumentality, the Trust is exempt 
from the Act pursuant to section 2(b). The LLC consists of age-based 
program series (``Program Series'') that invest in differing 
allocations in underlying portfolios of the LLC (the ``Underlying 
Portfolios''). Applicants state that the LLC and the Underlying 
Portfolios are exempt from the Act pursuant to sections 3(c)(1) and 
3(c)(7). Teachers Insurance and Annuity Association of America 
(``TIAA'') serves as the program administrator for the New York 
Program.
    2. TIAA-CREF Funds is an open-end management investment company 
registered under the Act. TIAA-CREF Funds is comprised of multiple 
series, three of which are the Institutional Growth Equity, 
Institutional Bond and Institutional Money Market Funds (the ``Affected 
Funds''). Advisors, an investment adviser registered under the 
Investment Advisers Act of 1940, and an indirect wholly owned 
subsidiary of TIAA, serves as investment adviser to the both the 
Affected Funds and the Underlying Portfolios.
    3. Applicants state that subsequent to the establishment of the 
Trust, New York adopted legislation that would allow the New York 
Program greater flexibility in its investment options. Applicants 
propose to convert the New York Program to a simpler structure 
utilizing TIAA-CREF Funds, and forming new program series (``New 
Program Series'') at the Trust level rather than the LLC level (the 
``Reorganization''). Applicants state that the Reorganization should 
result in greater flexibility and reduced costs for the New York 
Program as the New Program Series will invest directly in the Affected 
Funds. The Reorganization will involve the purchase by the New Program 
Series of shares of the Affected Funds in-kind with portfolio 
securities received by the New Program Series from the Underlying 
Portfolios (``the In-Kind Purchase''). The Underlying Portfolios 
subsequently will be liquidated. Applicants state that each Affected 
Fund has investment objectives and policies substantially identical to 
those of the corresponding Underlying Portfolio. Applicants further 
state that

[[Page 31394]]

the securities involved in the In-Kind Purchase will be valued in the 
same manner as they would be valued for purposes of computing the net 
asset values for the Affected Funds.

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 person, acting as principal, from selling to or 
purchasing from such investment company any security or other property. 
Section 2(a)(3) of the Act defines an ``affiliated person'' of another 
person to include (a) any person that directly or indirectly owns, 
controls, or holds with power to vote 5% or more of the outstanding 
voting securities of the other person; (b) any person 5% or more of 
whose outstanding voting 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.
    2. Applicants state that the Underlying Portfolios and the Affected 
Funds may be deemed to be affiliated persons under section 2(a)(3) 
because they may be deemed to be under the common control of Advisors. 
The Trust, by controlling the Underlying Portfolios by virtue of its 
ownership in the Program Series, would be an affiliated person of an 
affiliated person of TIAA-CREF Funds. In addition, applicants state 
that the Trust owns more than 5% of the outstanding voting securities 
of another series of TIAA-CREF Funds and therefore the Trust could be 
deemed to be an affiliated person of an affiliated person of the 
Affected Funds. Therefore, applicants state that the In-Kind Purchase 
may be prohibited by section 17(a).
    3. 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.
    4. Applicants submit that the terms of the In-Kind Purchase satisfy 
the standards set forth in section 17(b). Applicants state that TIAA-
CREF Fund's board of trustees, including a majority of the trustees who 
are not interested persons as defined in section 2(a)(19) of the Act, 
determined that the In-Kind Purchase would be in the best interests of 
each Affected Fund and would not dilute existing shareholder interests. 
Applicants also state that the In-Kind Purchase will comply with rule 
17a-7(b) through (g) under the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-11616 Filed 5-8-02; 8:45 am]
BILLING CODE 8010-01-P