[Federal Register Volume 68, Number 82 (Tuesday, April 29, 2003)]
[Notices]
[Pages 22763-22764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10522]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 26026; 812-12915]


Wells Fargo Funds Trust, et al.; Notice of Application

April 23, 2003.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (``Act'') for an exemption from section 15(f)(1)(A) 
of the Act.

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Summary of Application: The requested order would permit Wells Fargo 
Funds Trust (``Funds Trust'') not to reconstitute its board of trustees 
to meet the 75 percent non-interested director requirement of section 
15(f)(1)(A) of the Act in order for Wells Fargo Funds Management, LLC 
(``Funds Management'') to rely upon the safe harbor provisions of 
section 15(f).

Applicants: Funds Trust and Funds Management.

Filing Dates: The application was filed on December 20, 2002 and 
amended on April 22, 2003.

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 19, 2003, 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 
may request notification of a hearing by writing to the Commission's 
Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609. Applicants, 525 Market Street, 12th Floor, San Francisco, 
California 94105.

FOR FURTHER INFORMATION CONTACT: John Yoder, Attorney-Adviser, at (202) 
942-0544, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. Funds Trust is an open-end management investment company 
registered under the Act and consists of sixty-seven series. Funds 
Management, a wholly owned subsidiary of Wells Fargo & Company (``Wells 
Fargo''), currently serves as investment adviser to all of the Funds 
Trust series, and will serve as investment adviser to certain newly 
created series of Funds Trust. Funds Management is registered under the 
Investment Advisers Act of 1940 (``Advisers Act''). The Montgomery 
Funds, which consists of eleven series, and The Montgomery Funds II, 
which consists of three series, are open-end management investment 
companies registered under the Act. At the time of the Acquisition (as 
defined below), Montgomery Asset Management, LLC (``MAM'') served as 
investment adviser to the eleven series of The Montgomery Funds and The 
Montgomery Funds II involved in the Reorganization (as defined below) 
(the ``MAM Funds''). MAM is registered under the Advisers Act.
    2. On November 21, 2002, Wells Fargo, Commerzbank AG, the parent 
company of MAM, and others entered into an agreement providing for 
subsidiaries of Wells Fargo to acquire certain advisory business lines 
of MAM, including the investment advisory relationship with certain 
mutual funds and managed separate accounts currently advised by MAM. 
The transaction was consummated on January 17, 2003 (the 
``Acquisition''), and Wells Capital Management Incorporated (``Wells 
Capital''), a wholly-owned subsidiary of Wells Fargo that is registered 
under the Advisers Act, became the investment adviser for the MAM Funds 
under an interim investment advisory agreement (the ``Interim 
Agreement''). Applicants state that the Interim Agreement satisfies the 
requirements of rule 15a-4 under the Act and was approved by the boards 
of trustees of the MAM Funds on December 16, 2002.
    3. Following the Acquisition, it is proposed that five existing 
series and four new series of Funds Trust (the ``Successor Funds'') 
will acquire the assets of the MAM Funds (the ``Reorganization''). On 
December 16, 2002 and December 18, 2002, respectively, the boards of 
trustees (each a ``Board'') of the MAM Funds and Funds Trust 
unanimously approved the Reorganization. The MAM Funds have scheduled a 
special meeting of the MAM Funds' shareholders for April 25, 2003. 
Proxy materials for the special meeting were mailed to shareholders of 
the MAM Funds in February 2003.
    4. In connection with the Acquisition and the Reorganization, Funds 
Management has determined to seek to comply with the ``safe harbor'' 
provisions of section 15(f) of the Act. Applicants state that, absent 
exemptive relief, following consummation of the Reorganization, more 
than twenty-five percent of the Board of Funds Trust would be 
``interested persons'' for purposes of section 15(f)(1)(A) of the Act.

Applicants' Legal Analysis

    1. Section 15(f) of the Act is a safe harbor that permits an 
investment adviser to a registered investment company (or an affiliated 
person of the investment adviser) to realize a profit on the sale of 
its business if certain conditions are met. One of these conditions, 
set forth in section 15(f)(1)(A), provides that, for a period of three 
years after the sale, at least seventy-five percent of the board of 
directors of the investment company may not be ``interested persons'' 
with respect to either the predecessor or successor adviser of the 
investment company. Applicants state that, without the requested 
exemption, following the Reorganization, Funds Trust would have to 
reconstitute its Board to meet the seventy-five percent non-interested 
director requirement of section 15(f)(1)(A).
    2. Section 15(f)(3)(B) of the Act provides that if the assignment 
of an investment advisory contract results from the merger of, or sale 
of substantially all of the assets by, a registered company with or to 
another registered investment company with assets substantially greater 
in amount, such discrepancy in size shall be considered by the 
Commission in determining whether, or to what extent, to grant 
exemptive relief under section 6(c) from section 15(f)(1)(A).
    3. Section 6(c) of the Act permits the Commission to exempt any 
person or transaction from any provision of the Act, or any rule or 
regulation under the Act, if the exemption is necessary or appropriate 
in the public interest and

[[Page 22764]]

consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.
    4. Applicants request an exemption under section 6(c) of the Act 
from section 15(f)(1)(A) of the Act. Applicants state that, as of March 
31, 2003, Funds Trust had approximately $71 billion and the MAM Funds 
had approximately $1.4 billion in aggregate net assets, respectively, 
making the MAM Funds' assets less than 2% of the aggregate net assets 
of Funds Trust.
    5. Applicants state that two of the seven trustees who serve on the 
Board of Funds Trust are ``interested persons,'' within the meaning of 
section 2(a)(19) of the Act, of Funds Management. Applicants state that 
none of the trustees who serves on the Board of Funds Trust is an 
interested person of MAM or the MAM Funds.
    6. Applicants state that to comply with section 15(f)(1)(A) of the 
Act, Funds Trust would have to alter the composition of its Board, 
either by asking one or more of its experienced trustees to resign or 
by adding an additional non-interested trustee. Applicants state that 
either of these solutions would be unfair to Funds Trust shareholders 
in view of the amount of the assets of the MAM Funds being acquired 
relative to the amount of assets of Funds Trust. Applicants state that 
adequate safeguards will be in place to protect the interests of the 
former shareholders of the MAM Funds following the consummation of the 
Reorganization. Applicants also assert that adding an additional non-
interested trustee to the Board of Funds Trust would require a lengthy 
process, which could delay and increase the cost of the Reorganization.
    7. For the reasons stated above, applicants submit that the 
requested relief is necessary and 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.

    For the Commission, by the Division of Investment Management, 
under delegated authority.

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 03-10522 Filed 4-28-03; 8:45 am]
BILLING CODE 8010-01-P