31250 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices

11. Applicants state that the

transactions that may be deemed to be

within the scope of Section 17(a) have

been the subject of Commission review

in the context of reorganizations of

separate accounts from management

separate accounts to unit investment

separate accounts and the transfer of

assets to an underlying fund. Applicants

state that the terms and conditions of

the transfer of assets entailed in the

Substitution are consistent with such

precedent and the precedent under

Section 26(b).

Section 17(b) of the 1940 Act provides

that the Commission may grant an order

exempting transactions prohibited by

Section 17(a) from that section upon

application, subject to certain

conditions. Applicants request an order

of the Commission pursuant to Section

17(b) from the provisions of Section

17(a) in connection with any aspect of

the Substitution that may be deemed

prohibited by Section 17(a). Applicants

represent that the Substitution meets all

of the requirements of Section 17(b) of

the 1940 Act and that an order should

be granted exempting the Substitution

from the provisions of Section 17(a) to

the extent requested.

Conclusion

For the reasons summarized above,

Applicants submit that the proposed

Substitution is consistent with the

protection of investors and the purposes

fairly intended by the policy and the

provisions of the 1940 Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15075 Filed 6–5–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

23237; 812–10930]

Stagecoach Funds, Inc., et al.; Notice

of Application

June 2, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for

exemption under the Investment

Company Act of 1940 (‘‘Act’’).

SUMMARY OF THE APPLICATION:

Applicants seek an order that would

permit certain registered open-end

management investment companies to

utilize their uninvested cash to

purchase shares of affiliated money

market funds.

APPLICANTS: Stagecoach Funds, Inc., on

behalf of its series Asset Allocation

Fund, Arizona Tax-Free Fund, Balanced

Fund, California Tax-Free Bond Fund,

California Tax-Free Income Fund,

California Tax-Free Money Market

Mutual Fund, California Tax-Free

Money Market Trust, Corporate Bond

Fund, Diversified Equity Income Fund,

Equity Index Fund, Equity Value Fund,

Government Money Market Mutual

Fund, Growth Fund, Index Allocation

Fund, Intermediate Bond Fund,

International Equity Fund, Money

Market Mutual Fund, Money Market

Trust, National Tax-Free Fund, National

Tax-Free Money Market Trust, National

Tax-Free Money Market Mutual Fund,

Oregon Tax-Free Fund, Overland

Express Sweep Fund, Prime Money

Market Mutual Fund, ShortIntermediate U.S. Government Income

Fund, Short-Term Municipal Income

Fund, Short-Term Government

Corporate Income Fund, Small Cap

Fund, Strategic Growth Fund, Strategic

Income Fund, Treasury Money Market

Mutual Fund, U.S. Government

Allocation Fund, U.S. Government

Income Fund, and Variable Rate

Government Fund (each series, a

‘‘Stagecoach Fund,’’ and collectively,

the ‘‘Stagecoach Funds’’); Life &

Annuity Trust, on behalf of its series

Asset Allocation Fund, Equity Value

Fund, Growth Fund, Money Market

Fund, Strategic Growth Fund, and U.S.

Government Allocation Fund (each

series, a ‘‘LAT Fund,’’ and collectively,

the ‘‘LAT Funds’’); Wells Fargo Bank,

National Association and any entity

controlling, controlled by, or under

common control with Wells Fargo Bank,

National Association that in the future

may serve as an investment adviser to

the Funds (as defined below)

(collectively, ‘‘Wells Fargo’’); and each

registered investment company or series

to be organized in the future and

advised by, or to be advised in the

future by, Wells Fargo (together with the

Stagecoach Funds and LAT Funds, each

a ‘‘Fund,’’ and collectively, the

‘‘Funds’’).

FILING DATES: The application was filed

on December 23, 1997 and amended on

May 13, 1998.

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

June 29, 1998, 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.

Applicants, 525 Market Street, 19th

Floor, San Francisco, CA 94105.

FOR FURTHER INFORMATION CONTACT:

Michael W. Mundt, Staff Attorney, at

(202) 942–0578, or Mary Kay Frech,

Branch Chief, 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, N.W., Washington, D.C. 20549,

(202) 942–8090.

Applicant’s Representations

1. Stagecoach Funds, Inc.

(‘‘Stagecoach’’) is an open-end

management investment company

registered under the Act and organized

as a Maryland corporation. Stagecoach

currently offers thirty-four separate

Stagecoach Funds. Life & Annuity Trust

(‘‘LAT’’) is an open-end management

investment company registered under

the Act and organized as a Delaware

business trust. LAT currently offers six

LAT Funds. Ten of the Stagecoach

Funds and one LAT Fund are money

market funds subject to rule 2a–7 under

the Act (together with any future money

market portfolio of Stagecoach or LAT

or any future money market portfolio

advised by Wells Fargo, each a ‘‘Money

Market Fund,’’ and collectively, the

‘‘Money Market Funds’’). The remaining

Stagecoach Funds and LAT Funds are

variable net asset value funds (together

with any future variable net asset value

portfolio of Stagecoach or LAT or any

future variable net asset portfolio

advised by Wells Fargo, each a ‘‘NonMoney Market Fund,’’ and collectively,

the ‘‘Non-Money Market Funds’’).

2. Wells Fargo is the investment

adviser for all of the Stagecoach Funds

and LAT Funds and, as a national

banking association, is exempt from

registration under the Investment

Advisers Act of 1940 (‘‘Advisers Act’’).

Barclays Global Fund Advisors

(‘‘BGFA’’) is a registered investment

adviser under the Advisers Act that

serves as investment sub-adviser to four

Stagecoach Funds and two LAT Funds.
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices 31251

1Each Fund that intends to rely on the order has

been named as an applicant. Any other existing

Fund and any future Fund that may rely on the

order in the future will do so only in accordance

with the terms and conditions of the application.

Stephens Inc., a broker-dealer registered

under the Securities Exchange Act of

1934, serves as principal underwriter for

each series, and Wells Fargo and

Stephens Inc. provide administrative

services for each series. An affiliate of

BGFA serves as custodian for the Funds

that BGFA sub-advises, and Wells Fargo

serves as custodian to all of the other

Funds.

3. Each of the Non-Money Market

Funds has, or may be expected to have,

cash reserves that have not been

invested in portfolio securities

(‘‘Uninvested Cash’’) in an account at its

custodian that either may be invested

directly in individual short-term money

market instruments or may not

otherwise be invested in any portfolio

securities. Uninvested cash may result

from a variety of sources, including

dividends or interest received on

portfolio securities, unsettled securities

transactions, reserves held for

investment strategy purposes, maturity

of investments, liquidation of

investment securities to meet

anticipated redemptions and dividend

payments, or new monies received from

investors.

4. Applicants seek an order that

would permit each of the Non-Money

Market Funds to utilize the Uninvested

Cash to purchase shares of one or more

of the Money Market Funds (each Fund

purchasing shares of the Money Market

Funds, an ‘‘Investing Fund,’’ and

collectively, ‘‘Investing Funds’’), and

that would permit the Money Market

Funds to sell their shares to, and redeem

shares from, the Investing Funds. The

requested relief would apply to

Stagecoach Funds and LAT Funds (and

each of their series and each

subsequently created series) and other

registered open-end management

investment companies or series that

become advised by Wells Fargo.1

Applicants believe that the proposed

transactions would allow Investing

Funds to reduce transaction costs, create

more liquidity, enjoy greater returns on

the Uninvested Cash, and further

diversify their holdings.

Applicants’ Legal Analysis

A. Section 12(d)(1)

1. Section 12(d)(1)(A) of the Act

prohibits any registered investment

company (the ‘‘acquiring company’’) or

any company or companies controlled

by the acquiring company from

purchasing any security issued by any

other investment company (the

‘‘acquired company’’) if the acquiring

company or companies it controls

would own in the aggregate more than

3% of the outstanding voting stock of

the acquired company, if the purchased

securities would constitute more than

5% of the acquiring company’s total

assets, or if the securities, together with

the securities of other acquired

investment companies, would represent

more than 10% of the acquiring

company’s total assets. Section

12(d)(1)(B) provides that no acquired

company may sell its securities to

another investment company if the sale

would cause the acquiring company to

own more than 3% of the acquired

company’s voting stock, or if the sale

would cause more than 10% of the

acquired company’s voting stock to be

owned by investment companies.

2. Applicants request an order to

permit an Investing Fund to invest up

to 25% of its total net assets in shares

of the Money Market Funds. Under the

proposal, each Money Market Fund

would also be permitted to sell its

shares to an Investing Fund in excess of

the limits in section 12(d)(1)(B).

3. Section 12(d)(1)(J) of the Act

provides that the SEC may exempt

persons or transactions from any

provision of section 12(d)(1) if and to

the extent that such exemption is

consistent with the public interest and

the protection of investors.

4. Applicants believe that none of the

concerns underlying section 12(d)(1) is

presented by the proposed transactions

and that the proposed transactions meet

the section 12(d)(1)(J) standards for

relief. Applicants note that the

perceived abuses that section 12(d)(1)

sought to address include undue

influence by an acquiring fund over the

management of an acquired fund,

layering of fees, and complex fund

structures. Applicants submit that

because the Money Market Funds

contain a highly liquid portfolio, none

of the Money Market Funds will be

subject to undue influence from an

Investing Fund resulting from the threat

of a large-scale redemption. Applicants

state that the Investing Funds will vote

their shares in the same proportion as

the Money Market Funds’ other

shareholders. Applicants argue that

there will be no layering of fees because

the shares of the Money Market Funds

will be sold to and redeemed from the

Investing Funds without sales load or

redemption fee, and to the extent that

any distribution, service, or advisory

fees are charged in connection with the

investment in Money Market Funds,

Wells Fargo and any sub-advisers will

waive their advisory fees for each

Investing Fund in an amount that offsets

the amount of the fees.

B. Section 17(a)

1. Section 17(a) of the Act generally

prohibits sales or purchases of securities

between a registered investment

company and any affiliated person of

that company. Section 2(a)(3) of the Act

defines ‘‘affiliated person’’ to include

persons under common control. 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. Because

Stagecoash and LAT have a common set

of individuals serving as directors/

trustees and a common investment

adviser, each Fund may be deemed to be

under common control with the other

Stagecoach Funds and LAT Funds.

Accordingly, the sale of shares of the

Money Market Funds to the Investing

Funds, and the redemption of such

shares from the Investing Funds, may be

prohibited under section 17(a).

2. Section 17(b) of the Act permits the

SEC to grant an order permitting a

transaction otherwise prohibited by

section 17(a) if it finds that the terms of

the proposed transaction are fair and

reasonable and do not involve

overreaching on the part of any person

concerned, the proposed transaction is

consistent with the policy of each

investment company concerned, and the

proposed transaction is consistent with

the general purposes of the Act. Section

6(c) of the Act permits the SEC to

exempt a series of transactions if such

exemption is necessary or appropriate

in the public interest and consistent

with the protection of investors and the

purposes fairly intended by the policies

of the Act.

3. Applicants believe that the terms of

the transactions meet the standards of

sections 6(c) and 17(b). Applicants state

that the shares of the Money Market

Funds will be purchased and redeemed

at their net asset value, which is the

same consideration paid and received

for the shares by any other shareholder.

Applicants assert that the purchase of

shares of the Money Market Funds by

the Investing Funds will be effected in

accordance with each Investing Fund’s

investment policies and that the

proposed transactions are consistent

with the general purposes of the Act.

C. Section 17(d) and Rule 17d–1

1. Section 17(d) of the Act and rule

17d–1 under the Act prohibit affiliated

persons from participating in joint

arrangements with a registered

investment company unless authorized

by the SEC. In passing on applications

for such orders, rule 17d–1 provides
31252 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices

that the SEC will consider whether the

participation of the investment

company is consistent with the

provisions, policies, and purposes of the

Act, and the extent to which the

participation is on a basis different from

or less advantageous than that of the

other participants. Applicants state that

each Investing Fund, Wells Fargo, and

each Money Market Fund could be

deemed to be participants in a joint

enterprise or other joint arrangement.

2. Applicants believe that the

proposed transactions meet the

standards for relief under rule 17d–1.

Applicants state that the investment by

the Investing Funds in shares of the

Money Market Funds would be on the

same basis as any other shareholder.

Applicants further believe that the

proposed transactions would be

beneficial to each of the participants

and that there is no basis on which to

believe that any participant would

benefit to a greater extent than any

other. Applicants note that Wells Fargo

and any sub-advisers will not receive

any increased investment advisory fees

under the proposed transactions, though

they may experience reduced clerical

costs.

Applicants’ Conditions

Applciants agree that the order

granting the requested relief will be

subject to the following conditions:

1. Shares of the Money Market Funds

sold to and redeemed from the Investing

Funds will not be subject to a sales load

or redemption fee. Nor will such shares

be subject to a distribution fee under a

plan adopted in accordance with rule

12b–1 under the Act, or a service fee (as

defined in Rule 2830(b)(9) of the

Conduct Rules of the National

Association of Securities Dealers), or if

such shares are subject to any such a

distribution fee or service fee, Wells

Fargo will waive its advisory fee for

each Investing Fund in an amount that

offsets the amount of such distribution

and/or service fees incurred by the

Investing Fund.

2. Wells Fargo will waive its advisory

fee for each Investing Fund in an

amount that offsets the amount of the

advisory fees of a Money Market Fund

incurred by the Investing Fund.

3. Each Investing Fund will invest

Uninvested Cash in, and hold shares of,

the Money Market Funds only to the

extent that the Investing Fund’s

aggregate investment in the Money

Market Funds does not exceed 25% of

the Investing Fund’s total net assets. For

purposes of this limitation, each

Investing Fund or series thereof will be

treated as a separate investment

company.

4. Investment in shares of the Money

Market Funds will be in accordance

with each Investing Fund’s respective

investment restrictions, if any, and will

be consistent with each Investing

Fund’s policies as set forth in its

prospectus and statement of additional

information.

5. Each Investing Fund, each Money

Market Fund, and any future fund that

may rely on the order shall be advised

by Wells Fargo, or a person controlling,

controlled by, or under common control

with Wells Fargo.

6. No Money Market Fund shall

acquire securities of any other

investment company in excess of the

limits contained in section 12(d)(1)(A)

of the Act.

For the SEC, by the Division of Investment

Management, under delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15153 Filed 6–5–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

23238; 812–11018]

Wilmington Trust Company, et al.;

Notice of Application

June 2, 1998.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of application for

exemption under sections 6(c) and 17(b)

of the Investment Company Act of 1940

(the ‘‘Act’’) from section 17(a) of the

Act.

SUMMARY OF APPLICATION: Applicants

request an order to permit certain

collective investment funds to transfer

their assets to certain portfolios of

registered open-end management

companies in exchange for shares of the

portfolios.

APPLICANTS: Wilmington Trust Company

(‘‘WTC’’); Wilmington Trust Corporation

(‘‘Wilmington Trust’’); The Rodney

Square Strategic Equity Fund (‘‘Strategic

Equity Fund’’); and the Rodney Square

Fixed Income Fund (‘‘Strategic FixedIncome Fund,’’ and collectively with the

Strategic Equity Fund, the ‘‘Funds’’).

FILING DATES: The application was filed

on February 20, 1998. Applicants have

agreed to file an 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 June 24, 1998, 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, Security and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549.

Applicants, 1100 N. Market Street,

Wilmington, Delaware 19890–0001.

FOR FURTHER INFORMATION CONTACT:

Lawrence W. Pisto, Senior Counsel, at

(202) 942–0527, or George J. Zornada,

Branch Chief 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

Commission’s Public Reference Branch,

450 Fifth Street, NW., Washington, DC

20549 (tel. (202) 942–8090).

Applicants’ Representations

1. WTC, a Delaware state-chartered

bank, is a wholly-owned subsidiary of

Wilmington Trust, a bank holding

company. WTC serves as custodian and

investment manager and/or trustee for

numerous employee benefit plans

qualified under section 401 of the

Internal Revenue Code of 1986, as

amended. The assets of some of these

employee benefit plans are invested in

collective investment funds (‘‘CIFs’’)

sponsored by WTC and for which WTC

acts as trustee. Each CIF includes assets

of retirement benefit plans for

employees of entities unaffiliated with

WTC (‘‘Other Plans’’) as well as assets

of retirement benefit plans for

employees of WTC and its affiliates

(‘‘Affiliated Plans’’) (Other Plans and

Affiliated Plans are collectively referred

to as the ‘‘Plans’’). Assets of Affiliated

Plans represent 24% to 41% of the

assets of each CIF.

2. Both the Strategic Equity Fund and

the Strategic Fund-Income Fund are

Massachusetts business trusts registered

under the Act as open-end management

investment companies and may offer

several portfolios (‘‘Portfolios’’). Each

Fund is offered and sold without a sales

load, redemption fee, asset-based

distribution fee or shareholder servicing