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
Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices 31253

1As a ‘‘bank’’ within the meaning of section

202(a)(2) of the Investment Advisers Act of 1940

(the ‘‘Advisers Act’’), WTC is excluded from the

definition of an investment adviser in section

202(a)(11) of the Advisers Act and, accordingly, is

exempt from the registration requirements of

section 203 of the Advisers Act.

fee. The Strategic Equity Fund currently

consists of one Portfolio, the Large Cap

Growth Equity Portfolio. The Strategic

Fixed-Income Fund currently consists of

two Portfolios, the Diversified Income

Portfolio and the Municipal Income

Portfolio. WTC is the investment adviser

for each of the Portfolios and will serve

as the investment adviser for each new

Portfolio.1

3. WTC is terminating the CIFs and

intends to transfer in-kind the Plans’

assets in the CIFs to each of the existing

and certain newly created Portfolios (the

‘‘Conversion’’). In the Conversion the

Funds will accept a transfer of securities

from one or more CIFs with

substantially similar investment

objectives in exchange for Portfolio

shares having a total net asset value

equal to the market value of the

transferred securities (the ‘‘Proposed

Transactions’’). The Proposed

Transactions will be as follows:

CIF Corresponding portfolio

Growth Stock

Fund.

Large Cap Growth Equity

Portfolio.

Value Stock

Fund.

Large Cap Value Equity Portfolio (New).

Small Cap

Stock Fund.

Small Cap Equity Portfolio

(New).

International

Stock Fund.

International Equity Portfolio

(New).

Intermediate

Bond Fund.

Diversified Income Portfolio.2

Bond Fund .... Intermediate Bond Portfolio

(New).

2At or about the time of the Conversion, the

name of the Diversified Income Portfolio will

be changed to ‘‘Short-Intermediate Bond Portfolio.’’

Applicants state that the Conversion is

expected to occur on June 26, 1998.

4. The CIF assets to be transferred to

the Portfolios will be valued in

accordance with the provisions of rule

17a–7(b) under the Act. The Fund

shares received by the CIFs then will be

distributed, pro rata, to all Plans whose

interests were converted as of the date

of the transfer.

5. Applicants request relief to effect

the Proposed Transactions. Applicants

also request relief for any other

registered open-end management

investment company that may be

advised by WTC or an entity

controlling, controlled by, or under

common control with WTC, and any

other CIF sponsored by WTC in which

employee benefit plans established and

maintained for the benefit of employees

of WTC or its affiliates own five percent

or more of the assets that in the future

may convert into the registered openend investment company (‘‘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 this application.

Applicant’ Legal Analysis

1. Section 17(a) of the Act, in relevant

part, prohibits an affiliated person of a

registered investment company, or an

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, in relevant

part, defines ‘‘affiliated person’’ to

include: (a) any person directly or

indirectly owning, controlling, or

holding with the power to vote, five

percent or more of the outstanding

voting securities of such other person;

(b) any person directly or indirectly

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. Because the CIFs may

be viewed as acting as principals in the

Proposed Transactions and because CIFs

and the Funds may be viewed as being

under the common control of WTC

within the meaning of section 2(a)(3)(C)

of the Act, the Proposed Transactions

may be subject to the prohibitions

contained in section 17(a).

2. Rule 17a–7 under the Act exempts

certain purchase and sale transactions

otherwise prohibited by section 17(a) if

an affiliation exists solely by reason of

having a common investment adviser,

common directors, and/or common

officers, provided, among other

requirements, that the transaction

involves a cash payment against prompt

delivery of the security. Rule 17a–7 is

not available for the Conversion because

WTC and Wilmington Trust may be

deemed to have direct or indirect

beneficial interest (either as sponsor of

an Affiliated Plan or because WTC’s

employees or its affiliates’ employees

are participants in the Affiliated Plans)

in the CIFs in excess of give percent of

the assets of the CIFs, which creates an

affiliation ‘‘not solely by reason of’’

having common investment adviser,

common directors, and/or common

officers. In addition, the Conversion will

be effected as an in-kind transfer, rather

than in cash.

3. Rule 17a–8 under the Act exempts

certain mergers, consolidations, and

sales of assets of registered investment

companies from the provisions of

section 17(a) of the Act if an affiliation

exists solely be reason of having a

common investment adviser, common

directors, and/or common officers,

provided, among other requirements,

that the board of directors of each

investment company makes certain

determinations. Rule 17a–8 is not

available for the Conversion because the

CIFs are not registered investment

companies and because the CIFs and the

Funds have affiliations other than those

covered by the rule.

4. Section 17(b) of the Act provides

that the Commission shall exempt a

proposed transaction from section 17(a)

if evidence establishes that: (a) the terms

of the proposed transaction are

reasonable and fair and do not involve

overreaching; (b) the proposed

transaction is consistent with the policy

of the registered investment company

involved; and (c) the proposed

transaction is consistent with the

general purposes of the Act.

5. Section 6(c) provides that the

Commission 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 seek an order under

sections 6(c) and 17(b) of the Act to

permit the Proposed Transactions and

Future Transactions. Applicants submit

that the proposed transactions satisfy

the standards for relief under sections

6(c) and 17(b). Applicants assert that the

terms of the Proposed Transactions are

reasonable and fair and do not involve

overreaching on the part of any

applicant; the investment objectives,

policies, and restrictions of the CIFs are

compatible with and substantially

similar to the applicable Funds’

investment objectives, policies, and

restrictions; and the Proposed

Transactions 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.

7. Applicants agree to comply with

17a–7 and 17a–8 to the extent possible.

Applicants state that the Proposed

Transactions are in accordance with

procedures previously adopted by the

Funds’ board of trustees sthe ‘‘Boards’’)

pursuant to rule 17a–7(e), and the

provisions of rule 17a–7(b), (c), (d), and

(f) will be satisfied. The Proposed

Transactions will take place as in-kind

transfers from the CIFs to the Funds,

rather than cash transactions as required
31254 Federal Register / Vol. 63, No. 109 / Monday, June 8, 1998 / Notices

1 15 U.S.C. 78s(b)(1).

by rule 17a–7(a). Applicants assert that

if the Proposed Transactions were

effected in cash, the CIFs and the Plans

would have to bear unnecessary

expense and inconvenience in

transferring assets to the Funds. In

addition, in order for the Conversion to

take place, the Boards, including a

majority of the disinterested members,

shall have determined that the

participation of each Portfolio in the

Proposed Transactions is in the best

interests of that Portfolio and that the

interests of existing shareholders of the

Portfolio will not be diluted as a result

of the Conversion. Such findings and

the basis on which they were made will

be fully recorded by the Funds.

8. Applicants also state that the Plans

are all employee benefit plans subject to

the Employment Retirement Income

Security Act of 1974 (‘‘ERISA’’). Section

406(a) of ERISA prohibits certain types

of transactions between a plan and

‘‘parties in interest’’ (such as a plan

fiduciary, a service provider, or an

employer whose employees are covered

by the plan). Because WTC is a fiduciary

of the Affiliated Plans and the adviser

to the Portfolios, the Conversion would

be prohibited by section 406 of ERISA.

WTC plans to submit an application for

an exemption to the Department of

Labor (‘‘DOL’’). To comply with the

anticipated requirements for the

exemption, the Conversions will be

approved by each Affiliated Plan’s

employee benefit review committee (the

‘‘Committee’’), which serves as a

fiduciary for the Plan. In addition, if

required by the DOL, the Conversion

will be reviewed and approved by a

fiduciary independent of WTC,

Wilmington trust and their affiliates (an

‘‘Independent Fiduciary’’), who will be

retained solely for the purpose of

determining the fairness to the

Affiliated Plans of the Proposed

Transactions.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

1. The Proposed Transactions will

comply with the terms of Rule 17a–

7(b)–(f).

2. The Proposed Transactions will not

occur unless and until: (a) the Boards

(including a majority of their

disinterested members) and the

Committee and any Independent

Fiduciary for the Affiliated Plans

required by the DOL find that the

Proposed Transactions are in the best

interests of the Portfolios and the Plans,

respectively; and (b) the Boards

(including a majority of the

disinterested members) find that the

interests of the existing shareholders of

the Portfolios will not be diluted as a

result of the Proposed Transactions.

These determinations and the basis

upon which they are made will be

recorded fully in the records of the

Funds and the Affiliated Plans,

respectively.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15154 Filed 6–5–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

Sunshine Act Meeting

Notice is hereby given, pursuant to

the provisions of the Government in the

Sunshine Act, Pub. L. 94–409, that the

Securities and Exchange Commission

will hold the following open meeting

during the week of June 8, 1998.

An open meeting will be held on

Friday, June 12, 1998, at 11 a.m.

The subject matter of the open

meeting scheduled for Friday, June 12,

1998, at 11 a.m., will be:

Consideration of whether to propose

for pubic comment an amendment to

rule 102(e) of the Commission’s Rules of

Practice clarifying the Commission’s

standard for determining when

accountants engage in ‘‘improper

professional conduct.’’ For further

information, please contact, Michael J.

Kigin, Associate Chief Accountant,

Office of Chief Accountant at (202) 942–

4400.

At times, changes in Commission

priorities require alterations in the

scheduling of meeting items. For further

information and to ascertain what, if

any, matters have been added, deleted

or postponed, please contact:

The Office of the Secretary at (202)

942–7070.

Dated: June 4, 1998.

Jonathan G. Katz,

Secretary.

[FR Doc. 98–15362 Filed 6–4–98; 3:52 pm]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40050; File No. SR–NASD–

98–37]

Self-Regulatory Organizations; Notice

of Filing and Immediate Effectiveness

of Proposed Rule Change by the

National Association of Securities

Dealers, Inc. Relating to SelectNet

Fees

June 1, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 notice is hereby given that on

May 14, 1998, the National Association

of Securities Dealers, Inc. (‘‘NASD’’ or

‘‘Association’’) through its wholly

owned subsidiary, the Nasdaq Stock

Market, Inc. (‘‘Nasdaq’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’ or ‘‘SEC’’) the proposed

rule change as described in Items I, II,

and III below, which Items have been

prepared by the NASD. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

Nasdaq is herewith filing a proposed

rule change to extend, through August

31, 1998, the fees currently charged

under NASD Rule 7010(1) for the

execution of transactions in SelectNet.

Under the proposed extension,

SelectNet fees would continue to be

assessed in the following manner: (1)

$1.00 will be charged for each SelectNet

order entered and directed to one

particular market participant that is

subsequently executed in whole or in

part; (2) no fee will be charged to a

member who receives and executes a

directed SlectNet order; (3) the existing

$2.50 fee will remain in effect for both

sides of executed SelectNet orders that

result from broadcast messages; and (4)

a $.025 fee will remain in effect for any

member who cancels a SelectNet order.

If no further action is taken, SelectNet

fees will revert to their original $2.50

per-side level on September 1, 1998.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

NASD included statements concerning

the purpose of and basis for the

proposed rule change. The text of these

statements may be examined at places

specified in Item IV below. The self-