[Federal Register Volume 61, Number 113 (Tuesday, June 11, 1996)]
[Notices]
[Pages 29580-29582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14712]



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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22004; 812-10014]


Norwest Funds, et al.; Notice of Application

June 4, 1996.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption Under the Investment 
Company Act of 1940 (the ``Act'').

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applicants: Norwest Advantage Funds, Norwest Select Funds, Core Trusts 
(collectively, the ``Trusts'') and Norwest Bank Minnesota, N.A. 
(``Norwest'').

relevant act section: Order requested under rule 17d-1 to permit 
certain transactions in accordance with section 17(d) of the Act and 
rule 17d-1 thereunder.

summary of application: Applicants request an order to permit the 
series of certain investment companies and certain private accounts to 
deposit daily cash balances in one or more joint accounts to be used to 
enter into short-term investments.

filing dates: The application was filed on February 26, 1996 and 
amended on May 16, 1996.

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 July 1, 1996, 
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 5th Street, N.W., Washington, D.C. 
20549. Applicants, Forum Financial Services, Inc., Two Portland Square, 
Portland, Maine 04101; Norwest Bank Minnesota, N.A., Norwest Center, 
Sixth and Marquette, Minneapolis, Minnesota 55479-1026.

for further information contact: Suzanne Krudys, Senior Counsel, at 
(202) 942-0641, or Alison E. Baur, Branch Chief, (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.

Applicants' Representations

    1. The Trusts, organized as Delaware business trusts, are 
registered open-end management investment companies comprised of 
multiple series (the ``Series''). Existing and future series of the 
Trusts and other registered investment companies or Series thereof that 
are advised by Norwest are collectively referred to as the ``Funds'' 
and individually as a ``Fund.'' Norwest, a national bank, serves as 
investment adviser to each Fund. Norwest also serves as transfer agent, 
custodian, shareholder servicing and dividend paying agent of each 
Trust. The term ``Norwest'' shall include, in addition to the company 
itself, any other entity controlling, controlled by or under common 
control with Norwest that acts in the future as investment adviser for 
the Trusts or other investment companies.
    2. Applicants request relief on behalf of themselves and also any 
present or future Series and Funds that are advised by Norwest, or any 
entity controlling, controlled by, or under common control with Norwest 
and any individual corporate, charitable, endowment, common and 
collective trust fund, public entity, individual and retirement 
accounts for which Norwest serves as investment adviser (the ``Private 
Accounts''). All Funds that currently intend to rely on the requested 
order are named as applicants.
    3. All of the Funds are authorized to invest at least a portion of 
their uninvested cash balances in short-term liquid assets. Private 
Accounts are invested by Norwest in accordance with each Private 
Accounts' investment objectives, policies and restrictions. Assets of 
the Funds and Private Accounts are held by Norwest as custodian (the 
``Custodian'').
    4. The Funds and Private Accounts have uninvested cash balances in 
their accounts at the Custodian that are not otherwise invested in 
portfolio securities. Generally, such cash balances are invested in 
short-term liquid assets, such as commercial paper or U.S. Treasury 
bills. Cash balances may also be invested in shares of the money market 
series of the Trusts.\1\
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    \1\ An SEC exemptive order permits Funds advised by Norwest to 
invest their cash balances in shares of certain affiliated money 
market series. See Norwest Funds, Investment Company Act Release 
Nos. 20940 (Mar. 6, 1995) (notice) and 20983 (Apr. 3, 1995) (order).
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    5. Applicants propose to deposit daily cash balances of the Funds 
and Private Accounts into one or more joint accounts (the ``Joint 
Accounts'') established at the Custodian and to invest the daily 
balance of the Joint Account in: (a) Repurchase agreements 
``collateralized fully'' (as defined in rule 2a-7 under the Act); (b) 
interest-bearing or discounted commercial paper, including dollar 
denominated commercial paper of foreign issuers; and (c) any other 
short-term money market instruments, including variable rate demand 
notes and other tax exempt money market instruments, that constitute 
``Eligible Securities'' (as defined in rule 2a-7 under the Act) 
(collectively, ``Short-Term Investments''). The Funds and Private 
Accounts that are eligible to participate in a Joint Account and that 
elect to

[[Page 29581]]

participate in such Account are collectively referred to as 
``Participants.''
    6. A Participant's decision to use a Joint Account will be based on 
the same factors as its decision to make any other short-term liquid 
investment. The sole purpose of the Joint Accounts is to provide a 
convenient means of aggregating what otherwise would be one or more 
daily transactions for some or all Participants necessary to manage 
their respective daily account balances.
    7. Norwest would be responsible for investing funds held by the 
Joint Accounts, establishing accounting and control procedures, and 
ensuring fair treatment of Participants. Norwest would manage 
investments in the Joint Accounts in essentially the same manner as if 
it had invested in such instruments on an individual basis for each 
Fund or Private Account. A Participant will be able to transfer a 
portion of its cash balances to more than one Joint Account and a Joint 
Account would be permitted to invest in more than one Short-Term 
Investment.
    8. Any repurchase agreements entered into through the Joint Account 
will comply with the terms of Investment Company Act Release No. 13005 
(February 2, 1983). Applicants acknowledge that they have a continuing 
obligation to monitor the SEC's published statements on repurchase 
agreements, and represent that repurchase agreement transactions will 
comply with future positions of the SEC to the extent that such 
positions set forth different or additional requirements regarding 
repurchase agreements. In the event that the SEC sets forth guidelines 
with respect to other Short-Term Investments, all such investments made 
through the Joint Account will comply with those guidelines.

Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 thereunder prohibit an 
affiliated person of a registered investment company, or an affiliated 
person of such a person, from participating in any joint enterprise or 
arrangement in which such investment company is a participant, without 
an SEC order. The applicants believe that granting the requested order 
is consistent with the provisions, policies, and purposes of the Act 
and the Funds would participate in the Joint Account on a basis no 
different from or less advantageous than that of any other Participant.
    2. The Participants, by participating in the proposed Joint 
Accounts, and Norwest, by managing the proposed Joint Accounts, could 
be deemed to be ``joint participants'' in a transaction within the 
meaning of section 17(d) of the Act. In addition, the proposed Joint 
Accounts could be deemed to be a ``joint enterprise or other joint 
arrangement'' within the meaning of rule 17d-1.
    3. Applicants state that the Participants may earn a higher rate of 
return on investments through the Joint Accounts relative to the 
returns they could earn individually. Under most market conditions, it 
is generally possible to negotiate a rate of return on larger Short-
Term Investments that is higher than the rate available on smaller 
Short-Term Investments. The Joint Accounts also may increase the number 
of dealers and issuers willing to enter into Short-Term Investments 
with the Participants and may reduce the possibility that their cash 
balances remain uninvested.
    4. Applicants believe that no Participant would be in a less 
favorable position as a result of the Joint Accounts. Each 
Participant's investment in a Joint Account would not be subject to the 
claims of creditors, whether brought in bankruptcy, insolvency, or 
other legal proceeding, of any other Participant. Each Participant's 
liability on any Short-Term Investment would be limited to its interest 
in such investment; no Participant would be jointly liable for the 
investments of any other Participant.
    Applicants state that the Joint Accounts may result in certain 
administrative efficiencies and a reduction of the potential for errors 
by reducing the number of trade tickets and cash wires that must be 
processed by the counterparties to the transactions, the Custodian and 
Norwest's trading department.
    6. Applicants believe that the proposed operation of the Joint 
Account would not result in any conflicts of interest between any of 
the Participants and Norwest. When making investments, Norwest would 
take into account each Participant's investment objective, policies and 
restrictions, its obligation to fairly allocate investment 
opportunities among participants, the need for diversification and the 
time that cash becomes available.
    7. The Boards will have determined, prior to participation by any 
Fund, that the procedures for operating the Joint Accounts are 
reasonably designed to ensure (i) that the Joint Accounts are not 
inherently biased in favor of one Participant over another and should 
eliminate any bias due to size or lack thereof in any transaction; and 
(ii) that the anticipated benefits to each Participant would be within 
an acceptable range of fairness.
    8. For the reasons set forth above, applicants believe that 
granting the requested order is consistent with the provisions, 
policies and purpose of the Act and intention of rule 17d-1.

Applicants' Conditions

    Applicants would comply with the following as conditions to any 
order granted by the SEC:
    1. The Joint Accounts would not be distinguishable from any other 
accounts maintained by Participants at the Custodian except that monies 
from Participants would be deposited in a Joint Account on a commingled 
basis. The Joint Accounts would not have a separate existence and would 
not have indicia of a separate legal entity. The sole function of the 
Joint Accounts would be to provide a convenient way of aggregating 
individual transactions which would otherwise require daily management 
by Norwest of uninvested cash balances.
    2. Cash in the Joint Accounts would be invested in one or more of 
the following, as directed by Norwest: (a) Repurchase agreements 
``collateralized fully'' as defined in rule 2a-7 under the Act; (b) 
interest-bearing or discounted commercial paper, including dollar 
denominated commercial paper of foreign issuers; and (c) any other 
short-term money market instruments, including variable rate demand 
notes and other tax-exempt money market instruments, that constitute 
``Eligible Securities'' (as defined in rule 2a-7 under the Act) 
(collectively, ``Short-Term Investments''). Short-Term Investments that 
are repurchase agreements would have a remaining maturity of 60 days or 
less and other Short-Term Investments would have a remaining maturity 
of 90 days or less, each as calculated in accordance with rule 2a-7 
under the Act.
    3. All assets held in the Joint Accounts would be valued on an 
amortized cost basis to the extent permitted by applicable SEC 
releases, rules or orders.
    4. Each Participant that is a registered investment company valuing 
its net assets in reliance on rule 2a-7 under the Act would use the 
average maturity of the instruments in the Joint Account in which such 
Participant has an interest (determined on a dollar weighted basis) for 
the purpose of computing its average portfolio maturity with respect to 
its portion of the assets held in a Joint Account on that day.
    5. In order to assure that there will be no opportunity for any 
Participant to use any part of a balance of a Joint Account credited to 
another Participant, no Participant will be allowed to create

[[Page 29582]]

a negative balance in any Joint Account for any reason, although each 
Participant will be permitted to draw down its entire balance at any 
time. Each Participant's decision to invest in a Joint Account would be 
solely at its option, and no Participant would be obligated to invest 
in the Joint Account or to maintain any minimum balance in the Joint 
Account. In addition, each Participant would retain the sole rights of 
ownership to any of its assets invested in the Joint Account, including 
interest payable on such assets invested in the Joint Account.
    6. Norwest would administer the investment of cash balances in and 
operation of the Joint Accounts as part of its general duties under its 
advisory agreements with Participants and would not collect any 
additional or separate fees for advising any Joint Account.
    7. The administration of the Joint Account would be within the 
fidelity bond coverage required by section 17(g) of the Act and rule 
17g-1 thereunder.
    8. The Board of Trustees of each Trust (each a ``Board'') would 
adopt procedures pursuant to which the Joint Accounts would operate, 
which will be reasonably designed to provide that the requirements of 
this application will be met. Each Board will make and approve such 
changes as they deem necessary to ensure that such procedures are 
followed. In addition, the Board of each Fund would determine, no less 
frequently than annually, that the Joint Accounts have been operated in 
accordance with the proposed procedures and would permit a Fund to 
continue to participate therein only if it determines that there is a 
reasonable likelihood that the Fund and its shareholders would benefit 
from the Fund's participation.
    9. Any Short-Term Investments made through the Joint Accounts would 
satisfy the investment criteria of all Participants in that investment.
    10. Each Participant and the Custodian would maintain records (in 
conformity with Section 31 of the Act and the rules thereunder) 
documenting for any given day, the Participant's aggregate investment 
in a Joint Account and the Participant's pro rata share of each Short-
Term Investment made through such Joint Account. Each Participant that 
is not a registered investment company or registered investment adviser 
would make available to the Commission, upon request, such books and 
records with respect to its participation in a Joint Account.
    11. Short-Term Investments held in a Joint Account generally would 
not be sold prior to maturity except if: (a) Norwest believes the 
investment no longer presents minimal credit risks; (b) the investment 
no longer satisfies the investment criteria of all Participants in the 
investment because of a downgrading or otherwise; or (c) in the case of 
a repurchase agreement, the counterparty defaults. Norwest may, 
however, sell any Short-Term Investment (or any fractional portion 
thereof) on behalf of some or all Participants prior to the maturity of 
the investment if the cost of such transactions will be borne solely by 
the selling Participants and the transaction would not adversely affect 
other Participants. In no case would a sale prior to maturity of a 
Short-Term Investment on behalf of less than all Participants be 
permitted if it would reduce the principal amount or yield to be 
received by other Participants in the Short-Term Investment or 
otherwise adversely affect the other Participants. Each Participant of 
a Joint Account will be deemed to have consented to such sale and 
partition of the investments in the Joint Account.
    12. Short-Term Investments held through a Joint Account with a 
remaining maturity of more than seven days, as calculated pursuant to 
rule 2a-7 under the Act, will be considered illiquid and, for any 
Participant that is an open-end investment company registered under the 
Act, will be subject to the restriction that the Fund may not invest 
more than 10%, in the case of a money market fund, and 15%, in the case 
of a non-money market fund, (or such other percentage as set forth by 
the SEC from time to time) of its net assets in illiquid securities, if 
Norwest cannot sell the instrument, or the Fund's fractional interest 
in such instrument, pursuant to the preceding condition.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-14712 Filed 6-10-96; 8:45 am]
BILLING CODE 8010-01-M