Securities and Exchange Commission (“Commission”).
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.
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 May 17, 2004 and amended on June 29, 2004.
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 July 22, 2004, 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.
Secretary, Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Applicants, 525 Market Street, 12th Floor, San Francisco, California 94105.Start Further Info
FOR FURTHER INFORMATION CONTACT:
Deepak Pai, Senior Counsel, at (202) 942-0574, or Mary Kay Frech, Branch Chief, at (202) 942-0564 (Division of Investment Management, Office of Investment Company Regulation).End Further Info End Preamble Start Supplemental 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).
1. Funds Trust is an open-end management investment company registered under the Act and consists of approximately seventy 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”).
2. The Advisors' Inner Circle Fund (the “AIC Trust”) consists of 45 series and is registered under the Act as an open-end management investment company. Cooke & Bieler, L.P. (“C&B”) serves as investment adviser to the three series of AIC Trust involved in the Reorganization (as defined below) (the “C&B Funds”). C&B is an investment adviser registered under the Advisers Act.
3. On March 9, 2004, Funds Management and C&B entered into an agreement providing for the reorganization of the C&B Funds with and into three newly created series of Funds Trust (the “Successor Funds”) (the “Reorganization”). Funds Management will serve as investment adviser to the Successor Funds. C&B will remain independently owned and will serve as sub-adviser to the Successor Funds. Funds Management will pay a lump-sum cash fee to C&B on the date that the Reorganization is consummated. On February 18, 2004 and February 3, 2004, respectively, the boards of trustees (each a “Board”) of AIC Trust and Funds Trust unanimously approved the Reorganization. The Board of AIC Trust has scheduled a special meeting of the C&B Funds' shareholders for July 9, 2004. Proxy materials for the special meeting were mailed to shareholders of the C&B Funds on May 28, 2004.
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 assignment of an investment advisory contract 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 an assignment of an investment advisory contract, at least seventy-five percent of Start Printed Page 40690the 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 believe that the assumption by Funds Management of the investment advisory responsibilities for the C&B Funds and the compensation to be paid by Funds Management to C&B in connection with the Reorganization constitute a transaction covered by section 15(f) of the Act. 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 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, 2004, Funds Trust had approximately $75 billion and C&B Funds had approximately $500 million in aggregate net assets, respectively, making the C&B Funds' aggregate net assets less than 1% 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 serve on the Board of Funds Trust is an interested person of C&B or the C&B 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 an experienced trustee to resign or by adding a new non-interested trustee. Applicants state that either of these solutions would be unfair to shareholders of Funds Trust, particularly in view of the amount of the assets of the C&B Funds being acquired relative to the amount of the assets of Funds Trust.
7. Applicants acknowledge that the Commission has adopted amendments to certain existing rules that will require that at least 75% of the board of directors of any registered investment company that relies on these rules not be “interested persons” of the investment company. Funds Trust intends to comply with this requirement by the compliance date of the rule amendments. Applicants are not requesting relief from these rule amendments and acknowledge that the requested relief from section 15(f)(1)(A) will not extend beyond the compliance date of the rule amendments.
8. 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.Start Signature
For the Commission, by the Division of Investment Management, under delegated authority.
Jill M. Peterson,
1. The remaining series of AIC Trust are not advised by C&B and are not a party to the transaction.Back to Citation
[FR Doc. 04-15187 Filed 7-2-04; 8:45 am]
BILLING CODE 8010-01-P