
[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Notices]
[Pages 76864-76867]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30182]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30830; File No. 812-14090]


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

December 13, 2013.
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(a) of 
the Act and rule 18f-2 under the Act, as well as from certain 
disclosure requirements.

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SUMMARY: Summary of Application: Applicants request an order that would 
permit them to enter into and materially amend subadvisory agreements 
with Wholly-Owned Sub-Advisors (as defined below) and non-affiliated 
sub-advisors without shareholder approval and would grant relief from 
certain disclosure requirements.

Applicants: Wells Fargo Funds Trust, Wells Fargo Master Trust, and 
Wells Fargo Variable Trust (each, a ``Trust'' and together, the 
``Trusts''); and Wells Fargo Funds Management, LLC (``Funds 
Management'').

DATES: Filing Dates: The application was filed on November 1, 2012, and 
amended on April 11, 2013, September 27, 2013, November 13, 2013, and 
December 12, 2013.

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 January 7, 2014, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants, 
525 Market Street, 12th Floor, San Francisco, CA 94105.

FOR FURTHER INFORMATION CONTACT: David J. Marcinkus, Senior Counsel, at 
(202) 551-6882, or David P. Bartels, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Applicants' Representations

    1. Each Trust is organized as a Delaware trust and is registered 
with the Commission as an open-end management investment company under 
the Act. Each Trust may offer one or more series of shares (each, a 
``Series'' and collectively the ``Series'') with its own distinct 
investment objectives, policies and restrictions.\1\ Currently, the 
Trusts offer 135 Series. Funds Management is a limited liability 
company organized under the laws of the State of Delaware and is 
registered with the Commission as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act'').
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    \1\ Certain Series of the Wells Fargo Master Trust (the ``Master 
Trust,'' and each such series of Master Trust, a ``Master Fund'') 
are held by certain Series of Wells Fargo Funds Trust (``Funds 
Trust'') in a master-feeder structure pursuant to Section 
12(d)(1)(E) of the Act. Such series of Funds Trust as well as any 
future Series and any other investment company or series thereof 
that is advised by the Advisor (as defined below) may invest 
substantially all of their assets in a Master Fund pursuant to 
Section 12(d)(1)(E) of the Act (each a ``Feeder Fund''). No Feeder 
Fund will engage any sub-advisors other than through approving the 
engagement of one or more of the Master Fund's sub-advisors.
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    2. Applicants request an order to permit the Advisor,\2\ subject to 
the approval of the board of trustees of each applicable Trust (each a 
``Board''), including a majority of the trustees who are not 
``interested persons'' of the Series or the Advisor as defined in 
section 2(a)(19) of the Act (the ``Independent Trustees''), to, without 
obtaining shareholder approval: (i) Select Sub-Advisors \3\ to manage 
all or a portion of the assets of a Series and enter into Sub-Advisory 
Agreements (as defined below) with the Sub-Advisors, and (ii) 
materially amend Sub-Advisory Agreements with the Sub-Advisors.\4\ 
Applicants request that the relief apply to the named applicants, as 
well as to any future Series and any other existing or future 
registered open-end management investment company or series thereof 
that is advised by the Advisor, uses the multi-manager structure 
described in the application, and complies with the terms and 
conditions set forth in the application (each, a ``Subadvised 
Series'').\5\ The

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requested relief will not extend to any sub-advisor, other than a 
Wholly-Owned Sub-Advisor, who is an affiliated person, as defined in 
section 2(a)(3) of the Act, of the Subadvised Series, of any Feeder 
Fund, or of the Advisor, other than by reason of serving as a sub-
advisor to one or more of the Subadvised Series (``Affiliated Sub-
Advisor'').
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    \2\ The term ``Advisor'' includes (i) Funds Management and (ii) 
any entity controlling, controlled by or under common control with, 
Funds Management or its successors that serves as investment adviser 
to the Series. For purposes of the requested order, ``successor'' is 
limited to an entity that results from a reorganization into another 
jurisdiction or a change in the type of business organization.
    \3\ A ``Sub-Advisor'' for a Series is (a) an indirect or direct 
``wholly-owned subsidiary'' (as such term is defined in the Act) of 
the Advisor for that Series; (b) a sister company of the Advisor for 
that Series that is an indirect or direct ``wholly-owned 
subsidiary'' (as such term is defined in the Act) of the same 
company that, indirectly or directly, wholly owns the Advisor (each 
of (a) and (b), a ``Wholly-Owned Sub-Advisor'' and collectively, the 
``Wholly-Owned Sub-Advisors''), or (c) not an ``affiliated person'' 
(as such term is defined in section 2(a)(3) of the Act) of the 
Series, any Feeder Fund invested in one or more Master Funds, the 
applicable Trust, or the Advisor, except to the extent that an 
affiliation arises solely because the Sub-Advisor serves as a sub-
advisor to a Series (each, a ``Non-Affiliated Sub-Advisor'').
    \4\ Shareholder approval will continue to be required for any 
other sub-advisor changes (not otherwise permitted by rule or other 
action of the Commission or staff) and material amendments to an 
existing Sub-Advisory Agreement with any sub-advisor other than a 
Non-Affiliated Sub-Advisor or Wholly-Owned Sub-Advisor (all such 
changes referred to as ``Ineligible Sub-Advisor Changes'').
    \5\ All registered open-end investment companies that currently 
intend to rely on the requested order are named as applicants. All 
Series that currently are, or that currently intend to be, 
Subadvised Series (as defined below) are identified in the 
application. Any entity that relies on the requested order will do 
so only in accordance with the terms and conditions contained in the 
application. If the name of any Subadvised Series contains the name 
of a Sub-Advisor (as defined below), the name of the Advisor (as 
defined below) that serves as the primary adviser to the Subadvised 
Series, or a trademark or trade name that is owned by or publicly 
used to identify that Advisor, will precede the name of the Sub-
Advisor.
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    3. Funds Management serves as the investment adviser to each Series 
pursuant to an investment advisory agreement with the applicable Trust 
(each an ``Investment Management Agreement'' and together the 
``Investment Management Agreements''). Any other Advisor will be 
registered with the Commission as an investment adviser under the 
Advisers Act. The Investment Management Agreement for each existing 
Series was approved by the Board, including a majority the Independent 
Trustees, and by the shareholders of that Series in the manner required 
by sections 15(a) and 15(c) of the Act and rule 18f-2 thereunder. The 
terms of these Investment Management Agreements comply with section 
15(a) of the Act. Each other Investment Management Agreement will 
comply with section 15(a) of the Act and will be similarly approved.
    4. Pursuant to the terms of each Investment Management Agreement, 
Funds Management, subject to the supervision of the Board, provides 
continuous investment management of the assets of each Series. The 
Advisor periodically reviews a Series' investment policies and 
strategies and, based on the need of a particular Series, may recommend 
changes to the investment policies and strategies of the Series for 
consideration by the Board. For its services to each Series under the 
applicable Investment Management Agreement, the Advisor receives an 
investment management fee from that Series. Consistent with the terms 
of each Investment Management Agreement, the Advisor may, subject to 
the approval of the Board, including a majority of the Independent 
Trustees, and the shareholders of the applicable Subadvised Series (if 
required), delegate portfolio management responsibilities of all or a 
portion of the assets of a Subadvised Series to one or more Sub-
Advisors. The Advisor continues to have overall responsibility for the 
management and investment of the assets of each Subadvised Series, and 
the Advisor's responsibilities include, for example, recommending the 
removal or replacement of Sub-Advisors and determining the portion of 
that Subadvised Series' assets to be managed by any given Sub-Advisor 
and reallocating those assets as necessary from time to time.
    5. Funds Management has entered into sub-advisory agreements with 
various Sub-Advisors (``Sub-Advisory Agreements'') on behalf of the 
Subadvised Series. An Advisor may also, in the future, enter into Sub-
Advisory Agreements on behalf of other Series. The Sub-Advisory 
Agreements were approved by the Board, including a majority of the 
Independent Trustees, and the shareholders of the applicable Subadvised 
Series in accordance with Sections 15(a) and 15(c) of the Act and Rule 
18f-2 thereunder. In addition, the terms of each Sub-Advisory Agreement 
comply fully with the requirements of Section 15(a) of the Act. The 
Sub-Advisors, subject to the supervision of the Advisor and oversight 
of the Board, determine the securities and other instruments to be 
purchased, sold or entered into by a Subadvised Series' portfolio or a 
portion thereof, and place orders with brokers or dealers that they 
select. The Advisor will compensate each Sub-Advisor out of the fee 
paid to the Advisor under the relevant Investment Management Agreement.
    6. Subadvised Series will inform shareholders of the hiring of a 
new Sub-Advisor pursuant to the following procedures (``Modified Notice 
and Access Procedures''): (a) Within 90 days after a new Sub-Advisor is 
hired for any Subadvised Series, that Subadvised Series will send its 
shareholders \6\ either a Multi-manager Notice or a Multi-manager 
Notice and Multi-manager Information Statement; \7\ and (b) the 
Subadvised Series will make the Multi-manager Information Statement 
available on the Web site identified in the Multi-manager Notice no 
later than when the Multi-manager Notice (or Multi-manager Notice and 
Multi-manager Information Statement) is first sent to shareholders, and 
will maintain it on that Web site for at least 90 days. Applicants 
state that, in the circumstances described in the application, a proxy 
solicitation to approve the appointment of new Sub-Advisors provides no 
more meaningful information to shareholders than the proposed Multi-
manager Information Statement. Applicants also state that each Board 
would comply with the requirements of sections 15(a) and 15(c) of the 
Act before entering into or amending Sub-Advisory Agreements.
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    \6\ If the Subadvised Series is a Master Fund, for purposes of 
the Modified Notice and Access Procedures, ``shareholders'' include 
both the shareholders of the applicable Master Fund and the 
shareholders of its Feeder Funds.
    \7\ A ``Multi-manager Notice'' will be modeled on a Notice of 
Internet Availability as defined in rule 14a-16 under the Securities 
Exchange Act of 1934 (``Exchange Act''), and specifically will, 
among other things: (a) Summarize the relevant information regarding 
the new Sub-Advisor; (b) inform shareholders that the Multi-manager 
Information Statement is available on a Web site; (c) provide the 
Web site address; (d) state the time period during which the Multi-
manager Information Statement will remain available on that Web 
site; (e) provide instructions for accessing and printing the Multi-
manager Information Statement; and (f) instruct the shareholder that 
a paper or email copy of the Multi-manager Information Statement may 
be obtained, without charge, by contacting the Subadvised Series.
    A ``Multi-manager Information Statement'' will meet the 
requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 
14A under the Exchange Act for an information statement. Multi-
manager Information Statements will be filed with the Commission via 
the EDGAR system.
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    7. Applicants also request an order under section 6(c) of the Act 
exempting the Subadvised Series from certain disclosure obligations 
that may require each Subadvised Series to disclose fees paid by the 
Advisor to each Sub-Advisor. Applicants seek relief to permit each 
Subadvised Series to disclose (as a dollar amount and a percentage of 
the Subadvised Series' net assets): (a) The aggregate fees paid to the 
Advisor and any Wholly-Owned Sub-Advisors; (b) the aggregate fees paid 
to Non-Affiliated Sub-Advisors; and (c) the fee paid to each Affiliated 
Sub-Advisor (collectively, the ``Aggregate Fee Disclosure''). An 
exemption is requested to permit the Series to include only the 
Aggregate Fee Disclosure. All other items required by Sections 6-
07(2)(a), (b) and (c) of Regulation S-X will be disclosed.

Applicants' Legal Analysis

    1. Section 15(a) of the Act states, in part, that it is unlawful 
for any person to act as an investment adviser to a registered 
investment company ``except pursuant to a written contract, which 
contract, whether with such registered company or with an investment 
adviser of such registered company, has been approved by the vote of a 
majority of the outstanding voting securities of such registered 
company.'' Rule 18f-2 under the Act provides that each series or class 
of stock in a series investment company affected by a matter must 
approve that matter if the Act requires shareholder approval.
    2. Form N-1A is the registration statement used by open-end 
investment companies. Item 19(a)(3) of Form N-1A requires a registered 
investment company to disclose in its statement of additional 
information the method of computing the ``advisory fee payable'' by the 
investment company, including

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the total dollar amounts that the investment company ``paid to the 
adviser (aggregated with amounts paid to affiliated advisers, if any), 
and any advisers who are not affiliated persons of the adviser, under 
the investment advisory contract for the last three fiscal years.''
    3. Rule 20a-1 under the Act requires proxies solicited with respect 
to a registered investment company to comply with Schedule 14A under 
the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 
22(c)(9) of Schedule 14A, taken together, require a proxy statement for 
a shareholder meeting at which the advisory contract will be voted upon 
to include the ``rate of compensation of the investment adviser,'' the 
``aggregate amount of the investment adviser's fee,'' a description of 
the ``terms of the contract to be acted upon,'' and, if a change in the 
advisory fee is proposed, the existing and proposed fees and the 
difference between the two fees.
    4. Regulation S-X sets forth the requirements for financial 
statements required to be included as part of a registered investment 
company's registration statement and shareholder reports filed with the 
Commission. Sections 6-07(2)(a), (b), and (c) of Regulation S-X require 
a registered investment company to include in its financial statement 
information about the investment advisory fees.
    5. Section 6(c) of the Act provides that the Commission by order 
upon application may conditionally or unconditionally exempt any 
person, security, or transaction or any class or classes of persons, 
securities, or transactions from any provisions of the Act, or from any 
rule thereunder, 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 policy and provisions of the Act. 
Applicants state that their requested relief meets this standard for 
the reasons discussed below.
    6. Applicants assert that the shareholders expect the Advisor, 
subject to the review and approval of the Board, to select the Sub-
Advisors who are in the best position to achieve the Subadvised Series' 
investment objective. Applicants assert that, from the perspective of 
the shareholder, the role of the Sub-Advisors is substantially 
equivalent to the role of the individual portfolio managers employed by 
an investment adviser to a traditional investment company. Applicants 
believe that permitting the Advisor to perform the duties for which the 
shareholders of the Subadvised Series are paying the Advisor--the 
selection, supervision and evaluation of the Sub-Advisors--without 
incurring unnecessary delays or expenses is appropriate in the interest 
of the Subadvised Series' shareholders and will allow such Subadvised 
Series to operate more efficiently. Applicants state that each 
Investment Management Agreement will continue to be fully subject to 
section 15(a) of the Act and rule 18f-2 under the Act and approved by 
the Board, including a majority of the Independent Trustees, in the 
manner required by sections 15(a) and 15(c) of the Act. Applicants are 
not seeking an exemption with respect to the Investment Management 
Agreements.
    7. Applicants assert that disclosure of the individual fees that 
the Advisor would pay to the Sub-Advisors of Subadvised Series that 
operate in the multi-manager structure described in the application 
does not serve any meaningful purpose. Applicants contend that the 
primary reasons for requiring disclosure of individual fees paid to 
Sub-Advisors are to inform shareholders of expenses to be charged by a 
particular Subadvised Series and to enable shareholders to compare the 
fees to those of other comparable investment companies. Applicants 
believe that the requested relief satisfies these objectives because 
the advisory fee paid to the Advisor will be fully disclosed and, 
therefore, shareholders will know what the Subadvised Series' fees and 
expenses are and will be able to compare the advisory fees a Subadvised 
Series is charged to those of other investment companies. Applicants 
assert that the requested disclosure relief would benefit shareholders 
of the Subadvised Series because it would improve the Advisor's ability 
to negotiate the fees paid to Sub-Advisors. Applicants state that if 
the Advisor is not required to disclose the Sub-Advisors' fees to the 
public, the Advisor may be able to negotiate rates that are below a 
Sub-Advisor's ``posted'' amounts. Applicants assert that the relief 
will also encourage Sub-Advisors to negotiate lower sub-advisory fees 
with the Advisor if the lower fees are not required to be made public.
    8. Applicants submit that the requested relief meets the standards 
for relief under section 6(c) of the Act. Applicants state that each 
Subadvised Series will be required to obtain shareholder approval to 
operate as a ``multiple manager'' fund as described in the application 
before relying on the requested order. Applicants assert that 
conditions 6, 10, and 11 are designed to provide the Board with 
sufficient independence and the resources and information it needs to 
monitor and address any conflicts of interest. Applicants state that, 
accordingly, they believe the requested relief 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.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Before a Subadvised Series may rely on the order requested in 
the application, the operation of the Subadvised Series in the manner 
described in the application, including the hiring of Wholly-Owned Sub-
Advisors, will be approved by a majority of the Subadvised Series' 
outstanding voting securities as defined in the Act, which in the case 
of a Master Fund will include voting instructions provided by 
shareholders of the Feeder Funds investing in such Master Fund or other 
voting arrangements that comply with section 12(d)(1)(E)(iii)(aa) of 
the Act or, in the case of a new Subadvised Series whose public 
shareholders purchase shares on the basis of a prospectus containing 
the disclosure contemplated by condition 2 below, by the sole initial 
shareholder before offering the Subadvised Series' shares to the 
public.
    2. The prospectus for each Subadvised Series, and in the case of a 
Master Fund relying on the requested relief, the prospectus for each 
Feeder Fund investing in such Master Fund, will disclose the existence, 
substance and effect of any order granted pursuant to the application. 
Each Subadvised Series (and any such Feeder Fund) will hold itself out 
to the public as employing the multi-manager structure described in the 
application. Each prospectus will prominently disclose that the Advisor 
has the ultimate responsibility, subject to oversight by the Board, to 
oversee the Sub-Advisors and recommend their hiring, termination, and 
replacement.
    3. The Advisor will provide general management services to a 
Subadvised Series, including overall supervisory responsibility for the 
general management and investment of the Subadvised Series' assets. 
Subject to review and approval of the Board, the Advisor will (a) set a 
Subadvised Series' overall investment strategies, (b) evaluate, select, 
and recommend Sub-Advisors to manage all or a portion of a Subadvised 
Series' assets, and (c) implement procedures reasonably designed to 
ensure that Sub-Advisors

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comply with a Subadvised Series' investment objective, policies and 
restrictions. Subject to review by the Board, the Advisor will (a) when 
appropriate, allocate and reallocate a Subadvised Series' assets among 
Sub-Advisors; and (b) monitor and evaluate the performance of Sub-
Advisors.
    4. A Subadvised Series will not make any Ineligible Sub-Advisor 
Changes without such agreement, including the compensation to be paid 
thereunder, being approved by the shareholders of the applicable 
Subadvised Series, which in the case of a Master Fund will include 
voting instructions provided by shareholders of the Feeder Fund 
investing in such Master Fund or other voting arrangements that comply 
with section 12(d)(1)(E)(iii)(aa) of the Act.
    5. Subadvised Series will inform shareholders, and if the 
Subadvised Series is a Master Fund, shareholders of any Feeder Funds, 
of the hiring of a new Sub-Advisor within 90 days after the hiring of 
the new Sub-Advisor pursuant to the Modified Notice and Access 
Procedures.
    6. At all times, at least a majority of the Board will be 
Independent Trustees, and the selection and nomination of new or 
additional Independent Trustees will be placed within the discretion of 
the then-existing Independent Trustees.
    7. Independent Legal Counsel, as defined in rule 0-1(a)(16) under 
the Act, will be engaged to represent the Independent Trustees. The 
selection of such counsel will be within the discretion of the then-
existing Independent Trustees.
    8. The Advisor will provide the Board, no less frequently than 
quarterly, with information about the profitability of the Advisor on a 
per Subadvised Series basis. The information will reflect the impact on 
profitability of the hiring or termination of any sub-advisor during 
the applicable quarter.
    9. Whenever a sub-advisor is hired or terminated, the Advisor will 
provide the Board with information showing the expected impact on the 
profitability of the Advisor.
    10. Whenever a sub-advisor change is proposed for a Subadvised 
Series with an Affiliated Sub-Advisor or a Wholly-Owned Sub-Advisor, 
the Board, including a majority of the Independent Trustees, will make 
a separate finding, reflected in the Board minutes, that such change is 
in the best interests of the Subadvised Series and its shareholders, 
and if the Subadvised Series is a Master Fund, the best interests of 
any applicable Feeder Funds and their respective shareholders, and does 
not involve a conflict of interest from which the Advisor or the 
Affiliated Sub-Advisor or Wholly-Owned Sub-Advisor derives an 
inappropriate advantage.
    11. No Trustee or officer of the Trust, a Fund or a Feeder Fund, or 
partner, director, manager or officer of the Advisor, will own directly 
or indirectly (other than through a pooled investment vehicle that is 
not controlled by such person) any interest in a Sub-Advisor except for 
(a) ownership of interests in the Advisor or any entity, except a 
Wholly-Owned Sub-Advisor, that controls, is controlled by, or is under 
common control with the Advisor, or (b) ownership of less than 1% of 
the outstanding securities of any class of equity or debt of any 
publicly traded company that is either a Sub-Advisor or an entity that 
controls, is controlled by, or under common control with a Sub-Advisor.
    12. Each Subadvised Series and any Feeder Fund that invests in a 
Subadvised Series that is a Master Fund will disclose the Aggregate Fee 
Disclosure in its registration statement.
    13. In the event the Commission adopts a rule under the Act 
providing substantially similar relief to that requested in the 
application, the requested order will expire on the effective date of 
that rule.

For the Commission, by the Division of Investment Management, under 
delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30182 Filed 12-18-13; 8:45 am]
BILLING CODE 8011-01-P


