[Federal Register Volume 61, Number 69 (Tuesday, April 9, 1996)]
[Notices]
[Pages 15846-15847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8711]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 21868; 812-9964]
Norwest Advantage Funds, et al.; Notice of Application
April 2, 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 (the ``Trust'') and Norwest Bank
Minnesota, N.A. (the ``Adviser'').
RELEVANT ACT SECTIONS: Order requested under section 17(b) for an
exemption from section 17(a).
SUMMARY OF APPLICATION: Applicants request an order under section 17(b)
granting an exemption from section 17(a) to permit the Stable Income
Fund, Intermediate U.S. Government Fund, and Income Equity Fund (the
``Acquiring Funds'') to acquire all of the assets of the Adjustable
U.S. Government Reserve Fund, Government Income Fund, and Income Stock
Fund (the ``Transferor Funds,'' or collectively with the Acquiring
Funds, the ``Funds''), respectively. Each Fund is a series of the
Trust.
FILING DATE: The application was filed on January 30, 1996, and amended
on April 1, 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
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on April 29, 1996,
and should be accompanied by proof of service on applicant, 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 SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants: The Trust, Two Portland Square, Portland, Maine
04101, Attention: David I. Goldstein; The Adviser, Norwest Center,
Sixth and Marquette, Minneapolis, Minnesota 55479-1026, Attention:
Jeffrey P. Lund.
FOR FURTHER INFORMATION CONTACT: Mercer E. Bullard, Staff Attorney,
(202) 942-0565, or Alison E. Baur, Branch Chief, (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
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.
Applicant's Representations
1. The Trust is a registered open-end management investment company
that is organized as a Delaware business trust. The Adviser is a
national bank that is a wholly-owned subsidiary of Norwest Corporation.
The Adviser is the investment adviser to each series of the Trust,
including the Funds.
2. The Adviser holds of record more than twenty-five percent of the
total outstanding shares of each Transferor Fund in a trust, agency,
custodial, or other fiduciary or representative capacity. While the
Adviser may exercise voting power with respect to the shares, neither
the Adviser nor any of its affiliates have any economic interest in the
shares to be paid.
3. Each Transferor Fund offers shares in three classes: Class A,
Class B, and Class I. Each Acquiring Fund offers one class of shares
and recently filed a post-effective amendment to its registration
statement to register two additional classes of shares. The amendment
[[Page 15847]]
became effective on February 29, 1996, and applicants expect to begin
offering the new classes of shares in April 1996. The class and expense
structure of each Transferor Fund is similar to the class and expense
structure of its corresponding Acquiring Fund.
4. Applicants propose that the Transferor Funds be combined with
and into the Acquiring Funds in a tax-free reorganization (the
``Reorganization''). In the Reorganization, each Acquiring Fund will
acquire all of the assets and liabilities of its corresponding
Transferor Fund in exchange for shares of the Acquiring Fund, which
shares will then be distributed to shareholders of the Transferor Fund.
Each class of shares of an Acquiring Fund will be exchanged for the
corresponding class of shares of a Transferor Fund. The number of
Acquiring Fund shares to be issued in exchange for each Transferor Fund
share will be determined by dividing the net asset value of a share of
a class of a Transferor Fund by the net asset value of a share of the
corresponding class of the corresponding Acquiring Fund as of the last
business day preceding the closing date of the Reorganization (the
``Exchange Price''). No transactions in shares of the Funds (other than
under the terms of the Reorganization) may be effected at the Exchange
Price if the order is received or accepted after the calculation of
that price.
5. At a meeting on December 29, 1995, the board of the Trust,
including the disinterested directors, made the findings required under
rule 17a-8 and approved the Reorganization. In doing so, the board
considered the following factors: (i) the similarities between each
Transferor Fund and its corresponding Acquiring Fund with respect to
investment objectives, policies, and restrictions, and risk profiles,
(ii) the burdens of marketing two similar Funds, (iii) the benefits to
the shareholders of combining the Funds' assets, (iv) the fact that the
expense ratios of the Acquiring Funds will be no higher than those of
the corresponding Transferor Fund, (v) the more established performance
record of the Acquiring Funds, (vi) the treatment of the uncovered
distribution charges of the Transferor Funds, (vii) the tax-free nature
of the Reorganization, (viii) the terms and conditions of the
Reorganization and whether it would result in dilution of shareholder
interests, and (ix) the costs of the Reorganization.
6. In approving the Reorganization, the board of the Trust noted
that the contractual fees payable by the Acquiring Funds for the
advisory and custodial services provided by the Adviser were lower than
those payable by the corresponding Transferor Funds. Accordingly, the
board approved payment of all expenses incurred in connection with the
Reorganization by the Funds, including all expenses related to
obtaining exemptive relief from the SEC.
7. On February 14, 1996, the Trust filed a registration statement
on Form N-14 with respect to the Reorganization which became effective
on March 15, 1996. Shareholders of the Transferor Funds will vote on
the Reorganization at a meeting that applicants expect to occur on May
13, 1996. Notwithstanding shareholder approval of the Reorganization,
the closing of the Reorganization may be postponed and the board may
terminate the Plan of Reorganization at any time prior to closing.
Termination of the Plan may relate to one Transferor fund and its
corresponding Acquiring Fund without affecting the survival of the Plan
with respect to any other Fund. Applicants agree not to make any
material change to the reorganization that would affect the application
without prior SEC approval.
Applicants' Legal Analysis
1. Section 17(a) of the Act, in relevant part, prohibits an
affiliated person of a registered investment company, or any affiliated
person of such a person, acting as principal, from selling to or
purchasing from such registered company, or any company controlled by
such registered company, any security or other property.
2. Section 2(a)(3) of the Act defines the term ``affiliated
person'' of another person to include any person directly or indirectly
owning, controlling, or holding with power to vote, five percent or
more of the outstanding voting securities of such other person.
3. Section 17(b) of the Act provides that the SEC may exempt a
transaction from the provisions of section 17(a) if evidence
establishes that the terms of the proposed transaction, including the
consideration to be paid, are reasonable and fair and do not involve
overreaching on the part of any person concerned, and that the proposed
transaction is consistent with the policy of the registered investment
company concerned and with the general purposes of the Act.
4. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) mergers, consolidations, or purchases or sales of
substantially all of the assets of registered investment companies that
are affiliated persons solely by reason of having a common investment
adviser, common directors, and/or common officers, provided that
certain conditions set forth in the rule are satisfied.
5. Applicants may not rely on rule 17a-8 in connection with the
Reorganization because the Transferor funds and the Acquiring Funds may
be deemed to be affiliated for reasons other than those set forth in
the rule. As noted above, the Adviser holds of record more than twenty-
five percent or the total outstanding shares of each Transferor Fund in
a trust, agency, custodial or other fiduciary or representative
capacity. The Adviser therefore may be deemed to be an affiliated
person of the Transferor Funds because it controls or holds with the
power to vote more than five percent of the Funds' outstanding voting
securities.
6. Applicants submit that the Reorganization meets the standard for
relief under section 17(b), in that the terms of the Reorganization are
reasonable and fair and do not involve overreaching on the part of any
person concerned; and the Reorganization is consistent with the
provisions, policies, and purposes of the Act and with the policies of
the Funds.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-8711 Filed 4-8-96; 8:45 am]
BILLING CODE 8010-01-M
