[Federal Register Volume 60, Number 181 (Tuesday, September 19, 1995)]
[Notices]
[Pages 48580-48582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23167]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21350- 812-9680]
Northstar Advantage Multi-Sector Bond Fund, et al.; Notice of
Application
September 13, 1995.
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: Northstar Advantage Multi-Sector Bond Fund (the ``Acquired
Fund''), a series of Northstar Advantage Trust (the ``Trust''),
Northstar Advantage Strategic Income Fund (the ``Acquiring Fund''),
NWNL Northstar Distributors, Inc. (the ``Distributor''), Northstar
Investment Management Corporation (the ``Adviser''), ReliaStar
Financial Corp. (``ReliaStar''), Northwestern National Life Insurance
Company, and Northern Life Insurance Company.
RELEVANT ACT SECTIONS: Order requested under section 17(b) granting an
exemption from section 17(a) and under rule 17d-1 permitting certain
joint transactions under section 17(d) and rule 17d-1.
SUMMARY OF APPLICATION: Applicants seek an order to permit the
Acquiring Fund to acquire all of the assets of the Acquired Fund.
Because of certain affiliations, the two funds may not rely on rule
17a-8 under the Act.
FILING DATES: The application was filed on July 19, 1995, and amended
on September 1, 1995.
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 October 4, 1995,
and should be accompanied by proof of service on the 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 Fifth Street, N.W., Washington, D.C.
20549. Applicants: The Acquired Fund, the Acquiring Fund, the
Distributor, and Adviser, Two Pickwick Plaza, Greenwich, Connecticut
08630; ReliaStar and Northwestern National Life Insurance Company, 20
Washington Avenue South, Minneapolis, Minnesota 55401; and Northern
Life Insurance Company, 1110 Third Avenue, Seattle, Washington 98101.
FOR FURTHER INFORMATION CONTACT:
James J. Dwyer, Staff Attorney, at (202) 942-0581, or Alison E. Baur,
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
SEC's Public Reference Branch.
Applicants' Representations
1. The Trust and the Acquiring Fund are Massachusetts business
trusts that are registered under the Act as open-end management
investment companies. The Trust offers its shares in three series, one
of which is the Acquired Fund. The Acquiring Fund and the Acquired Fund
(each a ``Fund'') offer their shares in three classes. For the Acquired
Fund, Class A shares are sold with a maximum front-end sales load of
4.75% and a rule 12b-1 fee of .30% annually of average net assets;
Class B shares are sold with a maximum contingent deferred sales load
(a ``CDSL'') of 5% and a 1% rule 12b-1 fee; Class C shares are sold
with a 1% CDSL if redeemed within one year of purchase and a 1% rule
12b-1 fee. The three classes and expense structure for each class of
the Acquiring Fund will be similar to the existing expense structure of
the Acquired Fund, except that the Acquiring Fund has a lower advisory
fee and is not subject to any administrative services fee.
2. On June 2, 1995, as a result of a transfer to the Adviser of the
advisory business of Advest, Inc. and its affiliates, the Adviser and
the Distributor became, respectively, the investment adviser and
principal underwriter of the Trust and the Acquiring Fund. The Adviser
and the Distributor are wholly-owned by NWNL
[[Page 48581]]
Northstar, Inc., which in turn is majority-owned by ReliaStar.
Northwestern National Life Insurance Company and Northern Life
Insurance Company (collectively, the ``Life Insurance Companies'') are
wholly-owned by ReliaStar. The Life Insurance Companies collectively
own approximately 40% of the outstanding voting securities of the
Acquired Fund.
3. The Acquiring Fund proposes to acquire all of the assets of the
Acquired Fund in exchange for shares of the Acquiring Fund pursuant to
an agreement and plan of reorganization (the ``Reorganization
Agreement''). The Adviser submitted the proposal to the trustees of the
Acquired Fund based on, among other things, the Funds' very similar
investment objectives, policies, and techniques, and the burdens of
marketing two virtually identical Funds. Under the Reorganization
Agreement, the number of shares of each class of the Acquiring Fund to
be issued to the Acquired Fund will be determined on the basis of each
party's relative net asset value per its respective classes of shares
computed as of 4:00 p.m. (New York time) on the Closing Date, as set
forth in the Reorganization Agreement. The Acquired Fund then will
liquidate and distribute such shares of the Acquiring Fund pro rata to
its shareholders.
4. The trustees of each Fund, in approving the terms of the
proposed reorganization, made an inquiry into a number of matters and
considered the following factors, among others: The relative expense
ratios of the Funds; the terms and conditions of the reorganization and
whether the reorganization would result in dilution of shareholder
interests; the compatibility of the Funds' investment objectives,
policies and restrictions, as well as varying service features
available to shareholders of each Fund; the benefits anticipated to
inure to the shareholders of both Funds as a result of the combination;
and the tax consequences of the reorganization. In addition, the board
of trustees of the Acquired Fund determined that the proposed
reorganization would likely provide certain benefits to shareholders.
In making such determination, the trustees considered, among other
things, that the reorganization would promote more efficient operations
and eliminate the duplication inherent in marketing two Funds with
similar investment objectives.
5. The proposed reorganization was unanimously approved by the
boards of trustees of each Fund, including a majority of the trustees
who are not interested persons, on April 26, 1995, and June 2, 1995,
respectively. In approving the proposed reorganization, each board
found that participation in the reorganization is in the best interests
of the relevant Fund and that the interests of existing Fund
shareholders will not be diluted as a result of the reorganization. The
reorganization is subject to approval by the holders of a majority of
the outstanding shares of the Acquired Fund expected at a meeting to be
held on or about September 28, 1995. Such approval will be solicited
pursuant to a prospectus/proxy statement that the Acquiring Fund filed
with the SEC on August 17, 1995. No material change affecting the
application will be made to the agreement and plan of reorganization
without prior approval of the SEC.
6. The Acquiring Fund will bear all expenses related to the
registration of its shares to be issued in the reorganization. The
Acquired Fund will bear all expenses related to the solicitation of its
shareholders in seeking approval of the reorganization. The Adviser
will bear all expenses related to obtaining the requested order.
Applicants' Legal Analysis
1. Section 17(a) in relevant part prohibits an affiliated person or
principal underwriter of a registered investment company, or affiliated
person of such affiliated person or principal underwriter, acting as
principal, from selling to or purchasing from such registered company,
any security or other property. Section 2(a)(3) defines ``affiliated
person'' in relevant part to include persons under common control, and,
under section 2(a)(9), it is presumed that an entity that owns 25% or
more of the outstanding voting securities of another entity controls
such other entity.
2. Rule 17a-8 under the Act exempts from section 17(a) mergers,
consolidations, or purchases or sales of substantially all the assets
involving registered investment companies that may be affiliated
persons solely by reason of having a common investment adviser, common
directors/trustees and/or common officers, provided that certain
conditions are satisfied. In this case, ReliaStar controls the Acquired
Fund by virtue of its wholly-owned subsidiaries, the Life Insurance
Companies, owning more than 25% of the shares of the Acquired Fund.
Thus, the Funds may be affiliated persons of each other for reasons
other than the fact that the Funds have a common adviser.
3. Section 17(b) provides that the SEC may exempt a transaction
from 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 policies of the registered investment companies concerned and with
the general purposes of the Act.
4. Applicants believe that the terms of the proposed reorganization
satisfy the standards set forth in section 17(b). Applicants indicate
that section 17(a) is designed to protect investors from transactions
in which a party thereto has both the ability and the pecuniary
interest to influence the actions of the investment company. Applicants
assert that any pecuniary interest ReliaStar has in the Acquired Fund
is aligned with the best interests of the Acquired Fund's other
shareholders. In addition, because ReliaStar's interests in the Funds
is insignificant when compared to its aggregate overall net worth,
applicants believe that it is reasonable to conclude that ReliaStar has
no pecuniary incentive to influence the actions of the Funds.
5. Applicant submit that many of the elements of the type of
combination specifically contemplated by rule 17a-8 exist with respect
to the proposed reorganization. The boards of the Funds have reviewed
the terms of the reorganization as set forth in the Reorganization
Agreement, including the consideration to be paid or received, and have
found that participation in the reorganization is in the best interests
of each Fund and that the interests of the existing shareholders of
each Fund will not be diluted as a result of the reorganization. The
investment objectives of the Funds, moreover, are essentially the same.
Accordingly, applicants argue that the proposed reorganization will be
consistent with the policies of each Fund.
6. Section 17(d) and rule 17d-1 prohibit an affiliated person or
principal underwriter of an investment company, or an affiliated person
of such affiliated person or principal underwriter, acting as
principal, from participating in or effecting any transaction in
connection with any joint enterprise or joint arrangement in which the
investment company participates. Applicants believe that the proposed
merger could be deemed to be a ``joint enterprise or other joint
arrangement'' within the meaning of rule 17d-1.
7. Applicants believe that the terms of the proposed transaction
are consistent with the provisions, policies, and purposes of the Act,
and not on a basis less advantageous than that of other participants.
Applicants further note
[[Page 48582]]
that the proposed merger is consistent with the investment policies of
the Funds.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-23167 Filed 9-18-95; 8:45 am]
BILLING CODE 8010-01-M
