[Federal Register Volume 61, Number 69 (Tuesday, April 9, 1996)]
[Pages 15846-15847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-8711]


[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'').


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 

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 

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 
    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]