[Federal Register Volume 64, Number 5 (Friday, January 8, 1999)]
[Notices]
[Pages 1251-1253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-353]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23630; 812-11416]
The Sessions Group, et al.; Notice of Application
December 31, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 17(b) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from section 17(a)
of the Act.
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SUMMARY OF APPLICATION: Applicants request an order to permit certain
series of a registered open-end management investment company to
acquire all of the assets and assume identified liabilities of certain
series of another registered open-end management investment company.
Because of certain affiliations, applicants may not rely on rule 17a-8
under the Act. Applicants: The Sessions Group (``Sessions''), Governor
Funds (``Governor''), Keystone Financial, Inc. (``Keystone''), Governor
Group Advisors, Inc. (``GGA''), and
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Martindale Andres & Company, Inc. (``Martindale Andres'').
FILING DATES: The application was filed on November 23, 1998.
Applicants have agreed to file an amendment during the notice period,
the substance of which is reflected in this notice.
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 26, 1999, 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: Secretary, Securities & Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Applicants, 3435 Stelzer Road,
Columbus, Ohio 43219.
FOR FURTHER INFORMATION CONTACT: Lawrence W. Pisto, Senior Counsel, at
(202) 942-0527, or George J. Zornada, 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
Commission's Public Reference Branch, 450 Fifth Street, N.W.,
Washington, D.C. 20549 (tel. (202) 942-8090).
Applicants' Representations
1. Governor, a Delaware business trust, is registered under the Act
as an open-end management investment company. Governor will initially
offer shares of 12 series, four of which, Established Growth Fund,
Intermediate Term Income Fund, Aggressive Growth Fund, and Emerging
Growth Fund, are the ``Acquiring Series.'' \1\
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\1\ The other series are not part of the relief sought in the
application.
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2. Sessions, an Ohio business trust, is registered under the Act as
an open-end management investment company. Sessions currently offers 8
series, four of which, KeyPremier Established Growth Fund, KeyPremier
Intermediate Term Income Fund, KeyPremier Aggressive Growth Fund, and
KeyPremier Emerging Growth Fund, are the ``Acquired Series.''
3. GGA, a Pennsylvania corporation, is registered under the
Investment Advisers Act of 1940 (``Advisers Act'') and is investment
adviser for the Acquiring Series. Martindale Andres, a Pennsylvania
corporation, is registered under the Advisers Act and is currently
investment adviser for the Acquired Series. Martindale Andres has been
retained to serve as sub-adviser for the Acquiring Series. Both GGA and
Martindale Andres are wholly-owned subsidiaries of Keystone, a bank
holding and financial services company organized as a Pennsylvania
corporation. A defined benefit plan maintained for the benefit of the
employees of Keystone (the ``Keystone Plan''), owns 5% or more of the
outstanding voting securities of each of the Acquired Series.\2\
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\2\ The Keystone Plan owns approximately 11% of KeyPremier
Established Growth Fund, 11% of KeyPremier Intermediate Term Income
Fund, 15% of KeyPremier Aggressive Growth Fund, and 68% of
KeyPremier Emerging Growth Fund.
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4. On August 13, 1998, the board of trustees of the Acquired Series
(the ``Sessions Board''), and on October 5, 1998, the board of trustees
of the Acquiring Series (the ``Governor Board'', together with the
Sessions Board, the ``Boards''), including a majority of the trustees
who are not ``interested persons'' within the meaning of section
2(a)(19) of the Act (the ``Independent Trustees''), approved an
Agreement and Plan or Reorganization (the ``Agreement''). Under the
Agreement, on the date of the exchange (the ``Exchange Date''), which
is currently anticipated to be January 30, 1999, the Acquiring Series
will acquire all of the assets and identified liabilities of the
corresponding Acquired Series in exchange for shares of the Acquiring
Series that have an aggregate net asset value (``NAV'') equal to the
aggregate NAV of the Acquired Series at 4:00 p.m. EST on the day before
the Exchange Date (the ``Valuation Time''), followed by the liquidation
and dissolution of the corresponding Acquired Series and the pro rata
distribution to the shareholders of the Acquired Series of shares of
the corresponding Acquiring Series (the ``Reorganization''). Because
the Acquiring Series are newly formed and will have no assets or
liabilities as of the Valuation Time, the NAV per share of the
applicable Acquiring Series will be set initially to equal the NAV per
share of the corresponding Acquired Series as of the Valuation Time.\3\
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\3\ The Acquiring Series and the Acquired Series correspond with
one another as follows: Governor's Established Growth Fund
corresponds to Sessions' Key Premier Established Growth Fund;
Governor's Intermediate Term Income Fund corresponds to Sessions'
KeyPremier Intermediate Term Income Fund; Governor's Aggressive
Growth Fund corresponds to Sessions' KeyPremier Aggressive Growth
Fund; and Governor's Emerging Growth Fund corresponds to Sessions'
KeyPremier Emerging Growth Fund.
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5. Applicants state that the investment objectives, policies and
restrictions of the Acquiring Series are identical or substantially
identical to those of the Acquired Series. Each Acquired Series
currently has a single class of shares that is subject, with certain
exceptions, to a front-end sales charge. The Acquiring Series have a
single class of shares that is subject to an identical sales charge and
exceptions. No sales charge will be incurred by shareholders of the
Acquired Series in connection with their acquisition of shares of the
Acquiring Series. BISYS Fund Services, LP, the Acquired Series'
principal underwriter and distributor, will be responsible for all fees
and expenses related to the Reorganization.
6. The Board, including the Independent Trustees, determined that
the Reorganization is in the best interests of the shareholders of the
Acquired Series and the Acquiring Series, and that the interests of the
shareholders of the Acquired Series and the Acquiring Series would not
be diluted by the Reorganization. In assessing the Reorganization, the
factors considered by the Boards included, among others (a) the
business objectives and purposes of the Reorganization, (b) the
investment objectives and purposes of the Reorganization, (c) the terms
and conditions of the Agreement, including the allocation of expenses
of the Reorganization, (d) the tax-free nature of the Reorganization,
and (e) the expense ratios of the Acquiring Series and the
corresponding Acquired Series.
7. The Reorganization is subject to a number of conditions
precedent, including that: (a) definitive proxy solicitation materials
shall have been filed with the Commission and distributed to
shareholders of the Acquired Series; (b) the shareholders of the
Acquired Series approve the Agreement; (c) the Acquiring and Acquired
Series receive an opinion of tax counsel that the proposed
Reorganization will be tax-free for each Series and its shareholders;
and (d) applicants will receive from the Commission an exemption from
section 17(a) of the Act for the Reorganization. The plan may be
terminated and the Reorganization abandoned at any time by mutual
consent of the respective Boards of the Acquired Series and the
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Acquiring Series. Applicants agree not to make any material changes to
the Agreement without prior Commission approval.
8. Definitive proxy solicitation materials have been filed with the
Commission and were mailed to shareholders of the Acquired Series on or
about December 4, 1998. A special meeting of shareholders is scheduled
for January 15, 1999.
Applicants' Legal Analysis
1. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such a person, acting as principal, from selling any security to, or
purchasing any security from, the company. Section 2(a)(3) of the Act
defines an ``affiliated person'' of another person to include (a) any
person directly or indirectly owning, controlling, or holding with
power to vote 5% or more of the outstanding voting securities of the
other person; (b) any person 5% or more of whose securities are
directly or indirectly owned, controlled, or held with power to vote by
the other person; (c) any person directly or indirectly controlling,
controlled by or under common control with the other person, and (d) if
the other person is an investment company, any investment adviser of
that company. Applicants state that the Acquiring and Acquired Series
may be deemed affiliated persons and thus the Reorganization may be
prohibited by section 17(a).
2. 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, or affiliated persons of an affiliated person,
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.
3. Applicants believe that they may not rely on rule 17a-8 in
connection with the Reorganization because the Acquiring and Acquired
Series may be deemed to be affiliated by reason other than having a
common investment adviser, common directors, and/or common officers.
Keystone might be deemed to have an indirect pecuniary interest in the
performance of the assets held by the Keystone Plan. Because the
Keystone Plan owns 5% or more of the outstanding voting securities of
each of the Acquired Series, each Acquiring Series may be deemed an
affiliated person of an affiliated person of each of the Acquired
Series for a reason other than having a common investment adviser.
4. Section 17(b) of the Act provides that the Commission may exempt
a transaction from the provisions of section 17(a) if the 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 each registered investment
company concerned and with the general purposes of the Act.
5. Applicants request an order under section 17(b) of the Act
exempting them from section 17(a) of the Act to the extent necessary to
consummate the Reorganization. Applicants submit that the
Reorganization satisfies the standards of section 17(b) of the Act.
Applicants believe that the terms of the Reorganization are fair and
reasonable and do not involve overreaching. Applicants state that the
Reorganization will be based on the relative NAVs of the Acquiring and
Acquired Series' shares. Applicants also state that the Acquiring
Series were created for the express purpose of acquiring the assets and
liabilities of the corresponding Acquired Series, and that their
investment objectives, policies and restrictions were established to be
substantially identical to those of the corresponding Acquired Series.
In addition, applicants state that the Boards, including a majority of
the Independent Trustees, have made the requisite determinations that
the participation of the Acquiring and Acquired Series in the proposed
Reorganization is in the best interests of each Series and that such
participation will not dilute the interests of shareholders of the
Series.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-353 Filed 1-7-99; 8:45 am]
BILLING CODE 8010-01-M
