[Federal Register Volume 63, Number 191 (Friday, October 2, 1998)]
[Notices]
[Pages 53107-53108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-26374]
[[Page 53107]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23472; 812-11234]
The Sessions Group, et al.; Notice of Application
September 28, 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 all of the 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''), The Coventry Group
(``Coventry'') and 1st Source Bank (the ``Adviser'').
Filing Dates: The application was filed on July 30, 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 October 19, 1998, 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, NW., Washington, DC 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) 942-0546
(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, NW, Washington,
DC 20549 (tel. (202) 942-8090).
Applicant's Representation
1. Coventry, a Massachusetts business trust, is registered under
the Act as an open-end management investment company. Coventry
currently offers five series, and has registered four newly formed
series, two of which, 1st Source Monogram Diversified Equity Fund and
1st Source Monogram Income Fund, are the ``Acquiring Series.'' \1\
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\1\ The other two newly-formed series are not part of the relief
sought.
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2. Sessions, and Ohio business trust, is registered under the Act
as an open-end management investment company. Sessions currently offers
12 series, two of which, 1st Source Monogram Diversified Equity Fund
and 1st Source Monogram Income Fund, are the ``Acquired Series.''
3. The Adviser, an Indiana banking corporation and a wholly-owned
subsidiary of 1st Source Corporation, a publicly-held bank holding
company, is not required to register as an investment adviser under the
Investment Advisers Act of 1940. The Adviser is the investment adviser
for both the Acquiring Series and the Acquired Series. Certain defined
benefit plans maintained for the benefit of the employees of the
Adviser (the ``1st Source Plans''), own 5% or more of the outstanding
voting securities of each of the Acquired Series.
4. On July 23, 1998, the boards of trustees of the Acquired Series
and the Acquiring Series (together, 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 of Reorganization and Liquidation (the
``Agreement''). Under the Agreement, on the date of the exchange (the
``Exchange Date''), which is currently anticipated to be October 24,
1998, the Acquiring Series will acquire all of the assets and
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''). The value of the net assets of each Acquired
Series will be determined in the manner described in its current
prospectus. 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.\2\
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\2\ The Acquiring Series and the Acquired Series correspond with
one another as follows: Coventry's 1st Source Monogram Diversified
Equity Fund corresponds to Session's 1st Source Monogram Diversified
Equity Fund and Coventry's 1st Source Monogram Income Fund
corresponds to Sessions' 1st Source Monogram Income Fund.
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5. Each Acquired Series currently has a single class of shares that
is subject to a front-end sales charge. The shares also are subject to
a 0.25% asset-based sales charge. Each Acquiring Series has a single
class of shares that is subject to an identical sales charge and an
identical asset-based sales charge.
6. No sales charge will be incurred by shareholders of the Acquired
Series in connection with their acquisition of shares of the Acquiring
Series. Applicants state that the investment objectives, policies and
restrictions of the Acquiring Series are identical to those of the
Acquired Series. BISYS Fund Service, LP, the Acquired Series' principal
underwriter and distributor, will be responsible for all fees and
expenses of the Reorganization.
7. The Boards, 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 interest 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 (1) the
business objectives and purposes of the Reorganization, (2) the
investment objectives and purposes of the Reorganization, (3) the terms
and conditions of the Agreement, including the allocation of expenses
of the Reorganization, (4) the tax-free nature of the Reorganization,
and (5) the expense ratios of the Acquiring Series and the
corresponding Acquired Series.
8. 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 Series receive an
opinion of tax counsel that the proposed
[[Page 53108]]
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. Applicants agree not
to make any material changes to the Agreement without prior Commission
approval.
9. 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 Acquiring Series.
10. Definitive proxy solicitation materials were filed with the
Commission on September 9, 1998 and mailed to shareholders of the
Acquired Series on September 11, 1998. A special meeting of
shareholders is scheduled for October 16, 1998.
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 Series may be deemed to
be affiliated by reason other than having a common investment adviser,
common directors, and/or common officers. The Adviser might be deemed
to have an indirect pecuniary interest in the performance of the assets
held by the 1st Source Plans. Because the 1st Source Plans own 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 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 Series'
shares. Applicants also state that the applicable 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 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 relevant 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.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-26374 Filed 10-1-98; 8:45 am]
BILLING CODE 8010-01-M
