[Federal Register Volume 63, Number 24 (Thursday, February 5, 1998)]
[Notices]
[Pages 5976-5978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2883]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23014; 812-10908]
The Sessions Group, et al.; Notice of Application
January 30, 1997.
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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Summary of Application: Applicants request an order under sections
6(c) and 17(b) of the Act for an exemption from section 17(a) of the
Act to permit common trust funds sponsored by Financial Trust Services,
Inc. (``Trust Company'') to transfer substantially all of their assets
to series of The Sessions Group (``Sessions''), in exchange for shares
of the series.
Applicants: Sessions, Keystone Financial, Inc. (``Keystone''),
Martindale Andres & Company, Inc. (``Adviser''), Trust Company,
Collective Investment Fund A (``Fund A''), and Common Stock Fund
(``Stock Fund'') (Fund A and Stock Fund are collectively ``Common Trust
Funds'').
Filing Date: The application was filed on December 23, 1997.
Applicants have agreed to file an amendment during the notice period,
the substance of which is included in this notice.
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 February
24, 1998, 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, c/o Michael P. Malloy, Drinker Biddle & Reath LLP,
Philadelphia National Bank Building, 1345 Chestnut Street,
Philadelphia, PA 19107-3496.
FOR FURTHER INFORMATION CONTACT: John K. Forst, Attorney Advisor, at
(202) 942-0569, or Mary Kay Frech, Branch Chief, at (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, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. 202-942-8090).
Applicants' Representations
1. Sessions is a business trust organized under Ohio law and
registered under the Act as an open-end management investment company.
Sessions currently offers its shares to the public in several series
with different investment objectives and policies. Adviser is an
investment adviser registered under the Investment Advisers Act of 1940
and a wholly-owned subsidiary of Keystone, a bank holding company.
2. Keystone maintains a defined benefit pension plan (``Parent
Company Plan'') for the benefit of employees of Keystone and its
subsidiaries. The Parent Company Plan owns more than 5% of the
outstanding voting shares of the KeyPremier Established Growth Fund
(``Growth Fund'') and KeyPremier Intermediate Term Income Fund
(``Income Fund''), each a series of Sessions (the ``Mutual Funds'').
Adviser acts as investment adviser to the Mutual Funds.
3. The Common Trust Funds are common trust funds as defined in
Section 584(a) of the Internal Revenue Code of 1986, as amended. The
Common Trust Funds are maintained by Trust Company exclusively for the
collective investment and reinvestment of moneys contributed by Trust
Company in its capacity as a trustee, executor, administrator, or
guardian. The persons and entities for which Trust Company acts in such
capacity are referred to as ``Participants'' in the Common Trust Funds.
The Common Trust Funds are excluded from the definition of investment
company under section 3(c)(3) of the Act.
4. Applicants propose to transfer the assets held by Fund A to the
Growth Fund and the Income Fund in exchange for shares of the Growth
Fund and the Income Fund. Applicants also propose to transfer the
assets held by Stock Fund to the Growth Fund in exchange for shares of
the Growth Fund. Shares of
[[Page 5977]]
the Mutual Funds to be issued in the transactions would not be subject
to a front-end or deferred sales charge, a redemption fee, any asset-
based distribution fee, or any shareholder servicing fee. Common Trust
Fund assets to be transferred to the Mutual Funds will be valued in
accordance with the provisions of rule 17a-7(b) under the Act, and the
Mutual Funds' shares issued will have an aggregate net asset value
equal to the value of the Common Trust Funds' assets transferred.
Following the proposed transactions, the Common Trust Funds will be
terminated, and the Mutual Fund shares issued will be held by Trust
Company directly as trustee, executor, administrator, or guardian. The
Mutual Fund shares held by Trust Company, as fiduciary, will be
credited to the benefit of each Participant, pro rata, according to
each Participant's interest in the particular Common Trust Fund
immediately prior to the transactions.
5. Applicants state that the proposed transactions will be carried
out in accordance with procedures previously adopted by Sessions' board
of trustees pursuant to rule 17a-7(e) of the Act, and the provisions of
rule 17a-7(c), (d), and (f) will be satisfied with respect to Sessions.
Applicants assert that the investment objectives and policies of Growth
Fund and Income Fund, and the securities they hold, are generally
similar to those of the Stock Fund and Fund A, respectively. In
addition, Sessions' board of trustees, including a majority of the
trustees who are not interested persons, will determine, prior to the
consummation of the transactions, that participation by the Mutual
Funds in the proposed transactions is in the best interests of the
Mutual Funds and that the interests of existing Mutual Fund
shareholders will not be diluted as a result of the transactions. These
findings, and the basis upon which they were made, will be fully
recorded in the minute books of Sessions.
6. Trust Company, as the Common Trust Funds' trustee, will have
determined in accordance with its fiduciary duties that the proposed
transactions are in the best interests of Participants in the Common
Trust Funds. In making this determination, Trust Company will take into
account the anticipated benefits which are expected to flow to
Participants, including increased liquidity, the availability of daily
pricing, the accessibility of performance and other information
concerning the Mutual Funds, the similarity of Common Trust Funds' and
the Mutual Funds' investment objectives and policies, the anticipated
tax treatment of the proposed transactions, and the aggregate fee
levels experienced and expected to be experienced by Participants
before and after the proposed transactions.
7. In some instances, Trust Company will be required to obtain the
consent or direction of the party having investment authority regarding
a Participant's inclusion in the transactions. In the remaining
instances, Trust Company, acting alone in its fiduciary capacity, is
authorized by such instruments and applicable law to approve and cause
the Participant to be included in the proposed transactions. In all
instances, information concerning the proposed transactions, the Mutual
Funds, applicable fee schedules, and other related information will be
provided to Participants before the proposed transactions take place.
8. Applicants also request relief for any future transactions in
which common or collective trust funds for which Trust Company, or
another entity controlling, controlled by, or under common control with
it or Keystone, acts as trustee, transfer assets to registered open-end
investment companies (or series thereof) advised by Trust Company, or
by another entity controlling, controlled by, or under common control
with it or Keystone, which investment companies (or series) are 5% or
more owned by a defined benefit pension plan or other employee benefit
plan sponsored by Trust Company or another entity controlling,
controlled by, or under common control with it or Keystone (the
``Future Transactions''). Applicants state that they will rely on the
requested relief with respect to Future Transactions only in accordance
with the terms and conditions contained in the application.
Applicants' Legal Analysis
1. Section 17(a) of the Act, in pertinent part, prohibits an
affiliated person of a registered investment company, or an affiliated
person of such person, acting as principal, from selling to or
purchasing from such registered company any security or other property.
Section 2(a)(3) of the Act defines the term ``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 such other person; (b) any person
directly or indirectly controlling, controlled by, or under common
control with, such other person; and (c) if such other person is an
investment company, any investment adviser thereof.
2. Because the Common Trust Funds might be viewed as acting as
principals in the proposed transactions, and because the Common Trust
Funds and the Mutual Funds might be viewed as being under common
control of Keystone within the meaning of section 2(a)(3)(C) of the
Act, the proposed transactions may be subject to the prohibitions of
section 17(a). Accordingly, applicants request an order from the SEC
pursuant to sections 6(c) and 17(b) exempting them from section 17(a)
of the Act, on the terms and subject to the conditions set forth in the
application.
3. Section 17(b) provides that the SEC shall exempt a transaction
from section 17(a) if evidence establishes that (a) The terms of the
proposed transaction, including the consideration to be paid, are
reasonable and fair and do not involve overreaching; (b) the proposed
transaction is consistent with the policy of each registered investment
company concerned; and (c) the proposed transaction is consistent with
the general purposes of the Act. Rule 17a-7 exempts certain purchase
and sale transactions otherwise prohibited by section 17(a) if, among
other requirements, the transactions are effected at an independent
``current market price'' and the investment company's board of
directors reviews the transactions for fairness. Rule 17a-8 exempts
certain mergers and consolidations from section 17(a) if, among other
requirements, the investment company's board of directors determines
that the transactions are fair.
4. Applicants agree to comply with rules 17a-7 and 17a-8 to the
extent possible stated in the conditions to the requested order. The
proposed transactions will take place as in-kind transfers from the
Common Trust Funds to the Mutual Funds, rather than cash transactions.
Applicants assert that if the proposed transactions were effected in
cash, the Common Trust Funds and the Participants would have to bear
unnecessary expense and inconvenience in transferring assets to the
Mutual Funds.
5. Section 6(c) of the Act provides that the SEC may exempt any
person or transaction from any provision of the Act or any rule
thereunder to the extent that such exemption is necessary or
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of the Act.
6. Applicants submit that the proposed transactions satisfy the
standards for relief under sections 6(c)
[[Page 5978]]
and 17(b). Applicants assert that the terms of the proposed
transactions are reasonable and fair and do not involve overreaching on
the part of any Applicant; the investment objectives, policies, and
restrictions of the Common Trust Funds are compatible with and
substantially similar to the applicable Mutual Funds' investment
objectives, policies, and restrictions; and the proposed transactions
and the requested exemption are in the public interest, consistent with
the protection of investors and the purposes fairly intended by the
policies and provisions of the Act.
Applicants' Conditions
1. The proposed transactions will comply with the terms of rule
17a-7(b) through (f).
2. The proposed transactions will not occur unless and until the
board of trustees of the Mutual Funds (including a majority of the
board's disinterested members) find that participation by the Mutual
Funds in the proposed transactions is in the best interests of such
funds and that the interests of existing shareholders of such funds
will not be diluted as a result of the transactions. These findings,
and the basis upon which they are made, will be recorded fully in the
minute books of the Mutual Funds.
3. The proposed transactions will not occur unless and until Trust
Company or any entity controlling, controlled by, or under common
control with it or Keystone, as trustee, has determined in accordance
with its fiduciary duties as trustee for the Common Trust Funds and
fiduciary for the Participants, that the proposed transactions are in
the best interests of the Participants in the Common Trust Funds.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-2883 Filed 2-4-98; 8:45 am]
BILLING CODE 8010-01-M
