[Federal Register Volume 62, Number 134 (Monday, July 14, 1997)]
[Notices]
[Pages 37634-37636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18337]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-22735; 812-10592]


The Riverfront Funds, Inc., et al.; Notice of Application

July 7, 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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Applicants: The Riverfront Funds, Inc. (the ``Company''), The 
Riverfront Funds (the ``Trust''), and The Provident Bank (the 
``Bank'').

Relevant Act Sections: Order requested under section 17(b) for an 
exemption from sections 17(a)(1) and 17(a)(2).

Summary of Application: Applicants request an order to permit the 
Company to transfer all the assets and liabilities of certain of its 
series to the Trust in exchange for shares of corresponding series of 
the Trust (the ``Reorganization'').

Filing Dates: The application was filed on March 26, 1997, and amended 
on June 20, 1997. By letter dated July 3, 1997, applicants' counsel 
stated that an amendment, the substance of which is incorporated 
herein, will be filed during the notice period.

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 July 30, 1997, 
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. The Company and the Trust, 3435 Stelzer Road, Columbus, Ohio 
43219-3035, and the Bank, 309 Vine Street, Cincinnati, Ohio 45202.

For Further Information Contact: Brian T. Hourihan, Senior Counsel, at 
(202) 942-0526, or Mercer E. Bullard, 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 from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. The Company, a Maryland corporation, is a registered open-end 
management investment company. The Company operates as a series company 
and currently offers shares of the following series: The Riverfront 
U.S. Government Securities Money Market Fund (the ``Company Money 
Market Fund''), The Riverfront U.S. Government Income Fund (the 
``Company Government Income Fund''), The Riverfront Income Equity Fund 
(the ``Company Income Equity Fund''), The Riverfront Ohio Tax-Free Bond 
Fund (the ``Company Tax-Free Bond Fund''), The Riverfront Balanced Fund 
(the ``Company Balanced Fund''), The Riverfront Stock Appreciation Fund 
(the ``Company Stock Appreciation Fund''), and The Riverfront Large 
Company Select Fund (the ``Company Large Company Select Fund'') (the 
``Acquired Series'').\1\ Except for the Company Money Market Fund, each 
Acquired Series offers shares of two classes, Investor A Shares and 
Investor B Shares. The Company Money Market Fund offers shares of one 
class, Investor A Shares.
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    \1\ The Company Stock Appreciation Fund is not an applicant for 
relief hereunder and, unless stated otherwise, the term Acquired 
Series as used herein hereinafter will exclude such series.
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    2. Investor A Shares of each Acquired Series, other than the 
Company Money Market Fund, are sold with a sales charge of 4.50% which 
declines as the amount invested increases, all or a portion of which 
may be waived under certain circumstances. Investor A Shares of the 
Company Money Market Fund are sold without a sales charge. Investor A 
Shares of each Acquired Series also are subject to a distribution fee 
pursuant to rule 12b-1 under the Act (``rule 12b-1 fee'') of up to .25% 
of average daily net assets. Investor B Shares of each Acquired Series, 
other than the Company Money Market Fund, are sold subject to a 
contingent deferred sales charge that declines over time from 4% to 1% 
and which may be waived for

[[Page 37635]]

certain redemptions. Investor B Shares of each Acquired Series, other 
than the Company Money Market Fund, also are subject to a rule 12b-1 
fee of up to 1% of average daily net assets. Investor B Shares 
outstanding for eight years automatically convert to Investor A Shares.
    3. The Trust, an Ohio business trust, has been organized to succeed 
to the assets, liabilities, and operations of the Company. The Trust is 
authorized to issue shares of the following series: The Riverfront U.S. 
Government Securities Money Market Fund (the ``Trust Money Market 
Fund''), The Riverfront U.S. Government Income Fund, The Riverfront 
Income Equity Fund, The Riverfront Ohio Tax-Free Bond Fund, The 
Riverfront Balanced Fund, The Riverfront Small Company Select Fund (the 
``Trust Small Company Select Fund''), and The Riverfront Large Company 
Select Fund (the ``Acquiring Series'').\2\ The Acquiring Series' 
investment objectives, policies and restrictions are identical in all 
material respects to those of the Acquired Series. Currently, the Trust 
has four trustees, three of whom are identical to the four directors of 
the Company. The Trust's officers are identical to the Company's 
officers. Except for the Trust Money Market Fund, each of the Acquiring 
Series currently is authorized to offer two classes of shares, Investor 
A Shares and Investor B Shares. The Trust Money Market Fund currently 
is authorized to issue shares of one class, Investor A Shares. The 
Trust has been authorized to enter into written service provider 
agreements and distribution plans, and has adopted policies and 
procedures identical in all material respects to the service provider 
agreements, distribution plans, and policies and procedures now in 
place for the Company, and with the identical service providers, and 
has retained the same firm of independent public accountants.
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    \2\ The Trust Small Company Select Fund is not an applicant for 
relief hereunder and, unless stated otherwise, the term Acquiring 
Series as used herein hereinafter will exclude such series.
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    4. The Bank, an Ohio banking corporation, is a subsidiary of 
Provident Bancorp, Inc., a publicly held bank holding company. The Bank 
serves as investment adviser, fund accountant, transfer agent, and 
custodian for both the Company and the Trust. On February 28, 1997, 
Provident and its affiliates, directly or indirectly, owned, 
controlled, or held the power to vote 41.9% of the outstanding shares 
of the Company Money Market Fund, 94.5% of the Company Government 
Income Fund, 16.0% of the Company Income Equity Fund, 87.4% of the 
Company Tax-Free Bond Fund, 19.3% of the Company Balanced Fund, 1.9% of 
the Company Stock Appreciation Fund, and 99.6% of the Company Large 
Company Select Fund.
    5. The Company and the Trust have entered into an agreement and 
plan of reorganization and liquidation, dated as of March 21, 1997 (the 
``Agreement''). The principal purpose of the Reorganization is to 
change the domicile of the Company from that of a Maryland corporation 
to that of an Ohio business trust. The board of directors of the 
Company (the ``Company Board'') believes that operation as an Ohio 
business trust will provide greater latitude and flexibility of 
operation than operating the business as a Maryland corporation, which, 
in turn, may result in some cost savings. Under the Agreement, the 
Company has agreed to sell all of the assets, subject to liabilities, 
of each of the Acquired Series to the Trust and its corresponding 
Acquiring Series, in exchange for assumption of all of the Acquired 
Series' liabilities and the issuance and constructive delivery \3\ of 
Investor A Shares and Investor B Shares of the corresponding Acquiring 
Series of the Trust (Investor A Shares only for the Trust Money Market 
Fund) equal in net asset value, at the close of business on July 31, 
1997 (the ``Valuation Time''), to the value of the Investor A Shares 
and Investor B Shares of the corresponding Acquired Series.\4\ 
Thereafter, such shares constructively will be distributed pro rata to 
the respective Acquired Series' shareholders in proportion to the 
number and class of Acquired Series shares owned as of 9:00 a.m., on 
August 1, 1997, upon the liquidation and dissolution of the Company and 
the Acquired Series.
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    \3\ ``Constructive distribution'' means that, for state and tax 
law purposes, the Trust will issue and deliver to the Company, and 
the Company will distribute to its shareholders upon its 
liquidation, shares of the appropriate Acquiring Series only as 
bookkeeping entries, and that no share certificates representing 
ownership of the Acquiring Series actually can or will be issued, 
delivered and distributed.
    \4\ Because the Acquiring Series will have no assets or 
liabilities as of the Valuation Time, the net asset value per share 
of each of the Investor A Shares and Investor B Shares of an 
Acquiring Series (Investor A Shares only of the Trust Money Market 
Fund) has been established initially to equal the net asset value 
per share of the Investor A Shares and Investor B Shares of the 
corresponding Acquired Series (Investor A Shares of the Company 
Money Market Fund) as of the Valuation Time.
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    6. The Company Board, including the directors who are not 
``interested persons'' as defined in section 2(a)(19) of the Act, 
considered the Reorganization on August 16, 1996, and unanimously 
approved the Agreement on October 21, 1996. The sole trustee of the 
Trust (the ``Trust Board'') approved the Agreement on October 21, 
1996.\5\ Proxy solicitation materials of the Company describing the 
Trust, the Reorganization and the Agreement were mailed to the 
Company's shareholders on June 26, 1997, and a special meeting of 
shareholders will be held to consider the Agreement on or about July 
31, 1997. Subject to shareholder approval of the Agreement, and the 
issuance by the SEC of the requested order, the Reorganization will be 
completed on or about August 1, 1997. Maryland law and the Company's 
articles of incorporation require both director and shareholder 
approvals for certain organizational changes (including change of 
domicile reorganizations such as the Reorganization).
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    \5\ On such date and in connection with the Reorganization, the 
officers of the Trust were authorized to cause the Trust to adopt 
and succeed to the Company's registration statement.
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    7. In considering the Agreement, the Company Board, including the 
directors who are not ``interested persons'' as defined in the Act, and 
the Trust Board, found that participation in the Reorganization is in 
the best interests of the shareholders of the Company and the Trust, 
and that the interests of the shareholders of the Acquired Series and 
the Acquiring Series, respectively, will not be diluted as a result of 
the Reorganization. The factors considered by each of the Company Board 
and the Trust Board included, among others, (a) the business objectives 
and purposes of the Reorganization, (b) the fact that the investment 
objectives, policies, and restrictions of the respective Acquired 
Series are identical to those of the Acquiring Series, (c) the terms 
and conditions of the Agreement, including the allocation of expenses 
of the Reorganization, and (d) the tax-free nature of the 
Reorganization.
    8. Each of the Company and the Trust will pay its respective fees 
and expenses of the Reorganization, and the Trust will pay its own 
organization costs and the Company will be responsible for the proxy 
solicitation and other costs associated with the shareholders meeting.
    9. Completion of the Reorganization is subject to a number of 
conditions precedent, in addition to approval of the Agreement by the 
Company Board and the shareholders, including that (a) the Company and 
the Acquired Series, and the Trust and the Acquiring Series have 
received opinions of counsel stating, among other things, that the 
Reorganization will constitute a

[[Page 37636]]

``reorganization'' under section 368(a) of the Internal Revenue Code of 
1986, as amended (the ``Code''), that each of the corresponding 
Acquiring Series and Acquired Series is a ``party to a reorganization'' 
within the meaning of section 368(b) of the Code and, as a consequence, 
the Reorganization will be tax-free for each of the Acquiring Series 
and Acquired Series and their respective shareholders, and (b) the 
Company and the Trust shall have received the order requested in the 
application. After entry of an order by the SEC granting the relief 
requested in the application, neither the Company nor the Trust will 
make any material changes to the Agreement that affect the application 
without the prior approval of the SEC staff.

Applicants' Legal Analysis

    1. Sections 17(a)(1) and 17(a)(2) of the Act prohibit any 
affiliated person of a registered investment company, or any affiliated 
person of such a person, acting as principal, from knowingly selling to 
or purchasing from such registered company any security or other 
property. 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 the power to vote, 5 per centum or 
more of the outstanding voting securities of such other person; (b) any 
person 5 per centum or more of whose outstanding voting securities are 
directly or indirectly owned, controlled, or held with the power to 
vote, by such other person; (c) any person directly or indirectly 
controlling, controlled by, or under common control with, such other 
person; and, (d) if such other person is an investment company, any 
investment adviser thereof.
    2. Section 17(b) authorizes the SEC to exempt a proposed 
transaction from section 17(a) if evidence establishes that: (a) The 
terms of the transaction, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned; and (b) the proposed transaction is 
consistent with the policy of each registered investment company 
concerned and the general purposes of the Act.
    3. Rule 17a-8 generally exempts from the prohibitions of section 
17(a) mergers, consolations, 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 are satisfied. 
Applicants believe that, because Provident and its affiliates own, 
control, or hold with the power to vote 5% or more of the outstanding 
voting securities of each Acquired Series and because Provident is the 
investment adviser to the Company and the Trust, and each of their 
respective series, Provident may be an affiliated person of the Company 
and the Trust, and each of the Acquired Series and the Acquiring 
Series, under section 2(a)(3)(C) of the Act for reasons in addition to 
having common directors/trustees and officers and a common investment 
adviser. Applicants believe that the Company therefore is an affiliated 
person of an affiliated person of the Trust prohibited by section 
17(a)(1) from selling any security or other property to the Trust, and 
that applicants may not rely on rule 17a-8. For this reason, applicants 
request an order under section 17(b) of the Act exempting them from 
section 17(a) to the extent necessary to complete the Reorganization.
    4. Applicants submit that the Reorganization satisfies the 
requirements of section 17(b). Applicants state that the shareholders 
of the Acquired Series, in effect, will become shareholders of 
Acquiring Series, the investment objectives, policies and restrictions 
of which are identical to those of the Acquired Series, pursuant to an 
exchange which is based on the relative net asset values of such shares 
and no sales charge or contingent deferred sales charge will be 
incurred by shareholders of the Acquired Series in connection with 
their acquisition of Acquiring Series shares. In addition, applicants 
note that the Company Board and the Trust Board, including directors 
who are not ``interested persons'' as defined in the Act, have 
respectively determined that the Reorganization is in the best interest 
of the Company and the Trust and of the shareholders, respectively, of 
the Acquired Series and the Acquiring Series. Finally, applicants 
submit that the Reorganization, if undertaken in the manner described 
in the application, is consistent with the general purposes of the Act 
as set forth in section 1(b) of the Act.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-18337 Filed 7-11-97; 8:45 am]
BILLING CODE 8010-01-M