[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