[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]



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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

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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