[Federal Register Volume 64, Number 5 (Friday, January 8, 1999)]
[Notices]
[Pages 1251-1253]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-353]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23630; 812-11416]


The Sessions Group, et al.; Notice of Application

December 31, 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 identified 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''), Governor 
Funds (``Governor''), Keystone Financial, Inc. (``Keystone''), Governor 
Group Advisors, Inc. (``GGA''), and

[[Page 1252]]

Martindale Andres & Company, Inc. (``Martindale Andres'').

FILING DATES: The application was filed on November 23, 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 January 26, 1999, 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, N.W., Washington, D.C. 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) 942-0564 
(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, N.W., 
Washington, D.C. 20549 (tel. (202) 942-8090).

Applicants' Representations

    1. Governor, a Delaware business trust, is registered under the Act 
as an open-end management investment company. Governor will initially 
offer shares of 12 series, four of which, Established Growth Fund, 
Intermediate Term Income Fund, Aggressive Growth Fund, and Emerging 
Growth Fund, are the ``Acquiring Series.'' \1\
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    \1\ The other series are not part of the relief sought in the 
application.
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    2. Sessions, an Ohio business trust, is registered under the Act as 
an open-end management investment company. Sessions currently offers 8 
series, four of which, KeyPremier Established Growth Fund, KeyPremier 
Intermediate Term Income Fund, KeyPremier Aggressive Growth Fund, and 
KeyPremier Emerging Growth Fund, are the ``Acquired Series.''
    3. GGA, a Pennsylvania corporation, is registered under the 
Investment Advisers Act of 1940 (``Advisers Act'') and is investment 
adviser for the Acquiring Series. Martindale Andres, a Pennsylvania 
corporation, is registered under the Advisers Act and is currently 
investment adviser for the Acquired Series. Martindale Andres has been 
retained to serve as sub-adviser for the Acquiring Series. Both GGA and 
Martindale Andres are wholly-owned subsidiaries of Keystone, a bank 
holding and financial services company organized as a Pennsylvania 
corporation. A defined benefit plan maintained for the benefit of the 
employees of Keystone (the ``Keystone Plan''), owns 5% or more of the 
outstanding voting securities of each of the Acquired Series.\2\
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    \2\ The Keystone Plan owns approximately 11% of KeyPremier 
Established Growth Fund, 11% of KeyPremier Intermediate Term Income 
Fund, 15% of KeyPremier Aggressive Growth Fund, and 68% of 
KeyPremier Emerging Growth Fund.
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    4. On August 13, 1998, the board of trustees of the Acquired Series 
(the ``Sessions Board''), and on October 5, 1998, the board of trustees 
of the Acquiring Series (the ``Governor Board'', together with the 
Sessions Board, 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 or Reorganization (the ``Agreement''). Under the 
Agreement, on the date of the exchange (the ``Exchange Date''), which 
is currently anticipated to be January 30, 1999, the Acquiring Series 
will acquire all of the assets and identified 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''). 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.\3\
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    \3\ The Acquiring Series and the Acquired Series correspond with 
one another as follows: Governor's Established Growth Fund 
corresponds to Sessions' Key Premier Established Growth Fund; 
Governor's Intermediate Term Income Fund corresponds to Sessions' 
KeyPremier Intermediate Term Income Fund; Governor's Aggressive 
Growth Fund corresponds to Sessions' KeyPremier Aggressive Growth 
Fund; and Governor's Emerging Growth Fund corresponds to Sessions' 
KeyPremier Emerging Growth Fund.
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    5. Applicants state that the investment objectives, policies and 
restrictions of the Acquiring Series are identical or substantially 
identical to those of the Acquired Series. Each Acquired Series 
currently has a single class of shares that is subject, with certain 
exceptions, to a front-end sales charge. The Acquiring Series have a 
single class of shares that is subject to an identical sales charge and 
exceptions. No sales charge will be incurred by shareholders of the 
Acquired Series in connection with their acquisition of shares of the 
Acquiring Series. BISYS Fund Services, LP, the Acquired Series' 
principal underwriter and distributor, will be responsible for all fees 
and expenses related to the Reorganization.
    6. The Board, 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 interests 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 (a) the 
business objectives and purposes of the Reorganization, (b) the 
investment objectives and purposes of the Reorganization, (c) the terms 
and conditions of the Agreement, including the allocation of expenses 
of the Reorganization, (d) the tax-free nature of the Reorganization, 
and (e) the expense ratios of the Acquiring Series and the 
corresponding Acquired Series.
    7. 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 Acquiring and Acquired 
Series receive an opinion of tax counsel that the proposed 
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. 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

[[Page 1253]]

Acquiring Series. Applicants agree not to make any material changes to 
the Agreement without prior Commission approval.
    8. Definitive proxy solicitation materials have been filed with the 
Commission and were mailed to shareholders of the Acquired Series on or 
about December 4, 1998. A special meeting of shareholders is scheduled 
for January 15, 1999.

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 Acquiring and Acquired 
Series may be deemed to be affiliated by reason other than having a 
common investment adviser, common directors, and/or common officers. 
Keystone might be deemed to have an indirect pecuniary interest in the 
performance of the assets held by the Keystone Plan. Because the 
Keystone Plan owns 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 of the 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 Acquiring and 
Acquired Series' shares. Applicants also state that the 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 
substantially 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 Acquiring and Acquired 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.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-353 Filed 1-7-99; 8:45 am]
BILLING CODE 8010-01-M