[Federal Register Volume 67, Number 90 (Thursday, May 9, 2002)]
[Notices]
[Pages 31391-31393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11615]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25567; 812-12772]


Independence One Mutual Funds, et al.; Notice of Application

May 3, 2002.
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:  Independence One Mutual Funds, the ABN AMRO Funds and ABN 
AMRO North America Holding Company (``ABN AMRO'').

Filing Dates:  The application was filed on February 1, 2002. 
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 May 28, 2002, 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 Commission's Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609; Applicants, c/o Mark L. Winget, Vedder, Price, Kaufman & 
Kammholz, 222 North LaSalle Street, Chicago, IL 60601.

FOR FURTHER INFORMATION, CONTACT: Jean Minarick, Senior Counsel, at 
(202) 942-0527, or Nadya Roytblat, Assistant Director, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. Independence One Mutual Funds, a Massachusetts business trust, 
is registered under the Act as an open-end management investment 
company and currently offers eight series, seven of which will 
participate in the proposed transactions (the ``Acquired Funds''). The 
ABN AMRO Funds, a Delaware business trust, is registered under the Act 
as an open-end management investment company and offers thirty-one 
series, six of which are involved in the proposed transactions. Three 
existing series of the ABN AMRO Funds are referred to as the ``Existing 
Acquiring Funds'' and three newly established series,\1\ together with 
the Existing Acquiring Funds, are referred to as the ``Acquiring 
Funds'' (together with the Acquired Funds, the ``Funds''). The 
Independence One Mutual Funds and the ABN AMRO Funds are referred to as 
the ``Trusts.''
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    \1\ An amendment to the registration statement for the ABN AMRO 
Funds to register the new series that will participate in the 
Reorganization was filed with Commission on March 22, 2002 and 
became effective March 26, 2002.
    \2\ Under the Plan of Reorganization, the Acquired Funds will 
merge into the corresponding Acquiring Funds as follows: 
Independence One U.S. Treasury Money Market Fund will merge into ABN 
AMRO Treasury Money Market Fund; Independence One Prime Money Market 
Fund into ABN AMRO Institutional Prime Money Market Fund; 
Independence One Fixed Income Fund and Independence One U.S. 
Government Securities Fund into ABN AMRO Investment Grade Bond Fund; 
Independence One Small Cap Fund into ABN AMRO Select Small Cap Fund; 
Independence One Equity Plus Fund into ABN AMRO Equity Plus Fund; 
and Independence One International Equity Fund into ABN AMRO 
International Equity Fund.
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    2. ABN AMRO Asset Management (USA) LLC (``AAAM''), a wholly owned 
subsidiary of ABN AMRO, will serve as the investment adviser to the 
Acquired Funds and is the investment adviser to the Acquiring Funds. 
AAAM is registered under the Investment Advisers Act of 1940. 
Affiliated persons of ABN AMRO own 5% or more (and in some cases more 
than 25%) of the outstanding securities of the Acquiring Funds in a 
fiduciary capacity. In addition, affiliated persons of ABN AMRO, in a 
fiduciary or custodial capacity, or on behalf of brokerage customers, 
own 5% or more (and in some cases more than 25%) of the outstanding 
voting securities of the Acquired Funds.
    3. On July 25, 2001 and December 20, 2001, the boards of trustees 
of the Independence One Mutual Funds and the ABN AMRO Funds (together, 
the ``Boards''), including all the trustees who are not ``interested 
persons,'' as defined in section 2(a)(19) of the Act (``Independent 
Trustees''), unanimously approved the reorganization and an agreement 
and plan of reorganization (the ``Plan of Reorganization''). Under the 
Plan of Reorganization, the Acquiring Funds acquire all of the assets 
and liabilities of the corresponding Acquired Funds.\2\ Applicants 
state that the Reorganization will occur on or about June 1, 2002 and 
June 8, 2002 (each a ``Closing Date'' and collectively, the ``Closing 
Dates''). On the applicable Closing Date, each class of shares of each 
Acquiring Fund will acquire all of the assets and liabilities of the 
corresponding class of shares of the corresponding Acquired Fund in 
exchange for shares of the designated class of the Acquiring Fund. The 
shares of each Acquiring Fund exchanged will have an aggregate net 
asset value equal to the aggregate net asset value of the corresponding 
Acquired Fund's shares determined as of the close of business on the 
business day immediately preceding the applicable Closing Date. The net 
asset value of the Acquiring Funds and value of the assets of the 
Acquired Funds will be determined according to the Acquiring Funds' 
then-current valuation policies and procedures stated in their 
prospectuses and statements of additional information. The Plan of 
Reorganization provides, however, that each Acquired Fund and the 
corresponding Acquiring Fund agree to use all commercially reasonable 
efforts to resolve any material differences between the prices of 
portfolio securities determined in accordance with the pricing policies 
and procedures of its corresponding Acquiring Fund and those determined 
in accordance with the pricing policies and procedures of its 
corresponding Acquired Fund, and that where a pricing difference 
results from a difference in pricing methodology, the parties will 
eliminate such difference by using the corresponding Acquiring Fund's 
methodology in valuing the Acquired Fund's assets. As soon as

[[Page 31392]]

practicable after the applicable Closing Date, the Acquired Funds will 
distribute the shares of the corresponding Acquiring Funds pro rata to 
their shareholders of record, determined as of the close of business on 
the business day immediately preceding the applicable Closing Date. 
Following the distribution of the Acquiring Funds' shares, the Acquired 
Funds will terminate.
    4. The Acquired Funds offer Class A Shares, which are subject to a 
sales load, and for certain Acquired Funds, a rule 12b-1 distribution 
fee, and no shareholder servicing fees; Class B shares, which are 
subject to a sales load, rule 12b-1 distribution fees of 0.75% and 
shareholder servicing fees; Class K shares, which are subject to 
shareholder servicing fees, but no sales load or rule 12b-1 
distribution fees; and Class Y Shares and Trust Class Shares, which are 
not subject to any sales load, rule 12b-1 distribution fees, or 
shareholder servicing fees. The Acquiring Funds will offer Class N 
shares, which are subject to rule 12b-1 distribution fees of 0.25%, but 
no shareholder servicing fees or sales loads; Class I and Class Y 
Shares, which are not subject to any sales loads, rule 12b-1 
distribution fees or shareholder servicing fees; Class S Shares, which 
are subject to rule 12b-1 distribution fees of 0.25% and shareholder 
servicing fees, but no sales loads; and Class YS Shares, which are 
subject to shareholder servicing fees, but no sales loads or rule 12b-1 
distribution fees.
    5. Shareholders with Class K Shares of the Independence One U.S. 
Treasury Money Market Fund will receive Class I Shares of the ABN AMRO 
Treasury Money Market Fund. Shareholders of Class A Shares of the 
Independence One International Equity Fund will receive Class N Shares 
of the ABN AMRO International Equity Fund. Shareholders of Trust Class 
and Class B Shares of the Independence One Fixed Income Fund and 
shareholders of Class A Shares and Class B Shares of the Independence 
One U.S. Government Securities Fund will receive Class I shares of the 
ABN AMRO Investment Grade Bond Fund. Shareholders of Class A Shares of 
the Independence One Small Cap Fund will receive Class N Shares of the 
ABN AMRO Select Small Cap Fund. Shareholders of Trust Class, Class A 
and Class B Shares of the Independence One Equity Plus Fund will 
receive Class I Shares of the ABN AMRO Equity Plus Fund. Shareholders 
of Class Y and Class K Shares of the Independence One Prime Money 
Market Fund will receive Class Y and Class YS Shares, respectively, of 
the ABN AMRO Institutional Prime Money Market Fund.
    6. Applicants state that the investment objectives, policies and 
restrictions of each Acquired Fund are substantially similar to those 
of the corresponding Acquiring Fund, except for the Independence One 
U.S. Government Securities Fund whose investment objectives, policies 
and restrictions are similar to those of the corresponding Acquiring 
Fund. Applicants state that the rights and obligations of each class of 
shares of the Acquired Funds are similar to those of the corresponding 
class of shares of the Acquiring Funds. No sales charges will be 
imposed in connection with the Reorganization. AAAM and/or its 
affiliates (but not the Funds) will bear the costs associated with the 
Reorganization.
    7. The Boards, including all of the Independent Trustees, 
unanimously determined that the Reorganization is in the best interests 
of each Fund and its shareholders and that the interests of 
shareholders of each Fund would not be diluted as a result of the 
Reorganization. In assessing the Reorganization, the Boards considered 
various factors, including: (a) The terms and conditions of the 
Reorganization; (b) the compatibility of the Funds' investment 
objectives, policies and limitations; (c) the performance histories of 
the Acquired Funds and corresponding Existing Acquiring Funds; (d) the 
pro forma expense ratios of the Acquiring Funds; (e) the potential 
economies of scale to be gained from the Reorganization; (f) the 
advantages of increased investment opportunities for the Acquired 
Funds' shareholders; (g) the anticipated tax-free nature of the 
Reorganization; (h) the service features available to the shareholders 
of the corresponding Funds; (i) the assumption of all liabilities of 
the Acquired Funds and (j) the fact that Reorganization expenses will 
be borne by AAAM and/or its affiliated persons (but not the Funds).
    8. The Reorganization is subject to a number of conditions 
precedent, including that: (a) The shareholders of each Acquired Fund 
will have approved the Reorganization; (b) the Trusts will have 
received opinions of counsel that the Reorganization will be tax-free 
for the Trusts and their shareholders; (c) applicants will have 
received from the Commission an exemption from section 17(a) of the Act 
for the Reorganization; (d) the registration statement under the 
Securities Act of 1933 for the Acquiring Funds will have become 
effective; and (e) each Acquired Fund shall have declared and paid 
dividend(s) which shall have the effect of distributing to its 
shareholders all net investment company taxable income for all taxable 
periods ending on or before the applicable Closing Date and, with 
respect to each Acquired Fund that is reorganizing into an Existing 
Acquired Fund, all of its net capital gains, if any, to its 
shareholders. The Plan of Reorganization may be terminated by mutual 
agreement or by either party at or before the Closing Dates. No 
material changes to the Plan of Reorganization will be made without 
prior Commission approval.
    9. The registration statement on Form N-14 for the ABM AMRO Funds 
(which contains a combined prospectus/proxy statement) was filed with 
the Commission on February 6, 2002. The solicitation materials related 
to the Reorganization were mailed to shareholders of the Acquired Funds 
on April 5, 2002. A special meeting of shareholders of the Acquired 
Funds to consider the Reorganization is scheduled for May 10, 2002.

Applicants' Legal Analysis

    1. Section 17(a) of the Act prohibits any affiliated person of a 
registered investment company, or any affiliated person of that person, 
acting as principal, from selling to or purchasing from the registered 
investment 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 power to vote 5% or more of the outstanding voting securities of 
the other person; (b) any person 5% or more of whose outstanding voting 
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.
    2. Rule 17a-8 under the Act exempts certain mergers, 
consolidations, and 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 rule 17a-8 may not be available to exempt the Reorganization 
because the Funds may be deemed to be affiliated by reasons other than 
having a common investment adviser, common directors, and/or common 
officers. Applicants state that an affiliated person

[[Page 31393]]

of ABN AMRO owns of record and beneficially and has the power to vote 
more than 5% of the outstanding voting securities of the Independence 
One Prime Money Market Fund. Applicants state that because affiliated 
persons of ABN AMRO, in a fiduciary capacity, own 5% or more (and in 
some cases more than 25%) of the outstanding voting securities of the 
Acquiring Funds, each may be deemed to be affiliated persons of the 
Acquiring Funds. In addition, applicants state that because affiliated 
persons of ABN AMRO also own 5% or more (and in some cases more than 
25%) of the outstanding voting securities of the Acquired Funds, in a 
fiduciary or custodial capacity, or on behalf of brokerage customers, 
each also may be deemed to be an affiliated person of the Acquired 
Funds. As a result, the Acquiring Funds may be deemed to be affiliated 
persons of an affiliated person of the Acquired Funds.
    3. Section 17(b) of the Act provides, in relevant part, that the 
Commission may exempt a transaction from the provisions of section 
17(a) if evidence establishes that the terms of the proposed 
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 the proposed transaction is consistent with the 
policy of each registered investment company concerned and the general 
purposes of the Act.
    4. Applicants request an order under section 17(b) of the Act 
exempting them from section 17(a) to the extent necessary to effect the 
Reorganization. Applicants submit that the Reorganization satisfies the 
conditions of section 17(b) of the Act. Applicants also state that the 
Boards, including all of the Independent Trustees, have determined that 
the participation of the Funds in the Reorganization is in the best 
interests of each Fund and that such participation will not dilute the 
interests of existing shareholders of each Fund. Applicants also state 
that the Reorganization will be effected on the basis of relative net 
asset value.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-11615 Filed 5-8-02; 8:45 am]
BILLING CODE 8010-01-P