[Federal Register Volume 65, Number 237 (Friday, December 8, 2000)]
[Notices]
[Pages 77051-77053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31275]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-24780; 812-12316]


Vision Group of Funds, et al.; Notice of Application

December 1, 2000.
AGENCY: Securities and Exchange Commission (the ``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 the 
proposed reorganizations of eleven series (the ``Acquired Funds'') of 
Governor Funds with and into eleven series of Vision Group of Funds 
(``Vision Funds'') (the ``Acquiring Funds,'' and together with the 
Acquired Funds, the ``Funds''). Because of certain affiliations, 
applicants may not rely on rule 17a-8 under the Act.

Applicants: Vision Funds, Governor Funds, Manufacturers and Traders 
Trust Company (``M&T Bank''), Governor Funds, and Martindale Andres & 
Company LLC (``Martindale'').

Filing Dates: The application was filed on November 3, 2000. Applicants 
have agreed to file an amendment to the application 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 copies of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on December 26, 2000, 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 may request notification of a hearing by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 5th 
Street, NW., Washington, DC 20549-0609. Applicants, c/o Victor R. 
Siclari, Esq., Federated Services Company, Federated Investors Tower--
12th Floor, Pittsburgh, Pennsylvania 15222-3779.

FOR FURTHER INFORMATION CONTACT: Karen L. Goldstein, Senior Counsel, at 
(202) 942-0646, or Christine Y. Greenlees, Branch Chief, at (202) 942-

[[Page 77052]]

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 
SEC's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 
20549-0102 (telephone (202) 942-8090).

Applicants' Representations

    1. Vision Funds, a Delaware business trust, is registered under the 
Act as an open-end management investment company and currently offers 
eighteen series (the ``Vision Series''). Eleven of the Vision Series, 
Vision Treasury Money Market Fund, Vision Large Cap Core Fund, Vision 
Institutional Prime Money Market Fund, Vision Small Cap Stock Fund, 
Vision International Equity Fund, Vision Intermediate Term Bond Fund, 
Vision Institutional Limited Duration U.S. Government Fund, Vision 
Pennsylvania Municipal Income Fund, Vision Managed Allocation Fund--
Conservative Growth, Vision Managed Allocation Fund--Moderate Growth, 
and Vision Managed Allocation Fund--Aggressive Growth, are Acquiring 
Funds. All of the Acquiring Funds except Vision Treasury Money Market 
Fund and Vision Large Cap Core Fund were recently organized for 
purposes of the proposed Reorganizations (as defined below).
    2. Governor Funds, a Delaware business trust, is registered under 
the Act as an open-end management investment company and currently 
offers eleven series, which are Acquired Funds: Governor Prime Money 
Market Fund, Governor U.S. Treasury Obligations Money Market Fund, 
Governor Established Growth Fund, Governor Aggressive Growth Fund, 
Governor International Equity Fund, Governor Intermediate Term Income 
Fund, Governor Limited Duration Government Securities Fund, Governor 
Pennsylvania Municipal Bond Fund, Governor Lifestyle Conservative 
Growth Fund, Governor Lifestyle Moderate Growth Fund, and Governor 
Lifestyle Growth Fund.
    3. M&T Bank serves as investment adviser to each Acquiring Fund. 
M&T Bank is not currently required to register as an investment adviser 
pursuant to section 202(a)(11)(A) of the Investment Advisers Act of 
1940 (``Advisers Act''). M&T Bank is the principal banking subsidiary 
of M&T Bank Corporation, a regional bank holding company.
    4. Martindale is an investment adviser registered under the 
Advisers Act and serves as investment adviser to each of the Acquired 
Funds. In addition, Martindale will be the sub-adviser of the Vision 
Small Cap Stock Fund. Martindale is a subsidiary of M&T Bank 
Corporation. Brinson Partners, Inc., an investment adviser registered 
under the Advisers Act, is the current sub-adviser to the Governor 
International Equity Fund and will be the sub-adviser for the 
corresponding Vision International Equity Fund.
    5. M&T Bank and/or certain affiliated persons of M&T Bank (M&T Bank 
and such affiliated persons are collectively referred to as ``M&T Bank 
Affiliates'') hold of record for the benefit of others, in trust, 
agency, custodial or other fiduciary or representative capacity, more 
than 5% (in some cases, more than 25%) of the total outstanding shares 
of certain of the Acquired Funds.
    6. On August 11, 2000 and October 27, 2000, the board of trustees 
of Vision Funds (``Vision Board'') and the board of trustees of 
Governor Funds (``Governor Board'' and together with the Vision Board, 
the ``Boards''), respectively, including all the trustees who are not 
``interested persons'' of those Funds, as defined in section 2(a)(19) 
of the Act (``Disinterested Trustees''), approved the respective 
agreements and plans or reorganization entered into between Vision 
Funds and Governor Funds (the ``Plans''). Under the Plans, each 
Acquired Fund will acquire all, or substantially all, of the assets and 
liabilities of the corresponding Acquired Fund in exchange for Class A 
shares of the Acquiring Fund (each a ``Reorganization,'' and 
collectively, the ``Reorganizations'').\1\ The shares of each Acquiring 
Fund exchanged will have an aggregate net asset value equal to the 
aggregate net asset value of the Acquired Fund's shares determined as 
of the close of regular trading on the New York Stock Exchange on the 
business day preceding the day of the closing of each Reorganization 
(``Closing Date''). The value of the assets of the Acquired Funds will 
be determined according to the Acquired Funds' then-current 
prospectuses and statements of additional information. As soon as 
reasonably practicable after the Closing Date, each Acquired Fund will 
be liquidated by the distribution of the Acquiring Fund shares pro rata 
to the shareholders of the Acquired Fund.
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    \1\ Under the Plans, the Acquired Funds will be reorganized into 
the Acquiring Funds as follows: Governor Aggressive Growth Fund will 
reorganize into Vision Small Cap Stock Fund, Governor Established 
Growth Fund into Vision Large Cap Core Fund, Governor Intermediate 
Term Income Fund into Vision Intermediate Term Bond Fund, Governor 
International Equity Fund into Vision International Equity Fund, 
Governor Lifestyle Conservative Growth Fund into Vision Managed 
Allocation Fund--Conservative Growth, Governor Lifestyle Growth Fund 
into Vision Managed Allocation Fund--Aggressive Growth, Governor 
Lifestyle Moderate Growth Fund into Vision Managed Allocation Fund--
Moderate Growth, Governor Limited Duration Government Securities 
Fund into Vision Institutional Limited Duration U.S. Government 
Fund, Governor Pennsylvania Municipal Bond Fund into Vision 
Pennsylvania Municipal Income Fund, Governor Prime Money Market Fund 
into Vision Institutional Prime Money Market Fund and Governor U.S. 
Treasury Obligations Money Market Fund into Vision Treasury Money 
Market Fund.
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    7. Applicants state that the investment objectives and policies of 
each Acquired Fund are identical or substantially similar to those of 
the corresponding Acquiring Fund. The Acquired Funds offer two classes 
shares, Investor shares and S shares, and the Acquiring Funds offer 
Class A, Class B and Class S shares. The only shares that will be 
involved in the Reorganizations will be Investor shares and Class A 
shares. Investor shares and Class A shares of the Acquired and 
Acquiring Funds are subject to a front-end sales charge, except for 
Class A shares of Vision Treasury Money Market Fund and Vision 
Institutional Prime Money Market Fund and Investor shares of their 
corresponding Acquired Funds. Shares of each Acquired Fund and the 
Class A shares of each Acquiring Fund are currently not subject to a 
contingent deferred sales charge. The Acquired Funds' Investor shares 
are not subject to rule 12b-1 distribution or shareholder service fees, 
except for Investor shares of three of the Acquired Funds, which are 
subject to rule 12b-1 distribution fees. The Acquiring Funds' Class A 
shares are subject to rule 12b-1 distribution and shareholder services 
fees. Shareholders of the Acquired Funds will not be subject to a 
contingent deferred sales charge upon redemption of the Acquiring Fund 
shares that they receive in connection with the Reorganizations. No 
sales charges will be imposed in connection with the Reorganizations. 
M&T Bank will bear the costs associated with the Reorganizations.
    8. The Boards, including all of the Disinterested Trustees, 
determined that the participation of each Acquiring and Acquired Fund 
in a Reorganization was in the best interests of each Fund and its 
shareholders, and that the interests of the shareholders of each Fund 
would not be diluted as a result of the Reorganization. In assessing 
the Reorganizations, the Boards considered various factors, including: 
(a) The investment objectives, policies and strategies of each of the 
Acquired Funds and their corresponding Acquiring Funds; (b) the 
investment advisory and other fees paid by each of the Acquiring

[[Page 77053]]

Funds and the projected expenses of each of the Acquiring Funds; (c) 
the terms and conditions of the Plans; and (d) the anticipated tax 
consequences of the Reorganizations for the Funds and their 
shareholders. In addition, the Governor Board considered: (a) The 
capabilities, resources, and experience of M&T Bank and other service 
providers; and (b) the shareholder services offered by Vision Funds.
    9. The Reorganizations are subject to a number of conditions 
precedent, including that: (a) The shareholders of each Acquired Fund 
will have approved the Reorganization; (b) the Funds will have received 
opinions of counsel concerning the tax-free nature of each 
Reorganization; (c) applicants will have received from the Commission 
an exemption from section 17(a) of the Act for the Reorganizations, (d) 
an N-14 Registration Statement relating to each Reorganization has 
become effective with the Commission, and (e) each of the Acquired 
Funds and the Vision Treasury Money Market Fund will declare and pay on 
or before the Closing Date a dividend or dividends, which, together 
with all previous dividends, will have the effect of distributing to 
its shareholders substantially all of its net investment income and 
realized net capital gain, if any, for all taxable years ending on or 
before the Closing Date. The Plans may be terminated and the 
Reorganizations abandoned at any time prior to the Closing Date by the 
mutual consent of the Governor Board and the Vision Board. Applicants 
agree not to make any material changes to the Plans without prior 
approval of the Commission staff.
    10. A registration statement on Form N-14 with respect to the 
Reorganizations, containing a proxy statement/prospectus, was filed 
with the Commission on November 13, 2000 and was mailed to shareholders 
of the Acquired Funds on November 14, 2000. A shareholders meeting of 
the Acquired Funds is scheduled for December 13, 2000.

Applicant's Legal Analysis

    1. Section 17(a) of the Act, in relevant part, 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.
    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 not be available to exempt the Reorganizations because the 
Funds may be deemed to be affiliated by reasons other than having a 
common investment adviser, common directors/trustees, and/or common 
officers. Applicants state that M&T Bank Affiliates hold of record for 
the benefit of others, in trust, agency, custodial or other fiduciary 
or representative capacity, more than 5% (in some cases, more than 25%) 
of the total outstanding shares of certain of the Acquired Funds. 
Because of these ownership positions, each Acquired Fund may be deemed 
to be an affiliated person of an affiliated person of its corresponding 
Acquiring Fund.
    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 that the proposed transaction is consistent with 
the policy of each registered investment company concerned and with 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 complete 
the Reorganizations. Applicants submit that the Reorganizations satisfy 
the standards of section 17(b) of the Act. Applicants state that the 
terms of the Reorganizations are reasonable and fair and do not involve 
overreaching. Applicants state that the investment objectives and 
policies of each Acquired Fund are identical, or substantially similar 
to, those of its corresponding Acquiring Fund. Applicants also state 
that the Boards, including all of the Disinterested Trustees, found 
that the participation of the Acquired and Acquiring Funds in the 
Reorganizations is in the best interests of each Fund and its 
shareholders and that such participation will not dilute the interests 
of the existing shareholders of each Fund. In addition, applicants 
state that the Reorganizations will be on the basis of the Funds' 
relative net asset values.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-31275 Filed 12-7-00; 8:45 am]
BILLING CODE 8010-01-M