[Federal Register Volume 62, Number 217 (Monday, November 10, 1997)]
[Notices]
[Pages 60536-60538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-29601]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-22875; 812-10718]
Evergreen Trust, et al.; Notice of Application
November 4, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under sections 6(c) and
17(b) of the Investment Company Act of 1940 (the ``Act'') from section
17(a) of the Act.
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SUMMARY OF APPLICATION: Applicants seek an order to permit the
reorganization and consolidation of certain registered open-end
investment companies, and the conversion of certain common trust funds
and collective investment funds into registered open-end investment
companies.
APPLICANTS: Evergreen Trust, Evergreen Growth and Income Fund,
Evergreen Foundation Trust, The Evergreen Municipal Trust, The
Evergreen American Retirement Trust, Evergreen Equity Trust, Evergreen
Investment Trust, The Evergreen Lexicon Fund, Evergreen Money Market
Trust, Evergreen Tax Free Trust, Keystone Institutional Trust (each a
``Fund'' and collectively, the ``Funds''); Evergreen Select Fixed
Income Trust, Evergreen Select Equity Trust, Evergreen Select Money
Market Trust, Evergreen Municipal Trust, Evergreen Equity Trust,
Evergreen Fixed Income Trust, Evergreen International Trust, Evergreen
Money Market Trust (collectively, the ``Delaware Trusts''); First Union
National Bank (North Carolina), and First Union National Bank
(Pennsylvania) (collectively, the ``Bank'').
FILING DATES: The application was filed on September 19, 1997.
Applicants have agreed to file an amendment to the application during
the notice period, the substance of which is included in this notice.
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 November 21,
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, NW., Washington, DC 20549.
Applicants, Marion A. Cowell, Jr., Esq., General Counsel, First Union
Corporation, One First Union Center, Charlotte, North Carolina 28288.
FOR FURTHER INFORMATION CONTACT:
Joseph B. McDonald, Jr., Senior Counsel, at (202) 942-0533, or Mary Kay
Frech, 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 at the
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. 202-942-8090).
Applicants' Representations
1. Each Fund is registered under the Act as an open-end management
investment company. The Funds are organized as either Massachusetts
business trusts or Maryland corporations. The Delaware Trusts have been
organized as Delaware business trusts to succeed to the Funds'
registration statements and operations. The Delaware Trusts either have
been or will be registered under the Act as open-end management
investment companies.
2. First Union National Bank is a North Carolina corporation and a
banking subsidiary of First Union Corporation, a publicly held bank
holding company. The Capital Management Group, a division of the Bank,
and two of its subsidiaries, Evergreen Asset Management Corp. and
Keystone Investment Management Company, act as investment advisers to
the Funds and the Delaware Trusts. Evergreen Asset Management Corp. and
Keystone Investment Management Company are each registered as
investment advisers under the Investment Advisers Act of 1940.
3. Applicants propose to transfer $7 billion of assets in the
Bank's various common trust funds and collective investment funds
(collectively, ``CTFs''): (i) to certain newly established series of
Delaware Trusts; and (ii) to certain Funds prior to the Funds'
reorganizing into Delaware Trusts (``CTF Conversions''). Applicants
state that the CTF Conversions will be accomplished by transferring CTF
assets to the Delaware Trusts or to the Funds having
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comparable investment objectives in exchange for shares of the series
of the Delaware Trusts or Funds at the then-current market value of the
CTF's assets. At the same time, the CTFs will distribute the shares of
the respective Delaware Trusts or the funds on a pro rata basis to all
participants in the CTFs.
4. The Bank's employee pension plan (``Affiliated Plan'') has more
than 5% participation in the Equity Growth Fund and, therefore, the
Bank may be deemed to have a significant financial interest in this CTF
Conversion. In addition, certain of the CTF Conversions will involve
converting CTF assets into certain of the Funds where the Bank, as a
fiduciary for its customers, may own of record, or hold or control with
power to vote 5% or more of the outstanding voting securities of these
Funds. This includes 15 Funds in which the Bank, as a fiduciary for its
customers, owns of record, or holds or controls with power to vote, 25%
or more of the outstanding securities of these Funds.
5. Many of the participants in the CTFs, other than the Affiliated
Plan, have an independent or ``second'' fiducicary that supervises and
will supervise the investment of CTF's assets (``Second Fiduciary'').
In the case of the Affiliated Plan, the Bank's employee benefit review
committee (the ``Committee'') serves as a fiduciary. In other
situations, the Bank as sole trustee will exercise its fiduciary
responsibility to authorize the CTF Conversions.
6. Completion of the CTF Conversions is subject to a number of
conditions precedent, including requirements that: (1) The proposed
transfers will comply with the provisions of rule 17a-7 (b) through (f)
under the Act; and (ii) the CTF Conversions will not occur unless and
until (a) the boards of the Delaware Trusts and of the Funds (the
``Boards'') (including a majority of their disinterested directors/
trustees (``Disinterested Directors'')) and the Committee, the Second
Fiduciary, or the Bank, as the case may be, find that the CTF
Conversions are in the best interests of the Funds, the Delaware
Trusts, and participants in the CTF, respectively, and (b) the Boards
and the Disinterested Directors find that the interests of the existing
shareholders will not be diluted as a result of the proposed CTF
Conversions. These determinations and the basis upon which they are
made will be recorded fully in the records of the Delaware Trusts and
The Funds.
7. Where the Bank acts as the sole trustee for a CTF, the Bank will
determine in accordance with its fiduciary duties that the proposed CTF
Conversion is in the best interests of participants in the CTF. In
making this determination, the Bank will consider the anticipated
benefits to the CTF participants. These benefits may include increased
liquidity, the availability of daily pricing, the accessibility of
performance and other information concerning the CTF, the similarity of
the investment objectives and policies of the Fund or Delaware Trust
and the CTF, the anticipated tax treatment of the proposed transaction
and the aggregate fee levels experienced and expected to be experienced
by CTF participants before and after the proposed transaction.
8. Applicants also request relief to permit future transactions in
which a CTF for which the Bank acts as trustee and in which an employee
benefit plan sponsored by the Bank is a participant, proposes to
transfer all of its assets to a registered open-end investment company
or a series thereof (a) that is advised by the Bank or by any entity
controlling, controlled by, or under common control with the Bank, and
(b) in which the Bank, as fiduciary for its customers, owns of record
or controls or holds with power to vote 5% or more of the outstanding
voting securities, provided that the Bank has no beneficial ownership
interest in any security of either party to the transaction (``Future
Transactions''). Applicants state that they will rely on the requested
relief for Future Transactions only in accordance with the terms and
conditions contained in the application.
9. On September 16 and 17, 1997, the Board of each Fund, including
a majority of the Disinterested Directors, authorized the
reorganization of the Funds into the various Delaware Trusts (``Fund
Reorganizations''). The purpose of the Fund Reorganizations is to
change the domicile of the Funds from Massachusetts or Maryland to
Delaware. In conjunction with this proposal, applicants propose that
certain of the Funds will be consolidated with other Funds into a
single series of a Delaware Trust (``Consolidations'').
10. The Boards of the Funds approved agreements and plans of
reorganization under which the Funds being acquired (``Acquired
Funds'') have agreed to sell all of their assets and liabilities to a
corresponding series of the Delaware Trusts (``Acquiring Series'')
(``Agreements''). The exchange of shares will be equal to the net asset
value at the close of business on the day before the exchange date
specified in the Agreement. The shares will be distributed pro rata to
the respective Acquired Funds' shareholders in proportion to the number
and class of shares of the Acquiring Series owned on the exchange date
upon the liquidation and dissolution of the Acquired Funds. At the time
of the Fund Reorganizations, the Acquired Funds will have either three
or four classes of shares. In all cases, the Acquired Fund shareholders
will receive the class of shares which has the same rights and
obligations as the class they presently hold.
11. The Agreements are subject to a number of conditions precedent,
including requirements that: (I) The Agreements have been approved by
the Boards of the Delaware Trusts and the Acquired Funds; (ii) the
Acquired Funds and the Delaware Trusts have received opinions of
counsel stating, among other things, that the Fund Reorganizations will
constitute a ``reorganization'' under section 368 of the Internal
Revenue Code of 1986, as amended and, as a consequence, the Fund
Reorganizations will not result in Federal income taxes for the Funds
or their shareholders; and (iii) the Acquired Funds and the Delaware
Trusts have received from the SEC, if necessary, an order exempting the
Fund Reorganizations and Consolidations from the provisions of section
17(a) of the Act. Applicants agree not to make any material changes to
the Agreements that affect representations in the application without
the prior approval of the SEC staff.
12. Proxy solicitation materials describing each Delaware Trust,
the Fund Reorganizations, Consolidations, and the terms of the
Agreements will be filed with the SEC and mailed to the Funds'
shareholders for their approval. A joint special meeting of
shareholders of the Funds to consider the Agreements will be held on or
about December 15, 1997, and, subject to shareholder approval of the
Agreements and the issuance by the SEC of the requested order, the Fund
Reorganizations and Consolidations will be completed on or about
December 19, 1997.
13. Each Acquired Fund and each Delaware Trust will be responsible
for its respective fees and expenses of the Fund Reorganizations and
Consolidations. Each Fund will be responsible for its proxy
solicitation and other costs associated with its special meeting of
shareholders held to consider the Fund Reorganizations and
Consolidations. The expenses with respect to the Agreements using Form
N-14 will be paid by the Bank.
Applicants' Legal Analysis
1. Section 17(a) of the Act provides that it is unlawful for any
affiliated person of a registered investment company, or any affiliated
person of such person, knowingly (a) to sell any
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security or other property to such registered company, or (b) to
purchase from such registered company any security or other property.
Section 2(a)(3) of the Act defines the term ``affiliated person'' of
another person to include: (a) Any person owning, controlling or
holding with power to vote, 5% or more of the outstanding voting
securities of such 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 such other person; (c) any
person 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) of the Act provides that the SEC may exempt a
transaction from section 17(a) of the Act if evidence establishes that
(a) 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; (b) the proposed transaction is
consistent with the policy of each registered investment company
concerned; and (c) the proposed transaction is consistent with the
general purposes of the Act.
3. Section 6(c) provides that the SEC may exempt any person or
transaction from any provision of the Act or any rule under the Act to
the extent that such exemption is necessary or appropriate in the
public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
4. Some of the CTF Conversions may be deemed to be subject to the
prohibitions of section 17(a) of the Act because the Bank may have
legal title to the assets of the CTF and therefore may be viewed as
acting as a principal in the CTF Conversions. In addition, the
Affiliated Plan is a participant in the Equity Growth Fund conversion.
Certain CTF Conversions also involve Funds in which the Bank, as
fiduciary for its trust and employee pension plan customers, may own of
record or control or hold for such customers with power to vote 5% of a
particular Fund's outstanding voting securities (``Affiliated Funds'').
Accordingly, applicants request an order from the SEC pursuant to
sections 6(c) and 17(b) of the Act exempting the CTF Conversions from
section 17(b) of the Act on the terms and subject to the conditions set
forth in the application.
5. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) of the Act 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 are
satisfied. The Fund Reorganizations and Consolidations may not be
exempt from the prohibitions of section 17(a) by reason of rule 17a-8
because the Affiliated Funds may be an affiliated person of the Bank.
The Bank or its affiliated persons are investment advisers to the
Delaware Trusts. The Affiliated Funds, therefore, may each be an
affiliated person of an affiliated person of the Delaware Trusts and,
as such, be prohibited by section 17(a)(1) of the Act from selling any
security or other property to the Delaware Trusts. As a consequence,
the Fund Reorganizations may not meet the requirements of rule 17a-8.
For this reason, applicants request an order from the SEC under section
17(b) of the Act exempting applicants from section 17(a) of the Act to
the extent necessary to complete the Fund Reorganizations and
Consolidations.
6. Applicants submit that the CTF Conversions satisfy the
requirements of sections 6(c) and 17(b) of the Act and that the
Reorganizations and Consolidations satisfy the requirements of section
17(b) of the Act. Applicants assert that the transactions are in the
best interests of the CTFs, Funds, and Delaware Trusts. In approving of
or consenting to the transactions, the CTF fiduciaries and the Boards
considered that the interests of shareholders will not be diluted; that
the registered investment companies' investment objectives and policies
are generally substantially identical in the Fund Reorganizations and
Consolidations and comparable in the CTF Conversions; that the
conditions and policies of rule 17a-7 and rule 17a-8 under the Act will
be followed; that no overreaching by any affiliated person is
occurring; and that the in-kind transfers of securities avoid the costs
of selling securities by the Acquired Funds and the CTFs and purchasing
the same or similar securities by the Acquiring Series of the Delaware
Trusts. Applicants also submit that the CTF Conversions meet the
section 6(c) standards for relief as necessary or appropriate in the
public interest and consistent with the protection of investors and the
purposes fairly intended by the policies and provisions of the Act.
Applicants' Conditions
1. The proposed CTF Conversions will not occur unless and until:
(a) The boards of the Delaware Trusts and of the Funds (including a
majority of their disinterested directors/trustees) and the Committee,
Second Fiduciary, or the Bank, as the case may be, find that the CTF
Conversions are in the best interests of the Delaware Trusts, Funds,
and participants in the CTF, respectively, and (b) the boards of the
Delaware Trusts and of the Funds (including a majority of their
disinterested directors/trustees) find that the interests of the
existing shareholders will not be diluted as a result of the proposed
transfers. These determinations and the basis upon which they are made
will be recorded fully in the records of the Delaware Trusts and the
Funds.
2. In order to comply with the policies underlying rule 17a-8, any
CTF Conversion will have to be approved by the board of the Delaware
Trust or Fund and any CTF's Committee, Secondary Fiduciary, or the
Bank, as appropriate, who would be required to find that the interests
of beneficial owners would not be diluted.
3. The proposed transaction will comply with the terms of rule 17a-
7(b) through (f).
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-29601 Filed 11-7-97; 8:45 am]
BILLING CODE 8010-01-M