[Federal Register Volume 64, Number 133 (Tuesday, July 13, 1999)]
[Notices]
[Pages 37824-37826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17787]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23897; 812-11612]


Evergreen Equity Trust, et al.; Notice of Application

July 8, 1999.
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 registered open-end management investment companies to 
acquire all of the assets and assume all of the liabilities of certain 
other series of the investment companies. Because of certain 
affiliations, applicants may not rely on rule 17a-8 under the Act.

APPLICANTS: Evergreen Equity Trust (the ``Equity Trust''), Evergreen 
Fixed Income Trust (the ``Fixed Income Trust''), Evergreen Municipal 
Trust (the ``Municipal Trust''), Evergreen Select Equity Trust (the 
``Select Equity Trust'') (collectively, the ``Trusts''), and First 
Union National Bank (``FUNB'').

FILING DATES: The application was filed on May 17, 1999. 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

[[Page 37825]]

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 July 28, 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 and Exchange Commission, 450 Fifth 
Street, NW, Washington, DC 20549-0609. Applicants, One First Union 
Center, Charlotte, NC 28288.

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, NW, Washington, 
DC 20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. The Trusts, each a Delaware business trust, are registered under 
the Act as open-end management investment companies. Equity Trust has 
twenty series. Four of these series, the Evergreen Fund, Evergreen 
Micro Cap Fund, Evergreen Income and Growth Fund, and Evergreen 
American Retirement Fund are involved in the proposed transactions. 
Fixed Income Trust has eight series, two of which, Evergreen U.S. 
Government Fund and Evergreen Intermediate Term Government Securities 
Fund, are involved in the proposed transactions. Municipal Trust has 
seventeen series. Three of these series. Evergreen High Grade Municipal 
Bond Fund, Evergreen California Municipal Bond Fund, and Evergreen New 
York Municipal Bond Fund are involved in the proposed transactions. 
Select Equity Trust has thirteen series, two of which, Evergreen Select 
Core Equity Fund and Evergreen Select Equity Income Fund, are involved 
in the proposed transactions.
    2. Evergreen Fund, Evergreen Income and Growth Fund, Evergreen U.S. 
Government Fund, Evergreen High Grade Municipal Bond Fund, and 
Evergreen Select Core Equity Fund are the ``Acquiring Series.'' 
Evergreen Micro Cap Fund, Evergreen American Retirement Fund, Evergreen 
Intermediate Term Government Securities Fund, Evergreen California 
Municipal Bond Fund, Evergreen New York Municipal Bond Fund, and 
Evergreen Select Equity Income Fund are the ``Acquired Series.'' 
Collectively, the Acquiring Series and the Acquired Series are referred 
to as the ``Series.'' \1\
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    \1\ The Acquired Series and the Acquiring Series correspond with 
one another as follows: Equity Trust's Evergreen Micro Cap Fund with 
Evergreen Fund; Equity Trust's Evergreen American Retirement Fund 
with Evergreen Income and Growth Fund; Fixed Income Trust's 
Evergreen Intermediate Term Government Securities Fund with 
Evergreen U.S. Government Fund; Municipal Trust's Evergreen 
California Municipal Bond Fund and Evergreen New York Municipal Bond 
Fund with Evergreen High Grade Municipal Bond Fund; and Select 
Equity Trust's Evergreen Select Equity Income Fund with Evergreen 
Select Core Equity Fund.
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    3. FUNB is a national banking association and a banking subsidiary 
of First Union Corporation, a publicly-held bank holding company. 
Evergreen Investment Management (``EIM''), a division of FUNB, is the 
investment adviser to the Evergreen High Grade Municipal Bond Fund, 
Evergreen U.S. Government Fund, and Evergreen Intermediate Term 
Government Securities Fund. First Investment Advisors (``FIA''), 
another division of FUNB, is the investment adviser to Evergreen Select 
Core Equity Fund and Evergreen Select Equity Income Fund. Evergreen 
Asset Management Corp. (``EAMC''), an indirect wholly-owned subsidiary 
of FUNB, is the investment adviser to the Evergreen Income and Growth 
Fund, Evergreen American Retirement Fund, Evergreen Fund and Evergreen 
Micro Cap Fund. Evergreen Investment Management Company (``EIMC''), an 
indirect wholly-owned subsidiary of FUNB, is the investment adviser to 
the Evergreen California Municipal Bond Fund and the Evergreen New York 
Municipal Bond Fund. EIM and FIA, as divisions of FUNB, are not 
required to register as investment advisers under the Investment 
Advisers Act of 1940 (the ``Advisers Act''). EAMC and EIMC are 
registered under the Advisers Act.
    4. FUNB, as fiduciary for its customers, owns of record more than 
5% (and in some cases, more than 25%) of the outstanding voting 
securities of certain of the Acquired Series. In addition, FUNB, as 
fiduciary for its customers, owns of record more than 5% (and in one 
case, more than 25%) of the outstanding voting securities of certain of 
the Acquiring Series.\2\ All such shares are held by FUNB in a 
fiduciary capacity, and FUNB does not have an economic interest in any 
such shares.
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    \2\ FUNB owns 21.13% of Equity Trust's Evergreen Fund, 12.41% of 
Fixed Income Trust's Evergreen U.S. Government Fund, 45.22% of Fixed 
Income Trust's Evergreen Intermediate Term Government Securities 
Fund, 7.84% of Municipal Trust's Evergreen High Grade Municipal Bond 
Fund, 99.08% of Select Equity Trust's Evergreen Select Equity Income 
Fund, and 98.19% of Select Equity Trust's Evergreen Select Equity 
Fund. Although the proposed transaction between Equity Trust's 
Evergreen American Retirement Fund and Equity Trust's Evergreen 
Income and Growth Fund does not currently require exemptive relief, 
applicants are requesting relief in the event that FUNB's ownership 
as fiduciary increase to 5% or more of either Series' assets prior 
to the proposed transactions. If FUNB does not acquire such 
ownership, the Series will not rely on the requested relief.
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    5. On March 12, 1999 (May 14, 1999 in the case of Select Equity 
Trust), the boards of trustees of the Trusts (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 plans of reorganization (the ``Plans''). Under 
the Plans, on the closing date (the ``Closing Date''), which is 
currently anticipated to be July 30, 1999, the Acquiring Series will 
acquire all the assets and stated 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 Closing 
Date (``Valuation Date''). On or as soon as is reasonably practicable 
after the Closing Date, each Acquired Series will distribute full and 
fractional shares of the Acquiring Series pro rata to shareholders of 
record of the Acquired Series, determined as of the close of business 
on the Valuation Date (the ``Reorganizations''). After the distribution 
of the share of the Acquiring Series and the winding up of their 
affairs, the Acquired Series will be liquidated.
    6. Applicants state that the investment objectives of each Acquired 
Series and its corresponding Acquiring Series are similar. The 
investment restrictions and limitations of each Acquired Series and 
corresponding Acquired Series are substantially similar, but in some 
cases involve differences that reflect the differences in the general 
investment strategies utilized by the Funds. The Acquired Series offer 
four classes of shares, Class A, Class B, Class C, and Class Y which 
are identical to the respective classes of the Acquiring Funds.\3\ 
Shareholders of

[[Page 37826]]

the Acquired Series will not incur any sales charges in connection with 
the Reorganizations. FUNB will be responsible for the fees and expenses 
related to the Reorganizations other than each Acquiring Series federal 
and state registration fees.
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    \3\ Except for Class A shares of the Evergreen Intermediate Term 
Government Securities Fund, which have a maximum front-end sales 
load of 3.25% and a distribution fee of 0.10% of average daily net 
assets, while other Class A shares have a maximum front end sales 
load of 4.75% and a distribution fee of 0.25% of average daily net 
assets.
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    7. The Boards, including the Independent Trustees, determined that 
the Reorganizations are in the best interests of the shareholders of 
each of the Acquired Series and each of the Acquiring Series, and that 
the interests of the shareholders of the Acquired Series and the 
Acquiring Series would not be diluted by the Reorganizations. In 
assessing the Plans, the factors considered by the Boards included, 
among others, (a) the terms and conditions of the Reorganizations, (b) 
the expense ratios, fees and expenses of the Acquired Series and 
Acquiring Series, (c) the fact that FUMB will bear the expenses 
incurred in connection with the Reorganizations, and (d) the tax-free 
nature of the Reorganizations.
    8. The Plans are subject to a number of conditions precedent, 
including that: (a) the Plans shall have been approved by the Boards on 
behalf of each of the Acquiring Series and the Acquired Series and 
approved by the shareholders of each of the Acquired Series, (b) 
definitive proxy solitation materials shall have been filed with the 
Commission and distributed to shareholders of the Acquired Series, (c) 
the Acquiring and Acquired Series receive an opinion of tax counsel 
that the Reorganizations will be tax-free for each Series and its 
shareholders, and (d) applicants receive from the Commission an 
exemption from section 17(a) of the Act for the Reorganizations. Each 
Plan may be terminated and the Reorganizations abandoned at any time by 
mutual consent of the respective Boards of the Acquired Series and the 
Acquiring Series or by either party in case of a breach of the Plan. 
Applicants agree not to make any material changes to the Plans without 
prior Commission approval.
    9. Definitive proxy solicitation materials have been filed with the 
Commission and were mailed to shareholders of the Acquired Series (with 
the exception of the Evergreen Select Equity Income Fund) on or about 
June 2, 1999. Proxies were mailed to shareholders of Evergreen Select 
Equity Income Fund on or about June 25, 1999. A special meeting of 
shareholders is scheduled for July 23, 1999 (July 30, 1999 in the case 
of Evergreen Select Equity Income Fund).

Applicant's 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 and 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 Reorganizations 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 Reorganizations because the Acquiring Series and 
Acquired Series may be deemed to be affiliated by reason other than 
having a common investment adviser, common directors, and/or common 
officers. FUNB, as fiduciary for its customers, owns of record with 
power to vote more than 5% (and in some cases, more than 25%) of the 
outstanding voting securities of certain of the Acquired Series and 
Acquiring Series. Because of this ownership 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 Reorganizations. Applicants submit that the 
Reorganizations satisfy the standards of section 17(b) of the Act. 
Applicants state that the Boards have determined that the transactions 
are in the best interests of each Series' shareholders and that the 
interests of the existing shareholders will not be diluted as a result 
of the Reorganizations. In addition, applicants state that the exchange 
of the Acquired Series' shares for shares of the Acquiring Series will 
be based on relative NAV.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-17787 Filed 7-12-99; 8:45 am]
BILLING CODE 8010-01-M