[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]
-----------------------------------------------------------------------
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.
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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