[Federal Register Volume 65, Number 128 (Monday, July 3, 2000)]
[Notices]
[Pages 41113-41115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-16744]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-24547 812-12022]


Evergreen Equity Trust, et al.; Notice of Application

June 27, 2000.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION:  Notice of application for an order under section 17(b) of the 
Investment Company Act of 1940 (the

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``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 open-end management investment companies to acquire all of 
the assets and certain stated 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, Evergreen Fixed Income Trust, 
Evergreen Select Fixed Income Trust, and Evergreen Select Equity Trust 
(collectively, the ``Evergreen Funds'') and First Union National Bank 
(``FUNB'').

Filing Date: The application was filed on March 14, 2000. 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 July 20, 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 
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. FUNB, 201 S. College Street, Charlotte, NC 28288; Evergreen 
Funds, 200 Berkeley Street, Boston, MA 02116-9000.

FOR FURTHER INFORMATION CONTACT: Sara P. Crovitz, Senior Counsel, at 
(202) 942-0667 or Michael W. Mundt, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102, (202) 942-8090.

Applicant's Representations

    1. The Evergreen Funds, each a Delaware business trust, are 
registered under the Act as open-end management investment companies. 
Evergreen Equity Trust has twenty-three series. Six of these series, 
the Evergreen Stock Selector Fund (``Stock Selector''), Evergreen Small 
Cap Value Fund (``Small Cap Value''), Evergreen Equity Income Fund 
(``Equity Income''), Evergreen Income and Growth Fund (``Income and 
Growth''), Evergreen Capital Balanced Fund (``Capital Balanced''), and 
Evergreen Foundation Fund (``Foundation''), are involved in the 
proposed transactions. Evergreen Fixed Income Trust has nine series. 
Three of these series, Evergreen High Income Fund (``High Income''), 
Evergreen High Yield Bond Fund (``High Yield Bond''), and Evergreen 
Capital Preservation and Income Fund (``Capital Preservation and 
Income''), are involved in the proposed transactions. Evergreen Select 
Fixed Income Trust has ten series. One of its series, Evergreen Select 
Adjustable Rate Fund (``Adjustable Rate''), is involved in the proposed 
transactions. Evergreen Select Equity Trust has twelve series. Five of 
these series, Evergreen Select Large Cap Blend Fund (``Large Cap 
Blend''), Evergreen Select Small Company Value Fund (``Small Company 
Value'' ), Evergreen Select Social Principles Fund (``Social 
Principles''), Evergreen Select Special Equity Fund (``Special 
Equity''), and Evergreen Select Diversified Value Fund (``Diversified 
Value''), are involved in the proposed transactions.
    2. Large Cap Blend, Small Company Value, Social Principles, 
Diversified Value, Equity Income, Capital Balanced, High Income, and 
Capital Preservation and Income are the ``Acquired Series.'' Stock 
Selector, Small Cap Value, Special Equity, Income and Growth, 
Foundation, High Yield Bond, and Adjustable Rate are the ``Acquiring 
Series.'' Collectively, the Acquired Series and Acquiring Series are 
referred to as the ``Series.''\1\
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    \1\ Each Acquired Series and its corresponding Acquiring Series 
are as follows: Large Cap Blend and Stock Selector; Small Company 
Value and Small Cap Value; Social Principles and Special Equity; 
Diversified Value and Stock Selector; Equity Income and Income and 
Growth; Capital Balanced and Foundation; High Income and High Yield 
Bond; and Capital Preservation and Income and Adjustable Rate.
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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. First 
Capital Group (``FCG''), a division of FUNB, is the investment adviser 
to Large Cap Blend, Social Principles, and Diversified Value. Evergreen 
Asset Management Corp. (``EAMC''), an indirect wholly-owned subsidiary 
of FUNB, is the investment adviser to Small Company Value, Small Cap 
Value, Income and Growth, and Foundation. Evergreen Investment 
Management Company (``EIMC''), also an indirect wholly-owned subsidiary 
of FUNB, is the investment adviser to Equity Income, High Yield Bond, 
Capital Preservation and Income, and Adjustable Rate. Meridian 
Investment Company (``Meridian''), also an indirect wholly owned 
subsidiary of FUNB, is the investment adviser to Stock Selector and 
Special Equity. Mentor Investment Advisors, LLC (``Mentor''), also an 
indirect wholly owned subsidiary of FUNB, is the investment adviser to 
Capital Balanced and High Income. EAMC, EIMC, Meridian, and Mentor are 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). FCG, as a division of FUNB, is not required to register as an 
investment adviser 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 some 
cases, 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 approximately 100% of Large Cap Blend, 84% of 
Stock Selector, 93% of Small Company Value, 16% of Small Cap Value, 
100% of Social Principles, 61% of Special Equity, 51% of Diversified 
Value, and 6% of Adjustable Rate. Although the proposed transactions 
between Equity Income and Income and Growth, Capital Balanced and 
Foundation, and High Income and High Yield Bond do not currently 
require exemptive relief, applicants are requesting relief in the 
event that FUNB's ownership as fiduciary increases to 5% or more of 
either of the respective merging Series' assets prior to the 
proposed transactions. If FUNB does not acquire such ownership, the 
respective merging Series will not rely on the requested relief.
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    On March 23-24, 2000, the boards of trustees of the Evergreen Funds 
(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 24, 2000, the 
Acquiring Series will acquire all of 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, calculated as of the close 
of business on

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the business day next preceding the date on which the fund 
reorganization will occur (the ``Valuation Date''). The net asset value 
of each Series will be determined in the manner set forth in the 
Series' current prospectus and statement of additional information. On 
or as soon as is reasonably practicable after the Closing Date, each 
Acquired Series will distribute its full and fractional shares of the 
Acquiring Series pro rata to its shareholders of record, determined as 
of the close of business on the Valuation Date (the 
``Reorganizations''). After the distribution of the Acquiring Series' 
shares and the winding up of its affairs, each Acquired Series will be 
terminated.
    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 its 
corresponding Acquiring Series are also similar, but in some cases 
involve differences that reflect the differences in the general 
investment strategies utilized by the Series. The respective Acquired 
Series and Acquiring Series offer identical classes of shares, and 
after the Reorganizations, the shareholders of the Acquired Series and 
the Acquiring Series will hold shares with the same distribution-
related fees as the shares they currently hold. Shareholders of the 
Acquired Series will not incur any sales charges in connection with the 
Reorganizations. For purposes of calculating contingent deferred sales 
charges, shareholders of the Acquired Series will be deemed to have 
held corresponding shares of the Acquiring Series since the date the 
shareholders initially purchased the shares of the Acquired Series. 
FUNB will be responsible for the fees and expenses related to the 
Reorganizations other than each Acquiring Series' federal and state 
registration fees.
    7. The Board of each Series, including a majority of the 
Independent Trustees, determined that the Reorganization is in the best 
interests of each Series and its shareholders, and that the interests 
of the shareholders will 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 Plans; (b) the 
expense ratios, fees, and expenses of the Acquired Series and Acquiring 
Series, (c) the fact that FUNB will bear the expenses incurred in 
connection with the Reorganizations, and (d) the tax-fee 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 Series and approved by the shareholders of each 
of the Acquired Series; (b) definitive proxy solicitation materials 
shall have been filed with the Commission and distributed to 
shareholders of the Acquired Series; (c) the 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 
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. Proxy solicitation materials have been filed with the Commission 
and were mailed to shareholders of the Acquired Series on or about May 
26, 2000. A special meeting of shareholders is scheduled for July 14, 
2000.

Applicants' 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 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 person; and (d) if the other person 
is an investment company, any investment adviser of that company. 
Applicants state that the Acquired Series and Acquiring 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 state 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 reasons 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, common directors, and/or common officers.
    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 each Board determined that the Reorganization is 
in the best interests of each Series and its shareholders, and that the 
interests of existing shareholders will not be diluted as a result of 
the Reorganizations. 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. 00-16744 Filed 6-30-00; 8:45 am]
BILLING CODE 8010-01-M