[Federal Register Volume 67, Number 94 (Wednesday, May 15, 2002)]
[Notices]
[Pages 34739-34742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-12113]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25573; 812-12738]


The Wachovia Funds, et al.; Notice of Application

May 9, 2002.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 17(b) of the Investment 
Company Act of 1940 (``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 certain identified 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: The Wachovia Funds, The Wachovia Municipal Funds, The 
Wachovia Variable Insurance Funds (collectively, the ``Wachovia 
Trusts''); Evergreen Equity Trust, Evergreen Select Equity Trust, 
Evergreen Fixed Income Trust, Evergreen Select Fixed Income Trust, 
Evergreen International Trust, Evergreen Select Money Market Trust, 
Evergreen Municipal Trust, and Evergreen Variable Annuity Trust 
(collectively, the ``Evergreen Trusts''); and Wachovia Bank National 
Association (``Wachovia Bank'').

[[Page 34740]]


Filing Dates: The application was filed on December 27, 2001 and 
amended on May 9, 2002.

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 June 3, 2002, 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 Commission's 
Secretary.

ADDRESSES: Secretary, Commission, 450 Fifth Street, NW, Washington, DC 
20549-0609. Wachovia Trusts, 1001 Liberty Avenue, Pittsburgh, PA 15222; 
Wachovia Bank, 201 S. College Street, Charlotte, NC 28288; and 
Evergreen Trusts, 200 Berkeley Street, Boston, MA 02116-9000.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel, at 
(202) 942-0611, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549-0102 (tel. 202-942-8090).

Applicants' Representations

    1. The Wachovia Trusts, each a Massachusetts business trust, are 
open-end management investment companies registered under the Act. The 
Wachovia Trusts together have a total of 27 series, of which 22 series 
are involved in the proposed transactions (the ``Wachovia Acquired 
Funds''). The Wachovia Funds is presently comprised of 20 series, of 
which 15 series are involved in the proposed transactions. The Wachovia 
Municipal Funds is presently comprised of 4 series, all of which are 
involved in the proposed transactions. The Wachovia Variable Insurance 
Funds is presently comprised of 3 series, all of which are involved in 
the proposed transactions. Shares of the series of The Wachovia 
Variable Insurance Funds are sold only to separate accounts of 
insurance companies to serve as the investment medium for variable life 
insurance policies and variable annuity contracts issued by the 
insurance companies, and to qualified pension and retirement plans.
    2. The Evergreen Trusts, each a Delaware business trust, are open-
end management investment companies registered under the Act. The 
Evergreen Trusts together have a total of 92 series, of which 27 series 
are involved in the proposed transactions (the ``Evergreen Funds''). 
Evergreen Equity Trust is presently comprised of 23 series, of which 5 
series are involved in the proposed transactions. Evergreen Select 
Equity Trust is presently comprised of 8 series, of which 4 series are 
involved in the proposed transactions. Evergreen Fixed Income Trust is 
presently comprised of 7 series, of which 4 series are involved in the 
proposed transactions. Evergreen Select Fixed Income Trust is presently 
comprised of 9 series, of which 3 series are involved in the proposed 
transactions. Evergreen International Trust is presently comprised of 6 
series, of which 3 series are involved in the proposed transactions. 
Evergreen Select Money Market Trust is presently comprised of 10 
series, of which one series is involved in the proposed transactions. 
Evergreen Municipal Trust is presently comprised of 14 series, of which 
4 series are involved in the proposed transactions. Evergreen Variable 
Annuity Trust is presently comprised of 15 series, of which 3 series 
are involved in the proposed transactions. Shares of the series of 
Evergreen Variable Annuity Trust are sold only to separate accounts 
funding variable annuity contracts and variable life insurance policies 
issued by life insurance companies, and to qualified pension and 
retirement plans. Certain Evergreen Funds are the ``Acquiring Funds'' 
and certain other Evergreen Funds are the ``Evergreen Acquired Funds,'' 
and together with the Wachovia Acquired Funds, are the ``Acquired 
Funds.'' The Acquired Funds and the Acquiring Funds are collectively 
referred to as the ``Funds'' and individually as a ``Fund.''\1\
---------------------------------------------------------------------------

    \1\ The Acquired Funds and the corresponding Acquiring Funds 
are: (i) Wachovia Balanced Fund and Evergreen Balanced Fund; (ii) 
Wachovia Quantitative Equity Fund and Evergreen Stock Selector Fund; 
(iii) Wachovia Special Values Fund and Evergreen Special Values 
Fund; (iv) Wachovia Blue Chip Value Fund and Evergreen Value Fund; 
(v) Wachovia New Horizons Fund and Evergreen Omega Fund; (vi) 
Wachovia Equity Fund, Wachovia Growth & Income Fund, Wachovia 
Personal Equity Fund and Evergreen Core Equity Fund; (vii) Wachovia 
Equity Index Fund and Evergreen Equity Index Fund; (viii) Wachovia 
Fixed Income Fund, Evergreen Intermediate Term Bond Fund, Evergreen 
Income Plus Fund and Evergreen Core Bond Fund; (ix) Wachovia Short-
Term Fixed Income Fund, Wachovia Intermediate Fixed Income Fund, 
Evergreen Short duration Income Fund and Evergreen Fixed Income 
Fund; (x) Wachovia Emerging Markets Fund, Evergreen Latin America 
Fund and Evergreen Emerging Markets Growth Fund; (xi) Wachovia 
International Equity Fund and Evergreen International Growth Fund; 
(xii) Wachovia Prime Cash Management Fund and Evergreen Prime Cash 
Management Fund; (xiii) Wachovia Georgia Municipal Bond Fund and 
Evergreen Georgia Municipal Bond Fund; (xiv) Wachovia North Carolina 
Municipal Bond Fund and Evergreen North Carolina Municipal Bond 
Fund; (xv) Wachovia South Carolina Municipal Bond Fund and Evergreen 
South Carolina Municipal Bond Fund; (xvi) Wachovia Virginia 
Municipal Bond Fund and Evergreen Virginia Municipal Bond Fund; 
(xvii) Wachovia Equity Fund II and Evergreen VA Fund; (xviii) 
Wachovia Special Values Fund II and Evergreen VA Small Cap Value 
Fund; (xix) Wachovia Balanced Fund II and Evergreen VA Foundation 
Fund; (xx) Evergreen Quality Income Fund and Evergreen Diversified 
Bond Fund; and (xxi) Evergreen Secular Growth Fund and Evergreen 
Select Strategic Growth Fund.
---------------------------------------------------------------------------

    3. Evergreen Investment Management Company, LLC (``EIMC''), an 
indirect wholly owned subsidiary of Wachovia Corporation, is registered 
as an investment adviser under the Investment Advisers Act of 1940 (the 
``Advisers Act''). EIMC serves as investment adviser to the Evergreen 
Funds. The Wachovia Trusts, on behalf of their series which are 
Wachovia Acquired Funds, have each entered into an interim advisory 
agreement with EIMC dated as of January 1, 2002, in reliance on rule 
15a-4 under the Act.
    4. Wachovia Bank, a national banking association, is a wholly owned 
subsidiary of Wachovia Corporation. Wachovia Bank, as fiduciary for its 
customers, owns of record or beneficially or both 5% or more (and in 
some cases, 25% or more) of the outstanding voting securities of 
certain of the Funds.\2\ All of these shares are held by Wachovia Bank 
in a fiduciary capacity and Wachovia Bank does not have an economic 
interest in such shares.
---------------------------------------------------------------------------

    \2\ Although the proposed transactions between certain of the 
Funds do not currently require exemptive relief, applicants are 
requesting relief in the event that Wachovia Bank's ownership as 
fiduciary increases to 5% or more of the respective Funds' assets 
prior to the proposed transactions. If Wachovia Bank does not 
acquire as record owner such ownership, the respective Funds will 
not rely on the requested relief.
---------------------------------------------------------------------------

    5. On December 6, 2001 and January 15, 2002, and December 13-14, 
2001, respectively, the board of trustees of each Wachovia Trust (the 
``Wachovia Board'') and the board of trustees of each Evergreen Trust 
(the ``Evergreen Board,'' and together with the Wachovia Board, the 
``Boards''), including a majority of the trustees of each Board who are 
not ``interested persons'' within the meaning of section 2(a)(19) of 
the Act (the ``Independent Trustees''), considered and approved each 
applicable Fund Reorganization (as

[[Page 34741]]

defined below), including each applicable agreement and plan of 
reorganization (each, a ``Plan'' and collectively, the ``Plans''). 
Pursuant to the Plans, the Acquiring Funds will acquire all of the 
assets and assume the identified liabilities of the corresponding 
Acquired Funds, in exchange for shares of designated classes of the 
respective Acquiring Funds (the ``Fund Reorganizations''). The shares 
of each Acquiring Fund exchanged will have an aggregate net asset value 
equal to the aggregate net asset value of the corresponding Acquired 
Fund's shares determined as of the close of business on the business 
day immediately prior to the date on which the Fund Reorganizations 
will occur (the ``Valuation Date''). The net asset value of the assets 
of the Funds will be determined in the manner set forth in the 
Acquiring Funds' then-current prospectuses and statements of additional 
information.\3\ The Fund Reorganizations are expected to occur on or 
about June 7, 2002 for the fixed income, money market, and variable 
annuity Funds and June 14, 2002 for the equity and international Funds 
(the ``Closing Date''). On or as soon as is conveniently practicable 
after the Closing Date, each Acquired Fund will distribute its full and 
fractional shares of the applicable classes of the Acquiring Fund pro 
rata to its shareholders of record, determined as of the Valuation 
Date. After the distribution of the Acquiring Fund's shares and the 
winding up of the Acquired Fund's business, each Acquired Fund will be 
liquidated.
---------------------------------------------------------------------------

    \3\ In the Fund Reorganizations, each Acquired Fund and the 
corresponding Acquiring Fund will use all commercially reasonable 
efforts to resolve any material differences between the prices of 
portfolio securities determined in accordance with the pricing 
policies and procedures of its corresponding Acquiring Fund and 
those determined in accordance with the pricing policies and 
procedures of its corresponding Acquired Fund, and where a pricing 
difference results from a difference in pricing methodology, the 
parties will eliminate such difference by using the corresponding 
Acquiring Fund's methodology in valuing the Acquired Fund's assets.
---------------------------------------------------------------------------

    6. Applicants state that the investment objectives and strategies 
of each Acquired Fund are identical or substantially similar to its 
corresponding Acquiring Fund. Shareholders of Class A, Class B, Class 
C, Class Y, and the Institutional Class of the Wachovia Acquired Funds, 
and shareholders of Class A, Class B, Class C, Class I, and Class IS of 
the Evergreen Acquired Funds, as applicable, will exchange their shares 
for Class A, Class B, Class C, Class I, and Class IS shares, 
respectively, of the corresponding Acquiring Funds (except that 
shareholders of Class A, Class B, and Class C of three Wachovia 
Acquired Funds will exchange their shares for Class IS shares of the 
corresponding Acquiring Fund). Shareholders of the Wachovia Variable 
Insurance Funds will exchange their one class of shares for shares of 
the corresponding series of Evergreen Variable Annuity Trust. 
Applicants represent that the rights and obligations of each class of 
shares of the Acquired Funds are generally similar to those of the 
corresponding class of shares of the respective Acquiring Funds into 
which they will be reorganized. Applicants also state that each class 
of shares of the Acquiring Fund has the same or substantially similar 
distribution-related fees, if any, as the shares of the respective 
class of the Acquired Fund held prior to the Fund Reorganizations. For 
the purposes of calculating deferred sales charges, shareholders of 
Class B or Class C shares of an Acquired Fund will be deemed to have 
held the corresponding class of shares of the Acquiring Fund since the 
date such shareholder initially purchased the shares of the Acquired 
Fund. No sales charge will be imposed in connection with the Fund 
Reorganizations. EIMC or an affiliate will pay the expenses of the Fund 
Reorganizations.
    7. The Boards, including a majority of the Independent Trustees, 
determined that participation in the Fund Reorganizations is in the 
best interests of each of the applicable Funds and its shareholders and 
determined that the interests of each Fund's existing shareholders will 
not be diluted as a result of the Fund Reorganizations. In approving 
the Fund Reorganizations, the Boards considered various factors, 
including, among others: (a) The investment objectives and policies of 
the Acquired Fund and the Acquiring Fund; (b) the terms and conditions 
of each Fund Reorganization; (c) the tax-free nature of the Fund 
Reorganizations; (d) the expense ratios, fees, and expenses of the 
Acquired Fund and the Acquiring Fund; and (e) the fact that the costs 
of the Fund Reorganizations will be borne by EIMC or an affiliate.
    8. The Plans are subject to a number of conditions precedent, 
including that: (a) The Plans shall have been approved by the Boards of 
each of the Funds and approved by the shareholders of each Acquired 
Fund; (b) the Funds shall have received an opinion of counsel that the 
Fund Reorganizations will be tax-free for each Fund and its 
shareholders; (c) registration statements on Form N-14 containing 
combined prospectus/proxy statements relating to the Acquiring Funds 
will have become effective with the Commission; and (d) applicants 
receive from the Commission an exemption from section 17(a) of the Act 
for the Fund Reorganizations. Each Plan may be terminated by the mutual 
agreement of the Acquiring Fund and the Acquired Fund, or by either 
party in the case of a breach of the Plan. Applicants agree not to make 
any material changes to the Plans that would affect the application 
without prior approval of the Commission.
    9. Registration statements on Form N-14 with respect to each Fund 
Reorganization containing a prospectus/proxy statement were filed with 
the Commission on February 4, 2002 through February 26, 2002, and 
became effective on March 6, 2002 through March 28, 2002. Definitive 
prospectus/proxy statement materials were mailed to shareholders of the 
Acquired Funds beginning on or about March 22, 2002. A special meeting 
of the shareholders of each Acquired Fund is scheduled to be held on or 
about May 13, 2002 (except for the special meeting of shareholders of 
The Wachovia Municipal Funds which was held on April 29, 2002).

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 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. Section 2(a)(9) of the Act defines ``control'' in part to mean 
the power to exercise a controlling influence over the management or 
policies of a company, and provides that any person who owns 
beneficially, either directly or through one or more controlled 
companies, more than 25% of a company's voting securities shall be 
presumed to control such company.
    3. 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

[[Page 34742]]

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.
    4. Applicants state that they may not rely on rule 17a-8 in 
connection with the Fund Reorganizations because the Funds may be 
deemed to be affiliated for reasons other than those set forth in the 
rule. Applicants state that Wachovia Bank, as fiduciary for its 
customers, owns of record 5% or more (and in some cases, 25% or more) 
of the outstanding voting securities of certain Wachovia Acquired 
Funds. Applicants also state that Wachovia Bank, as fiduciary for its 
customers, owns of record 5% or more (and in some cases, 25% or more) 
of the outstanding voting securities of certain Evergreen Acquired 
Funds and certain Acquiring Funds.
    As a result of these relationships, the Acquired Funds and the 
Acquiring Funds may be deemed to be affiliated persons of one another 
within the meaning of sections 2(a)(3)(A), (B) and (C) of the Act.
    5. Section 17(b) of the Act provides 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.
    6. Applicants request an order under section 17(b) of the Act 
exempting them from section 17(a) to the extent necessary to complete 
the Fund Reorganizations. Applicants submit that the Fund 
Reorganizations satisfy the standards of section 17(b) of the Act. 
Applicants state that the Wachovia Board and the Evergreen Board, 
including a majority of each Board's Independent Trustees, determined 
that participation in the Fund Reorganizations is in the best interests 
of each of the applicable Funds and its shareholders, and that the 
interests of existing shareholders of the applicable Funds will not be 
diluted as a result of the Fund Reorganizations. Applicants also note 
that the exchange of the Acquired Funds' assets for shares of the 
Acquiring Funds will be based on relative net asset value.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-12113 Filed 5-14-02; 8:45 am]
BILLING CODE 8010-01-P