[Federal Register Volume 59, Number 234 (Wednesday, December 7, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-30058]
[[Page Unknown]]
[Federal Register: December 7, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-20750; 812-9258]
The Evergreen Fund, et al.; Notice of Application
December 1, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Company Act of 1940 (the ``Act'').
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APPLICANTS: The Evergreen Fund, The Evergreen Total Return Fund, The
Evergreen Limited Market Fund, Inc., The Evergreen Growth and Income
Fund, The Evergreen Money Market Trust, The Evergreen American
Retirement Trust, The Evergreen Municipal Trust, The Evergreen Real
Estate Equity Trust, The Evergreen Fixed Income Trust, The Evergreen
Foundation Trust (the ``Evergreen Funds''), and Evergreen Asset
Management Corp. (the ``Adviser'').
RELEVANT ACT SECTIONS: Order requested under section 6(c) of the Act to
grant an exemption from sections 2(a)(32), 2(a)(35), 18(f), 18(g),
18(i), 22(c), and 22(d) of the Act, and rule 22c-1 thereunder.
SUMMARY OF APPLICATION: Applicants request an order to permit the
Evergreen Funds to issue multiple classes of shares representing
interests in the same portfolio of securities, and to assess and, under
certain circumstances, waive or reduce a contingent deferred sales
charge (``CDSC'') upon certain redemptions of shares.
FILING DATES: The application was filed on September 28, 1994 and
amended on November 1, 1994 and November 23, 1994.
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 December 23,
1994, 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: 2500 Westchester Avenue, Purchase, New York 10577.
FOR FURTHER INFORMATION CONTACT: Sarah A. Buescher, Law Clerk, at (202)
942-0573, or Robert A. Robertson, 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 from
the SEC's Public Reference Branch.
Applicants' Representations
1. The Evergreen Fund, The Evergreen Total Return Fund, The
Evergreen Growth and Income Fund, The Evergreen Money Market Trust, The
Evergreen American Retirement Trust, The Evergreen Municipal Trust, The
Evergreen Real Estate Equity Trust, The Evergreen Fixed Income Trust,
and The Evergreen Foundation Trust are Massachusetts business trusts
and are registered open-end management investment companies. The
Evergreen Limited Market Fund, Inc. is a Maryland corporation and is a
registered open-end management investment company. The Evergreen
American Retirement Trust, The Evergreen Municipal Trust, The Evergreen
Real Estate Equity Trust, The Evergreen Fixed Income Trust, and The
Evergreen Foundation Trust (collectively, the ``Trusts'') currently
offer their shares in separate series.
2. The Adviser serves as investment adviser to the Evergreen Funds
and is a wholly-owned subsidiary of First Union National Bank of North
Carolina. The distributor of the Funds is Evergreen Funds Distributor,
Inc., a subsidiary of Furman Selz Incorporated. Applicants request
relief on behalf of applicants and any existing\1\ or future registered
open-end management investment company or series thereof representing a
separate investment portfolio for which the Adviser, or an entity
controlled by or under common control with the Adviser, serves now or
in the future as investment adviser (collectively, the ``Funds'').
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\1\The Evergreen Funds are the only investment companies
existing on the date of this application which currently intend to
rely on the requested order. First Union National Bank of North
Carolina, the Adviser's parent, acts as investment adviser to First
Union Funds. While First Union Funds do not currently intend to rely
on the order requested in this application, they may do so in the
future, subject to the representations and conditions in the
application.
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3. The Funds currently offer one class of shares (the ``Existing
Class''). The Existing Class is not subject to any sales or redemption
charges and is not subject to any charges pursuant to a plan adopted in
accordance with rule 12b-1 under the Act. Shares of the Existing Class
have been primarily sold to individuals and institutional investors
through referrals and general media advertisements. Applicants
currently propose to establish a multiple class distribution system
that would authorize each Fund to sell four classes of its shares,
Class Y, Class A, Class B, and Class C. Applicants also propose that
the Funds be able to create additional classes of shares in the future.
4. Applicants propose that the current shares of each Existing
Class be redesignated as Class Y shares. Class Y shares will not be
subject to any sales charges or fees pursuant to a rule 12b-1
distribution plan or shareholder services plan. Class Y shares will be
sold solely to (a) all shareholders of record in one or more of the
Evergreen Funds prior to the commencement of the multi-class
distribution, (b) institutional investors, and (c) investment advisory
clients of the Adviser or affiliates of the Adviser.
5. Class A, Class B, and Class C shares will be offered primarily
to individual investors. Class A shares will be offered with a front-
end sales load and will be subject to a distribution fee under a rule
12b-1 distribution plan. Class B shares will be offered without a
front-end sales load, but will be subject to a CDSC and distribution
fees under a rule 12b-1 distribution plan. After a specified period,
Class B shares will convert to Class A shares. Class C shares will be
offered without a front-end sales load and also will be subject to a
CDSC and distribution fees under a rule 12b-1 distribution plan. The
Class C CDSC will only apply for the first year after purchase and
Class C shares will have no conversion privileges.
6. Each Fund may also enter into servicing agreements
(``Shareholder Servicing Agreements'') with broker-dealers, banks, and
financial institutions with respect to each newly created class of
shares to provide various shareholder record keeping, administrative,
personal, and support services to their customers. While it is
currently anticipated that payments made under Shareholder Servicing
Agreements will be pursuant to a rule 12b-1 plan, a Fund may in the
future make such payments pursuant to a non-rule 12b-1 shareholder
servicing plan in the event such a plan is duly adopted by the Fund in
accordance with condition 5 of this application. The services provided
under a Shareholder Servicing Agreement will augment (and not be
duplicative of) the services provided by the Adviser or the Fund's
custodian.
7. Each class of shares would be identical in all respects, except
for: (a) The impact of expenses described in condition 1 below that are
attributable only to certain classes (``Class Expenses''); (b) the fact
that the classes will vote separately with respect to a Fund's rule
12b-1 distribution plan, and if applicable, any shareholder servicing
plan; (c) the different exchange privileges of each class of shares;
(d) any conversion feature applicable to a class of shares; and (e)
different class designations.
8. All classes of shares of a Fund will bear Fund or Trust expenses
on the basis of the relative net asset value of the classes. Expenses
specific to a class will be allocated to that class. A Fund's
investment adviser may choose to reimburse or waive Class Expenses of
certain classes on a voluntary, temporary basis. The amount of Class
Expenses waived or reimbursed by the Adviser may vary from class to
class. Class Expenses are by their nature specific to a given class and
obviously expected to vary from one class to another. Applicants thus
believe that it is acceptable and consistent with shareholder
expectations to reimburse or waive Class Expenses at different levels
for different classes of the same Fund.
9. In addition, the Adviser may voluntarily waive or reimburse
Trust expenses and/or Fund expenses (with or without a waiver or
reimbursement of Class Expenses) but only if the same proportionate
amount of Trust expenses and/or Fund expenses are waived or reimbursed
for each class. Thus, any Trust expenses that are waived or reimbursed
would be credited to each class of a Fund based on the relative net
assets of the classes. Similarly, any Fund expenses that are waived or
reimbursed would be credited to each class of that Fund according to
the relative net assets of the classes. Trust expenses and Fund
expenses apply equally to all classes of a given Fund. Accordingly, it
may not be appropriate to waive or reimburse Trust expenses or Fund
expenses at different levels for different classes of the same Fund.
10. Because Class Expenses and payments made under a rule 12b-1
distribution plan or non-rule 12b-1 shareholder services plan may
differ for each class, the per share net income of, and dividends on,
each class may differ from the net income of, and dividends on, the
other classes of shares of a Fund. In addition, except for Funds that
seek to maintain a stable net asset value and declare dividends daily,
the net asset value attributable to each class of shares of a Fund may
differ.
11. Shares of a class of one Fund will be exchangeable for shares
of the same class of another Fund. Any exchanges will comply with the
provisions of rule 11a-3 under the Act.
12. Shares of certain classes, including Class B and Class C, may
be subject to the imposition of a CDSC if they are redeemed within a
prescribed time after their purchase (the ``CDSC Period''). The amount
of the CDSC will be calculated as a specified percentage of the lesser
of the net asset value at the time of purchase or at the time of
redemption.
13. No CDSC will be imposed on amounts representing increases in
the value of shares due to capital appreciation, redemptions of shares
acquired through reinvestment of dividends or capital gain
distributions, or redemptions of shares held by longer than the CDSC
Period. In determining whether the CDSC is payable, it will be assumed
that shares not subject to the CDSC are redeemed first and that other
shares are then redeemed in the order purchased. This will result in a
charge, if any, being imposed at the lowest possible rate.
14. If a shareholder pays a CDSC upon redemption and a reinvestment
occurs within a specified time period stated in the prospectus in
effect at the time the shares are sold, the shareholder may receive a
credit, paid by the distributor, for any CDSC paid.
15. Applicants request the ability to waive or reduce the CDSC on
certain redemptions. Any waiver of the CDSC will comply with the
requirements set forth in subparagraphs (a) through (d) of rule 22d-1
under the Act.
16. Shares of some classes subject to a CDSC (``Convertible CDSC
Shares'') retained by an investor past a prescribed period following
the purchase of Convertible CDSC Shares will convert into shares of
other classes not subject to a CDSC (``Non-CDSC Shares''). Shares
acquired through the reinvestment of dividends and other distributions
paid with respect to Convertible CDSC Shares also will be Convertible
CDSC shares, but will convert to Non-CDSC Shares on the earlier of a
prescribed period following the date of such reinvestment or the
conversion date of the most recently purchased Convertible CDSC Shares
not acquired through the reinvestment of dividends or other
distributions.
17. The sum of any front-end sales charge, asset-based sales
charge, and CDSC will not exceed the maximum sales charge as provided
in Article III, Section 26(d) of the Rules of Fair Practice of the
National Association of Securities Dealers Inc. (``NASD'').
Applicant's Legal Analysis
1. Applicants request an exemption under section 6(c) of the Act
from sections 18(f)(1), 18(g), and 18(i) of the Act to the extent that
the proposed issuance and sale of shares might be deemed to result in
the issuance of a ``senior security'' within the meaning of sections
18(g) of the Act and therefore might be deemed to be prohibited by
section 18(f)(1) and to violate the equal voting provisions of section
18(i) of the Act. Applicants believe that the proposed allocation of
expenses and the voting rights in the manner described above is
equitable and would not discriminate against any group of shareholders.
2. Applicants also request an exemption under section 6(c) from
sections 2(a)(32), 2(a)(35), 22(c), and 22(d) of the Act and rule 22c-1
thereunder, to assess and, under certain circumstances, waive or reduce
a CDSC with respect to certain redemptions of shares. Applicants
believe that this request would allow shareholders the option of having
more investment dollars working for them from the time of their share
purchases than if they invested in a class with a front-end sales load.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. Each class of shares will represent interests in the same
portfolio of investments of a Fund and will be identical in all
respects, except as set forth below. The only differences between the
classes of shares of a Fund will relate solely to: (a) The impact of
the Class Expenses specifically attributable to the particular class
which will be limited to: fees payable pursuant to a rule 12b-1
distribution plan and/or shareholder servicing plan, if applicable;
transfer agent fees as identified by the transfer agent as being
attributable to a specific class; fees and expenses of a Fund's
administrator that are identified and approved by the trustees or
directors as being attributable to a specific class of shares; printing
and postage expenses related to preparing and distributing materials
such as shareholder reports, prospectuses, and proxies to current
shareholders; ``blue sky'' registration fees incurred by a class of
shares; SEC registration fees incurred with respect to a class; the
expense of administrative personnel and services as required to support
the shareholders of a specific class; litigation or other legal or
audit expenses relating solely to one class of shares; trustees' or
directors' fees incurred as a result of issues relating to one class of
shares; and any other incremental expenses subsequently identified that
should be properly allocated to one class and which are approved by the
SEC pursuant to an amended order; (b) the fact that the classes will
vote separately with respect to a Fund's distribution plan and/or
shareholder servicing plan, if applicable, except as provided in
condition 17 below; (c) the different exchange privileges of each class
of shares; (d) the conversion feature applicable only to Class B
shares; and (e) the different class designation of each class of
shares.
2. The trustees or directors of a Fund, including a majority of the
disinterested trustees or directors, will approve the multi-class
distribution system. The minutes of the meetings of the trustees or
directors of a Fund regarding their deliberations with respect to the
approvals necessary to implement the multi-class distribution system
will reflect in detail the reasons for their determination that the
proposed multi-class distribution system is in the best interests of
both a Fund and its shareholders.
3. The initial determination of the class expenses that will be
allocated to a particular class and any subsequent changes thereto will
be reviewed and approved by a vote of the trustees or directors of each
Fund, including a majority of the trustees or directors who are not
interested persons of a Fund. Any person authorized to direct the
allocation and disposition of monies paid or payable by a Fund to meet
class expenses shall provide to the board of trustees or directors, and
the trustees or directors shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made.
4. On an ongoing basis, the trustees or directors of a Fund,
pursuant to their fiduciary responsibilities under the Act and
otherwise, will monitor the Fund for the existence of any material
conflicts between the interests of the classes of shares. The trustees
or directors, including a majority of the disinterested trustees or
directors, shall take such action as is reasonably necessary to
eliminate any such conflicts that may develop. The adviser or
distributor will be responsible for reporting any potential or existing
conflicts to the trustees or directors. If a conflict arises, the
adviser or distributor at its own cost will remedy such conflict by
taking such steps as are necessary, up to an including establishing a
new registered management investment company.
5. Any shareholder services plan that may in the future be adopted
with respect to a Fund will be adopted and operated in accordance with
the procedures set forth in rule 12b-1(b) through (f) as if the
expenditures made thereunder were subject to rule 12b-1, except that
shareholders will not enjoy the voting rights specified in rule 12b-1.
6. The trustees or directors of a Fund will receive quarterly and
annual statements concerning distribution and shareholder servicing
expenditures complying with paragraph (b)(3)(ii) of rule 12b-1, as it
may be amended from time to time. In the statements, only expenditures
properly attributable to the sale or servicing of a particular class of
shares will be used to justify any distribution or servicing fee
charged to that class. Expenditures not related to the sale or
servicing of a particular class will not be presented to the trustees
or directors to justify any distribution or servicing fee attributable
to that class. The statements, including the allocations upon which
they are based, will be subject to the review and approval of the
disinterested trustees or directors in the exercise of their fiduciary
duties.
7. Dividends paid by a Fund with respect to each class of its
shares, to the extent any dividends are paid, will be calculated in the
same manner, at the same time, on the same day, and will be in the same
amount, except that distribution and/or shareholder service payments
relating to each respective class of shares will be borne exclusively
by that class and any incremental transfer agency costs and other Class
Expenses relating to a specific class of shares will be borne
exclusively by that class.
8. The methodology and procedures for calculating the net asset
value, dividends, and distributions of the various classes and the
proper allocation of expenses between the classes has been reviewed by
an expert (the ``Expert'') who has rendered a report to the applicants,
which has been provided to the staff of the SEC, that such methodology
and procedures are adequate to ensure that such calculations and
allocations will be made in an appropriate manner. On an ongoing basis,
the Expert, or an appropriate substitute Expert, will monitor the
manner in which the calculations and allocations are being made and,
based upon such review, will render at least annually a report to the
Fund that the calculations and allocations are being made properly. The
reports of the Expert shall be filed as part of the periodic reports
filed with the SEC pursuant to sections 30(a) and 30(b)(1) of the Act.
The work papers of the Expert with respect to such reports, following
request by the Fund (which the Fund agrees to provide), will be
available for inspection by the SEC staff upon the written request to
the Fund for such work papers by a senior member of the Division of
Investment Management, limited to the Director, an Associate Director,
the Chief Accountant, the Chief Financial Analyst, an Assistant
Director, and any Regional Administrators or Associate and Assistant
Administrators. The initial report of the Expert is a ``report on
policies and procedures placed in operation,'' as defined and described
in Statement of Auditing Standards (``SAS'') No. 70 of the American
Institute of Certified Public Accountants (``AICPA''), and the ongoing
reports will each be a ``report on policies and procedures placed in
operation and tests of operating effectiveness,'' as defined and
described in SAS No. 70 of the AICPA, as it may be amended from time to
time, or in similar accounting standards as may be adopted by the AICPA
from time to time.
9. Applicants have adequate facilities in place to ensure
implementation of the methodology and procedures for calculating the
net asset value, dividends, and distributions of the classes of shares
and the proper allocation of expenses between the classes of shares,
and this representation has been concurred with by the Expert in the
initial report referred to in condition 8 above and will be concurred
with by the Expert, or an appropriate substitute Expert, on an ongoing
basis at least annually in the ongoing reports referred to in condition
8 above. Applicants will take immediate corrective measures if this
representation is not concurred in by the Expert or appropriate
substitute Expert.
10. The prospectus will contain a statement to the effect that a
salesperson and any other person entitled to receive compensation for
selling or servicing shares in a Fund may receive different
compensation with respect to one particular class of shares over
another in the same Fund.
11. Applicants will cause the distributor, and any successor to the
distributor, to adopt compliance standards which govern the
circumstances under which each class of shares may appropriately be
sold to particular investors. Applicants will require all persons
selling shares of a Fund to agree to conform to such standards.
12. The conditions pursuant to which the exemptive order is granted
and the duties and responsibilities of the trustees or directors of
each Fund with respect to the multi-class distribution system will be
set forth in guidelines which will be furnished to the trustees or
directors.
13. Each Fund will disclose the respective expenses, performance
data, distribution arrangements, services, fees, sales loads, deferred
sales loads, and exchange privileges applicable to each class of shares
in every prospectus, regardless of whether all classes of shares are
offered through each prospectus. The Fund will disclose the respective
expenses and performance data applicable to all classes of shares in
every shareholder report. The shareholder reports will contain, in the
statement of assets and liabilities and statement of operations,
information related to each Fund as a whole generally and not on a per
class basis. Each Fund's per share data, however, will be prepared on a
per class basis with respect to all classes of shares of such Fund. To
the extent any advertisement or sales literature describes the expenses
or performance data applicable to any class of shares, it will also
disclose the respective expenses and/or performance data applicable to
all classes of shares. The information provided by applicants for
publication in any newspaper or similar listing of a Fund's net asset
value and public offering price will present each class of shares
separately.
14. The applicants acknowledge that the grant of the exemptive
order requested by this application will not imply SEC approval,
authorization, or acquiescence in any particular level of payments that
the Fund may make pursuant to its rule 12b-1 distribution plan or any
shareholder services plan a Fund may adopt in the future in reliance on
the exemptive order.
15. Applicants will comply with the provisions of proposed rule 6c-
10 under the Act, Investment Company Act Release No. 16619 (Nov. 2,
1988), as such rule is currently proposed and as it may be reproposed,
adopted, or amended.
16. Any class of shares with a conversion feature (``Purchase
Class'') will convert into another class of shares (``Target Class'')
on the basis of the relative net asset values of the two classes,
without the imposition of any sales load, fee, or other charge. After
conversion, the converted shares will be subject to an asset-based
sales charge and/or service fee (as those terms are defined in Article
III, Section 26 of the NASD's Rules of Fair Practice), if any, that in
the aggregate are lower than the asset-based sales charge and service
fee to which they were subject prior to the conversion.
17. If a Fund implements any amendment to its rule 12b-1
distribution plans (or adopts or implements any amendment to a non-rule
12b-1 shareholder services plan) that would increase materially the
amount of asset-based charges that may be borne by Target Class shares
for distribution or shareholder services, existing Purchase Class
shares will stop converting into Target Class shares unless the
Purchase Class shareholders, voting separately as a class, approve the
proposal. The directors or trustees shall take such action as is
necessary to ensure that existing Purchase Class shares are exchanged
or converted into a new class of shares (``New Target Class''),
identical in all material respects to the Target Class as it existed
prior to implementation of the proposal, no later than such shares
previously were scheduled to convert into Target Class shares. If
deemed advisable by the directors or trustees to implement the
foregoing, such action may include the exchange of all existing
Purchase Class shares for a new class (``New Purchase Class''),
identical to existing Purchase Class shares in all material respects
except that New Purchase Class shares will convert into New Target
Class shares. New Target Class or New Purchase Class shares (as well as
other future classes formed for other purposes) may be formed without
further exemptive relief. Exchanges or conversions described in this
condition shall be effected in a manner that the directors or trustees
reasonably believe will not be subject to federal taxation. In
accordance with condition 4, any additional cost associated with the
creation, exchange, or conversion of New Target Class or New Purchase
Class shares shall be borne solely by the adviser or distributor.
Purchase Class shares sold after the implementation of the proposal
providing for the payment of higher distribution and shareholder
servicing fees with respect to Target Class shares may convert to
Target Class shares subject to the higher maximum payment, provided
that the material features of the proposal and the level of the higher
distribution and shareholder servicing fees under the amended Target
Class Plan and the relationship of such plan to the Purchase Class
shares are disclosed in an effective registration statement.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-30058 Filed 12-6-94; 8:45 am]
BILLING CODE 8010-01-M
