[Federal Register Volume 63, Number 24 (Thursday, February 5, 1998)]
[Notices]
[Pages 5978-5979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2881]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-23013; 812-10902]
The Virtus Funds, et al.; Notice of Application
January 30, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under section 17(b) of the
Investment Company Act of 1940 (the ``Act'') from section 17(a) of the
Act.
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SUMMARY OF APPLICATION: Applicants seek an order to permit the
reorganization and consolidation of series of certain registered open-
end investment companies into certain series of another registered
open-end investment company.
APPLICANTS: Evergreen Municipal Trust, Evergreen Equity Trust,
Evergreen Fixed Income Trust, Evergreen International Trust, Evergreen
Money Market Trust (together, ``Evergreen Funds'' or ``Acquiring
Funds''), The Virtus Funds (``Virtus Funds''), and First Union National
Bank (the ``Bank'').
FILING DATES: The application was filed on December 19, 1997, and
amended on January 27, 1998. Applicants have agreed to file an
amendment to the application during the notice period, the substance of
which is included in this notice.
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 February 24,
1998, 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, N.W., Washington, D.C.
20549. Applicants: Bank, 201 S. College Street, Charlotte, North
Carolina 28288; Virtus Funds, Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779; and Evergreen Funds, 200 Berkeley Street,
Boston, Massachusetts 02116.
FOR FURTHER INFORMATION CONTACT: Joseph B. McDonald, Jr., Senior
Counsel, at (202) 942-0533, 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
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549 (tel. 202-942-8090).
Applicant's Representations
1. The Virtus Funds, a Massachusetts business trust consisting of
eight series is an open-end management investment company registered
under the Act. Virtus Capital Management, Inc. (``Virtus'') is
registered under the Investment Advisers Act of 1940 (``Advisers Act'')
and is the investment adviser for the Virtus Funds.
2. The Evergreen Funds are Delaware business trusts and each is an
open-end management investment company registered under the Act. The
Bank is a North Carolina corporation and a banking subsidiary of First
Union Corporation, a publicly held bank holding company. The Capital
Management Group, a division of the Bank, and two of its subsidiaries,
Evergreen Asset Management Corp. and Keystone Investment Management
Company, are the investment advisers to the Evergreen Funds. Evergreen
Asset Management Corp. and Keystone Investment Management Company are
each registered as investment advisers under the Advisers Act.
3. The Bank, as a fiduciary for its customers, controls, or holds
with power to vote, 5% or more of the outstanding voting securities of
the Virtus Funds. In addition, the Bank, as a fiduciary for its
customers, owns of record or controls, or holds with power to vote, 5%
or more of the outstanding voting securities of the Evergreen Funds.
4. On September 16 and 17, 1997, the board of each Evergreen Fund
and Virtus Fund (together, the ``Funds'') (''Board''), including a
majority of the disinterested directors/trustees, authorized plans of
reorganization pursuant to which a series of the Evergreen Funds will
acquire a corresponding series of the Virtus Funds with similar
investment objectives (``Plans'').
Pursuant to the terms of the Plans, the Virtus Funds have agreed to
sell all of their assets and certain stated liabilities to a
corresponding series of the Acquiring Funds in exchange for shares of
the Acquiring Fund (``Reorganization''). The number of Acquiring Fund
shares to be issued in exchange for each Virtus Fund share of each
class will be determined by dividing the net asset value of one
Acquiring Fund share of the appropriate corresponding class by the net
asset value of one Virtus Fund share of such class.
5. Holders of Investment Shares of the Virtus Funds will receive
Class A shares of the corresponding Evergreen Fund and holders of Trust
Shares will receive
[[Page 5979]]
Class Y shares of the corresponding Evergreen Fund. Each such class of
shares of the Evergreen Fund has the same distribution-related fees, if
any, as the shares of the class of Virtus Funds held prior to the
Reorganization and no initial sales charge will be imposed in
connection with Class A shares of the Evergreen Funds received by
Virtus Fund shareholders.
6. The investment objectives of each Virtus Fund and its
corresponding Acquiring Fund are similar. The investment restrictions
and limitations of each Virtus Fund and corresponding Acquiring Fund
are substantially similar, but in some cases involve differences that
reflect the differences in the general investment strategies utilized
by the Funds.
7. The Board of each Fund approved the Reorganization as in the
best interests of existing shareholders and determined that the
interests of existing shareholders will not be diluted as a result of
the Reorganization. The Bank will be responsible for the expenses
incurred in connection with the Reorganization.
8. The Board of each Fund considered a number of factors in
authorizing the Reorganization, including: (a) The terms and conditions
of the Reorganization; (b) whether the Reorganization would result in
the dilution of shareholders' interests; (c) expense ratios, fees and
expenses of the Funds participating in the Reorganization; (d) the
comparative performance records of the Acquiring Fund and Virtus Fund;
(e) compatibility of the Funds' investment objectives and policies; (f)
the investment experience, expertise and resources of the Funds'
advisers; (g) service features available to shareholders of the
respective Acquiring Fund and Virtus Fund; (h) the fact that the Bank
will bear the expenses incurred by the Funds in connection with the
Reorganization other than the Acquiring Fund's federal and state
registration fees; (i) the fact that the Acquiring Funds will assume
certain stated liabilities of the Virtus Fund; and (j) the expected
federal income tax consequences of the Reorganization.
9. The Reorganization is subject to a number of conditions
precedent, including requirements that: (a) the Plans have been
approved by the Boards of the Acquiring Funds and the Virtus Funds and
each of such Fund's shareholders in the manner required by law; (b) the
Virtus Funds and the Acquiring Funds have received opinions of counsel
stating, among other things, that the Reorganization will constitute a
``reorganization'' under section 368 of the Internal Revenue Code of
1986, as amended and, as a consequence, the Reorganization will not
result in Federal income taxes for the Fund or its shareholders; and
(c) the Virtus Funds and the Acquiring Funds have received from the SEC
an order exempting the Reorganization from the provisions of the Act as
requested in the application. Applicants agree not to make any material
changes to the Plans that affect the application without prior SEC
approval.
Applicants' Legal Analysis
1. Section 17(a) of the Act provides that it is unlawful for any
affiliated person of a registered investment company, or any affiliated
person of such person, knowingly: (a) To sell any security or other
property to such registered company; or (b) to purchase from such
registered company any security or other property. Section 2(a)(3) of
the Act defines the term ``affiliated person'' of another person to
include: (a) Any person owning, controlling, or holding with power to
vote, 5% or more of the outstanding voting securities of such other
person; (b) any person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled, or held with
power to vote, by such other person; (c) any person controlling,
controlled by, or under common control with, such other person; and (d)
if such other person is an investment company, any investment adviser
of the person.
2. Rule 17a-8 under the Act exempts from the prohibitions of
section 17(a) of the Act 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 are
satisfied. Applicants believe that the proposed transactions may not be
exempt from the prohibitions of section 17(a) by reason of rule 17a-8
because the Funds may be affiliated for reasons other than those set
forth in the rule. The Virtus Funds may be affiliated persons of the
Bank because the Bank, as fiduciary for its customers, owns of record
or controls or holds with the power to vote 5% or more of the
outstanding securities of the Virtus Funds. The Bank, in turn, is an
affiliated person of the Evergreen Funds because the Bank, or one of
its subsidiaries, serves as adviser to the Evergreen Funds. In
addition, the Evergreen Funds may be affiliated persons of the Bank
because the Bank, as fiduciary for its customers, owns of record or
controls or holds with the power to vote 5% or more of the outstanding
securities of the Evergreen Funds and a subsidiary of the Bank (i.e.,
Virtus) is the adviser to the Virtus Funds. Consequently. applicants
are requesting an order pursuant to section 17(b) of the Act exempting
them from section 17(a) to the extent necessary to complete the
Reorganization.
3. Section 17(b) of the Act provides that the SEC may exempt a
transaction from section 17(a) of the Act if evidence establishes that:
(a) 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; (b) the proposed transaction is
consistent with the policy of each registered investment company
concerned; and (c) the proposed transaction is consistent with the
general purposes of the Act.
4. Applicants submit that the Reorganization satisfies the
provisions of section 17(b) of the Act. The Board of each of the Funds
has determined that the transactions are in the best interests of the
shareholders. In approving the Plans, the Boards of the Funds
considered: (a) That the interests of Fund shareholders will not be
diluted; (b) that the Virtus and Acquiring Funds' investment objectives
and policies are generally substantially identical; (c) that no sales
charges will be imposed; (d) that the conditions and policies of rule
17a-8 will be followed; and (e) that no overreaching by any affiliated
person is occurring.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-2881 Filed 2-4-98; 8:45 am]
BILLING CODE 8010-01-M
