[Federal Register Volume 63, Number 128 (Monday, July 6, 1998)]
[Notices]
[Pages 36455-36457]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17783]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Releases No. IC-23289, 812-11120]
The Evergreen Equity Trust, et al.; Notice of Application
June 26, 1998.
Agency: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for an order 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 certain stated liabilities of certain
series of another registered open-end management investment company.
APPLICANTS: Evergreen Equity Trust, Evergreen Select Equity Trust,
Evergreen International Trust, Evergreen Fixed Income Trust, Evergreen
Select Fixed Income Trust, Evergreen Municipal Trust, Evergreen Money
Market Trust, Evergreen Select Money Market Trust (together with their
series, the ``Evergreen Funds''), CoreFunds, Inc. (with its series, the
``CoreFunds'' and together with the Evergreen Funds, the ``Funds''),
and First Union National Bank (``FUND'').
FILING DATES: The application was filed on April 23, 1998 and amended
on June 24, 1998. Applicants have agreed to file an amendment during
the notice period, the substance of which is reflected in this notice.
HEARING ON NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request 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 July 21, 1998,
and should be accompanied by proof of service on the applicants, in the
form of an affidavit or, for lawyers, a certificate or 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.
[[Page 36456]]
ADDRESSES: Secretary, SEC, 450 Fifth Street, NW, Washington, DC 20549.
Applicants: FUNB, 201 S. College Street, Charlotte, North Carolina
20288; CoreFunds, Inc., 530 East Swedesford Road, Wayne, Pennsylvania
19087; The Evergreen Funds, 200 Berkeley Street, Boston, Massachusetts
02116.
FOR FURTHER INFORMATION CONTACT: John K. Forst, Attorney Advisor, at
(202) 942-0569, or Edward P. Macdonald, 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, NW, Washington, DC
20549 (tel. 202-942-8090).
Applicant's Representations
1. The CoreFunds is a Maryland corporation registered under the Act
as an open-end management investment company. CoreFunds consist of
twenty-one separate series, nineteen of which are the selling funds
(``Selling Funds'') \1\ CoreStates Investment Advisers, Inc. (``CSIA'')
is registered under the Investment Advisers Act 1940 (``Advisers Act'')
and is the investment adviser for the CoreFunds.
---------------------------------------------------------------------------
\1\ The CoreFunds Elite Government Reserve Fund has not
commenced operations as the date of the filing of the application
and is not being acquired by the Evergreen Funds. The CoreFunds
Treasury Reserve Fund will reorganize into the Evergreen Treasury
Money Market Fund and will rely on rule 17a-8. Accordingly, these
three series are not parties to this application.
---------------------------------------------------------------------------
2. The Evergreen Funds are Delaware business trusts and each is
registered under the Act as an open-end management investment company.
Nineteen of the Evergreen Funds' series are the acquiring funds
(``Acquiring Funds''). FUNB, a subsidiary of First Union Corporation
(``First Union'') , is a national banking association. FUNB is not
required to register under the Advisers Act. The Capital Management
Group, a division of FUNB and two of FUNB's subsidiaries, Evergreen
Asset Management Corp. and Keystone Investment Management Company as
well as Meridian Investment Company, an indirect wholly-owned
subsidiary of First Union are the investment advisers to the Evergreen
Funds. Evergreen Asset Management Corp. and Keystone Investment
Management Company are each registered under the Advisers Act. FUNB, as
a fiduciary for its customers, owns of record 5% (in some cases 25%) or
more of the outstanding voting securities of each of the Selling Funds
or their respective Acquiring Funds.
3. On April 30, 1998, CoreStates Financial merged with and into a
wholly-owned subsidiary of First Union (the ``Merger''). CSIA was a
wholly-owned, indirect subsidiary of CoreStates Financial. As a result
of the Merger, CSIA became a wholly-owned subsidiary of FUNB. .
4. On February 6 and 11, 1998 respectively, the board of CoreFunds
and each Evergreen Fund (the ``Boards''), including a majority of the
directors/trustees who are not ``interested persons'' under section
2(a)(19) of the Act (the ``Independent Directors''), approved plans of
reorganization under which the Acquiring Funds will acquire
corresponding Selling Funds with similar investment objectives (the
``Plans''). Pursuant to the Plans, each Selling Fund has agreed to sell
all of its assets and certain stated liabilities to the corresponding
Acquiring Fund in exchange for shares of the Acquiring Fund (the
``Reorganizations.'') \2\ As a result of the Reorganizations, each
Selling Fund shareholder will receive Acquiring Fund shares having an
aggregate net asset value equal to the aggregate net asset value of the
corresponding Selling Fund's shares held by that shareholder calculated
as of the close of business immediately prior to the date on which the
Reorganizations will occur. Applicants expect that the Reorganizations
will occur on or about July 27, 1998 (the ``Closing Date'').
---------------------------------------------------------------------------
\2\ The Selling Funds and the corresponding Acquiring Funds are:
CoreFunds Balanced Fund and Evergreen Foundation Fund; CoreFunds
Growth Equity Fund and Evergreen Select Strategic Growth Fund;
CoreFunds International Growth Fund and Evergreen International
Growth Fund; CoreFunds Government Income Fund and Evergreen U.S.
Government Fund; CoreFunds Bond Fund and Evergreen Select Income
Plus Fund; CoreFunds Short-Intermediate Bond Fund and Evergreen
Select Fixed Income Fund; CoreFunds Short-Term Income Fund and
Evergreen Select Limited Duration Fund; CoreFunds Intermediate
Municipal Bond Fund and Evergreen High Grade Tax Free Fund;
CoreFunds New Jersey Municipal Bond Fund and Evergreen New Jersey
Tax-Free Income Fund; CoreFunds Pennsylvania Municipal Bond Fund and
Evergreen Pennsylvania Tax-Free Fund; CoreFunds Cash Reserve Fund
and Evergreen Money Market Fund; CoreFunds Tax-Free Reserve Fund and
Evergreen Municipal Money Market Fund; CoreFunds Elite Cash Reserve
Fund and Evergreen Select Money Market Fund; CoreFunds Elite Tax-
Free Reserve Fund and Evergreen Select Municipal Money Market Fund;
CoreFunds Elite Treasury Reserve Fund and Evergreen Select Treasury
Money Market Fund; CoreFunds Global Bond Fund and Evergreen Select
International Bond Fund; CoreFunds Core Equity Fund and Evergreen
Stock Selector Fund; CoreFunds Equity Index Fund and Evergreen
Select Equity Index Fund; CoreFunds Special Equity Fund and
Evergreen Select Special Equity Fund.
---------------------------------------------------------------------------
5. The Selling Funds, except for the money market funds, offer four
classes of shares: Classes A Individual, B Individual, C Individual,
and Y (Institutional) Shares. Certain of the Acquiring Funds offer one
or more of six classes of shares, which are Classes A, B, C, Y,
Institutional, and Institutional Service Shares.
6. Under the Plans, holders of Class A and Class B Shares of
CoreFunds Balanced Fund, CoreFunds Intermediate Municipal Bond Fund,
CoreFunds New Jersey Municipal Bond Fund, CoreFunds Pennsylvania
Municipal Bond Fund, CoreFunds Cash Reserve Fund, CoreFunds Tax-Free
Reserve Fund, CoreFunds Treasury Reserve Fund, CoreFunds International
Growth Fund, CoreFunds Government Income Fund, and CoreFunds Core
Equity Fund will receive Class A or B Shares of the corresponding
Acquiring Fund. Holders of Class A and B Shares of the remaining
Selling Funds will receive Institutional Service Shares of the
corresponding Acquiring Fund. Holders of Class C Shares of the
CoreFunds Cash Reserve Fund, CoreFunds Tax-Free Reserve Fund and
CoreFunds Treasury Reserve Fund will receive Class A Shares of the
corresponding Acquiring Fund. Holders of Class C Shares of the
remaining Selling Funds will receive Institutional Service Shares of
the corresponding Acquiring Fund. Holders of Class Y Shares of the
CoreFunds Balanced Fund, CoreFunds Intermediate Municipal Bond Fund,
CoreFunds New Jersey Municipal Bond Fund, CoreFunds Pennsylvania
Municipal Bond Fund, CoreFunds Cash Reserve Fund, CoreFunds Tax-Free
Reserve Fund, CoreFunds Treasury Reserve Fund, CoreFunds International
Growth Fund, CoreFunds Government Income Fund, and CoreFunds Core
Equity Fund will receive Class Y Shares of the corresponding Acquiring
Fund. Holders of Class Y Shares of the remaining Selling Funds will
receive Institutional Shares of the corresponding Acquiring Fund.
7. Class Y (Institutional) Shares of the Selling Fund and Class Y
and Institutional Shares of the Acquiring Funds are not subject to any
asset-based distribution or administrative service fees. Class C Shares
of the Selling Funds and Institutional Service Shares of the Acquiring
Funds are subject to an asset-based distribution fee. Class A
Individual and Class A Shares are subject to varying front-end sales
charges and asset-based distribution fees. Class B Individual and Class
B Shares are subject to varying contingent deferred sales charges and
asset-based distribution fees. No initial sales charge will be imposed
in connection with Class A Shares and no contingent
[[Page 36457]]
deferred sales charge will be imposed with respect to Class B
Institutional Service Shares.
8. The investment objectives of each Selling Fund and its
corresponding Acquiring Fund are substantially similar. The investment
restrictions and limitations of each Selling Fund and its corresponding
Acquiring Fund also are substantially similar, but in some cases
involve differences that reflect the differences in the general
investment strategies utilized by the Funds.
9. The Boards, including a majority of Independent Directors,
approved the Reorganizations in the best interests of existing
shareholders of the Funds and determined that the interests of existing
shareholders will not be diluted. The Boards considered a number of
factors in authorizing the Reorganizations, including: (a) The terms
and conditions of the Reorganizations; (b) whether the Reorganizations
would result in the dilution of shareholders' interests; (c) expense
ratios of the Funds, fees and expenses of the Reorganizations; (d) the
comparative performance records of the Funds; (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
Selling Fund; (h) the fact that FUNB will bear the expenses incurred by
the Funds in connection with the Reorganizations; (i) the fact that the
Acquiring Funds will assume the identified liabilities of the Selling
Funds; and (j) the expected federal income tax consequences of the
Reorganizations. FUNB will pay the expenses of the Reorganizations
other than the Acquiring Funds' federal and state registration fees.
10. The Plans may be terminated by either the Selling or Acquiring
Fund at or prior to the Closing Date if the other party breaches any
provision of a Plan that was to be performed and the breach is not
cured within 30 days or a condition precedent to the terminating
party's obligations has not been met and it appears that the condition
precedent will not or cannot be met.
11. Registration statements on Form N-14 containing preliminary
combined prospectus/proxy statements for each Fund Reorganization, were
filed with the SEC between April 10, 1998 and June 10, 1998. A final
prospectus/proxy was mailed to shareholders of the Selling Funds on
June 10, 1998, except for the CoreFunds Global Bond Fund the
prospectus/proxy for which will be mailed on or about July 10, 1998. A
special meeting of the Selling Funds' shareholders will be held on or
about July 17, 1998 for all Selling Funds except for the CoreFunds
Global Bond Fund the meeting of whose shareholders will be held on or
about August 17, 1998.
12. The consummation of each Reorganization under the Plans is
subject to a number of conditions precedent, including: (a) The Plans
have been approved by the Boards and each of the Funds' shareholders in
the manner required by applicable law; (b) management of each Selling
Fund solicits proxies from its shareholders seeking approval of the
Reorganizations; (c) the Funds have received opinions of counsel
stating, among other things, that each Reorganization will not result
in federal income taxes for the Fund or its shareholders; and (d) the
Funds have received from the SEC an order exempting the Reorganizations
from the provisions of section 17(a) of the Act. 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 generally prohibits an affiliated
person of a registered investment company, or any affiliated person of
the person, acting as principal, knowingly from selling any security
to, or purchasing any security from the company. Section 2(a)(3) of the
Act defines the term 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 outstanding voting
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 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 solely by reason of having a common
investment adviser, common directors, and/or common officers, provided
that certain conditions are satisfied.
3. Applicants believe that they cannot rely on rule 17a-8 under the
Act because the Funds may be affiliated for reasons other than those
set forth in the rule. The Selling Funds may be affiliated persons of
FUNB because FUNB, as fiduciary for its customers, owns of record 5% or
more of the outstanding securities of the Selling Funds. FUNB, in turn,
is an affiliated person of the Acquiring Funds because FUNB, or one of
its affiliates, serves as adviser to the Acquiring Funds. In addition,
the Acquiring Funds may be affiliated persons of FUNB because FUNB, as
fiduciary for its customers, owns of record 5% or more of the
outstanding securities of the Acquiring Funds.
4. 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.
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 provisions of section 17(b) of the Act.
Applicants state that the Board of each of the Funds has determined
that the transactions are in the best interests of the 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 Selling Funds' shares for shares of the Acquiring Funds
will be based on the relative net asset values.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-17783 Filed 7-2-98; 8:45 am]
BILLING CODE 8010-01-M
