[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