1933 Act No. 333-36047
1940 Act No. 811-08363
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 5 [X]
EVERGREEN SELECT EQUITY TRUST
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices)
(617) 210-3200
(Registrant's Telephone Number)
Michael H. Koonce, Esquire
200 Berkeley Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
<PAGE>
EVERGREEN SELECT EQUITY TRUST
CONTENTS OF POST-EFFECTIVE NO. 5 TO
REGISTRATION STATEMENT ON
FORM N-1A
This Post-Effective Amendment No. 5 to Registrant's Registration
Statement No. 333-36047/811-08363 consists of the following pages, items of
information and documents, together with the exhibits indicated in Part C as
being filed herewith.
Facing Sheet
Contents Page
Cross-Reference Sheet
PART A
Prospectuses for the Institutional Shares and Institutional Service
Shares of Evergreen Select Strategic Value Fund, Evergreen Select
Diversified Value Fund, Evergreen Select Large Cap Blend
Fund, Evergreen Select Common Stock Fund, Evergreen Select
Strategic Growth Fund, Evergreen Select Equity Income Fund,
Evergreen Select Small Company Value Fund, Evergreen Select
Social Principles Fund, Evergreen Select Balanced Fund,
Evergreen Select Equity Index Fund, and Evergreen Select
Special Equity Fund are contained herein.
Prospectuses for Evergreen Select Small Cap Growth Fund
are contained in Registration Statement No. 333-36047/811-08363
filed on June 30, 1998 and incorporated by reference herein.
Prospectus for the Charitable Shares of Evergreen Select Large Cap
Blend Fund and Evergreen Select Social Principles Fund are contained in
Registration Statement No. 333-36047/811-08363 filed on November 17, 1997
and incorporated by reference herein.
PART B
Statement of Additional Information for Evergreen Select Strategic Value
Fund, Evergreen Select Diversified Value Fund, Evergreen Select
Large Cap Blend Fund, Evergreen Select Common Stock Fund, Evergreen Select
Strategic Growth Fund, Evergreen Select Equity Income Fund,
Evergreen Select Small Company Value Fund, Evergreen Select
Social Principles Fund, Evergreen Select Balanced Fund,
Evergreen Select Equity Index Fund, and Evergreen Select
Special Equity Fund is contained herein.
Statement of Additional Information for Evergreen Select
Small Cap Growth Fund Fund is contained in Registration
Statement No. 333-36047/811-08363 filed on June 30, 1998
and incorporated by reference herein.
PART C
Exhibits
Number of Security Holders
Indemnification
Business and Other Connections
of Investment Advisors
Principal Underwriter
Location of Accounts and Records
Signatures
<PAGE>
EVERGREEN SELECT EQUITY TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1993
ITEM OF PART A OF FORM N-1A LOCATION IN THE PROSPECTUS
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Cover Page; Expenses
Item 3. Condensed Financial Information Not applicable
Item 4. General Description of Registrant Cover Page; Fund Details
Item 5. Management of the Fund Fund Details
Item 6. Capital Stock and Other Securities Fund Details; Buying and
Selling Shares
Item 7. Purchase of Securities Being Offered Buying and Selling Shares
Item 8. Redemption or Repurchase Buying and Selling Shares
Item 9. Pending Legal Proceedings Not Applicable
LOCATION IN STATEMENT OF
ITEM IN PART B OF FORM N-1A ADDITIONAL INFORMATION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Securities and Investment
Practices; Investment Advisory
Services
Item 14. Management of the Fund Investment Advisory Services
Item 15. Control Persons and Principal Principal Holders of
Holders of Securities Fund Shares
Item 16. Investment Advisory and Other Services Investment Advisory and Other
Services
Item 17. Brokerage Allocation Brokerage Allocation and Other
Services
Item 18. Capital Stock and Other Securities Description Of Shares; Voting
Rights; Limitation of
Trustees' Liability
Item 19. Purchase, Redemption and Pricing of Purchase, Redemption and
Shares Pricing of Securities Being
Offered
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Principal Underwriter
Item 22. Calculation of Performance Data Calculation of Performance
Data
Item 23. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART A
PROSPECTUSES
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS
June 1, 1998, as amended August 1, 1998
- -------------------------------------------------------------------------------
EVERGREEN SELECT EQUITY TRUST
- -------------------------------------------------------------------------------
[LOGO OF EVERGREEN
FUNDS(SM) APPEARS HERE]
EVERGREEN SELECT STRATEGIC VALUE FUND
EVERGREEN SELECT DIVERSIFIED VALUE FUND
EVERGREEN SELECT LARGE CAP BLEND FUND
EVERGREEN SELECT COMMON STOCK FUND
EVERGREEN SELECT STRATEGIC GROWTH FUND
EVERGREEN SELECT EQUITY INCOME FUND
EVERGREEN SELECT SMALL COMPANY VALUE FUND
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
EVERGREEN SELECT BALANCED FUND
EVERGREEN SELECT EQUITY INDEX FUND
EVERGREEN SELECT SPECIAL EQUITY FUND
(EACH A "FUND," TOGETHER THE "FUNDS")
INSTITUTIONAL SHARES
This prospectus explains important information about the Institutional
Shares of the Evergreen Select Equity Trust, including information on how the
Funds invest and services available to shareholders. Please read this
prospectus before investing, and keep it for future reference.
When you consider investing in a Fund, remember that the higher the risk
of losing money, the higher the potential reward. The reverse is also
generally true: the lower the risk, the lower the potential reward.
By itself, no Fund is a complete investment plan. When considering an
investment in any of the Funds, remember to consider your overall investment
objectives and any other investments you own. You should also carefully
evaluate your ability to handle the risks posed by your investment in the
Funds. You can find information on the risks associated with investing in the
Funds under the section called "Fund Descriptions."
To learn more about the Evergreen Select Equity Trust, call 1-800-343-
2898 for a free copy of the Funds' statement of additional information
("SAI"). The Funds have filed the SAI with the Securities and Exchange
Commission and have incorporated it by reference (legally included it) into
this prospectus.
PLEASE REMEMBER THAT SHARES OF THE FUNDS ARE:
. NOT DEPOSITS OR OBLIGATIONS OF ANY BANK.
. NOT ENDORSED OR GUARANTEED BY ANY BANK.
. NOT INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY.
. SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSES................................................................ 3
FINANCIAL HIGHLIGHTS.................................................... 4
FUND DESCRIPTIONS....................................................... 5
Investment Objectives................................................ 5
Securities and Investment Practices
Used By The Funds................................................... 6
BUYING AND SELLING SHARES............................................... 9
How To Buy Shares.................................................... 9
How to Redeem Shares................................................. 10
Additional Transaction Policies...................................... 10
Exchanges............................................................ 11
Dividends............................................................ 11
Taxes................................................................ 11
Shareholder Services................................................. 11
FUND DETAILS............................................................ 12
Fund Organization and Service Providers............................. 12
Other Information And Policies....................................... 16
Fund Performance..................................................... 16
</TABLE>
2
<PAGE>
- -------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------
The tables and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest
in the Funds. Shareholder transaction expenses are fees paid directly from
your account when you buy or sell shares of a Fund. There are no shareholder
transaction expenses.
Annual operating expenses reflect the normal operating expenses of a
Fund, and include costs such as management, distribution and other fees. The
table below shows the Funds' estimated annual operating expenses for the
fiscal period ended June 30, 1998. Each Fund's example shows what you would
pay if you invested $1,000 over the periods indicated. The examples assume
that you reinvest all of your dividends and that each Fund's average annual
return will be 5%. The examples are for illustration purposes only and should
not be considered a representation of past or future expenses or annual
return. THE FUNDS' ACTUAL EXPENSES AND RETURNS WILL VARY. For a more complete
description of the various costs and expenses borne by the Funds see "Fund
Details."
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES MANAGEMENT OTHER TOTAL OPERATING
(AS A PERCENTAGE OF FEES EXPENSES EXPENSES (AFTER
AVERAGE DAILY NET (AFTER EXPENSE 12B-1 (AFTER EXPENSE EXPENSE WAIVERS OR
ASSETS) WAIVERS)(1) FEES REIMBURSEMENTS) REIMBURSEMENTS)(1)
--------------------- -------------- ------- --------------- ------------------
<S> <C> <C> <C> <C>
Evergreen Select 0.60% None 0.15% 0.75%
Strategic Value Fund
Evergreen Select 0.50% None 0.10% 0.60%
Diversified Value Fund
Evergreen Select Large 0.60% None 0.11% 0.71%
Cap Blend Fund
Evergreen Select Common 0.60% None 0.10% 0.70%
Stock Fund
Evergreen Select 0.60% None 0.12% 0.72%
Strategic Growth Fund
Evergreen Select Equity 0.60% None 0.17% 0.77%
Income Fund
Evergreen Select Small 0.80% None 0.20%(1) 1.00%
Company Value Fund
Evergreen Select Social 0.70% None 0.16% 0.86%
Principles Fund
Evergreen Select 0.50% None 0.11% 0.61%
Balanced Fund
Evergreen Select Equity 0.06% None 0.31% 0.37%
Index Fund(2)
Evergreen Select Special 0.74% None 0.31% 1.05%
Equity Fund(3)
<CAPTION>
EXAMPLE OF FUND EXPENSES 1 YEAR 3 YEARS
- ------------------------ -------------- -------
<S> <C> <C>
Evergreen Select $8 $24
Strategic Value Fund
Evergreen Select $6 $20
Diversified Value Fund
Evergreen Select Large $7 $23
Cap Blend Fund
Evergreen Select Common $7 $22
Stock Fund
Evergreen Select $7 $23
Strategic Growth Fund
Evergreen Select Equity $8 $25
Income Fund
Evergreen Select Small $10 $32
Company Value Fund
Evergreen Select Social $9 $27
Principles Fund
Evergreen Select $6 $20
Balanced Fund
Evergreen Select Equity $4 $12
Index Fund
Evergreen Select Special $11 $33
Equity Fund
</TABLE>
- -------
(1) Each Fund's investment adviser has voluntarily agreed to waive a portion
of each Fund's investment advisory fee. Without such waivers, each
management fee set forth above would be higher. The investment advisers
currently intend to continue this expense waiver through November 30,
1998; however, each may modify or cancel its expense waiver at any time.
See "Fund Details" for more information. In addition, the investment
adviser to Evergreen Select Small Company Value Fund has limited that
Fund's Other Expenses to 0.20%.
(2) The investment adviser of Evergreen Select Equity Index Fund has
undertaken to limit the Fund's Total Operating Expenses for a period of at
least two years to 0.71%.
(3) The investment adviser of Evergreen Select Special Equity Fund has
undertaken to limit the Fund's Total Operating Expenses for a period of at
least two years to 1.82%.
Absent expense waivers and/or reimbursements, the Total Operating
Expenses for each of the Funds would be as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEE OTHER EXPENSES (WITHOUT TOTAL FUND
FUND (WITHOUT WAIVERS) REIMBURSEMENTS) OPERATING EXPENSES
---- ----------------- ----------------------- ------------------
<S> <C> <C> <C>
Evergreen Select Strate-
gic Value Fund 0.70% 0.15% 0.85%
Evergreen Select Diver-
sified Value Fund 0.60% 0.10% 0.70%
Evergreen Select Large
Cap Blend Fund 0.70% 0.11% 0.81%
Evergreen Select Common
Stock Fund 0.70% 0.10% 0.80%
Evergreen Select Strate-
gic Growth Fund 0.70% 0.12% 0.82%
Evergreen Select Equity
Income Fund 0.70% 0.17% 0.87%
Evergreen Select Small
Company Value Fund 0.90% 0.28% 1.18%
Evergreen Select Social
Principles Fund 0.80% 0.16% 0.96%
Evergreen Select Bal-
anced Fund 0.60% 0.11% 0.71%
Evergreen Select Equity
Index Fund 0.40% 0.31% 0.71%
Evergreen Select Special
Equity Fund 1.50% 0.31% 1.81%
</TABLE>
3
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The financial highlights below pertain to Institutional Shares of
Evergreen Select Equity Index Fund and Evergreen Select Special Equity Fund.
These two Funds were formerly Equity Index Fund and Special Equity Fund,
respectively, portfolios of CoreFunds, Inc. They were reorganized into
Evergreen funds in July 1998. The information for Evergreen Select Equity
Index Fund has been audited by Ernst & Young LLP, independent auditors, for
the periods from inception through June 30, 1997. The information for
Evergreen Select Special Equity Fund has been audited by Ernst & Young LLP for
the periods from November 1, 1995 through June 30, 1997 and by the Fund's
prior auditor for the periods ended October 31, 1994 through October 31, 1995.
The information below for the period from July 1, 1997 to December 31, 1997
has not been audited. A report of Ernst & Young on the information it has
audited appears in the Funds' Annual Report which is incorporated by reference
in the SAI. The Annual Report may be obtained without charge.
The other Funds in this prospectus have a fiscal year end of June 30,
1998 and therefore audited financial highlights are not available.
EVERGREEN SELECT EQUITY INDEX FUND--INSTITUTIONAL SHARES*
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING JUNE 30
THROUGHOUT THE PERIOD DEC. 31, ----------------------------------------------------------------
ENDED 1997 1997 1996 1995 1994 1993 1992 1991(1)
- ----------------------- -------- -------- -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $37.39 $28.47 $23.79 $20.54 $20.97 $19.22 $18.46 $19.48
-------- -------- -------- -------- ------- ------- ------- -------
Net Investment Income... 0.26 0.51 0.51 0.52 0.55 0.52 0.52 0.03
Realized and Unrealized
Net Gains (Losses) on
Securities............. 3.50 9.16 5.47 4.24 (0.43) 1.84 1.80 (0.94)
Distributions from Net
Investment Income...... (0.26) (0.51) (0.51) (0.52) (0.55) (0.52) (0.48) (0.02)
Distributions from
Capital Gains.......... (1.24) (0.24) (0.79) (0.99) -- (0.09) (1.08) (0.09)
-------- -------- -------- -------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $39.65 $37.39 $28.47 $23.79 $20.54 $20.97 $19.22 $18.46
======== ======== ======== ======== ======= ======= ======= =======
TOTAL RETURN............ 10.12%+ 34.44% 25.69% 24.45% 0.55% 12.39% 12.59% (4.64)%+
Net Assets, End of
Period (000 omitted)... $262,831 $241,413 $166,350 $112,533 $72,552 $50,551 $20,166 $12,117
Ratio of Expenses to
Average Net Assets..... 0.37% 0.37% 0.35% 0.37% 0.35% 0.49% 0.57% 0.97%
Ratio of Net Income to
Average Net Assets..... 1.30% 1.63% 1.94% 2.48% 2.63% 2.82% 2.66% 1.79%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers).... 0.71% 0.71% 0.71% 0.76% 0.75% 0.88% 1.06% 1.20%
Ratio of Net Income to
Average Net Assets
(Excluding Waivers).... 0.96% 1.29% 1.59% 2.09% 2.23% 2.43% 2.17% 1.56%
Portfolio Turnover
Rate................... 9% 11% 13% 27% 13% 4% 27% --
Average Commission Rate
Paid(2)................ $0.0621 $0.0545 $0.0641 n/a n/a n/a n/a n/a
</TABLE>
- -------
* On April 22, 1996, the Series A Shares of the Fund were redesignated Class Y
Shares.
+ This figure has not been annualized.
(1) Commenced operations June 1, 1991. Unless otherwise noted, all ratios for
the period have been annualized.
(2) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
EVERGREEN SELECT SPECIAL EQUITY FUND--INSTITUTIONAL SHARES(3)*
<TABLE>
<CAPTION>
OCTOBER 31
---------------------
JUNE 30 INSTITUTIONAL PRIOR
FOR A SHARE OUTSTANDING DEC. 31, ---------------- CLASS CLASS
THROUGHOUT THE PERIOD ENDED 1997 1997 1996 1995 1994(1)
- --------------------------- -------- ------- ------- ------------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................. $11.27 $11.86 $11.42 $9.37 $10.00
------- ------- ------- ------- -------
Net Investment Income...... (0.03) 0.02 0.07 0.12 0.06
Realized and Unrealized Net
Gains (Losses) on
Securities................ 0.90 1.81 2.13 2.12 (0.63)
Distributions from Net
Investment Income......... -- (0.03) (0.07) (0.12) (0.06)
Distributions from Capital
Gains..................... (1.49) (2.39) (1.69) (0.07) --
------- ------- ------- ------- -------
Net Asset Value, End of
Period.................... $10.65 $11.27 $11.86 $11.42 $9.37
======= ======= ======= ======= =======
TOTAL RETURN(2)............ 8.14%+ 17.94% 22.27% 24.44% (5.72)%
Net Assets, End of Period
(000 omitted)............. $74,025 $71,980 $63,680 $57,396 $10,069
Ratio of Expenses to
Average Net Assets........ 1.07% 0.84% 0.34% 0.32% 0.15%
Ratio of Net Income to
Average Net Assets........ (0.44)% 0.19% 0.94% 1.14% 1.06%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers)....... 1.81% 1.82% 1.79% 1.97% 2.10%
Ratio of Net (Loss) to
Average Net Assets
(Excluding Waivers)....... (1.18)% (0.79)% (0.51)% (0.51)% (0.89)%
Portfolio Turnover Rate**.. 32% 74% 72% 129% 39%
Average Commission Rate
Paid(4)................... $0.0628 $0.0257 $0.0539 n/a n/a
</TABLE>
- -------
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21, 1995
through October 31, 1995. For the year ended October 31, 1995, the Financial
Highlights' ratios of expenses, net investment income, total return, and the
per share investment activities and distributions reflect this allocation.
Also, on April 22, 1996, the assets of the Conestoga Special Equity Fund
were acquired by CoreFunds. At that time the Institutional Class Shares of
the Fund were exchanged for Class Y Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
(1) Commenced operations March 15, 1994. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return for the period ended June 30, 1996 is for an eight-month
period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
period November 1 to October 31.
(4) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
+ This figure has not been annualized.
4
<PAGE>
- -------------------------------------------------------------------------------
FUND DESCRIPTIONS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
EVERGREEN SELECT STRATEGIC VALUE FUND seeks long-term capital
appreciation with current income as a secondary objective. The Fund invests
primarily in the equity securities of large companies (i.e., companies with
market capitalizations of over $5 billion at the time of investment) and mid-
size U.S. companies (i.e., companies with market capitalizations of over $1
billion but less than $5 billion at the time of investment). Generally
selected are stocks that the Fund's investment adviser believes are
undervalued relative to their true values and exhibit positive trends in their
underlying operations and earnings expectations.
EVERGREEN SELECT DIVERSIFIED VALUE FUND seeks long-term capital
appreciation with current income as a secondary objective. Normally, the Fund
invests primarily in equity securities of U.S. companies with prospects for
earnings growth and dividends. Generally selected are stocks that the Fund's
investment adviser believes are undervalued relative to their true values and
exhibit positive trends in their underlying operations and earnings
expectations.
EVERGREEN SELECT LARGE CAP BLEND FUND seeks to achieve long-term capital
growth. The Fund invests at least 65% of its total assets in the equity
securities of large companies (i.e. companies with market capitalizations of
over $5 billion at the time of investment). The Fund's stock selection is
based on a diversified style of equity management that allows it to invest in
both value and growth-oriented equity securities.
EVERGREEN SELECT COMMON STOCK FUND seeks long-term capital appreciation.
The Fund invests at least 65% of its total assets in common stocks of U.S.
companies. The Fund's stock selection is based on a diversified style of
equity management that allows it to invest in both value and growth-oriented
equity securities.
EVERGREEN SELECT STRATEGIC GROWTH FUND seeks long-term capital
appreciation. The Fund invests primarily in the equity securities of large and
mid-size U.S. companies, which, in the opinion of the Fund's investment
adviser, demonstrate the potential for superior and sustainable earnings
growth.
EVERGREEN SELECT EQUITY INCOME FUND seeks high current income as a
primary investment objective, and long-term capital appreciation as a
secondary objective. The Fund invests at least 65% of its total assets in
income producing equity securities that are generally characterized by having
below-average price to earnings ratios and higher dividend yields relative to
their industry groups. The Fund's stock selection is based on a diversified
style of equity management that allows it to invest in both value and growth-
oriented equity securities.
EVERGREEN SELECT SMALL COMPANY VALUE FUND seeks capital appreciation. The
Fund invests at least 65% of its total assets in the equity securities of
small companies (i.e., companies with market capitalizations of $1 billion or
less at the time of investment). The Fund invests in stocks of companies it
believes the market has temporarily undervalued in relation to such factors as
the company's assets, cash flow or earnings potential. The Fund's investment
adviser selects securities it thinks will rise in value sooner than most
observers anticipate, increasing the value of Fund shares.
EVERGREEN SELECT SOCIAL PRINCIPLES FUND seeks to provide long-term
capital growth. The Fund invests in the equity securities of mid-size
companies that respect human rights, play a role in local communities and
produce useful products in an environmentally sound way. The Fund will not
invest in companies that produce liquor, tobacco, weapons or nuclear energy.
EVERGREEN SELECT BALANCED FUND seeks long-term total return through
capital appreciation, dividends and interest income. The Fund invests in
growth oriented common and preferred stocks and fixed income securities to
provide a stable income flow. It is anticipated that the Evergreen Select
Balanced Fund's asset allocation will range between 40-75% in common and
preferred stocks, 25-50% in fixed income securities (including some
convertible securities) and 0-25% in cash equivalents.
EVERGREEN SELECT EQUITY INDEX FUND seeks investment results that achieve
price and yield performance similar to the S&P 500 Index. The Fund invests
primarily in stocks represented in the Standard & Poor's Corporation ("S&P")
500 Index.
5
<PAGE>
EVERGREEN SPECIAL EQUITY FUND seeks capital growth. The Fund strives to
provide a return greater than stock market indices such as the Russell 3000
Equal Weighted Index by investing principally in a diversified portfolio of
common stocks of domestic companies that its investment adviser expects will
experience growth in earnings and price including stocks of companies with
small market capitalizations (i.e., under $1 billion), medium market
capitalizations (i.e., between $1 billion and $5 billion) and large market
capitalizations (i.e., over $5 billion).
Each Fund's investment objective(s) is nonfundamental. As a result, a
Fund may change its objective(s) without a shareholder vote. Each Fund has
also adopted certain fundamental investment policies which are mainly designed
to limit a Fund's exposure to risk. A Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
a Fund's fundamental investment policies or other related investment policies.
SECURITIES AND INVESTMENT PRACTICES USED BY THE FUNDS
You can find more information about the types of securities in which a Fund
may invest, the types of investment techniques a Fund may employ in pursuit of
its objective and a summary of related risks set forth below. The Funds' SAI
contains additional information about these investments and investment
techniques.
Equity Securities. Each Fund, with the exception of Evergreen Select Balanced
Fund, invests primarily in common stocks. A common stock represents an equity
(ownership) interest in a corporation. Each Fund expects to profit from stocks
primarily by (1) selling shares at a higher price than it paid and (2) earning
dividends.
Each Fund may invest in convertible securities. Convertible securities
are corporate securities that can be exchanged for a different type of
corporate security. Convertible securities normally purchased by the Funds are
convertible preferred stocks and convertible bonds, both of which can be
exchanged for common stocks.
Investments in stocks are subject to market risk, which is the
possibility that stock prices in general will decline over short or even
extended periods. Stock markets tend to move in cycles, with periods of rising
stock prices and periods of falling stock prices. Also, investing in small and
mid-sized companies involves greater risk than investing in larger companies.
Small and mid-sized company stock prices can rise very quickly and drop
dramatically in a short period of time. This volatility results from a number
of factors, including reliance by such companies on limited product lines,
markets, and financial and management resources. These and other factors may
make small and mid-sized companies more susceptible to setbacks or downturns.
These companies may experience higher rates of bankruptcy or other failures
than larger companies. They may be more likely to be negatively affected by
changes in management. In addition, the stock of small and mid-sized companies
may be less marketable than larger companies.
The Evergreen Select Equity Index Fund invests at least 90% of its total
assets in equity securities that represent a composite of the S&P 500 Index.
The S&P 500 Index consists of 500 common stocks, most of which are listed on
the New York Stock Exchange. In choosing the 500 stocks which are included in
the S&P 500 Index, S&P considers market values and industry diversification.
The correlation between the performance of the Fund and the S&P 500 Index is
expected to be, before expenses, 0.98 or higher. A correlation of 1.00 would
indicate perfect correlation.
The Evergreen Select Equity Index Fund investment portfolio will
generally consist of common stocks of as many issuers listed in the S&P 500
Index as is feasible. The Fund's investment adviser uses a computer model that
closely monitors the industry weightings of the S&P 500 Index. Although the
Fund's investment adviser does not screen securities by traditional methods of
financial and market analyses, it monitors the Fund's investments with a view
toward removing stocks of companies which exhibit extreme financial distress
or which may impair the Fund's ability to achieve its investment objective.
The Fund strives to provide a total return comparable to the S&P 500 Index.
Evergreen Select Equity Index Fund is not sponsored by nor affiliated with
S&P.
Foreign Investments. Evergreen Select Special Equity Fund may invest in
foreign securities, including securities of foreign issuers, securities issued
by foreign branches of U.S. banks and foreign banks, Canadian commercial paper
and Europaper (U.S. dollar-denominated commercial paper of foreign issuers),
American Depositary Receipts, European Depositary Receipts and Global
Depositary Receipts.
6
<PAGE>
There are special risks associated with international investing:
. Currency Risk--The possibility that changes in foreign exchange
rates will affect, favorably or unfavorably, the value of foreign
securities.
. Volatility--Investments in foreign stock markets can be more
volatile than investments in U.S. markets. Diplomatic, political or
economic developments could affect investment in foreign countries.
. Expense Considerations--Fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S.
exchanges. Expenses for custodial arrangements of foreign securities
may be somewhat greater than typical expenses for custodial
arrangements for handling U.S. securities of equal value.
. Foreign Taxes--Certain foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a
portion of these taxes are recoverable, the non-recovered portion of
foreign withholding taxes will reduce the income received from the
securities comprising the portfolio.
. Regulatory Environment--Foreign companies generally are not subject
to uniform accounting, auditing and financial reporting standards
comparable to those applicable to U.S. domestic companies. There is
generally less government regulation of securities exchanges,
brokers and listed companies abroad than in the U.S. Foreign
branches of U.S. banks, foreign banks and foreign issuers may be
subject to less stringent reserve requirements and to different
accounting, auditing, reporting and record keeping standards than
those applicable to domestic branches of U.S. banks and U.S.
domestic issuers.
Debt Securities. Evergreen Select Balanced Fund may invest in bonds or other
instruments used by corporations or governments to borrow money from
investors, including all kinds of convertible securities. When the Fund buys a
debt security, it expects to earn a variable or fixed rate of interest and it
expects the issuer to repay the amount borrowed at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. The main risks of investing in
debt securities are:
. Interest Rate Risk: The risk that a bond's prices will fall when
interest rates rise, and vice versa. Debt securities have varying
levels of sensitivity to interest rates. Longer-term bonds are
generally more sensitive to changes in interest rates than short
term bonds.
. Credit Risk: The chance that the issuer of a bond will have its
credit rating downgraded or will default (fail to make scheduled
interest and principal payments), potentially reducing the Fund's
income and/or share price.
Debt securities have varying degrees of quality. Investment grade bonds
are generally rated within the three highest grades as determined by Standard
& Poor's Ratings Group ("S & P") (AAA, AA, or A), Moody's Investors Service
("Moody's") (Aaa, Aa, or A), or Fitch IBCA, Inc. ("Fitch") (AAA, AA, or A) or
their respective equivalent ratings or, if not rated or rated by another
system, determined by the Fund's adviser to be of equivalent credit quality to
securities so rated. Bonds rated A or above are regarded as having a strong
capacity to pay interest and repay principal. However, adverse economic
conditions or changing circumstances may to lead to a weakened capacity to pay
interest and repay principal compared to higher-rated bonds.
The Fund is not required to sell or otherwise dispose of any security
that loses its rating or has its rating reduced after the Fund has purchased
it. Also, if S&P, Moody's or Fitch changes its ratings system, each Fund will
try to use comparable ratings as standards according to the Fund's investment
objectives and policies.
United States ("U.S.") Government Securities. U.S. government securities are
debt securities that are issued or guaranteed by the U.S. Treasury or by an
agency or instrumentality of the U.S. government. Some U.S. government
securities, such as Treasury bills, notes and bonds, are supported by the full
faith and credit of the U.S. Others, however, are supported only by the credit
of the instrumentality or by the right of the instrumentality to borrow from
the U.S. government.
7
<PAGE>
While U.S. government securities are guaranteed as to principal and
interest, their market value is not guaranteed. Generally, U.S. government
securities are subject to the same interest rate and credit risks as other
fixed-income securities. However, since U.S. government securities are of the
highest credit quality, the credit risk is minimal. THE U.S. GOVERNMENT DOES
NOT GUARANTEE THE NET ASSET VALUE OF THE FUNDS' SHARES.
Mortgage-Backed Securities. A mortgage-backed security represents an interest
in a "pool" of commercial or residential mortgages. Payments of interest and
principal made by the individual borrowers on the mortgages that underlie the
securities are passed through to the Fund. Evergreen Select Balanced Fund may
invest in mortgage-backed securities and other complex asset backed
securities, including collateralized mortgage obligations and stripped
mortgage-backed securities.
Early repayment of the mortgages underlying the securities may expose the
Fund to a lower rate of return when it reinvests the principal. The rate of
prepayments will affect the price and volatility of the mortgage-backed
security and may have the effect of shortening or extending the effective
maturity beyond what a fund anticipated at the time of purchase.
Like other debt securities, changes in interest rates generally affect
the value of a mortgage-backed security. Additionally, some mortgage-backed
securities may be structured so that they may be particularly sensitive to
interest rates.
Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate. Each Fund may purchase put and call
options, write covered put and call options, enter into futures contracts and
use options on futures contracts. The Funds may use futures and options for
hedging purposes only, not for speculation. The Evergreen Select Special
Equity Fund may neither purchase futures contracts or options where premiums
and margin deposit exceed 5% of total assets nor enter into futures contracts
or options where its obligations would exceed 20% of its total assets.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains or losses in the value of the derivative. Derivatives
can also cause a Fund to lose money if the Fund fails to correctly predict the
direction in which the underlying asset or economic factor will move. See
"Futures Transactions and Related Options Transactions" in the SAI.
Borrowing. Each Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. A Fund may only borrow as a temporary
measure for extraordinary or emergency purposes such as the redemption of Fund
shares. A Fund will not purchase securities while borrowings are outstanding
except to exercise prior commitments and to exercise subscription rights.
Securities Lending. To generate income and offset expenses, each Fund may lend
securities to broker-dealers and other financial institutions. While
securities are on loan, the borrower will pay the Fund any income accruing on
the security. Also, the Fund may invest any collateral it receives in
additional securities.
Gains or losses in the market value of a lent security will affect a Fund
and its shareholders. When a Fund lends its securities, it runs the risk that
it could not retrieve the securities on a timely basis, possibly losing the
opportunity to sell the securities at a desirable price. Also, if the borrower
files for bankruptcy or becomes insolvent, the Fund's ability to dispose of
the securities may be delayed.
Repurchase Agreements. Each Fund may enter into repurchase agreements. A
repurchase agreement is an agreement by a Fund to purchase a security and sell
it back for a specified price. The repurchase price reflects an agreed-upon
interest rate for the time period of the agreement. A Fund's risk is the
inability of the seller to pay the agreed-upon price at delivery date.
However, such risk is tempered by the ability of a Fund to sell the security
in the open market in case of default. In such a case, a Fund may incur costs
in disposing of the security which would increase Fund expenses.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by a Fund to sell a
security and repurchase it at a specified time and price. A Fund could lose
money if the market value of the securities it sold declines below their
repurchase price.
8
<PAGE>
Reverse repurchase agreements may be considered a form of borrowing, and,
therefore, a form of leverage. Leverage may magnify gains or losses of a Fund.
Investing in Securities of Other Investment Companies. The Funds may invest in
securities of other investment companies. As a shareholder of another
investment company, a Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that a
Fund currently bears concerning its own operations and may result in some
duplication of fees.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. Each Fund
may enter into transactions whereby it commits to buying a security, but does
not pay for or take delivery of the security until some specified date in the
future. The value of these securities is subject to market fluctuation during
this period and no income accrues to a Fund until settlement. At the time of
settlement, a when-issued security may be valued at less than its purchase
price. When entering into these transactions, a Fund relies on the other party
to consummate the transaction; if the other party fails to do so, the Fund may
be disadvantaged. Each Fund does not intend to purchase when-issued securities
for speculative purposes, but only in furtherance of its investment objective.
Temporary Defensive Investments. Each Fund may invest for temporary defensive
purposes up to 100% of its assets in short-term obligations. Such obligations
may include U.S. government securities, master demand notes, commercial paper
and notes, bank deposits and other financial institution obligations.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions and guidelines that are set forth in the SAI.
- -------------------------------------------------------------------------------
BUYING AND SELLING SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
Institutional investors may buy Institutional Shares of the Funds through
broker-dealers, banks and certain other financial intermediaries, or directly
through the Funds' distributor, Evergreen Distributor, Inc. ("EDI") Investors
may purchase Institutional shares at the public offering price, which equals
the class's net asset value per share ("NAV"). See "Offering Price and Other
Purchase Information" below.
Minimum Investment. The minimum initial investment in Institutional Shares is
$1 million, which may be waived in certain situations. There is no minimum
amount required for subsequent purchases.
Opening an Account. You may open an account by mailing a signed account
application to the particular Fund c/o Evergreen Service Company, P.O. Box
2121, Boston, Massachusetts 02106-2121. You may get an account application by
calling 1-800-633-2700.
Except as provided below, you can only purchase shares by wiring federal
funds to Evergreen Service Company (the "Service Company"). You may obtain
wiring instructions by calling 1-800-633-2700. When you call, the Service
Company representative will ask you for the following information: name of
authorized person; shareholder name; shareholder account number; name of the
Fund and share class; amount being wired; and wiring bank name.
Offering Price and Other Purchase Information. When you buy a Fund's shares,
you pay its NAV next determined after the Fund receives and accepts your
order. To receive that day's offering price, a Fund must receive and accept
your order by the close of regular trading (currently 4:00 p.m. Eastern time);
otherwise, you will receive the next day's offering price. For more
information, see "How the Funds Calculate Their NAV."
You may, at a Fund's discretion, pay for shares of a Fund with securities
instead of cash. Additionally, if you want to buy a Fund's shares equal in
amount to $5 million or more, the Fund may require you to pay for those shares
with securities instead of cash. A Fund will only accept securities that are
consistent with its investment objective, policies and restrictions. Also, a
Fund will value the securities in the manner described under "How the Funds
Calculate Their NAV." Investors who receive a Fund's shares for securities
instead of cash may pay such transaction costs as broker's commissions, taxes
or governmental fees.
9
<PAGE>
Signature Guarantee. For your protection, signatures on stock powers, and
written orders or authorizations must have a signature guarantee. A signature
guarantee can be provided by a U.S. stock exchange member, a bank, or other
persons eligible to guarantee signatures under the Securities Exchange Act of
1934 and the Service Company's policies. The Service Company may waive this
requirement or may require additional documentation in certain cases.
EXCHANGES
You may exchange Institutional Shares of any Fund for Institutional
Shares of any other Evergreen Select fund. You may exchange your shares
through your broker-dealer, by mail or by telephone. All exchange orders must
comply with the applicable requirements for purchases and redemptions and must
include your account number, the number or value of shares to be exchanged,
the class of shares, and the funds to and from which you wish to exchange.
Signatures on exchange orders must be guaranteed, as described above.
The Funds reserve the right to change or revoke the exchange privilege of
any shareholder or to limit or revoke any exchange. Currently, you may not
make more than five exchanges in a year or three exchanges in a calendar
quarter.
Please read the prospectus of the fund that you want to exchange into
before requesting your exchange.
For federal income tax purposes, an exchange is treated as a sale for
taxable investors.
DIVIDENDS
As a shareholder, you are entitled to your share of earnings on a Fund's
investments. You receive such earnings as either an income dividend or a
capital gains distribution. Income dividends come from the dividends that a
Fund earns from its stocks plus any interest it receives from its bonds. The
Fund realizes a capital gain whenever it sells a security for a higher price
than its tax basis.
Dividend Schedule. Each Fund pays shareholders its net investment income
monthly. Each Fund pays shareholders its net capital gains at least once a
year.
Payment Options. Unless you select another option on your account application,
your dividends and capital gains will be reinvested in additional shares of
the same class of the same Fund.
You may elect to receive some or all of your dividends and capital gains
in cash. Should you select this option, a check will be mailed to you or your
agent or trustee no later than seven days after the payment date.
TAXES
Each Fund intends to qualify as a regulated investment company (a "RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As long as a Fund qualifies as a RIC and distributes substantially
all of its net investment income and capital gains, it will not pay federal
income taxes on the earnings it distributes to shareholders.
Distributions to shareholders, whether taken in cash or reinvested in
shares, are generally considered taxable for federal income tax purposes as
follows:
. Income distributions and net short-term capital gains are taxable as
ordinary income.
. Long-term capital gains distributions are taxable as capital gains,
regardless of how long you have held your shares.
After each calendar year, the Service Company will mail you a statement
indicating which of that year's distributions you should treat as ordinary
income and which you should treat as capital gains. Distributions of income or
capital gains may also be subject to state and local taxes. You should always
consult your tax adviser for specific guidance as to the tax consequences of
your investment in the Funds.
11
<PAGE>
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from the Service
Company by calling toll free 1-800-633-2700 or by writing to the Service
Company.
Subaccounts. Special processing has been arranged with the Service Company for
banks and other institutions that wish to open multiple accounts (a master
account and subaccounts). An investor wishing to avail himself or herself of
the Service Company's subaccounting facilities will be required to enter into
a separate agreement, with the charges to be determined on the basis of the
level of services to be rendered. Subaccounts may be opened with the initial
investment or at a later date and may be established by an investor with
registration either by name or by number.
- -------------------------------------------------------------------------------
FUND DETAILS
- -------------------------------------------------------------------------------
FUND ORGANIZATION AND SERVICE PROVIDERS
Fund Structure. Each Fund is an investment pool, which invests shareholders'
money towards a specified goal. Each Fund is a diversified series of an open-
end, management investment company, called "Evergreen Select Equity Trust"
(the "Trust"). The Trust is a Delaware business trust organized on September
18, 1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee each Fund's activities, reviewing,
among other things, its performance and its contractual arrangements with
various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, your shares will be fully paid
and nonassessable. Shares of the Funds are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Funds do not hold annual shareholder meetings; a Fund may, however,
hold special meetings for such purposes as electing or removing Trustees,
changing fundamental policies and approving investment advisory agreements or
12b-1 plans. In addition, the Funds are prepared to assist shareholders in
communicating with one another for the purpose of convening a meeting to elect
Trustees.
Adviser. The adviser to each Fund, other than the Evergreen Select Small
Company Value Fund and Evergreen Select Special Equity Fund, is First Union
National Bank ("FUNB"), a subsidiary of First Union Corporation ("First
Union"). First Union is located at 301 South College Street, and FUNB at 201
South College Street, Charlotte, North Carolina 28288-0630. First Union and
its subsidiaries provide a broad range of financial services to individuals
and businesses throughout the U.S.
Each Fund, other than the Evergreen Select Small Company Value Fund and
Evergreen Select Special Equity Fund, pays FUNB a fee for its services as set
forth below. FUNB annual advisory fees are expressed as a percentage of
average net assets. In addition, FUNB has voluntarily agreed to reduce its
advisory fee for each Fund it advises, resulting in the net advisory fees that
are also indicated in the table below.
<TABLE>
<CAPTION>
FUND ADVISORY FEE NET ADVISORY FEE
---- ------------ ----------------
<S> <C> <C>
Evergreen Select Strategic Value Fund 0.70% 0.60%
Evergreen Select Diversified Value Fund 0.60% 0.50%
Evergreen Select Large Cap Blend Fund 0.70% 0.60%
Evergreen Select Common Stock Fund 0.70% 0.60%
Evergreen Select Strategic Growth Fund 0.70% 0.60%
Evergreen Select Equity Income Fund 0.70% 0.60%
Evergreen Select Social Principles Fund 0.80% 0.70%
Evergreen Select Balanced Fund 0.60% 0.50%
Evergreen Select Equity Index Fund 0.40% 0.06%
</TABLE>
12
<PAGE>
Evergreen Asset Management Corp. ("Evergreen Asset") is the investment
adviser to Evergreen Select Small Company Value Fund. Evergreen Asset is
located at 2500 Westchester Avenue, Purchase, New York 10577 and is also a
subsidiary of First Union. Evergreen Select Small Company Value Fund pays
Evergreen Asset an annual advisory fee equal to 0.90% of average net assets.
Currently, Evergreen Asset has voluntarily agreed to limit its advisory fee to
0.80% of the average net assets of the Fund.
The investment adviser of Evergreen Select Special Equity Fund is
Meridian Investment Company ("Meridian"). Meridian is an indirect subsidiary
of FUNB. Meridian's address is 55 Valley Stream Parkway, Malvern, Pennsylvania
19355. Meridian receives an annual fee equal to 1.50% of average daily net
assets of Evergreen Select Special Equity Fund. Currently Meridian has
voluntarily agreed to limit its advisory fee to 0.52% of the average net
assets of the Fund.
FUNB, Evergreen Asset and Meridian currently intend to continue waiving a
portion of each Fund's respective advisory fee, where applicable, through
November 30, 1998. FUNB, Evergreen Asset and Meridian may each modify or
cancel its expense waiver at any time.
Sub-Adviser. With respect to Evergreen Select Small Company Value Fund,
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company. Under that agreement, Lieber & Company furnishes Evergreen Asset with
information, investment recommendations, advice and assistance. Evergreen
Asset reimburses Lieber & Company for the direct and indirect costs it incurs
while performing its sub-advisory services. Lieber & Company is located at
2500 Westchester Avenue, Purchase, New York, 10566. Lieber & Company is a
subsidiary of First Union.
Portfolio Managers. Information about the individual portfolio managers
responsible for managing each Fund, including their occupations for the past
five years, is provided below.
<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER(S)
---- --------------------
<C> <S>
Evergreen Select The portfolio managers of the Fund are Mark C. Sipe,
Common Stock Fund CFA and Hanspeter Giger, CFA.
Mark C. Sipe, CFA. Since joining First Union in 1983,
Mr. Sipe has been a Senior Vice President. He has over
19 years of investment management experience. Aside
from co-managing the Fund, he is responsible for the
oversight of equity research efforts and all equity
investment processes.
Hanspeter Giger, CFA. Mr. Giger has 12 years of
investment management experience. For the past five
years, Mr. Giger has been a Vice President and Equity
Analyst of First Union. Aside from co-managing the
Fund, he is responsible for overseeing and
coordinating FUNB's Investment Research/Core team.
Prior to joining First Union in 1987, Mr. Giger held a
securities analyst position at Wells Fargo Bank in San
Francisco, CA.
Evergreen Select Equity Paul A. DiLella. Paul A. DiLella is a Vice President
Income Fund and Senior Investment Officer of FUNB. Aside from
managing the Fund, Mr. DiLella has been the portfolio
manager of the Evergreen Utility Fund since 1996. Mr.
DiLella joined First Fidelity Bank in 1982, which was
acquired by First Union in 1995, as Vice President and
Portfolio Manager of the Asset Management Group. Mr.
DiLella has over 16 years of investment experience.
Evergreen Select Large Eric Wiegand is the team leader of a group of four
Cap Blend Fund seasoned investment professionals who manage this
Fund.
Eric M. Wiegand. Eric Wiegand is also responsible for
managing the Evergreen Select Social Principles Fund.
Mr Wiegand has been Portfolio Manager for Evergreen
Select Large Cap Blend Fund since 1996 and for
Evergreen Select Social Principles Fund since 1994.
Prior to rejoining First Fidelity Bank in 1994, which
was acquired by First Union in 1995, Mr. Wiegand was
an Assistant VicePresident and Portfolio Manager with
First Fidelity Bank from 1989-1993. He also served as
a Vice President and Senior Portfolio Manager with PNC
Bank in Philadelphia from 1993-1994.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER(S)
---- --------------------
<C> <S>
Evergreen Select The portfolio managers of the Fund are W. Shannon
Strategic Growth Fund Reid, CFA, and Timothy M. Stevenson, CFA.
W. Shannon Reid, CFA. Shannon Reid has over 13 years
of investment experience. His responsibilities include
equity analysis and portfolio management for FUNB's
growth-style equity products. Mr. Reid has been with
First Union since 1988 as a Vice President and
Portfolio Manager.
Timothy M. Stevenson, CFA. Tim Stevenson has over 16
years of investment experience. Before joining First
Union in 1994 as a Senior Vice President and Portfolio
Manager, Tim served as a research director and
portfolio manager for Cedar Hill Associates, Inc. from
1989-1994.
Evergreen Select Timothy O'Grady is the team leader of a group of three
Strategic Value Fund seasoned professionals who manage the Strategic Value
Fund.
Timothy E. O'Grady. Since joining First Union (then
First Fidelity Bank) in 1986, Timothy O'Grady has been
a portfolio manager in the Employee Benefit
Equity/Balanced Unit of the Capital Management Group
in Newark, NJ. He is also co-manager of the Evergreen
Select Value Fund. He recently became a Senior Vice
President and Senior Portfolio Manager this year.
Evergreen Select The portfolio managers for the Fund are Stephen A.
Small Company Lieber, Peter J. Kovalski and Nola M. Falcone, CFA.
Value Fund
Stephen A. Lieber. Mr. Lieber is Chairman and Co-Chief
Executive Officer of Lieber & Co. and Evergreen Asset.
He was the founding Partner of Lieber & Co. in 1969
and served as Senior Partner until June, 1994. He is
Portfolio Manager of Evergreen Fund, Evergreen
Foundation Fund, Evergreen Tax Strategic Foundation
Fund, Evergreen VA Foundation Fund, and Evergreen VA
Fund.
Peter J. Kovalski, CFA. Mr. Kovalski joined Lieber &
Co. as an analyst in 1992. Previously, he was a
security Analyst at International Assets Advisory
Corp., 1990-1991; a Security Analyst at Ryan Beck &
Co., 1985-1987; and a Financial Analyst at
Ayco/American Express, 1984-1985.
Nola M. Falcone, CFA. Nola Falcone is President and
Co-Chief Executive Officer of Lieber & Co. and
Evergreen Asset. She was a General Partner of Lieber &
Co. from January, 1981 to June, 1994 and joined Lieber
& Co. as a Senior Portfolio Manager in 1974. She is
Portfolio Manager for Evergreen Income & Growth Fund,
Evergreen Small Cap Equity Income Fund and Evergreen
VA Small Cap Equity Income Fund.
Evergreen Select Social Eric M. Wiegand. Eric Wiegand is also responsible for
Principles Fund managing the Evergreen Select Large Cap Blend Fund.
Mr. Wiegand has been Portfolio Manager for Evergreen
Select Large Cap Blend Fund since 1996 and for
Evergreen Select Social Principles Fund since 1994.
Prior to rejoining First Fidelity Bank in 1994, which
was acquired by First Union in 1995, Mr. Wiegand was
an Assistant Vice President and Portfolio Manager with
First Fidelity Bank from 1989-1993. He also served as
a Vice President and Senior Portfolio Manager with PNC
Bank in Philadelphia from 1993-1994.
Evergreen Select Dean Hawes manages the Fund's equity portfolio. Rollin
Balanced Fund C. Williams is responsible for the fixed income
portfolio of the Fund.
Dean Hawes. Dean Hawes has over 22 years of investment
experience. He is currently portfolio manager of the
Evergreen Balanced Fund and a limited number of
institutional accounts. Since joining First Union from
Merrill Lynch in 1981, Mr. Hawes has been a Vice
President and Senior Portfolio Manager.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER(S)
---- --------------------
<C> <S>
Rollin C. Williams, CFA. Rollin Williams has over 28
years of investment and banking management experience. In
addition to managing First Union's Diversified Bond Group
Trust and the Evergreen U.S. Government Fund, he is also
responsible for the management of over $2.2 billion in
fixed income portfolios. Before joining First Union, Mr.
Williams was the head of fixed income investment at
Dominion Trust Company in Roanoke, VA. Mr. Williams has
been with First Union since 1993 when Dominion was
acquired by the bank; he started with Dominion Trust
Company in 1988 as Vice President and Portfolio Manager.
Since joining First Union, Mr. Williams has been a Vice
President and Senior Portfolio Manager.
Evergreen Select David C. Francis, CFA. David Francis joined First Union
Diversified in 1994 as Managing Director and Chief Investment
Value Fund Officer. David Francis has over 20 years of equity
analysis and investment experience. He is responsible for
directing the institutional investment organization for
the First Union Capital Management Group. Mr. Francis
joined First Union from Federated Investment Counseling,
a division of Federated Investors in Pittsburgh, PA,
where he managed equities for employee benefit and tax-
exempt separate accounts and mutual funds since 1978.
Evergreen Select Leonard Capristo. Mr. Capristo has 26 years of investment
Equity Index Fund experience and currently manages First Capital Group's
Enhanced Stock Market Fund. He joined First Union's
Capital Management Group in 1989 as the Director of
Equity Trading. He rejoined the Capital Management Group
in 1997 from First Union's Capital Markets Group where he
served as co-manager of public equity investments for
three years. Prior investment experience includes
positions with Dean Witter Reynolds, First Boston Corp.,
and Salomon Brothers.
Evergreen Select Joseph E. Stocke, CFA. Mr. Stocke joined Meridian in 1983
Special Equity Fund as an Assistant Investment Officer and since 1990 has
been a Senior Investment Manager/Equities with Meridian.
Mr. Stocke has been with Meridian since 1983 and prior to
July 1998 managed the Special Equity Fund and Core Equity
Fund of CoreFunds, Inc.
</TABLE>
Distributor. Evergreen Distributor, Inc. is each Fund's distributor. Evergreen
Distributor, Inc. is located at 125 West 55th Street, New York, New York 10019
and is a subsidiary of The BISYS Group, Inc. Evergreen Distributor, Inc.
markets the Funds and distributes their shares through broker-dealers,
financial planners and other financial representatives. Evergreen Distributor,
Inc. is not affiliated with First Union.
Transfer Agent. Evergreen Service Company is each Fund's transfer agent.
Evergreen Service Company is a subsidiary of First Union and is located at 200
Berkeley Street, Boston, MA 02116-5034. Evergreen Service Company handles
shareholder services, including record keeping and account statements,
distribution of dividends and capital gains and processing of transactions.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to each Fund. As administrator, and subject to the supervision
and control of the Trust's Board of Trustees, EIS provides the Funds with
facilities, equipment and personnel. For its services as administrator, EIS is
entitled to receive a fee based on the aggregate average daily net assets of
the Funds at a rate based on the total assets of all mutual funds administered
by EIS for which any affiliate of FUNB serves as investment advisor. The
administration fee is calculated in accordance with the following schedule:
<TABLE>
<CAPTION>
AGGREGATE AVERAGE DAILY NET ASSETS OF MUTUAL FUNDS FOR WHICH ANY
ADMINISTRATIVE FEE SUBSIDIARY OF FIRST UNION SERVES AS INVESTMENT ADVISER
------------------ ----------------------------------------------------------------
<S> <C>
0.050%.................. on the first $7 billion
0.035%.................. on the next $3 billion
0.030%.................. on the next $5 billion
0.020%.................. on the next $10 billion
0.015%.................. on the next $5 billion
0.010%.................. on assets in excess of $30 billion
</TABLE>
15
<PAGE>
OTHER INFORMATION AND POLICIES
Banking Laws. The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company or its affiliates (a "Bank") from
sponsoring, organizing, controlling, or distributing the shares of a
registered open-end investment company such as each Fund. However, a Bank may
act as investment adviser, transfer agent or custodian to a registered open-
end investment company. A Bank may also purchase shares of such company and
pay third parties for performing these functions.
Securities Transactions. Under policies established by the Trust's Board of
Trustees, each Fund's investment adviser selects broker-dealers to execute
portfolio transactions subject to the receipt of best execution. In so doing,
each Fund's investment adviser may select broker-dealers who are affiliated
with the adviser. Moreover, the Funds may pay higher commissions to broker-
dealers that provide research services, which the adviser may use in advising
the Funds or its other clients.
Portfolio Turnover. The portfolio turnover rates for Evergreen Select Equity
Index Fund and Evergreen Special Equity Fund appear in the Financial
Highlights on page 4. The estimated annual portfolio turnover rates for the
other Funds are not expected to exceed the rates set forth below.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
FUND NAME PORTFOLIO TURNOVER
- --------- ------------------
<S> <C>
Evergreen Select Strategic Value 35%
Evergreen Select Diversified Value 50%
Evergreen Select Large Cap Blend 75%
Evergreen Select Common Stock 50%
Evergreen Select Strategic Growth 125%
Evergreen Select Equity Income 50%
Evergreen Select Small Cap Value 50%
Evergreen Select Social Principles 75%
Evergreen Select Balanced 100%
</TABLE>
A high rate of portfolio turnover (100% or more) may involve correspondingly
greater brokerage commissions and other transaction costs, which a Fund and
its shareholders must bear. It may also result in the realization of larger
amounts of net short-term capital gains, distributions from which are taxable
to shareholders as ordinary income.
Code of Ethics. Each Fund and its investment adviser have adopted a code of
ethics incorporating policies on personal securities trading. In general,
these codes of ethics require that certain personnel of the Funds and their
investment advisers (1) abstain from engaging in certain personal trading
practices and (2) report certain personal trading activities.
Other Classes of Shares. Each Fund, other than Evergreen Select Large Cap
Blend Fund and Evergreen Select Social Principles Fund, offers two classes of
shares, Institutional and Institutional Service. Evergreen Select Large Cap
Blend Fund and Evergreen Select Social Principles Fund each offer three
classes of shares, Charitable, Institutional and Institutional Service. Only
Institutional Shares are offered through this prospectus. Call the Service
Company for information on the other classes of shares, including how to get a
prospectus.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Funds' investment advisers and
the Funds' other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Funds' investment advisers are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use and to obtain assurances that comparable steps are being taken
by the Funds' other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the Funds.
FUND PERFORMANCE
Total Return. Total return is the change in value of an investment in a Fund
over a given period, assuming that dividends and capital gains are reinvested
and that recurring charges are deducted. A cumulative total return reflects
actual performance over a stated period of time. An average annual total
return is a hypothetical rate of return that, if achieved annually, would have
produced the same cumulative total return if performance had been constant
over the entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
16
<PAGE>
Yield. Yield is the income generated by an investment in a Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond Funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Related Performance Information. EVERGREEN SELECT STRATEGIC VALUE FUND,
EVERGREEN SELECT LARGE CAP BLEND FUND, EVERGREEN SELECT COMMON STOCK FUND,
EVERGREEN SELECT STRATEGIC GROWTH FUND, EVERGREEN SELECT EQUITY INCOME FUND
AND EVERGREEN SELECT SOCIAL PRINCIPLES FUND. The Funds commenced operations on
or about November 24, 1997. On that date, each of seven common trust funds
(each a "CTF") transferred substantially all its assets to the Fund having
materially equivalent investment objectives, policies and limitations in
exchange for shares of such Fund. After such transfer, each Fund's portfolio
of investments was the same as the portfolio of the corresponding CTF
immediately prior to the transfer. The performance information below is that
of the CTF's and not the Funds.
The CTF's are for all practical purposes "predecessors" of the Funds. As
a result, the performance for each Fund's Institutional Shares is calculated
for periods before the commencement of the Funds' operations by including the
corresponding CTF's average annual total return. The CTF's average annual
total return is adjusted to reflect the deduction of fees and expenses as
stated under "Expenses." These fees and expenses include management fees and
certain other Fund expenses. These fees and expenses have not, however, been
adjusted to reflect any expense waivers or reimbursements. Applying the
expenses of the Funds rather than those of the CTF's makes the performance
figures below lower.
The quoted performance data includes the performance of the CTF's for
periods before the Trust's Registration Statement became effective. In the
case of Evergreen Select Strategic Growth Fund, where two CTFs transferred
assets into the Fund, performance information provided is for the larger of
the two CTF's. The CTF's were not registered under the Investment Company Act
of 1940, as amended (the "1940 Act") and thus were not subject to certain
investment restrictions that are imposed by the 1940 Act. If the CTF's had
been registered under the 1940 Act, their performance might have been
adversely affected. In addition, the CTF's were not subject to the provisions
of the Internal Revenue Code with respect to "regulated investment companies,"
which provisions, if imposed, could have adversely affected the CTF's
performance. Employee benefit plans that invest plan assets in the CTF's may
be subject to certain charges as set forth in their respective Plan Documents.
Total return figures would be lower for the period if they reflected these
charges.
<TABLE>
<CAPTION>
FUND NAME (PREDECESSOR CTF) 1 YEAR 3 YEARS 5 YEARS 10 YEARS (OR
(THE FUNDS COMMENCED OPERATIONS ON (ENDING (ENDING (ENDING SINCE INCEPTION
NOVEMBER 24, 1997) 10/31/96) 10/31/96) 10/31/96) INCEPTION) DATE
- ---------------------------------- --------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Evergreen Select Strategic
Value Fund
(Select Value Trust) 33.24% 26.47% 20.55% 16.58% 12/31/81
Institutional Shares
Evergreen Select Large Cap
Blend Fund
(Charitable Equity Trust) 29.69% 30.01% N/A 22.12% 12/31/93
Institutional Shares
Evergreen Select Common
Stock Fund
(Common Stock Trust) 30.07% 26.65% 16.67% 14.90% 12/31/81
Institutional Shares
Evergreen Select Strategic
Growth Fund
(Common Stock Growth
Trust) 28.41% N/A N/A 30.28% 12/31/94
Institutional Shares
Evergreen Select Equity
Income Fund
(Equity Income Trust) 25.08% 21.29% 14.43% 13.71% 12/31/78
Institutional Shares
Evergreen Select Social
Principles Fund
(Social Principles Trust) 28.33% 24.80% 18.98% 15.30% 5/31/88
Institutional Shares
</TABLE>
Performance of Evergreen Asset for Private Accounts Similar to Evergreen
Select Small Company Value Fund. Set forth below is composite performance
information relating to the historical performance of all actual, fee-paying,
fully discretionary equity accounts managed by Evergreen Asset. These accounts
have investment objectives, policies, strategies, and risks substantially
similar to those of Evergreen Select Small Company Value Fund.
Evergreen Asset's composite performance data shown below is presented in
accordance with the recommended standards of the Association for Investment
Management and Research (commonly referred to as AIMR) retroactively applied
for all time periods. All returns include cash and cash equivalents. These
results
17
<PAGE>
calculated by AIMR standards would be different from those obtained by using
the SEC method of accounting performance of a mutual fund. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. The composite's returns are calculated on a time-weighted basis and
do not reflect the deduction of fees or expenses.
The investment results of Evergreen Asset's composite presented below are
unaudited and are not intended to predict or suggest the future returns of the
Fund. The performance data set forth below is provided to illustrate the past
performance of Evergreen Asset in managing substantially similar accounts and
does not represent the performance of the Funds. Investors should be aware
that the use of a methodology different than that used below to calculate
performance could result in different performance data. The accounts contained
in the composite are not subject to the same type of expenses as the Funds and
are not subject to the diversification requirements, specific tax
restrictions, and investment limitations imposed on a mutual fund by federal
law. Consequently, the performance results for such accounts could have been
adversely affected if they had been regulated under federal laws.
<TABLE>
<CAPTION>
TOTAL ASSETS NO. OF
(IN MILLIONS) AT ACCOUNTS
12/31/97(SM AS OF
COMPOSITE M) FOR AIMR 12/31/97 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------- ---------------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Composite 296.4 3 39.51% 32.89% 20.39% 17.62%
</TABLE>
The composite performance reflecting the estimated expenses of the
Evergreen Select Small Company Value Fund would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
38.33% 31.71% 19.21% 16.43%
</TABLE>
Evergreen Select Balanced Fund and Evergreen Select Diversified Value
Fund. The following total return information is provided with reference to
Evergreen Balanced Fund and Evergreen Value Fund, the Class Y shares of which
were reorganized into the Institutional Shares of Evergreen Select Balanced
Fund and Evergreen Select Diversified Value Fund, respectively in November of
1997. Evergreen Balanced Fund and Evergreen Value Fund were series of
Evergreen Investment Trust, a registered investment company managed by
Evergreen Asset. Evergreen Balanced Fund and Evergreen Value Fund have
investment objectives, policies and strategies materially equivalent to those
of Evergreen Select Balanced Fund and Evergreen Select Diversified Value Fund,
respectively. Past performance of the Evergreen Balanced Fund and Evergreen
Value Fund is no guarantee of the future performance of Evergreen Select
Balanced Fund and Evergreen Select Diversified Value Fund. The performance
information set forth below is provided as of March 31, 1997 for Evergreen
Balanced Fund and as of December 31, 1997 for Evergreen Value Fund.
<TABLE>
<CAPTION>
EVERGREEN EVERGREEN
PERIOD BALANCED FUND VALUE FUND
------ ------------- ----------
<S> <C> <C>
One Year 19.97% 27.77%
Three Years 17.69% 22.49%
Five Years 13.13% 17.04%
Ten Years 12.80% 16.95%
Inception Date 4/1/91 1/3/91
</TABLE>
Evergreen Select Equity Index Fund and Evergreen Select Special Equity
Fund. The following total return information is provided with reference to
Equity Index Fund and Special Equity Fund, the Class Y Shares of which were
reorganized into the Institutional Shares of Evergreen Select Equity Index
Fund and Evergreen Select Special Equity Fund, respectively, in July 1998.
Equity Index Fund and Special Equity Fund were portfolios of CoreFunds, Inc.,
a registered investment company managed by CoreStates Investment Advisers,
Inc. Equity Index Fund and Special Equity Fund had investment objectives,
policies and strategies materially equivalent to those of Evergreen Select
Equity Index Fund and Evergreen Select Special Equity Fund, respectively. Past
performance of the Equity Index Fund and Special Equity Fund is no guarantee
of the future performance of Evergreen Select Equity Index Fund and Evergreen
Select Special Equity Fund, respectively. The performance information set
forth below is provided as of June 30, 1997 for the Class Y shares of the
predecessor funds.
<TABLE>
<CAPTION>
EQUITY SPECIAL
PERIOD INDEX FUND EQUITY FUND
------ ---------- -----------
<S> <C> <C>
One Year 34.44% 17.94%
Five Years 18.90% N/A
Ten Years 13.43% N/A
Inception Date 6/1/91 3/15/94
</TABLE>
18
<PAGE>
General. The Funds may include comparative performance information in
advertising or in marketing the Funds' shares. Such information could include
data from Lipper Analytical Services, Inc., Morningstar, Inc., CDA
Weisenberger and Value Line, or other industry publications or various indexes
such as the S&P 500 Index.
19
<PAGE>
INVESTMENT ADVISERS
First Union National Bank, 201 South College Street, Charlotte, North Carolina
28288
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
Meridian Investment Company, 55 Valley Stream Parkway, Malvern, Pennsylvania
19355
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
TRANSFER AGENT
Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116-
5034
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
541909Rv1
60652
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS
June 1, 1998, as amended August 1, 1998
- -------------------------------------------------------------------------------
EVERGREEN SELECT EQUITY TRUST
[LOGO OF EVERGREEN FUNDS APPEARS HERE]
- -------------------------------------------------------------------------------
EVERGREEN SELECT STRATEGIC VALUE FUND
EVERGREEN SELECT DIVERSIFIED VALUE FUND
EVERGREEN SELECT LARGE CAP BLEND FUND
EVERGREEN SELECT COMMON STOCK FUND
EVERGREEN SELECT STRATEGIC GROWTH FUND
EVERGREEN SELECT EQUITY INCOME FUND
EVERGREEN SELECT SMALL COMPANY VALUE FUND
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
EVERGREEN SELECT BALANCED FUND
EVERGREEN SELECT EQUITY INDEX FUND
EVERGREEN SELECT SPECIAL EQUITY FUND
(EACH A "FUND," TOGETHER THE "FUNDS")
INSTITUTIONAL SERVICE SHARES
This prospectus explains important information about the Institutional
Service Shares of the Evergreen Select Equity Trust, including information on
how the Funds invest and services available to shareholders. Please read this
prospectus before investing, and keep it for future reference.
When you consider investing in a Fund, remember that the higher the risk
of losing money, the higher the potential reward. The reverse is also
generally true: the lower the risk, the lower the potential reward.
By itself, no Fund is a complete investment plan. When considering an
investment in any of the Funds, remember to consider your overall investment
objectives and any other investments you own. You should also carefully
evaluate your ability to handle the risks posed by your investment in the
Funds. You can find information on the risks associated with investing in the
Funds under the section called "Fund Descriptions."
To learn more about the Evergreen Select Equity Trust, call 1-800-343-
2898 for a free copy of the Funds' statement of additional information
("SAI"). The Funds have filed the SAI with the Securities and Exchange
Commission and have incorporated it by reference (legally included it) into
this prospectus.
PLEASE REMEMBER THAT SHARES OF THE FUNDS ARE:
. NOT DEPOSITS OR OBLIGATIONS OF ANY BANK.
. NOT ENDORSED OR GUARANTEED BY ANY BANK.
. NOT INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY.
. SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSES........................................ 3
FINANCIAL HIGHLIGHTS............................ 4
FUND DESCRIPTIONS............................... 5
Investment Objectives........................ 5
Securities and Investment Practices
Used By The Funds........................... 6
BUYING AND SELLING SHARES....................... 9
How To Buy Shares............................ 9
How to Redeem Shares......................... 9
Additional Transaction Policies.............. 10
Exchanges.................................... 10
Dividends.................................... 11
Taxes........................................ 11
Shareholder Services......................... 11
FUND DETAILS.................................... 11
Fund Organization and Service
Providers................................... 11
Other Information And Policies............... 15
Fund Performance............................. 16
</TABLE>
2
<PAGE>
- -------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------
The tables and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest
in the Funds. Shareholder transaction expenses are fees paid directly from
your account when you buy or sell shares of a Fund. There are no shareholder
transaction expenses.
Annual operating expenses reflect the normal operating expenses of a
Fund, and include costs such as management, distribution and other fees. The
table below shows the Funds' estimated annual operating expenses for the
fiscal period ended June 30, 1998. Each Fund's example shows what you would
pay if you invested $1,000 over the periods indicated. The examples assume
that you reinvest all of your dividends and that each Fund's average annual
return will be 5%. The examples are for illustration purposes only and should
not be considered a representation of past or future expenses or annual
return. THE FUNDS' ACTUAL EXPENSES AND RETURNS WILL VARY. For a more complete
description of the various costs and expenses borne by the Funds see "Fund
Details."
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING MANAGEMENT OTHER TOTAL OPERATING
EXPENSES FEES EXPENSES EXPENSES (AFTER
(AS A PERCENTAGE OF (AFTER EXPENSE 12B-1 (AFTER EXPENSE EXPENSE WAIVERS OR
AVERAGE DAILY NET ASSETS) WAIVERS)(1) FEES REIMBURSEMENTS) REIMBURSEMENTS)(1)
- ------------------------- -------------- ------- --------------- ------------------
<S> <C> <C> <C> <C>
Evergreen Select
Strategic Value Fund 0.60% 0.25% 0.15% 1.00%
Evergreen Select
Diversified Value Fund 0.50% 0.25% 0.10% 0.85%
Evergreen Select Large
Cap Blend Fund 0.60% 0.25% 0.11% 0.96%
Evergreen Select Common
Stock Fund 0.60% 0.25% 0.10% 0.95%
Evergreen Select
Strategic Growth Fund 0.60% 0.25% 0.12% 0.97%
Evergreen Select Equity
Income Fund 0.60% 0.25% 0.17% 1.02%
Evergreen Select Small
Company Value Fund 0.80% 0.25% 0.20%(1) 1.25%
Evergreen Select Social
Principles Fund 0.70% 0.25% 0.16% 1.11%
Evergreen Select Balanced
Fund 0.50% 0.25% 0.11% 0.86%
Evergreen Select Equity
Index Fund(2) 0.06% 0.25% 0.31% 0.62%
Evergreen Select Special
Equity Fund(3) 0.74% 0.25% 0.31% 1.30%
EXAMPLE OF FUND EXPENSES 1 YEAR 3 YEARS
Evergreen Select
Strategic Value Fund $10 $32
Evergreen Select
Diversified Value Fund $9 $27
Evergreen Select Large
Cap Blend Fund $10 $31
Evergreen Select Common
Stock Fund $10 $30
Evergreen Select
Strategic Growth Fund $10 $31
Evergreen Select Equity
Income Fund $10 $32
Evergreen Select Small
Company Value Fund $13 $40
Evergreen Select Social
Principles Fund $11 $35
Evergreen Select Balanced
Fund $9 $27
Evergreen Select Equity
Index Fund $6 $20
Evergreen Select Special
Equity Fund $13 $41
</TABLE>
- -------
(1) Each Fund's investment adviser has voluntarily agreed to waive a portion
of each Fund's investment advisory fee. Without such waivers, each
management fee set forth above would be higher. The investment advisers
currently intend to continue this expense waiver through November 30,
1998; however, each may modify or cancel its expense waiver at any time.
See "Fund Details" for more information. In addition, the investment
adviser to Evergreen Select Small Company Value Fund has limited that
Fund's Other Expenses to 0.20%.
(2) The investment adviser of Evergreen Select Equity Index Fund has
undertaken to limit the Fund's Total Operating Expenses for a period of at
least two years to 0.96%.
(3) The investment adviser of Evergreen Select Special Equity Fund has
undertaken to limit the Fund's Total Operating Expenses for a period of at
least two years to 2.07%.
Absent expense waivers and/or reimbursements, the Total Operating
Expenses for each of the Funds would be as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEE 12B-1 OTHER EXPENSES (WITHOUT TOTAL FUND
FUND (WITHOUT WAIVERS) FEES REIMBURSEMENTS) OPERATING EXPENSES
- ---- ----------------- ----- ----------------------- ------------------
<S> <C> <C> <C> <C>
Evergreen Select
Strategic Value Fund 0.70% 0.25% 0.15% 1.10%
Evergreen Select
Diversified Value Fund 0.60% 0.25% 0.10% 0.95%
Evergreen Select Large
Cap Blend Fund 0.70% 0.25% 0.11% 1.06%
Evergreen Select Common
Stock Fund 0.70% 0.25% 0.10% 1.05%
Evergreen Select
Strategic Growth Fund 0.70% 0.25% 0.12% 1.07%
Evergreen Select Equity
Income Fund 0.70% 0.25% 0.17% 1.12%
Evergreen Select Small
Company Value Fund 0.90% 0.25% 0.28% 1.43%
Evergreen Select Social
Principles Fund 0.80% 0.25% 0.16% 1.21%
Evergreen Select
Balanced Fund 0.60% 0.25% 0.25% 0.96%
Evergreen Select Equity
Index Fund 0.40% 0.25% 0.31% 0.96%
Evergreen Select Special
Equity Fund 1.50% 0.25% 0.31% 2.06%
</TABLE>
3
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The financial highlights below pertain to Institutional Service Shares of
Evergreen Select Equity Index Fund and Evergreen Select Special Equity Fund.
These two Funds were formerly Equity Index Fund and Special Equity Fund,
respectively, portfolios of CoreFunds, Inc. They were reorganized into
Evergreen funds in July 1998. The information for Evergreen Select Equity
Index Fund has been audited by Ernst & Young LLP, independent auditors, for
the periods from inception through June 30, 1997. The information for
Evergreen Select Special Equity Fund has been audited by Ernst & Young LLP for
the periods from November 1, 1995 through June 30, 1997 and by the Fund's
prior auditor for the periods ended October 31, 1994 through October 31, 1995.
The information below for the period from July 1, 1997 to December 31, 1997
has not been audited. A report of Ernst & Young on the information it has
audited appears in the Funds' Annual Report which is incorporated by reference
in the SAI. The Annual Report may be obtained without charge.
The other Funds in this prospectus have a fiscal year end of June 30,
1998 and therefore audited financial highlights are not available.
EVERGREEN SELECT EQUITY INDEX FUND--INSTITUTIONAL SERVICE SHARES
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD ENDED DECEMBER 31, JUNE 30,
- --------------------------------------------------- 1997 1997(1)
------------ --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $ 37.37 $ 29.62
------- -------
Net Investment Income................................... $ 0.26 $ 0.32
Realized and Unrealized Net Gains on Securities......... $ 3.51 $ 8.05
Distributions from Net Investment Income................ $ (0.24) $ (0.38)
Distributions from Capital Gains........................ $ (1.24) $ (0.24)
------- -------
Net Asset Value, End of Period.......................... $ 39.66 $ 37.37
======= =======
TOTAL RETURN(2)......................................... 2.74%+ 28.58%+
Net Assets, End of Period (000 omitted)................. $ 9,113 $ 4,507
Ratio of Expenses to Average Net Assets................. 0.37% 0.37%
Ratio of Net Income to Average Net Assets............... 1.05% 1.51%
Ratio of Expenses to Average Net Assets (Excluding
Waivers)............................................... 0.71% 0.69%
Ratio of Net Income to Average Net Assets (Excluding
Waivers)............................................... 0.71% 1.19%
Portfolio Turnover Rate................................. 9% 11%
Average Commission Rate Paid(3)......................... $0.0621 $0.0545
</TABLE>
- -------
+ This figure has not been annualized.
(1) Commenced operations October 9, 1996. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load.
(3) Average commission rate paid per share for security purchases and sales
during the period.
EVERGREEN SELECT SPECIAL EQUITY FUND--INSTITUTIONAL SERVICE SHARES(3)*
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD
ENDED DECEMBER 31 JUNE 30 OCTOBER 31
- ----------------------- ----------- ------------------ ------------------
RETAIL PRIOR
CLASS CLASS(1)
1997 1997 1996 1995 1994
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD................ $ 11.25 $ 11.85 $ 11.42 $ 9.37 $ 10.00
-------- -------- -------- -------- --------
Net Investment Income..... $ (0.03) $ -- $ 0.08 $ 0.12 $ 0.06
Realized and Unrealized
Net Gains (Losses) on
Securities............... $ 0.87 $ 1.81 $ 2.11 $ 2.12 $ (0.63)
Distributions from Net
Investment Income........ $ -- $ (0.02) $ (0.07) $ (0.12) $ (0.06)
Distributions from Capital
Gains.................... $ (1.49) $ (2.39) $ (1.69) $ (0.07) $ --
-------- -------- -------- -------- --------
Net Asset Value, End of
Period................... $ 10.60 $ 11.25 $ 11.85 $ 11.42 $ 9.37
======== ======== ======== ======== ========
TOTAL RETURN(2)........... 7.88%+ 17.73% 22.14% 24.44% (5.72)%
Net Assets, End of Period
(000 omitted)............ $ 2,858 $ 2,347 $ 1,144 $ 734 $ 10,069
Ratio of Expenses to
Average Net Assets....... 1.32% 1.14% 0.37% 0.27% 0.15%
Ratio of Net Income to
Average Net Assets....... (0.69)% (0.12)% 0.91% 1.29% 1.06%
Ratio of Expenses to
Average Net Assets
(Excluding Waivers)...... 2.06% 2.07% 1.82% 2.24% 2.10%
Ratio of Net Loss to
Average Net Assets
(Excluding Waivers)...... (1.43)% (1.05)% (0.55)% (0.68)% (0.89)%
Portfolio Turnover
Rate**................... 32% 74% 72% 129% 39%
Average Commission Rate
Paid(4).................. $ 0.0628 $ 0.0257 $ 0.0539 n/a n/a
</TABLE>
- -------
* On February 21, 1995, the Shares of the Fund were redesignated as either
Retail or Institutional Shares. On that date, the Fund's net investment
income, expenses and distributions for the period November 1, 1994 through
February 20, 1995 were allocated to each class of Shares. The basis for the
allocation was the relative net assets of each class of Shares as of
February 21, 1995. The results were combined with the results of operations
and distributions for each applicable class for the period February 21, 1995
through October 31, 1995. For the year ended October 31, 1995, the Financial
Highlights' ratio of expenses, net investment income, total return, and the
per share investment activities and distributions reflect this allocation.
Also, on April 22, 1996, the assets of the Conestoga Special Equity Fund
were acquired by CoreFunds. At that time the Retail Class Shares of the Fund
were exchanged for Class A Shares.
** For the period ended June 30, 1996, transactions relating to the merger
were excluded from the calculation of the Portfolio Turnover Rate.
(1) Commenced operations March 15, 1994. Unless otherwise noted, all ratios
for the period have been annualized.
(2) Total return does not reflect applicable sales load. Additionally, total
return for the period ended June 30, 1996 is for an eight-month period.
(3) The per share amount for the period ended June 30, 1996 represents the
period from November 1, 1995 to June 30, 1996. All prior years are for the
period November 1 to October 31.
(4) Presentation of the rate is only required for fiscal periods beginning
after September 1, 1995.
+ This figure has not been annualized.
4
<PAGE>
- -------------------------------------------------------------------------------
FUND DESCRIPTIONS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
EVERGREEN SELECT STRATEGIC VALUE FUND seeks long-term capital
appreciation with current income as a secondary objective. The Fund invests
primarily in the equity securities of large companies (i.e., companies with
market capitalizations of over $5 billion at the time of investment) and mid-
size U.S. companies (i.e., companies with market capitalizations of over $1
billion but less than $5 billion at the time of investment). Generally
selected are stocks that the Fund's investment adviser believes are
undervalued relative to their true values and exhibit positive trends in their
underlying operations and earnings expectations.
EVERGREEN SELECT DIVERSIFIED VALUE FUND seeks long-term capital
appreciation with current income as a secondary objective. Normally, the Fund
invests primarily in equity securities of U.S. companies with prospects for
earnings growth and dividends. Generally selected are stocks that the Fund's
investment adviser believes are undervalued relative to their true values and
exhibit positive trends in their underlying operations and earnings
expectations.
EVERGREEN SELECT LARGE CAP BLEND FUND seeks to achieve long-term capital
growth. The Fund invests at least 65% of its total assets in the equity
securities of large companies (i.e. companies with market capitalizations of
over $5 billion at the time of investment). The Fund's stock selection is
based on a diversified style of equity management that allows it to invest in
both value and growth-oriented equity securities.
EVERGREEN SELECT COMMON STOCK FUND seeks long-term capital appreciation.
The Fund invests at least 65% of its total assets in common stocks of U.S.
companies. The Fund's stock selection is based on a diversified style of
equity management that allows it to invest in both value and growth-oriented
equity securities.
EVERGREEN SELECT STRATEGIC GROWTH FUND seeks long-term capital
appreciation. The Fund invests primarily in the equity securities of large and
mid-size U.S. companies, which, in the opinion of the Fund's investment
adviser, demonstrate the potential for superior and sustainable earnings
growth.
EVERGREEN SELECT EQUITY INCOME FUND seeks high current income as a
primary investment objective, and long-term capital appreciation as a
secondary objective. The Fund invests at least 65% of its total assets in
income producing equity securities that are generally characterized by having
below-average price to earnings ratios and higher dividend yields relative to
their industry groups. The Fund's stock selection is based on a diversified
style of equity management that allows it to invest in both value and growth-
oriented equity securities.
EVERGREEN SELECT SMALL COMPANY VALUE FUND seeks capital appreciation. The
Fund invests at least 65% of its total assets in the equity securities of
small companies (i.e., companies with market capitalizations of $1 billion or
less at the time of investment). The Fund invests in stocks of companies it
believes the market has temporarily undervalued in relation to such factors as
the company's assets, cash flow or earnings potential. The Fund's investment
adviser selects securities it thinks will rise in value sooner than most
observers anticipate, increasing the value of Fund shares.
EVERGREEN SELECT SOCIAL PRINCIPLES FUND seeks to provide long-term
capital growth. The Fund invests in the equity securities of mid-size
companies that respect human rights, play a role in local communities and
produce useful products in an environmentally sound way. The Fund will not
invest in companies that produce liquor, tobacco, weapons or nuclear energy.
EVERGREEN SELECT BALANCED FUND seeks long-term total return through
capital appreciation, dividends and interest income. The Fund invests in
growth oriented common and preferred stocks and fixed income securities to
provide a stable income flow. It is anticipated that the Evergreen Select
Balanced Fund's asset allocation will range between 40-75% in common and
preferred stocks, 25-50% in fixed income securities (including some
convertible securities) and 0-25% in cash equivalents.
EVERGREEN SELECT EQUITY INDEX FUND seeks investment results that achieve
price and yield performance similar to the Standard & Poor's Corporation
("S&P") 500 Index. The Fund invests primarily in stocks represented in the S&P
500 Index.
5
<PAGE>
EVERGREEN SPECIAL EQUITY FUND seeks capital growth. The Fund strives to
provide a return greater than stock market indices such as the Russell 3000
Equal Weighted Index by investing principally in a diversified portfolio of
common stocks of domestic companies that its investment adviser expects will
experience growth in earnings and price including stocks of companies with
small market capitalizations (i.e., under $1 billion), medium market
capitalizations (i.e., between $1 billion and $5 billion) and large market
capitalizations (i.e., over $5 billion).
Each Fund's investment objective(s) is nonfundamental. As a result, a
Fund may change its objective(s) without a shareholder vote. Each Fund has
also adopted certain fundamental investment policies which are mainly designed
to limit a Fund's exposure to risk. A Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
a Fund's fundamental investment policies or other related investment policies.
SECURITIES AND INVESTMENT PRACTICES USED BY THE FUNDS
You can find more information about the types of securities in which a
Fund may invest, the types of investment techniques a Fund may employ in
pursuit of its objective and a summary of related risks set forth below. The
Funds' SAI contains additional information about these investments and
investment techniques.
Equity Securities. Each Fund, with the exception of Evergreen Select Balanced
Fund, invests primarily in common stocks. A common stock represents an equity
(ownership) interest in a corporation. Each Fund expects to profit from stocks
primarily by (1) selling shares at a higher price than it paid and (2) earning
dividends.
Each Fund may invest in convertible securities. Convertible securities
are corporate securities that can be exchanged for a different type of
corporate security. Convertible securities normally purchased by the Funds are
convertible preferred stocks and convertible bonds, both of which can be
exchanged for common stocks.
Investments in stocks are subject to market risk, which is the
possibility that stock prices in general will decline over short or even
extended periods. Stock markets tend to move in cycles, with periods of rising
stock prices and periods of falling stock prices. Also, investing in small and
mid-sized companies involves greater risk than investing in larger companies.
Small and mid-sized company stock prices can rise very quickly and drop
dramatically in a short period of time. This volatility results from a number
of factors, including reliance by such companies on limited product lines,
markets, and financial and management resources. These and other factors may
make small and mid-sized companies more susceptible to setbacks or downturns.
These companies may experience higher rates of bankruptcy or other failures
than larger companies. They may be more likely to be negatively affected by
changes in management. In addition, the stock of small and mid-sized companies
may be less marketable than larger companies.
The Evergreen Select Equity Index Fund invests at least 90% of its total
assets in equity securities that represent a composite of the S&P 500 Index.
The S&P 500 Index consists of 500 common stocks, most of which are listed on
the New York Stock Exchange. In choosing the 500 stocks which are included in
the S&P 500 Index, S&P considers market values and industry diversification.
The correlation between the performance of the Fund and the S&P 500 Index is
expected to be, before expenses, 0.98 or higher. A correlation of 1.00 would
indicate perfect correlation.
The Evergreen Select Equity Index Fund investment portfolio will
generally consist of common stocks of as many issuers listed in the S&P 500
Index as is feasible. The Fund's investment adviser uses a computer model that
closely monitors the industry weightings of the S&P 500 Index. Although the
Fund's investment adviser does not screen securities by traditional methods of
financial and market analyses, it monitors the Fund's investments with a view
toward removing stocks of companies which exhibit extreme financial distress
or which may impair the Fund's ability to achieve its investment objective.
The Fund strives to provide a total return comparable to the S&P 500 Index.
Evergreen Select Equity Index Fund is not sponsored by nor affiliated with
S&P.
Foreign Investments. Evergreen Select Special Equity Fund may invest in
foreign securities. including securities of foreign issuers, securities issued
by foreign branches of U.S. banks and foreign banks, Canadian commercial paper
and Europaper (U.S. dollar-denominated commercial paper of foreign issuers),
American Depositary Receipts, European Depositary Receipts and Global
Depositary Receipts.
6
<PAGE>
There are special risks associated with international investing:
. Currency Risk--The possibility that changes in foreign exchange rates
will affect, favorably or unfavorably, the value of foreign
securities.
. Volatility--Investments in foreign stock markets can be more volatile
than investments in U.S. markets. Diplomatic, political or economic
developments could affect investment in foreign countries.
. Expense Considerations--Fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S.
exchanges. Expenses for custodial arrangements of foreign securities
may be somewhat greater than typical expenses for custodial
arrangements for handling U.S. securities of equal value.
. Foreign Taxes--Certain foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a
portion of these taxes are recoverable, the non-recovered portion of
foreign withholding taxes will reduce the income received from the
securities comprising the portfolio.
. Regulatory Environment--Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards
comparable to those applicable to U.S. domestic companies. There is
generally less government regulation of securities exchanges, brokers
and listed companies abroad than in the U.S. Foreign branches of U.S.
banks, foreign banks and foreign issuers may be subject to less
stringent reserve requirements and to different accounting, auditing,
reporting and record keeping standards than those applicable to
domestic branches of U.S. banks and U.S. domestic issuers.
Debt Securities. Evergreen Select Balanced Fund may invest in bonds or other
instruments used by corporations or governments to borrow money from
investors, including all kinds of convertible securities. When the Fund buys a
debt security, it expects to earn a variable or fixed rate of interest and it
expects the issuer to repay the amount borrowed at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. The main risks of investing in
debt securities are:
. Interest Rate Risk: The risk that a bond's prices will fall when
interest rates rise, and vice versa. Debt securities have varying
levels of sensitivity to interest rates. Longer-term bonds are
generally more sensitive to changes in interest rates than short term
bonds.
. Credit Risk: The chance that the issuer of a bond will have its credit
rating downgraded or will default (fail to make scheduled interest and
principal payments), potentially reducing the Fund's income and/or
share price.
Debt securities have varying degrees of quality. Investment grade bonds
are generally rated within the three highest grades as determined by Standard
& Poor's Ratings Group ("S & P") (AAA, AA, or A), Moody's Investors Service
("Moody's") (Aaa, Aa, or A), or Fitch IBCA, Inc. ("Fitch") (AAA, AA, or A) or
their respective equivalent ratings or, if not rated or rated by another
system, determined by the Fund's adviser to be of equivalent credit quality to
securities so rated. Bonds rated A or above are regarded as having a strong
capacity to pay interest and repay principal. However, adverse economic
conditions or changing circumstances may to lead to a weakened capacity to pay
interest and repay principal compared to higher-rated bonds.
The Fund is not required to sell or otherwise dispose of any security
that loses its rating or has its rating reduced after the Fund has purchased
it. Also, if S&P, Moody's or Fitch changes its ratings system, each Fund will
try to use comparable ratings as standards according to the Fund's investment
objectives and policies.
United States ("U.S.") Government Securities. U.S. government securities are
debt securities that are issued or guaranteed by the U.S. Treasury or by an
agency or instrumentality of the U.S. government. Some U.S. government
securities, such as Treasury bills, notes and bonds, are supported by the full
faith and credit of the U.S. Others, however, are supported only by the credit
of the instrumentality or by the right of the instrumentality to borrow from
the U.S. government.
While U.S. government securities are guaranteed as to principal and
interest, their market value is not guaranteed. Generally, U.S. government
securities are subject to the same interest rate and credit risks as other
fixed-income securities. However, since U.S. government securities are of the
highest credit quality, the credit risk is minimal. THE U.S. GOVERNMENT DOES
NOT GUARANTEE THE NET ASSET VALUE OF THE FUNDS' SHARES.
Mortgage-Backed Securities. A mortgage-backed security represents an interest
in a "pool" of commercial or residential mortgages. Payments of interest and
principal made by the individual borrowers on the mortgages that
7
<PAGE>
underlie the securities are passed through to the Fund. Evergreen Select
Balanced Fund may invest in mortgage-backed securities and other complex asset
backed securities, including collateralized mortgage obligations and stripped
mortgage-backed securities.
Early repayment of the mortgages underlying the securities may expose the
Fund to a lower rate of return when it reinvests the principal. The rate of
prepayments will affect the price and volatility of the mortgage-backed
security and may have the effect of shortening or extending the effective
maturity beyond what a fund anticipated at the time of purchase.
Like other debt securities, changes in interest rates generally affect
the value of a mortgage-backed security. Additionally, some mortgage-backed
securities may be structured so that they may be particularly sensitive to
interest rates.
Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate. Each Fund may purchase put and call
options, write covered put and call options, enter into futures contracts and
use options on futures contracts. The Funds may use futures and options for
hedging purposes only, not for speculation. The Evergreen Select Special
Equity Fund may neither purchase futures contracts or options where premiums
and margin deposit exceed 5% of total assets nor enter into futures contracts
or options where its obligations would exceed 20% of its total assets.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains or losses in the value of the derivative. Derivatives
can also cause a Fund to lose money if the Fund fails to correctly predict the
direction in which the underlying asset or economic factor will move. See
"Futures Transactions and Related Options Transactions" in the SAI.
Borrowing. Each Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. A Fund may only borrow as a temporary
measure for extraordinary or emergency purposes such as the redemption of Fund
shares. A Fund will not purchase securities while borrowings are outstanding
except to exercise prior commitments and to exercise subscription rights.
Securities Lending. To generate income and offset expenses, each Fund may lend
securities to broker-dealers and other financial institutions. While
securities are on loan, the borrower will pay the Fund any income accruing on
the security. Also, the Fund may invest any collateral it receives in
additional securities.
Gains or losses in the market value of a lent security will affect a Fund
and its shareholders. When a Fund lends its securities, it runs the risk that
it could not retrieve the securities on a timely basis, possibly losing the
opportunity to sell the securities at a desirable price. Also, if the borrower
files for bankruptcy or becomes insolvent, the Fund's ability to dispose of
the securities may be delayed.
Repurchase Agreements. Each Fund may enter into repurchase agreements. A
repurchase agreement is an agreement by a Fund to purchase a security and sell
it back for a specified price. The repurchase price reflects an agreed-upon
interest rate for the time period of the agreement. A Fund's risk is the
inability of the seller to pay the agreed-upon price at delivery date.
However, such risk is tempered by the ability of a Fund to sell the security
in the open market in case of default. In such a case, a Fund may incur costs
in disposing of the security which would increase Fund expenses.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by a Fund to sell a
security and repurchase it at a specified time and price. A Fund could lose
money if the market value of the securities it sold declines below their
repurchase price. Reverse repurchase agreements may be considered a form of
borrowing, and, therefore, a form of leverage. Leverage may magnify gains or
losses of a Fund.
Investing in Securities of Other Investment Companies. The Funds may invest in
securities of other investment companies. As a shareholder of another
investment company, a Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that a
Fund currently bears concerning its own operations and may result in some
duplication of fees.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. Each Fund
may enter into transactions whereby it commits to buying a security, but does
not pay for or take delivery of the security until some specified
8
<PAGE>
date in the future. The value of these securities is subject to market
fluctuation during this period and no income accrues to a Fund until
settlement. At the time of settlement, a when-issued security may be valued at
less than its purchase price. When entering into these transactions, a Fund
relies on the other party to consummate the transaction; if the other party
fails to do so, the Fund may be disadvantaged. Each Fund does not intend to
purchase when-issued securities for speculative purposes, but only in
furtherance of its investment objective.
Temporary Defensive Investments. Each Fund may invest for temporary defensive
purposes up to 100% of its assets in short-term obligations. Such obligations
may include U.S. government securities, master demand notes, commercial paper
and notes, bank deposits and other financial institution obligations.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions and guidelines that are set forth in the SAI.
- -------------------------------------------------------------------------------
BUYING AND SELLING SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
Institutional investors may buy Institutional Service Shares of the Funds
through broker-dealers, banks and certain other financial intermediaries, or
directly through the Funds' distributor, Evergreen Distributor, Inc. ("EDI")
Investors may purchase Institutional Service Shares at the public offering
price, which equals the class's net asset value per share ("NAV"). See
"Offering Price and Other Purchase Information" below.
Minimum Investment. The minimum initial investment in Institutional Service
Shares is $1 million, which may be waived in certain situations. There is no
minimum amount required for subsequent purchases.
Opening an Account. You may open an account by mailing a signed account
application to the particular Fund c/o Evergreen Service Company, P.O. Box
2121, Boston, Massachusetts 02106-2121. You may get an account application by
calling 1-800-343-3453.
Except as provided below, you can only purchase shares by wiring federal
funds to Evergreen Service Company (the "Service Company"). You may obtain
wiring instructions by calling 1-800-343-3453. When you call, the Service
Company representative will ask you for the following information: name of
authorized person; shareholder name; shareholder account number; name of the
Fund and share class; amount being wired; and wiring bank name.
Offering Price and Other Purchase Information. When you buy a Fund's shares,
you pay its NAV next determined after the Fund receives and accepts your
order. To receive that day's offering price, a Fund must receive and accept
your order by the close of regular trading (currently 4:00 p.m. Eastern time);
otherwise, you will receive the next day's offering price. For more
information, see "How the Funds Calculate Their NAV."
You may, at a Fund's discretion, pay for shares of a Fund with securities
instead of cash. Additionally, if you want to buy a Fund's shares equal in
amount to $5 million or more, the Fund may require you to pay for those shares
with securities instead of cash. A Fund will only accept securities that are
consistent with its investment objective, policies and restrictions. Also, a
Fund will value the securities in the manner described under "How the Funds
Calculate Their NAV." Investors who receive a Fund's shares for securities
instead of cash may pay such transaction costs as broker's commissions, taxes
or governmental fees.
HOW TO REDEEM SHARES
You may redeem shares of a Fund by mail, telephone or other types of
telecommunication.
Mail Redemptions. You may redeem shares on each day that the New York Stock
Exchange ("NYSE") is open by mailing a written request to the Service Company
at the following address:
Evergreen Service Company
P.O. Box 2121
Boston, Massachusetts 02106-2121
The signatures on the written request must be properly guaranteed, as
described below.
How To Redeem By Telephone. You may redeem your shares by calling 1-800-343-
3453 between the hours of 8:00 a.m. and 6:00 p.m. (Eastern time) on each
business day. You may also redeem shares by sending a
9
<PAGE>
facsimile to 617-210-2711 or by other means of wire communication. You must
state the Fund and class from which you want to redeem, the number or dollar
amount of shares you want to redeem and your account number. The telephone
redemption service is not available to you automatically. You must elect to do
so on your account application.
If you are unable to reach the Funds, or the Service Company by
telephone, you should redeem by mail.
The Service Company will wire your redemption proceeds to the commercial
bank account designated on the account application. If the Service Company
deems it appropriate, it may require additional documentation. Although at
present the Service Company pays the wire costs involved, it reserves the
right at any time to require the shareholder to pay such costs.
Redemption Value and Other Redemption Policies. When you sell shares, you
receive the NAV computed at the close of the NYSE on the day that a Fund
receives your request, if your request is received before 4:00 p.m. Eastern
time. If a Fund receives your redemption request after 4:00 p.m. Eastern time,
you will receive the next day's NAV. Generally, a Fund pays redemption
proceeds within seven days. The Funds may, at any time, change, suspend or
terminate any of the redemption methods described in this prospectus, except
redemptions by mail. For more information, see "How the Funds Calculate Their
NAV."
The Funds may, at their discretion, pay your redemption proceeds with
securities instead of cash. However, each Fund is obligated to redeem shares
solely in cash, up to the lesser of $250,000 or 1% of a Fund's total net
assets during any ninety day period for any one shareholder. See the SAI for
further details.
Except as otherwise noted, neither the Funds, the Service Company nor the
Funds' distributor assumes responsibility for the authenticity of any
instructions received by any of them from a shareholder by telephone. The
Service Company will employ reasonable procedures to confirm that instructions
received over the telephone or otherwise are genuine. Neither the Funds, the
Service Company nor the Funds' distributor will be liable when following
instructions received by telephone or otherwise that the Service Company
reasonably believes to be genuine.
Shareholders may only change information contained in their account
registration (such as the bank account designated to receive wire redemption
proceeds) by writing to the Service Company. Signatures on such written
instructions must be guaranteed, as described below.
ADDITIONAL TRANSACTION POLICIES
How The Funds Calculate Their NAV. A Fund's NAV equals the value of its
share without sales charges. A Fund calculates its NAV by adding up the total
value of its investments and other assets, subtracting its liabilities and
then dividing the result by the number of shares outstanding. The Funds
compute their NAV as of the close of regular trading (generally 4:00 p.m.
Eastern time) on each day that the NYSE is open.
The Funds' assets are valued primarily on the basis of market quotations.
Short-term securities with remaining maturities of sixty days or less for
which quotations are not readily available are valued on the basis of
amortized cost. In addition, securities for which quotations are not readily
available or do not reflect current market value are valued by a method that
the Board of Trustees believes accurately reflects fair value.
Signature Guarantee. For your protection, signatures on stock powers, and
written orders or authorizations must have a signature guarantee. A signature
guarantee can be provided by a U.S. stock exchange member, a bank, or other
persons eligible to guarantee signatures under the Securities Exchange Act of
1934 and the Service Company's policies. The Service Company may waive this
requirement or may require additional documentation in certain cases.
EXCHANGES
You may exchange Institutional Service Shares of any Fund for
Institutional Service Shares of any other Evergreen Select fund. You may
exchange your shares through your broker-dealer, by mail or by telephone. All
exchange orders must comply with the applicable requirements for purchases and
redemptions and must include your account number, the number or value of
shares to be exchanged, the class of shares, and the funds to and from which
you wish to exchange.
Signatures on exchange orders must be guaranteed, as described above.
10
<PAGE>
The Funds reserve the right to change or revoke the exchange privilege of
any shareholder or to limit or revoke any exchange. Currently, you may not
make more than five exchanges in a year or three exchanges in a calendar
quarter.
Please read the prospectus of the fund that you want to exchange into
before requesting your exchange.
For federal income tax purposes, an exchange is treated as a sale for
taxable investors.
DIVIDENDS
As a shareholder, you are entitled to your share of earnings on a Fund's
investments. You receive such earnings as either an income dividend or a
capital gains distribution. Income dividends come from the dividends that a
Fund earns from its stocks plus any interest it receives from its bonds. The
Fund realizes a capital gain whenever it sells a security for a higher price
than its tax basis.
Dividend Schedule. Each Fund pays shareholders its net investment income
monthly. Each Fund pays shareholders its net capital gains at least once a
year.
Payment Options. Unless you select another option on your account application,
your dividends and capital gains will be reinvested in additional shares of
the same class of the same Fund.
You may elect to receive some or all of your dividends and capital gains
in cash. Should you select this option, a check will be mailed to you or your
agent or trustee no later than seven days after the payment date.
TAXES
Each Fund intends to qualify as a regulated investment company (a "RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As long as a Fund qualifies as a RIC and distributes substantially
all of its net investment income and capital gains, it will not pay federal
income taxes on the earnings it distributes to shareholders.
Distributions to shareholders, whether taken in cash or reinvested in
shares, are generally considered taxable for federal income tax purposes as
follows:
. Income distributions and net short-term capital gains are taxable as
ordinary income.
. Long-term capital gains distributions are taxable as capital gains,
regardless of how long you have held your shares.
After each calendar year, the Service Company will mail you a statement
indicating which of that year's distributions you should treat as ordinary
income and which you should treat as capital gains. Distributions of income or
capital gains may also be subject to state and local taxes. You should always
consult your tax adviser for specific guidance as to the tax consequences of
your investment in the Funds.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from the Service
Company by calling toll free 1-800-343-3453 or by writing to the Service
Company.
Subaccounts. Special processing has been arranged with the Service Company for
banks and other institutions that wish to open multiple accounts (a master
account and subaccounts). An investor wishing to avail himself or herself of
the Service Company's subaccounting facilities will be required to enter into
a separate agreement, with the charges to be determined on the basis of the
level of services to be rendered. Subaccounts may be opened with the initial
investment or at a later date and may be established by an investor with
registration either by name or by number.
- -------------------------------------------------------------------------------
FUND DETAILS
- -------------------------------------------------------------------------------
FUND ORGANIZATION AND SERVICE PROVIDERS
Fund Structure. Each Fund is an investment pool, which invests shareholders'
money towards a specified goal. Each Fund is a diversified series of an open-
end, management investment company, called "Evergreen Select Equity Trust"
(the "Trust"). The Trust is a Delaware business trust organized on September
18, 1997.
11
<PAGE>
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee each Fund's activities, reviewing,
among other things, its performance and its contractual arrangements with
various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, your shares will be fully paid
and nonassessable. Shares of the Funds are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Funds do not hold annual shareholder meetings; a Fund may, however,
hold special meetings for such purposes as electing or removing Trustees,
changing fundamental policies and approving investment advisory agreements or
12b-1 plans. In addition, the Funds are prepared to assist shareholders in
communicating with one another for the purpose of convening a meeting to elect
Trustees.
Adviser. The adviser to each Fund, other than the Evergreen Select Small
Company Value Fund and Evergreen Select Special Equity Fund, is First Union
National Bank ("FUNB"), a subsidiary of First Union Corporation ("First
Union"). First Union is located at 301 South College Street, and FUNB at 201
South College Street, Charlotte, North Carolina 28288-0630. First Union and
its subsidiaries provide a broad range of financial services to individuals
and businesses throughout the U.S.
Each Fund, other than the Evergreen Select Small Company Value Fund and
Evergreen Select Special Equity Fund, pays FUNB a fee for its services as set
forth below. FUNB annual advisory fees are expressed as a percentage of
average net assets. In addition, FUNB has voluntarily agreed to reduce its
advisory fee for each Fund it advises, resulting in the net advisory fees that
are also indicated in the table below.
<TABLE>
<CAPTION>
FUND ADVISORY FEE NET ADVISORY FEE
---- ------------ ----------------
<S> <C> <C>
Evergreen Select Strategic Value Fund 0.70% 0.60%
Evergreen Select Diversified Value Fund 0.60% 0.50%
Evergreen Select Large Cap Blend Fund 0.70% 0.60%
Evergreen Select Common Stock Fund 0.70% 0.60%
Evergreen Select Strategic Growth Fund 0.70% 0.60%
Evergreen Select Equity Income Fund 0.70% 0.60%
Evergreen Select Social Principles Fund 0.80% 0.70%
Evergreen Select Balanced Fund 0.60% 0.50%
Evergreen Select Equity Index Fund 0.40% 0.06%
</TABLE>
Evergreen Asset Management Corp. ("Evergreen Asset") is the investment
adviser to Evergreen Select Small Company Value Fund. Evergreen Asset is
located at 2500 Westchester Avenue, Purchase, New York 10577 and is also a
subsidiary of First Union. Evergreen Select Small Company Value Fund pays
Evergreen Asset an annual advisory fee equal to 0.90% of average net assets.
Of that amount, Evergreen Asset has voluntarily agreed to reduce its advisory
fee by 0.10%, resulting in a net annual advisory fee of 0.80% of the average
net assets of the Fund.
The investment adviser of Evergreen Select Special Equity Fund is
Meridian Investment Company ("Meridian"). Meridian is an indirect subsidiary
of FUNB. Meridian's address is 55 Valley Stream Parkway, Malvern, Pennsylvania
19355. Meridian receives an annual fee equal to 1.50% of average daily net
assets of Evergreen Select Special Equity Fund. Currently Meridian has
voluntarily agreed to limit its advisory fee to 0.52% of the average net
assets of the Fund.
FUNB, Evergreen Asset and Meridian currently intend to continue waiving a
portion of each Fund's respective advisory fee, where applicable, through
November 30, 1998. FUNB, Evergreen Asset and Meridian may each modify or
cancel its expense waiver at any time.
Sub-Adviser. With respect to Evergreen Select Small Company Value Fund,
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company. Under that agreement, Lieber & Company furnishes Evergreen Asset with
information, investment recommendations, advice and assistance. Evergreen
Asset reimburses Lieber & Company for the direct and indirect costs it incurs
while performing its sub-advisory services. Lieber & Company is located at
2500 Westchester Avenue, Purchase, New York, 10566. Lieber & Company is a
subsidiary of First Union.
12
<PAGE>
Portfolio Managers. Information about the individual portfolio managers
responsible for managing each Fund, including their occupations for the past
five years, is provided below.
<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER(S)
---- --------------------
<C> <S>
Evergreen Select The portfolio managers of the Fund are Mark C. Sipe,
Common Stock Fund CFA and Hanspeter Giger, CFA.
Mark C. Sipe, CFA. Since joining First Union in 1983,
Mr. Sipe has been a Senior Vice President. He has over
19 years of investment management experience. Aside
from co-managing the Fund, he is responsible for the
oversight of equity research efforts and all equity
investment processes.
Hanspeter Giger, CFA. Mr. Giger has 12 years of
investment management experience. For the past five
years, Mr. Giger has been a Vice President and Equity
Analyst of First Union. Aside from co-managing the
Fund, he is responsible for overseeing and coordinating
FUNB's Investment Research/Core team. Prior to joining
First Union in 1987, Mr. Giger held a securities
analyst position at Wells Fargo Bank in San Francisco,
CA.
Evergreen Select Paul A. DiLella. Paul A. DiLella is a Vice President
Equity Income Fund and Senior Investment Officer of FUNB. Aside from
managing the Fund, Mr. DiLella has been the portfolio
manager of the Evergreen Utility Fund since 1996. Mr.
DiLella joined First Fidelity Bank in 1982, which was
acquired by First Union in 1995, as Vice President and
Portfolio Manager of the Asset Management Group. Mr.
DiLella has over 16 years of investment experience.
Evergreen Select Large Eric Wiegand is the team leader of a group of four
Cap Blend Fund seasoned investment professionals who manage this Fund.
Eric M. Wiegand. Eric Wiegand is also responsible for
managing the Evergreen Select Social Principles Fund.
Mr Wiegand has been Portfolio Manager for Evergreen
Select Large Cap Blend Fund since 1996 and for
Evergreen Select Social Principles Fund since 1994.
Prior to rejoining First Fidelity Bank in 1994, which
was acquired by First Union in 1995, Mr. Wiegand was an
Assistant Vice President and Portfolio Manager with
First Fidelity Bank from 1989-1993. He also served as a
Vice President and Senior Portfolio Manager with PNC
Bank in Philadelphia from 1993-1994.
Evergreen Select The portfolio managers of the Fund are W. Shannon Reid,
Strategic Growth Fund CFA, and Timothy M. Stevenson, CFA.
W. Shannon Reid, CFA. Shannon Reid has over 13 years of
investment experience. His responsibilities include
equity analysis and portfolio management for FUNB's
growth-style equity products. Mr. Reid has been with
First Union since 1988 as a Vice President and
Portfolio Manager.
Timothy M. Stevenson, CFA. Tim Stevenson has over 16
years of investment experience. Before joining First
Union in 1994 as a Senior Vice President and Portfolio
Manager, Tim served as a research director and
portfolio manager for Cedar Hill Associates, Inc. from
1989-1994.
Evergreen Select Timothy O'Grady is the team leader of a group of three
Strategic Value Fund seasoned professionals who manage the Strategic Value
Fund.
Timothy E. O'Grady. Since joining First Union (then
First Fidelity Bank) in 1986, Timothy O'Grady has been
a portfolio manager in the Employee Benefit
Equity/Balanced Unit of FUNB in Newark, NJ. He is also
co-manager of the Evergreen Select Value Fund. He
recently became a Senior Vice President and Senior
Portfolio Manager this year.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
FUND PORTFOLIO MANAGER(S)
---- --------------------
<C> <S>
Evergreen Select Small The portfolio managers for the Fund are Stephen A.
Company Value Fund Lieber, Peter J. Kovalski and Nola M. Falcone, CFA.
Stephen Lieber. Mr. Lieber is Chairman and Co-Chief
Executive Officer of Lieber & Co. and Evergreen Asset.
He was the founding Partner of Lieber & Co. in 1969
and served as Senior Partner until June, 1994. He is
Portfolio Manager of Evergreen Fund, Evergreen
Foundation Fund and Evergreen Tax Strategic Foundation
Fund.
Peter J. Kovalski, CFA. Mr. Kovalski joined Lieber &
Co. as an analyst in 1992. Previously, he was a
security Analyst at International Assets Advisory
Corp., 1990-1991; a Security Analyst at Ryan Beck &
Co., 1985-1987; and a Financial Analyst at
Ayco/American Express, 1984-1985.
Nola M. Falcone, CFA. Nola Falcone is President and
Co-Chief Executive Officer of Lieber & Co. and
Evergreen Asset. She was a General Partner of Lieber &
Co. from January, 1981 to June, 1994 and joined Lieber
& Co. as a Senior Portfolio Manager in 1974. She is
Portfolio Manager for Evergreen Income & Growth Fund
and Evergreen Small Cap Equity Income Fund.
Evergreen Select Eric M. Wiegand. Eric Wiegand is also responsible for
Social Principles Fund managing the Evergreen Select Large Cap Blend Fund.
Wiegand has been Portfolio Manager for Evergreen
Select Large Cap Blend Fund since 1996 and for
Evergreen Select Social Principles Fund since 1994.
Prior to rejoining First Fidelity Bank in 1994, which
was acquired by First Union in 1995, Mr. Wiegand was
an Assistant Vice President and Portfolio Manager with
First Fidelity Bank from 1989-1993. He also served as
a Vice President and Senior Portfolio Manager with PNC
Bank in Philadelphia from 1993-1994.
Evergreen Select Dean Hawes manages the Fund's equity portfolio. Rollin
Balanced Fund C. Williams is responsible for the fixed income
portfolio of the Fund.
Dean Hawes. Dean Hawes has over 22 years of investment
experience. He is currently Portfolio Manager of the
Evergreen Balanced Fund and a limited number of
institutional accounts. Since joining First Union from
Merrill Lynch in 1981, Mr. Hawes has been a Vice
President and Senior Portfolio Manager.
Rollin C. Williams, CFA. Rollin Williams has over 28
years of investment and banking management experience.
In addition to managing First Union's Diversified Bond
Group Trust and the Evergreen U.S. Government Fund, he
is also responsible for the management of over $2.2
billion in fixed income portfolios. Before joining
First Union, Mr. Williams was the head of fixed income
investment at Dominion Trust Company in Roanoke, VA.
Mr. Williams has been with First Union since 1993 when
Dominion was acquired by the bank; he started with
Dominion Trust Company in 1988 as Vice President and
Portfolio Manager. Since joining First Union, Mr.
Williams has been a Vice President and Senior
Portfolio Manager.
Evergreen Select David C. Francis, CFA. David Francis joined First
Diversified Value Fund Union in 1994 as Managing Director and Chief
Investment Officer. David Francis has over 20 years of
equity analysis and investment experience. He is
responsible for directing the institutional investment
organization for the First Union Capital Management
Group. Mr. Francis joined First Union from Federated
Investment Counseling, a division of Federated
Investors in Pittsburgh, PA, where he managed equities
for employee benefit and tax-exempt separate accounts
and mutual funds since 1978.
Evergreen Select Leonard Capristo. Mr. Capristo has 26 years of
Equity Index Fund investment experience and currently manages First
Capital Group's Enhanced Stock Market Fund. He joined
First Union's Capital Management Group in 1989 as the
Director of Equity Trading. He rejoined the Capital
Management Group in 1997 from First Union's Capital
Markets Group where he served as co-manager of public
equity investments for three years. Prior investment
experience includes positions with Dean Witter
Reynolds, First Boston Corp., and Salomon Brothers.
Evergreen Select Joseph E. Stocke, CFA. Mr. Stocke joined Meridian in
Special Equity Fund 1983 as an Assistant Investment Officer and since 1990
has been a Senior Investment Manager/Equities with
Meridian. Mr. Stocke has been with Meridian since 1983
and prior to July 1998 managed the Special Equity Fund
and Core Equity Fund of CoreFunds, Inc.
</TABLE>
14
<PAGE>
Distributor. Evergreen Distributor, Inc. is each Fund's distributor. Evergreen
Distributor, Inc. is located at 125 West 55th Street, New York, New York 10019
and is a subsidiary of The BISYS Group, Inc. Evergreen Distributor, Inc.
markets the Funds and distributes their shares through broker-dealers,
financial planners and other financial representatives. Evergreen Distributor,
Inc. is not affiliated with First Union.
Transfer Agent. Evergreen Service Company is each Fund's transfer agent.
Evergreen Service Company is a subsidiary of First Union and is located at 200
Berkeley Street, Boston, MA 02116-5034. Evergreen Service Company handles
shareholder services, including record keeping and account statements,
distribution of dividends and capital gains and processing of transactions.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to each Fund. As administrator, and subject to the supervision
and control of the Trust's Board of Trustees, EIS provides the Funds with
facilities, equipment and personnel. For its services as administrator, EIS is
entitled to receive a fee based on the aggregate average daily net assets of
the Funds at a rate based on the total assets of all mutual funds administered
by EIS for which any affiliate of FUNB serves as investment adviser. The
administration fee is calculated in accordance with the following schedule:
<TABLE>
<CAPTION>
AGGREGATE AVERAGE DAILY NET ASSETS OF MUTUAL FUNDS FOR WHICH ANY
ADMINISTRATIVE FEE SUBSIDIARY OF FIRST UNION SERVES AS INVESTMENT ADVISER
------------------ ----------------------------------------------------------------
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
</TABLE>
OTHER INFORMATION AND POLICIES
Distribution Plan.The Trust has adopted a distribution plan for the
Institutional Service Class shares of each Fund as allowed under the
Investment Company Act of 1940. Each Fund's distribution plan permits the Fund
to pay an annual service fee of up to 0.25% of the average daily net assets of
the class for personal services rendered to shareholders and/or the
maintenance of accounts. Each Fund's distribution plan may be terminated at
any time by vote of the Independent Trustees or by vote of a majority of the
outstanding Institutional Service Shares. For more information about the
Funds' distribution plans, see the SAI.
Banking Laws. The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company or its affiliates (a "Bank") from
sponsoring, organizing, controlling, or distributing the shares of a
registered open-end investment company such as each Fund. However, a Bank may
act as investment adviser, transfer agent or custodian to a registered open-
end investment company. A Bank may also purchase shares of such company and
pay third parties for performing these functions.
Securities Transactions. Under policies established by the Trust's Board of
Trustees, each Fund's investment adviser selects broker-dealers to execute
portfolio transactions subject to the receipt of best execution. In so doing,
each Fund's investment adviser may select broker-dealers who are affiliated
with the adviser. Moreover, the Funds may pay higher commissions to broker-
dealers that provide research services, which the adviser may use in advising
the Funds or its other clients.
Portfolio Turnover. The portfolio turnover rates for Evergreen Select Equity
Index Fund and Evergreen Special Equity Fund appear in the Financial
Highlights on page 4. The estimated annual portfolio turnover rates for the
other Funds are not expected to exceed the rates set forth below.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
FUND NAME PORTFOLIO TURNOVER
--------- ------------------
<S> <C>
Evergreen Select Strategic Value 35%
Evergreen Select Diversified Value 50%
Evergreen Select Large Cap Blend 75%
Evergreen Select Common Stock 50%
Evergreen Select Strategic Growth 125%
Evergreen Select Equity Income 50%
Evergreen Select Small Cap Value 50%
Evergreen Select Social Principles 75%
Evergreen Select Balanced 100%
</TABLE>
15
<PAGE>
A high rate of portfolio turnover (100% or more) may involve
correspondingly greater brokerage commissions and other transaction costs,
which a Fund and its shareholders must bear. It may also result in the
realization of larger amounts of net short-term capital gains, distributions
from which are taxable to shareholders as ordinary income.
Code of Ethics. Each Fund and its investment adviser have adopted a code of
ethics incorporating policies on personal securities trading. In general,
these codes of ethics require that certain personnel of the Funds and their
investment advisers (1) abstain from engaging in certain personal trading
practices and (2) report certain personal trading activities.
Other Classes of Shares. Each Fund, other than Evergreen Select Large Cap
Blend Fund and Evergreen Select Social Principles Fund, offers two classes of
shares, Institutional and Institutional Service. Evergreen Select Large Cap
Blend Fund and Evergreen Select Social Principles Fund each offer three
classes of shares, Charitable, Institutional and Institutional Service. Only
Institutional Service Shares are offered through this prospectus. Call the
Service Company for information on the other classes of shares, including how
to get a prospectus.
Year 2000 Risks. Like other investment companies, financial business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Funds' investment advisers and
the Funds' other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Funds' investment advisers are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use and to obtain assurances that comparable steps are being taken
by the Funds' other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the Funds.
FUND PERFORMANCE
Total Return. Total return is the change in value of an investment in a Fund
over a given period, assuming that dividends and capital gains are reinvested
and that recurring charges are deducted. A cumulative total return reflects
actual performance over a stated period of time. An average annual total
return is a hypothetical rate of return that, if achieved annually, would have
produced the same cumulative total return if performance had been constant
over the entire period. Average annual total returns smooth out variations in
performance; they are not the same as actual year-by-year results.
Yield. Yield is the income generated by an investment in a Fund over a given
period of time, expressed as an annual percentage rate. Yields are calculated
according to a standard that is required for all stock and bond Funds. Because
this differs from other accounting methods, the quoted yield may not equal the
income actually paid to shareholders.
Related Performance Information. EVERGREEN SELECT STRATEGIC VALUE FUND,
EVERGREEN SELECT LARGE CAP BLEND FUND, EVERGREEN SELECT COMMON STOCK FUND,
EVERGREEN SELECT STRATEGIC GROWTH FUND, EVERGREEN SELECT EQUITY INCOME FUND
AND EVERGREEN SELECT SOCIAL PRINCIPLES FUND. The Funds commenced operations on
or about November 24, 1997. On that date, each of seven common trust funds
(each a "CTF") transferred substantially all its assets to the Fund having
materially equivalent investment objectives, policies and limitations in
exchange for shares of such Fund. After such transfer, each Fund's portfolio
of investments was the same as the portfolio of the corresponding CTF
immediately prior to the transfer. The performance below is that of the CTF's
and not the Funds.
The CTFs are for all practical purposes "predecessors" of the Funds. As a
result, the performance for each Fund's Institutional Service Shares is
calculated for periods before the commencement of the Funds' operations, by
including the corresponding CTF's average annual total return. The CTF's
average annual total return is adjusted to reflect the deduction of fees and
expenses as stated under "Expenses." These fees and expenses include
management fees, Rule 12b-1 fees and certain other Fund expenses. These fees
and expenses have not, however, been adjusted to reflect any expense waivers
or reimbursements. Applying the expenses of the Funds rather than those of the
CTF's makes the performance figures below lower.
The quoted performance data includes the performance of the CTFs for
periods before the Trust's Registration Statement became effective. In the
case of Evergreen Select Strategic Growth Fund, where two CTFs transferred
assets into the Fund, performance information provided is for the larger of
the two CTFs. The CTFs were not registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and thus were not subject to certain
investment restrictions that are imposed by the 1940 Act. If the CTFs had been
16
<PAGE>
registered under the 1940 Act, their performance might have been adversely
affected. In addition, the CTFs were not subject to the provisions of the
Internal Revenue Code with respect to "regulated investment companies," which
provisions, if imposed, could have adversely affected the CTFs' performance.
Employee benefit plans that invest plan assets in the CTFs may be subject to
certain charges as set forth in their respective Plan Documents. Total return
figures would be lower for the period if they reflected these charges.
<TABLE>
<CAPTION>
FUND NAME (PREDECESSOR
CTF)
(THE FUNDS COMMENCED 10 YEARS
OPERATIONS 1 YEAR 3 YEARS 5 YEARS (OR SINCE INCEPTION
ON NOVEMBER 24, 1997) (ENDING 10/31/96) (ENDING 10/31/96) (ENDING 10/31/96) INCEPTION) DATE
---------------------- ----------------- ----------------- ----------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Evergreen Select
Strategic Value Fund
(Select Value Trust) 32.92% 26.16% 20.25% 16.29% 12/31/81
Institutional Service
Shares
Evergreen Select Large
Cap Blend Fund
(Charitable Equity
Trust) 29.38% 29.69% N/A 21.82% 12/31/93
Institutional Service
Shares
Evergreen Select Common
Stock Fund
(Common Stock Trust) 29.75% 26.34% 16.38% 14.62% 12/31/81
Institutional Service
Shares
Evergreen Select
Strategic Growth Fund
(Common Stock Growth
Trust) 28.10% N/A N/A 29.97% 12/31/94
Institutional Service
Shares
Evergreen Select Equity
Income Fund
(Equity Income Trust) 24.78% 20.99% 14.15% 13.43% 12/31/78
Institutional Service
Shares
Evergreen Select Social
Principles Fund
(Social Principles
Trust) 28.01% 24.50% 18.69% 15.02% 12/31/87
Institutional Service
Shares
</TABLE>
Performance of Evergreen Asset for Private Accounts Similar to Evergreen
Select Small Company Value Fund. Set forth below is composite performance
information relating to the historical performance of all actual, fee-paying,
fully discretionary equity accounts managed by Evergreen Asset. These accounts
have investment objectives, policies, strategies, and risks substantially
similar to those of Evergreen Select Small Company Value Fund.
Evergreen Asset's composite performance data shown below is presented in
accordance with the recommended standards of the Association for Investment
Management and Research (commonly referred to as AIMR) retroactively applied
for all time periods. All returns include cash and cash equivalents. These
results calculated by AIMR standards would be different from those obtained by
using the SEC method of accounting performance of a mutual fund. Securities
transactions are accounted for on the trade date and accrual accounting is
utilized. The composite's returns are calculated on a time-weighted basis and
do not reflect the deduction of fees or expenses.
The investment results of Evergreen Asset's composite presented below are
unaudited and are not intended to predict or suggest the future returns of the
Fund. The performance data set forth below is provided to illustrate the past
performance of Evergreen Asset in managing substantially similar accounts and
does not represent the performance of the Funds. Investors should be aware
that the use of a methodology different than that used below to calculate
performance could result in different performance data. The accounts contained
in the composite are not subject to the same type of expenses as the Funds and
are not subject to the diversification requirements, specific tax
restrictions, and investment limitations imposed on a mutual fund by federal
law. Consequently, the performance results for such accounts could have been
adversely affected if they had been regulated under federal laws.
<TABLE>
<CAPTION>
TOTAL ASSETS NO. OF
(IN MILLIONS) AT ACCOUNTS
12/31/97(SM M) AS OF
COMPOSITE FOR AIMR 12/31/97 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------- ---------------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Composite 296.4 3 39.51% 32.89% 20.39% 17.62%
</TABLE>
The composite performance reflecting the estimated expenses of the
Evergreen Select Small Company Value Fund would be as follows:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
38.08% 31.46% 18.96% 16.18%
</TABLE>
17
<PAGE>
Evergreen Select Balanced Fund and Evergreen Select Diversified Value
Fund. The following total return information is provided with reference to
Evergreen Balanced Fund and Evergreen Value Fund, the Class Y shares of which
were reorganized into Evergreen Select Balanced Fund and Evergreen Select
Diversified Value Fund, respectively in November 1997. Evergreen Balanced Fund
and Evergreen Value Fund were series of Evergreen Investment Trust, a
registered investment company managed by Evergreen Asset. Evergreen Balanced
Fund and Evergreen Value Fund have investment objectives, policies and
strategies materially equivalent to those of Evergreen Select Balanced Fund
and Evergreen Select Diversified Value Fund, respectively. Past performance of
the Evergreen Balanced Fund and Evergreen Value Fund is no guarantee of the
future performance of Evergreen Select Balanced Fund and Evergreen Select
Diversified Value Fund. The performance information set forth below is
provided as of March 31, 1997 for Evergreen Balanced Fund and as of December
31, 1997 for Evergreen Value Fund.
<TABLE>
<CAPTION>
EVERGREEN EVERGREEN
PERIOD BALANCED FUND VALUE FUND
------ ------------- ----------
<S> <C> <C>
One Year 19.97% 27.77%
Three Years 17.69% 22.49%
Five Years 13.13% 17.04%
Ten Years 12.80% 16.95%
Inception Date 4/1/91 1/3/91
</TABLE>
Evergreen Select Equity Index Fund and Evergreen Select Special Equity
Fund. The Following total return information is provided with reference to
Equity Index Fund and Special Equity Fund, the Class A and Class B Shares of
which were reorganized into the Institutional Service Shares of Evergreen
Select Equity Index Fund and Evergreen Select Special Equity Fund,
respectively, in July 1998. Equity Index Fund and Special Equity Fund were
portfolios of CoreFunds, Inc., a registered investment company managed by
CoreStates Investment Advisers, Inc. Equity Index Fund and Special Equity Fund
had investment objectives, policies and strategies materially equivalent to
those of Evergreen Select Equity Index Fund and Evergreen Select Special
Equity Fund, respectively. Past performance of the Equity Index Fund and
Special Equity Fund is no guarantee of the future performance of Evergreen
Select Equity Index Fund and Evergreen Select Special Equity Fund,
respectively. The performance information set forth below is provided as of
June 30, 1997, for the Class A shares of the predecessor funds. Class B shares
were not yet offered as of that date.
<TABLE>
<CAPTION>
EQUITY INDEX FUND SPECIAL EQUITY FUND
PERIOD ----------------- -------------------
<S> <C> <C>
One Year N/A 11.25%
Since Inception 30.93% 15.22%
Inception Date 10/9/96 3/15/94
</TABLE>
General. The Funds may include comparative performance information in
advertising or in marketing the Funds' shares. Such information could include
data from Lipper Analytical Services, Inc., Morningstar, Inc., CDA
Weisenberger and Value Line, or other industry publications or various indexes
such as the S&P 500 Index.
18
<PAGE>
INVESTMENT ADVISERS
First Union National Bank, 201 South College Street, Charlotte, North Carolina
28288
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
Meridian Investment Company, 55 Valley Stream Parkway, Malvern, Pennsylvania
19355
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
TRANSFER AGENT
Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116-
5034
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
542267Rv1
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
June 1, 1998
As amended August 1, 1998
EVERGREEN SELECT STRATEGIC VALUE FUND
EVERGREEN SELECT DIVERSIFIED VALUE FUND
EVERGREEN SELECT LARGE CAP BLEND FUND
EVERGREEN SELECT COMMON STOCK FUND
EVERGREEN SELECT STRATEGIC GROWTH FUND
EVERGREEN SELECT EQUITY INCOME FUND
EVERGREEN SELECT SMALL COMPANY VALUE FUND
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
EVERGREEN SELECT BALANCED FUND
EVERGREEN SELECT EQUITY INDEX FUND
EVERGREEN SELECT SPECIAL EQUITY FUND
(EACH A "FUND" TOGETHER THE "FUNDS")
EACH FUND IS A SERIES OF AN OPEN-END MANAGEMENT
INVESTMENT COMPANY, KNOWN AS EVERGREEN SELECT
EQUITY TRUST (THE "TRUST").
Each Fund offers at least two classes of shares: Institutional Shares and
Institutional Service Shares. In addition, Evergreen Select Large Cap Blend Fund
and Evergreen Select Social Principles Fund offer Charitable Shares. This
Statement of Additional Information ("SAI") provides additional information
about the applicable classes of shares for the Funds listed above. It is not a
prospectus but you should read it in conjunction with Fund prospectuses dated
June 1, 1998, as supplemented from time to time. You may obtain prospectuses
from Evergreen Distributor, Inc.
24434
<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES........................................................ 3
Fundamental Investment Policies................................... 3
Additional Information on Securities and Investment
Practices................................................... 5
MANAGEMENT OF THE TRUST....................................................18
PRINCIPAL HOLDERS OF FUND SHARES...........................................20
INVESTMENT ADVISORY AND OTHER SERVICES.....................................27
Investment Advisers...............................................27
Distributor.......................................................28
Distribution Plan.................................................28
Additional Service Providers......................................29
BROKERAGE..................................................................30
Selection of Brokers..............................................30
Brokerage Commissions.............................................30
General Brokerage Policies........................................31
TRUST ORGANIZATION.........................................................31
Form of Organization..............................................31
Description of Shares.............................................31
Voting Rights.....................................................31
Limitation of Trustees' Liability.................................32
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES............................32
Exchanges.........................................................32
How and When the Funds Calculate Their Net Asset Value
Per Share ("NAV")...........................................32
How The Funds Value The Securities They Own.......................32
Shareholder Services..............................................33
PRINCIPAL UNDERWRITER......................................................33
ADDITIONAL TAX INFORMATION.................................................34
EXPENSES...................................................................36
CALCULATION OF PERFORMANCE DATA............................................37
ADDITIONAL INFORMATION.....................................................38
FINANCIAL STATEMENTS.......................................................38
24434
<PAGE>
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). Where necessary, an explanation beneath a fundamental policy
describes a Funds' practices with respect to that policy, as allowed by current
law. If the law governing a policy changes, the Fund's practices may change
accordingly without a shareholder vote. Unless otherwise stated, all references
to the assets of the Fund are in terms of current market value.
1. DIVERSIFICATION
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
FURTHER EXPLANATION OF DIVERSIFICATION POLICY
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States ("U.S.") government or its agencies or
instrumentalities.
2. CONCENTRATION
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S.
government or its agencies or instrumentalities).
FURTHER EXPLANATION OF CONCENTRATION POLICY
Each Fund may not invest more than 25% of its total assets, taken at
market value, in the securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities).
3. ISSUING SENIOR SECURITIES
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. BORROWING
Each Fund may not borrow money, except to the extent permitted by
applicable law.
FURTHER EXPLANATION OF BORROWING POLICY
Each Fund may borrow from banks in an amount up to 33 1/3% of its total
assets, taken at market value. Each Fund may also borrow up to an additional 5%
of its total assets from banks or
24434
3
<PAGE>
others. Each Fund may borrow only as a temporary measure for extraordinary or
emergency purposes such as the redemption of Fund shares. Each Fund may not
purchase securities while borrowings are outstanding except to exercise prior
commitments and to exercise subscription rights (as defined in the 1940 Act) or
enter into reverse repurchase agreements, in amounts up to 33 1/3 % of its total
assets (including the amount borrowed). Each Fund may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of portfolio
securities. Each Fund may purchase securities on margin and engage in short
sales to the extent permitted by applicable law.
5. UNDERWRITING
Each Fund may not underwrite securities of other issuers, except
insofar as each Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
6. REAL ESTATE
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, each Fund may invest in (a) securities that
are directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. COMMODITIES
Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that each Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.
8. LENDING
Each Fund may not make loans to other persons, except that each Fund
may lend its portfolio securities in accordance with applicable law. The
acquisition of investment securities or other investment instruments shall not
be deemed to be the making of a loan.
FURTHER EXPLANATION OF LENDING POLICY
To generate income and offset expenses, each Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay a Fund any income accruing on the security. Each
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect a Fund and its shareholders.
When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. A Fund has the right to call a
loan and obtain the securities lent at any time on notice of not more than five
business days. A Fund may pay reasonable fees in connection with such loans.
4
<PAGE>
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES
The investment objectives of each Fund and a description of the
securities in which each Fund may invest is set forth in the Funds' prospectus.
The following expands upon the discussion in the prospectus regarding certain
investments of the Funds.
Equity Securities
Equity securities consist primarily of common stocks and securities
convertible into common stocks. Investing in common stocks, particularly those
having growth characteristics, frequently involves greater risks (and possibly
greater rewards) than investing in other types of securities. Common stock
prices tend to be more volatile and companies having growth characteristics may
sometimes be unproven.
Investing in companies with medium market capitalizations involves
greater risk than investing in larger companies. The stock prices of mid-cap
companies can rise quickly and drop substantially in a short period of time.
This volatility results from a number of factors, including reliance by these
companies on relatively limited product lines, markets, and financial resources.
These and other factors may make mid-cap companies more susceptible to setbacks
or downturns.
Investing in companies with small market capitalizations involves
greater risk than investing in larger companies. Their stock prices can rise
very quickly and drop dramatically in a short period of time. This volatility
results from a number of factors, including reliance by these companies on
limited product lines, markets, and financial and management resources. These
and other factors may make small cap companies more susceptible to setbacks or
downturns. These companies may experience higher rates of bankruptcy or other
failures than larger companies. They may be more likely to be negatively
affected by changes in management. In addition, the stock of small cap companies
may be thinly traded.
Derivatives
Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates, and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices, and stock indices.
Derivatives may be standardized, exchange-traded contracts or customized,
privately negotiated contracts. Exchange-traded derivatives tend to be more
liquid and subject to less credit risk than those that are privately negotiated.
There are four principal types of derivative instruments -- options,
futures, forwards, and swaps -- from which virtually any type of derivative
transaction can be created. Debt instruments that incorporate one or more of
these building blocks for the purpose of determining the principal amount of
and/or rate of interest payable on the debt instruments are often referred to as
"structured securities." An example of this type of structured security is
indexed commercial paper. The term is also used to describe certain securities
issued in connection with the restructuring of certain foreign obligations. The
term "derivative" is also sometimes used to describe securities involving rights
to a portion of the cash flows from an underlying pool of mortgages or other
assets from which payments are passed through to the owner of, or that
collateralize, the securities.
The Funds can use derivatives to earn income, to enhance returns, to
hedge or adjust the risk profile of the portfolio, in place of more traditional
direct investments or to obtain exposure to
5
<PAGE>
otherwise inaccessible markets. A Fund's use derivatives for non-hedging
purposes entails greater risks than if a Fund were to use derivatives solely for
hedging purposes.
Derivatives are a valuable tool which, when used properly, can provide
significant benefit to a Fund's shareholders. Each Fund's investment adviser is
not an aggressive user of derivatives with respect to the Funds. However, a Fund
may take positions in those derivatives that are within its investment policies
if, in the judgment of the Adviser (as hereinafter defined), this represents an
effective response to current or anticipated market conditions. the Adviser's
use of derivatives is subject to continuous risk assessment and control from the
standpoint of a Fund's investment objective and policies. While the judicious
use of derivatives by experienced investment managers, such as the Adviser, can
be beneficial, derivatives also involve risks different from, and, in certain
cases, greater than, the risks presented by more traditional investments.
Following is a general discussion of important risk factors and issues
concerning the use of derivatives that investors should understand before
investing in a Fund.
Market Risk -- This is the general risk attendant to all investments
that the value of a particular investment will decline or otherwise change in a
way detrimental to a Fund's interest.
Management Risk -- Derivative products are highly specialized
instruments that require investment techniques and risk analyses different from
those associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument, but also of the derivative
itself, without the benefit of observing the performance of the derivative under
all possible market conditions. Because derivatives are complex, each Fund and
its Adviser must (1) maintain controls to monitor the transactions entered into,
(2) assess the risk that a derivative adds to a Fund's portfolio and (3)
forecast price, interest rate or currency exchange rate movements correctly.
Credit Risk -- This is the risk that a Fund may lose money because the
other party to a derivative (usually called a "counter party") failed to comply
with the terms of the derivative contract. The credit risk for exchange-traded
derivatives is generally less than for privately negotiated derivatives, since
the clearing house, which is the issuer or counter party to each exchange-traded
derivative, guarantees performance. This guarantee is supported by a daily
payment system (i.e., margin requirements) operated by the clearing house to
reduce overall credit risk. For privately negotiated derivatives, there is no
similar clearing agency guarantee. Therefore, a Fund considers the
creditworthiness of each counter party to a privately negotiated derivative in
evaluating potential credit risk.
Liquidity Risk -- Liquidity risk is the possibility that a Fund will
have difficult buying or selling a particular instrument. If a derivative
transaction is particularly large or if the relevant market is illiquid (as is
the case with many privately negotiated derivatives), a Fund may not be able to
initiate a transaction or liquidate a position at an advantageous price.
Leverage Risk -- Since many derivatives have a leverage component,
adverse changes in the value or level of the underlying asset, rate or index can
result in a loss substantially greater than the amount invested in the
derivative itself. In the case of swaps, the risk of loss generally is related
to a notional principal amount, even if the parties have not made any initial
investment. Certain derivatives have the potential for unlimited loss,
regardless of the size of the initial investment.
Other Risks -- Other risks in using derivatives include the risk of
mispricing or improper valuation and the inability of derivatives to correlate
perfectly with underlying assets, rates, and indices. Many derivatives, in
particular privately negotiated derivatives, are complex and often valued
subjectively. Improper valuations can result in increased cash payment
requirements to
6
<PAGE>
counter parties or a loss of value to a Fund. Derivatives do not always
perfectly or even highly correlate or track the value of the assets, rates or
indices they are designed to closely track. Consequently, a Fund's use of
derivatives may not always be an effective means of, and sometimes could be
counterproductive to, furthering a Fund's investment objective.
Options Transactions
Writing Covered Options. The Funds may write (i.e., sell) covered call
and put options. By writing a call option, a Fund becomes obligated during the
term of the option to deliver the securities underlying the option upon payment
of the exercise price. Writing a put option obligates the Fund during the term
of the option to purchase the securities underlying the option at the exercise
price if the option buyer exercises the option. A Fund also may write straddles
(combinations of covered puts and calls on the same underlying security).
The Funds may only write "covered" options. This means that while a
Fund is obligated as the writer of a call option it will own the underlying
securities subject to the option or, with call options on U.S. Treasury bills,
it might own similar U.S. Treasury bills. If a Fund has written options against
all of its securities that are available for writing options, the Fund may be
unable to write additional options unless it sells some of its portfolio
holdings to obtain new securities against which it can write options. If this
were to occur, higher portfolio turnover and correspondingly greater brokerage
commissions and other transaction costs may result. The Funds do not expect,
however, that this will occur. A Fund will be considered "covered" with respect
to a put option it writes if, while it is obligated as the writer of the put
option, it deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the exercise price of the
option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. A Fund receives a premium from writing a
call or put option, which it retains whether or not the option is exercised. By
writing a call option, a Fund might lose the potential for gain on the
underlying security while the option is open, and, by writing a put option, a
Fund might become obligated to purchase the underlying security for more than
its current market price upon exercise.
Purchasing Options. The Funds may purchase put or call options,
including put or call options for offsetting previously written put or call
options of the same series. Once a Fund has written a covered option, it will
continue to hold the segregated securities or assets until it effects a closing
purchase transaction. If the Fund is unable to close the option position, it
must hold the segregated securities or assets until the option expires or is
exercised. An option position may be closed out only in a secondary market for
an option of the same series. Although a Fund generally writes only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular option at
any particular time, and, for some options, no secondary market may exist. In
such event, effecting a closing transaction for a particular option might not be
possible.
Options on some securities are relatively new, and predicting how much
trading interest there will be for such options is impossible. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair a Fund's ability to
use such options to achieve its investment objective.
Options Trading Markets. The Funds trade in options that are generally
listed on national securities exchanges, currently including the Chicago Board
Options Exchange and the New York,
7
<PAGE>
American, Pacific and Philadelphia Stock Exchanges. Options on some securities
are traded in the over-the-counter market, and may not be listed on any
exchange. Options traded in the over-the-counter market involve a greater risk
that the securities dealers participating in the transactions could fail to meet
their obligations to a Fund.
A Fund will include the premiums it has paid for the purchase of
unlisted options and the value of securities used to cover options it has
written for purposes of calculating whether the Fund has complied with its
policies on illiquid securities.
Futures Transactions and Related Options Transactions
The Funds intend to enter into financial futures contracts as a hedge
against changes in prevailing levels of interest rates to seek relative
stability of principal and to establish more definitely the effective return on
securities held or intended to be acquired by the Funds or as a hedge against
changes in the prices of securities held by a Fund or to be acquired by a Fund.
A Fund's hedging may include sales of futures as an offset against the effect of
expected increases in interest rates or securities prices and purchases of
futures as an offset against the effect of expected declines in interest rates.
For example, when a Fund anticipates a significant market or market
sector advance, it will purchase a stock index futures contract as a hedge
against not participating in such advance at a time when a Fund is not fully
invested. The purchase of a futures contract serves as a temporary substitute
for the purchase of individual securities which may then be purchased in an
orderly fashion. As such purchases are made, an equivalent amount of index based
futures contracts would be terminated by offsetting sales. In contrast, a Fund
would sell stock index futures contracts in anticipation of or in a general
market or market sector decline that may adversely affect the market value of
the Fund's portfolio. To the extent that the Fund's portfolio changes in value
in correlation with a given index, the sale of futures contracts on that index
would substantially reduce the risk to the portfolio of a market decline or
change in interest rates, and, by doing so, provide an alternative to the
liquidation of the Fund's securities positions and the resulting transaction
costs.
The Funds intend to engage in options transactions which are related to
financial futures contracts for hedging purposes and in connection with the
hedging strategies described above.
Although techniques other than sales and purchases of futures contracts
and related options transactions could be used to reduce the Funds' exposure to
interest rate and/or market fluctuations, the Funds may be able to hedge their
exposure more effectively and perhaps at a lower cost through using futures
contracts and related options transactions. While the Funds do not intend to
take delivery of the instruments underlying futures contracts they hold, the
Funds do not intend to engage in such futures contracts for speculation.
8
<PAGE>
Futures Contracts
Futures contracts are transactions in the commodities markets rather
than in the securities markets. A futures contract creates an obligation by the
seller to deliver to the buyer the commodity specified in the contract at a
specified future time for a specified price. The futures contract creates an
obligation by the buyer to accept delivery from the seller of the commodity
specified at the specified future time for the specified price. In contrast, a
spot transaction creates an immediate obligation for the seller to deliver and
the buyer to accept delivery of and pay for an identified commodity. In general,
futures contracts involve transactions in fungible goods such as wheat, coffee
and soybeans. However, in the last decade an increasing number of futures
contracts have been developed which specify financial instruments or financially
based indexes as the underlying commodity.
U.S. futures contracts are traded only on national futures exchanges
and are standardized as to maturity date and underlying financial instrument.
The principal financial futures exchanges in the United States are The Board of
Trade of the City of Chicago, the Chicago Mercantile Exchange, the International
Monetary Market (a division of the Chicago Mercantile Exchange), the New York
Futures Exchange and the Kansas City Board of Trade. Each exchange guarantees
performance under contract provisions through a clearing corporation, a
nonprofit organization managed by the exchange membership, which is also
responsible for handling daily accounting of deposits or withdrawals of margin.
A futures commission merchant ("Broker") effects each transaction in connection
with futures contracts for a commission. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC") and National Futures Association ("NFA").
Interest Rate Futures Contracts. The sale of an interest rate futures
contract creates an obligation by a Fund, as seller, to deliver the type of
financial instrument specified in the contract at a specified future time for a
specified price. The purchase of an interest rate futures contract creates an
obligation by a Fund, as purchaser, to accept delivery of the type of financial
instrument specified at a specified future time for a specified price. The
specific securities delivered or accepted, respectively, at settlement date, are
not determined until at or near that date. The determination is in accordance
with the rules of the exchange on which the futures contract sale or purchase
was made.
Currently, interest rate futures contracts can be purchased or sold on
90-day U.S. Treasury bills, U.S. Treasury bonds, U.S. Treasury notes with
maturities between 6 1/2 and 10 years, Government National Mortgage Association
(GNMA) certificates, 90-day domestic bank certificates of deposit, 90-day
commercial paper, and 90-day Eurodollar certificates of deposit. It is expected
that futures contracts trading in additional financial instruments will be
authorized. The standard contract size is $100,000 for futures contracts in U.S.
Treasury bonds, U.S. Treasury notes and GNMA certificates, and $1,000,000 for
the other designated contracts. While U.S. Treasury bonds, U.S. Treasury bills,
U.S. Treasury notes and GNMA certificates are backed by the full faith and
credit of the U.S. government, the futures contracts in U.S. government
securities are not obligations of the U.S. Treasury.
Index Based Futures Contracts, Other Than Stock Index Based. It is
expected that bond index and other financially based index futures contracts
will be developed in the future. It is anticipated that such index based futures
contracts will be structured in the same way as stock index futures contracts
but will be measured by changes in interest rates, related indexes or other
measures, such as the consumer price index. In the event that such futures
contracts are developed, the Funds will sell interest rate index and other index
based futures contracts to hedge
9
<PAGE>
against changes which are expected to affect the Funds' portfolios.
The purchase or sale of a futures contract differs from the purchase or
sale of a security, in that no price or premium is paid or received. Instead, to
initiate trading an amount of cash, cash equivalents, money market instruments,
or U.S. Treasury bills equal to approximately 1 1/2% (up to 5%) of the contract
amount must be deposited by a Fund with the Broker. This amount is known as
initial margin. The nature of initial margin in futures transactions is
different from that of margin in security transactions. Futures contract margin
does not involve the borrowing of funds by the customer to finance the
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to a Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. The margin required for a particular futures contract is set by
the exchange on which the contract is traded and may be significantly modified
from time to time by the exchange during the term of the contract.
Subsequent payments, called variation margin, to the Broker and from
the Broker, are made on a daily basis as the value of the underlying instrument
or index fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as mark-to-market. For example, when a
Fund has purchased a futures contract and the price of the underlying financial
instrument or index has risen, that position will have increased in value, and
the Fund will receive from the Broker a variation margin payment equal to that
increase in value. Conversely, where a Fund has purchased a futures contract and
the price of the underlying financial instrument or index has declined, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the Broker. At any time prior to expiration of the
futures contract, a Fund may elect to close the position. A final determination
of variation margin is then made, additional cash is required to be paid to or
released by the Broker, and the Fund realizes a loss or gain.
The Trust intends to enter into arrangements with its custodian and
with Brokers to enable the initial margin of a Fund and any variation margin to
be held in a segregated account by its custodian on behalf of the Broker.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of financial instruments, and index based futures
contracts call for the delivery of cash equal to the difference between the
closing value of the index on the expiration date of the contract and the price
at which the futures contract is originally made, in most cases such futures
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out a futures contract sale is effected by an offsetting
transaction in which a Fund enters into a futures contract purchase for the same
aggregate amount of the specific type of financial instrument or index and same
delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund is paid the difference and thus realizes a gain. If the
offsetting purchase price exceeds the sale price, the Fund pays the difference
and realizes a loss. Similarly, the closing out of a futures contract purchase
is effected by an offsetting transaction in which a Fund enters into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the Fund
realizes a gain. If the purchase price exceeds the offsetting sale price the
Fund realizes a loss. The amount of the Fund's gain or loss on any transaction
is reduced or increased, respectively, by the amount of any transaction costs
incurred by the Fund.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one contract of September U.S. Treasury bills on an
exchange may be fulfilled at any time before delivery of the contract is
required (i.e. on a specified date in September, the "delivery month") by the
purchase of one contract of September U.S. Treasury bills on the same exchange.
In such instance the difference between the price at which the futures contract
was sold and the price paid
10
<PAGE>
for the offsetting purchase, after allowance for transaction costs, represents
the profit or loss to a Fund.
There can be no assurance, however, that a Fund will be able to enter
into an offsetting transaction with respect to a particular contract at a
particular time. If a Fund is not able to enter into an offsetting transaction,
the Fund will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms.
Options on Financial Futures. The Funds intend to purchase call and put
options on financial futures contracts and sell such options to terminate an
existing position. Options on futures are similar to options on stocks except
that an option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
rather than to purchase or sell stock at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures margin account. This amount represents the amount by which the market
price of the futures contract at exercise exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the futures
contract. If an option is exercised the last trading day prior to the expiration
date of the option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and value of the futures
contract.
The Funds intend to use options on financial futures contracts in
connection with hedging strategies. In the future the Funds may use such options
for other purposes.
Purchase of Put Options on Futures Contracts. The purchase of
protective put options on financial futures contracts is analogous to the
purchase of protective puts on individual stocks, where an absolute level of
protection is sought below which no additional economic loss would be incurred
by a Fund. Put options may be purchased to hedge a portfolio of stocks or debt
instruments or a position in the futures contract upon which the put option is
based.
Purchase of Call Options on Futures Contracts. The purchase of call
options on financial futures contracts represents a means of obtaining temporary
exposure to market appreciation at limited risk. It is analogous to the purchase
of a call option on an individual stock, which can be used as a substitute for a
position in the stock itself. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying financial instrument or index itself, purchase of a call option may
be less risky than the ownership of the interest rate or index based futures
contract or the underlying securities. Call options on commodity futures
contracts may be purchased to hedge against an interest rate increase or a
market advance when a Fund is not fully invested.
Use of New Investment Techniques Involving Financial Futures Contracts
or Related Options. The Funds may employ new investment techniques involving
financial futures contracts and related options. The Funds intend to take
advantage of new techniques in these areas which may be developed from time to
time and which are consistent with the Fund's investment objective. The Trust
believes that no additional techniques have been identified for employment by
the Funds in the foreseeable future other than those described above.
Limitations on Purchase and Sale of Futures Contracts and Related
Options on Such Futures Contracts. A Fund will not enter into a futures contract
if, as a result thereof, more than 5% of the Fund's total assets (taken at
market value at the time of entering into the contract)
11
<PAGE>
would be committed to margin deposits on such futures contracts, including any
premiums paid for options on futures.
The Funds intend that its futures contracts and related options
transactions will be entered into for traditional hedging purposes. That is,
futures contracts will be sold to protect against a decline in the price of
securities that a Fund owns, or futures contracts will be purchased to protect a
Fund against an increase in the price of securities it intends to purchase. The
Funds do not intend to enter into futures contracts for speculation.
In instances involving the purchase of futures contracts by a Fund, an
amount of cash and cash equivalents, equal to the market value of the futures
contracts will be deposited in a segregated account and/or in a margin account
with a Broker to collateralize the position and thereby insure that the use of
such futures is unleveraged.
Risks of Futures Contracts. Financial futures contracts prices are
volatile and are influenced, among other things, by changes in stock prices,
market conditions, prevailing interest rates and anticipation of future stock
prices, market movements or interest rate changes, all of which in turn are
affected by economic conditions, such as government fiscal and monetary policies
and actions, and national and international political and economic events.
At best, the correlation between changes in prices of futures contracts
and of the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances, such as variations in
speculative market demand for futures contracts and for securities, including
technical influences in futures contracts trading; differences between the
securities being hedged and the financial instruments and indexes underlying the
standard futures contracts available for trading, in such respects as interest
rate levels, maturities and creditworthiness of issuers, or identities of
securities comprising the index and those in a Fund's portfolio. In addition,
futures contract transactions involve the remote risk that a party be unable to
fulfill its obligations and that the amount of the obligation will be beyond the
ability of the clearing broker to satisfy. A decision of whether, when and how
to hedge involves the exercise of skill and judgment, and even a well conceived
hedge may be unsuccessful to some degree because of market behavior or
unexpected interest rate trends.
Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a 10% decrease in the
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out, and a 15% decrease would result in a loss equal to 150% of the
original margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, a Fund would presumably have sustained comparable losses if, instead of
entering into the futures contract, it had invested in the underlying financial
instrument. Furthermore, in order to be certain that a Fund has sufficient
assets to satisfy its obligations under a futures contract, the Fund will
establish a segregated account in connection with its futures contracts which
will hold cash or cash equivalents equal in value to the current value of the
underlying instruments or indices less the margins on deposit.
Most U.S. futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
contract, no
12
<PAGE>
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
Risks of Options on Futures Contracts. In addition to the risks
described above for financial futures contracts, there are several special risks
relating to options on futures contracts. The ability to establish and close out
positions on such options will be subject to the development and maintenance of
a liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. A Fund will
not purchase options on any futures contract unless and until it believes that
the market for such options has developed sufficiently that the risks in
connection with such options are not greater than the risks in connection with
the futures contracts. Compared to the use of futures contracts, the purchase of
options on such futures involves less potential risk to a Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the use of an option on a
futures contract would result in a loss to a Fund, even though the use of a
futures contract would not, such as when there is no movement in the level of
the futures contract.
Corporate Bond Ratings (Evergreen Select Balanced Fund)
Higher yields are usually available on securities that are lower rated
or that are unrated. Bonds rated Baa by Moody's Investors Service ("Moody's")
are considered as medium grade obligations, which are neither highly protected
nor poorly secured. Debt rated BBB by Standard & Poor's Ratings Group ("S&P") is
regarded as having an adequate capacity to pay interest and repay principal,
although adverse economic conditions are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories. Lower rated securities, commonly known as "junk bonds,"
are usually defined as Ba or lower by Moody's or BB or lower by S&P. The Fund
may purchase unrated securities, which are not necessarily of lower quality than
rated securities but may not be attractive to as many buyers. Debt rated BB, B,
CCC, CC and C by S&P is regarded, on balance, as predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation and C the
highest degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions. Debt rated CI by S&P is debt (income
bonds) on which no interest is being paid. Debt rated D by S&P is in default and
payment of interest and/or repayment of principal is in arrears. The Fund
intends to invest in D-rated debt only in cases where, in the judgment of the
Fund's investment adviser, there is a distinct prospect of improvement in the
issuer's financial position as a result of the completion of reorganization or
otherwise. Bonds that are rated Ca by Moody's are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest. Bonds that are rated Ca by Moody's represent obligations
which are speculative in a high degree. Such issues are often in default or have
other market shortcomings. Bonds that are rated C by Moody's are the lowest
rated class of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Convertible Securities
Convertible securities include bonds, debentures, corporate notes,
preferred stocks and
13
<PAGE>
other securities. Convertible securities are securities that the holder can
convert into common stock. Convertible securities rank senior to common stock in
a corporation's capital structure and, therefore, entail less risk than a
corporation's common stock. The value of a convertible security is a function of
its investment value (Its market worth without a conversion privilege) and its
conversion value (its market worth if exchanged). If a convertible security's
investment value is greater than its conversion value, its price primarily will
reflect its investment value and will tend to vary inversely with interest rates
(the issuer's creditworthiness and other factors may also affect its value). If
a convertible security's conversion value is greater than its investment value,
its price will tend to be higher than its conversion value and it will tend to
fluctuate directly with the price of the underlying equity security.
Investment Company Securities
Securities of other investment companies may be acquired by each of the
Funds to the extent permitted under the 1940 Act. These limits require that, as
determined immediately after a purchase is made, (i) not more than 5% of the
Fund's total assets will be invested in the securities of any one investment
company, (ii) not more than 10% of the value of its total assets will be
invested in the aggregate in securities of investment companies as a group, and
(iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by the Fund. As a shareholder of another investment
company, a Fund would bear, along with other shareholders, its pro rata portion
of the other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other expenses that the Fund
bears directly in connection with its own operations. However, a Fund may invest
all of its investable assets in securities of a single open-end management
company with substantially the same fundamental investment objectives, policies
and limitations as a Fund.
Loans of Securities
To generate income and offset expenses, the Funds may lend portfolio
securities to broker-dealers and other financial institutions. While securities
are on loan, the borrower will pay the Fund any income accruing on the security.
The Fund may invest any collateral it receives in additional portfolio
securities, such as U.S. Treasury notes, certificates of deposit, other
high-grade, short-term obligations or interest bearing cash equivalents. Gains
or losses in the market value of a security lent will affect the Fund and its
shareholders.
When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Funds have the right to
call a loan and obtain the securities lent any time on notice of not more than
five business days. The Fund may pay reasonable fees in connection with such
loans.
Although voting rights attendant to securities lent pass to the
borrower, a Fund may call such loans at any time and may vote the securities if
it believes a material event affecting the investment is to occur. The Funds may
experience a delay in receiving additional collateral or in recovering the
securities lent or may even suffer a loss of rights in the collateral should the
borrower of the securities fail financially. The Funds may only make loans to
borrowers deemed to be of good standing, under standards approved by the Board
of Trustees, when the income to be earned from the loan justifies the attendant
risks.
Master Demand Notes
14
<PAGE>
Master demand notes are unsecured obligations that permit the
investment of fluctuating amounts by the Funds at varying rates of interest
pursuant to direct arrangements between a Fund, as lender, and the issuer, as
borrower. Master demand notes may permit daily fluctuations in the interest rate
and daily changes in the amounts borrowed. A Fund has the right to increase the
amount under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount. The borrower may repay up to the full
amount of the note without penalty. Notes purchased by a Fund permit the Fund to
demand payment of principal and accrued interest at any time (on not more than
seven days' notice). Notes acquired by a Fund may have maturities of more than
one year, provided that (1) the Fund is entitled to payment of principal and
accrued interest upon not more than seven days' notice, and (2) the rate of
interest on such notes is adjusted automatically at periodic intervals, which
normally will not exceed 31 days, but may extend up to one year. The notes are
deemed to have a maturity equal to the longer of the period remaining to the
next interest rate adjustment or the demand notice period. Because these types
of notes are direct lending arrangements between the lender and borrower, such
instruments are not normally traded and there is no secondary market for these
notes, although they are redeemable and thus repayable by the borrower at face
value plus accrued interest at any time. Accordingly, a Fund's right to redeem
is dependent on the ability of the borrower to pay principal and interest on
demand. In connection with master demand note arrangements, a Fund's investment
adviser considers, under standards established by the Board of Trustees, earning
power, cash flow and other liquidity ratios of the borrower and will monitor the
ability of the borrower to pay principal and interest on demand. These notes are
not typically rated by credit rating agencies. Unless rated, a Fund may invest
in them only if at the time of an investment the issuer meets the criteria
established for commercial paper, which limits such investments to commercial
paper rated A-1 by S&P, Prime-1 by Moody's or F-1 by Fitch IBCA, Inc.
Obligations of Foreign Branches of United States Banks
The obligations of foreign branches of U.S. banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by government regulation.
Payment of interest and principal upon these obligations may also be affected by
governmental action in the country of domicile of the branch (generally referred
to as sovereign risk). In addition, evidences of ownership of such securities
may be held outside the U.S. and a Fund may be subject to the risks associated
with the holding of such property overseas. Examples of governmental actions
would be the imposition of currency controls, interest limitations, withholding
taxes, seizure of assets or the declaration of a moratorium. Various provisions
of federal law governing domestic branches do not apply to foreign branches of
domestic banks.
Obligations of United States Branches of Foreign Banks
Obligations of U.S. branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation as well as by governmental action in the country in which the foreign
bank has its head office. In addition, there may be less publicly available
information about a U.S.
branch of a foreign bank than about a domestic bank.
Repurchase Agreements
The Funds may enter into repurchase agreements with entities that are
registered U.S. government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed a Fund's
Adviser to be creditworthy. A repurchase agreement is an agreement by which a
15
<PAGE>
person (e.g., a Fund) obtains a security and simultaneously commits to return
the security to the seller (a member bank of the Federal Reserve System or
recognized securities dealer) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
A Fund's custodian or a third party will take possession of the
securities subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from a Fund, the Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by a Fund
might be delayed pending court action. The Funds believe that under the regular
procedures normally in effect for custody of a Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker-dealers, which are deemed by the Adviser
to be creditworthy pursuant to guidelines established by the Trustees.
Reverse Repurchase Agreements
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Fund transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Illiquid and Restricted Securities
Each Fund may not invest more than 15% of its net assets in securities
that are illiquid. A security is illiquid when a Fund cannot dispose of it in
the ordinary course of business within seven days at approximately the value at
which the Fund has the investment on its books.
Each Fund may invest in "restricted" securities, i.e., securities
subject to restrictions on resale under federal securities laws. Rule 144A under
the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining a Fund's
compliance with the limit on illiquid securities indicated above. In determine
the liquidity of Rule 144A securities, the
16
<PAGE>
Trustees will consider: (1) the frequency of trades and quotes for the security;
(2) the number of dealers willing to purchase or sell the security and the
number of other potential buyers; (3) dealer undertakings to make a market in
the security; and (4) the nature of the security and the nature of the
marketplace trades.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis. These
transactions involve the purchase of debt obligations with delivery and payment
normally take place within a month or more after the date of commitment to
purchase. The Funds will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-issued securities are subject
to market fluctuation, and no interest accrues on the security to the purchaser
during this period. The payment obligation and the interest rate that will be
received on the securities are each fixed at the time the purchaser enters into
the commitment.
Segregated accounts will be established, and the Funds will maintain
liquid assets in an amount at least equal in value to a Fund's commitments to
purchase when-issued securities. If the value of these assets declines, a Fund
will place additional liquid assets in the account on a daily basis so that the
value of the assets in the account is equal to the amount of such commitments.
Purchasing obligations on a when-issued basis is a form of leveraging
and can involve a risk that the yields available in the market when the delivery
takes place may actually be higher than those obtained in the transaction
itself. In that case there could be an unrealized loss at the time of delivery.
A Fund uses when-issued, delayed-delivery and forward commitment
transactions to secure what it considers to be an advantageous price and yield
at the time of purchase. When a Fund engages in when- issued, delayed-delivery
and forward commitment transactions, it relies on the buyer or seller, as the
case may be, to consummate the sale. If the buyer or seller fails to complete
the sale, then the Fund may miss the opportunity to obtain the security at a
favorable price or yield.
Typically, no income accrues on securities a Fund has committed to
purchase prior to the time delivery of the securities is made, although the Fund
may earn income on securities it has in a segregated account. When purchasing a
security on a when-issued, delayed delivery, or forward commitment basis, the
Fund assumes the rights and risks of ownership of the security, including the
risk of price and yield fluctuations, and takes such fluctuations into account
when determining its net asset value. Because the Fund is not required to pay
for the security until the delivery date, these risks are in addition to the
risks associated with the Fund's other investments.
Foreign Currency Transactions (Evergreen Select Special Equity Fund)
As one way of managing exchange rate risk, the Fund may enter into
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). The exchange rate for the transaction (the
amount of currency a Fund will deliver and receive when the
17
<PAGE>
contract is completed) is fixed when the Fund enters into the contract. The Fund
usually will enter into these contracts to stabilize the U.S. dollar value of a
security it has agreed to buy or sell. The Fund intends to use these contracts
to hedge the U.S. dollar value of a security it already owns, particularly if
the Fund expects a decrease in the value of the currency in which the foreign
security is denominated. Although the Fund will attempt to benefit from using
forward contracts, the success of its hedging strategy will depend on the
Adviser's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar. The value of the Fund's investments
denominated in foreign currencies will depend on the relative strengths of those
currencies and the U.S. dollar, and the Fund may be affected favorably or
unfavorably by changes in the exchange rates or exchange control regulations
between foreign currencies and the U.S. dollar. Changes in foreign currency
exchange rates also may affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed to shareholders by the Fund. The Fund may also
purchase and sell options related to foreign currencies in connection with
hedging strategies.
MANAGEMENT OF THE TRUST
Set forth below are the Trustees and officers of the Trust and their
principal occupations and some of their affiliations over the last five years.
Unless otherwise indicated, the address for each Trustee and officer is 200
Berkeley Street, Boston, Massachusetts, 02116. Each Trustee is also a Trustee of
each of the other Trusts in the Evergreen Fund complex.
<TABLE>
<CAPTION>
NAME POSITION WITH TRUST PRINCIPAL OCCUPATIONS FOR LAST FIVE YEARS
- ------------------------------- ------------------------- -----------------------------------------------------------------
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant;
(DOB: 2/2/28) and President of Centrum Equities and Centrum
Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.;
(DOB: 10/23/34) former Director, Executive Vice President and
Treasurer, State Street Research & Management
Company (investment advice); Director, The Andover
Companies (Insurance); and Trustee, Arthritis
Foundation of New England
18
<PAGE>
NAME POSITION WITH TRUST PRINCIPAL OCCUPATIONS FOR LAST FIVE YEARS
- ------------------------------- ------------------------- -----------------------------------------------------------------
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance Committee,
(DOB: 10/12/38) Cambridge College; Chairman Emeritus and Director, American
Institute of Food and Wine; Chairman and President, Oldways
Preservation and Exchange Trust (education); former Chairman
of the Board, Director, and Executive Vice President, The
London Harness Company; former Managing Partner, Roscommon
Capital Corp.; former Chief Executive Officer, Gifford Gifts
of Fine Foods; and former Chair man, Gifford, Drescher &
Associates (environmental consulting)
James S. Howell Chairman of the Former Chairman of the Distribution Foundation for
(DOB: 8/13/24) Board of Trustees the Carolinas; and former Vice President of Lance Inc.
(food manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer, Carson
(DOB: 2/14/39) Products Company; Director of Phoenix Total Return Fund and
Equifax, Inc.; Trustee of Phoenix Series Fund, Phoenix
Multi-Portfolio Fund, and The Phoenix Big Edge Series Fund;
and former President, Morehouse College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc. (steel
(DOB: 7/14/39) producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham
(DOB: 8/2/39) Corporation; and former Director of Carolina
Cooperative Federal Credit Union.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee Vice Chair and former Executive Vice President, DHR
(DOB: 9/14/41) International, Inc. (executive recruitment); former
Senior Vice President, Boyden International Inc.
(executive recruitment); and Director, Commerce and
Industry Association of New Jersey, 411
International, Inc., and J&M Cumming Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health
(DOB: 6/2/47) Services; former Managed Health Care Consultant;
and former President, Primary Physician Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)
Richard J. Shima Trustee Former Chairman, Environmental Warranty, Inc. (insurance
(DOB: 8/11/39) agency); Executive Consultant, Drake Beam Morin, Inc.
(executive outplacement); Director of Connecticut Natural Gas
Corporation, Hartford Hospital, Old State House Association,
Middlesex Mutual Assurance Company, and Enhance Financial
Services, Inc.; Chairman, Board of Trustees, Hartford
Graduate Center; Trustee, Greater Hartford YMCA; former
Director, Vice Chairman and Chief Investment Officer, The
Travelers Corporation; former Trustee, Kingswood-Oxford
School; and former Managing Director and Consultant, Russell
Miller, Inc.
William J. Tomko* President and Senior Vice President and Operations Executive,
(DOB: 8/30/58) Treasurer BISYS Fund Services.
Nimish S. Bhatt* Vice President and Vice President, Tax, BISYS Fund Services; former
(DOB: 6/6/63) Assistant Treasurer Assistant Vice President, Evergreen Asset
Management Corp./First Union National Bank; former
Senior Tax Consulting/Acting Manager, Investment
Bryan Haft* Vice President Team Leader, Fund Administration, BISYS Fund
(DOB: 1/23/65) Services.
D'Ray Moore* Secretary Vice President, Client Services, BISYS Fund Services.
(DOB: 3/30/59)
</TABLE>
*Address: BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219-8001
19
<PAGE>
Listed below is the estimated Trustee compensation for the fiscal year
ended June 30, 1998.
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM REGISTRANT
COMPENSATION ACCRUED AS PART OF BENEFITS UPON AND FUND COMPLEX
NAME OF PERSON FROM REGISTRANT FUND EXPENSES RETIREMENT PAID TO TRUSTEES
<S> <C> <C> <C> <C>
Laurence B. Ashkin $4,930 $0 $0 $67,108
Charles A. Austin $4,930 (a) $0 $0 $53,099 (b)
K. Dun Gifford $4,616 $0 $0 $49,700
James S. Howell $6,264 (c) $0 $0 $88,872 (d)
Leroy Keith Jr. $4,616 $0 $0 $49,700
Gerald M. McDonnell $4,616 * $0 $0 $71,596 *
Thomas L. McVerry $5,671 * $0 $0 $86,151 *
William Walt Pettit $4,616 * $0 $0 $77,196 *
David M. Richardson $4,945 $0 $0 $53,099
Russell A. Salton, III $4,616 * $0 $0 $77,450 *
Michael S. Scofield $4,616 $0 $0 $49,175
Richard J. Shima $4,616 $0 $0 $70,416
</TABLE>
(a) $740 of this amount payable in later years as deferred
compensation.
(b) $7,965 of this amount payable in later years as
deferred compensation.
(c) $5,011 of this amount payable in later years as deferred
compensation.
(d) $71,098 of this amount payable in later years as deferred
compensation.
* Entire amount payable in later years as deferred compensation.
PRINCIPAL HOLDERS OF FUND SHARES
As of the date of this SAI, the officers and Trustees of the Trust
owned as a group less than 1% of the outstanding of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of a
Fund's outstanding shares as of July 1, 1998.
EVERGREEN SELECT STRATEGIC VALUE FUND
INSTITUTIONAL CLASS
First Union National Bank/EB/INT 75.271%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 23.868%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT STRATEGIC VALUE FUND
INSTITUTIONAL SERVICE CLASS
Fiduciary Trust Company 21.705%
International
FBO Corrine C Zimmerman
Attn: Securities Department, 97th
Fl.
2 World Trade Center
New York, NY 10048-0772
Jefnat & Company 16.030%
Oramella Tomassich Trust
301 41st Street
Miami Beach, FL 33140
24448
20
<PAGE>
Percy Chubb III 12.658%
431 Claremont Road
Bernardsville, NJ 07924
Fiduciary Trust Company 12.076%
International
FBO L Caldecot Chubb
Attn: Securities Department, 97th
Fl.
2 World Trade Center
New York, NY 10048-0772
Tellson & Company 8.776%
c/o Peapack-Gladstone Bank
P.O. Box 178
Gladstone, NJ 07934
Wilmington Trust Co. of 7.410%
Pennsylvania
FBO Frank E English
1522 McDaniel Drive
West Chester, PA 19380
Draper & Company 5.753%
F/B/O I Grant Ivey Jr.
Attn: Trust Operations
10 South Bryn Mawr Ave.
Bryn Mawr, PA 19010
EVERGREEN SELECT DIVERSIFIED VALUE FUND
INSTITUTIONAL CLASS
First Union National Bank/EB/INT 78.342%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 21.658%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT DIVERSIFIED VALUE FUND
INSTITUTIONAL SERVICE CLASS
None
EVERGREEN SELECT LARGE CAP BLEND FUND
INSTITUTIONAL CLASS
24448
21
<PAGE>
First Union National Bank/EB/INT 56.187%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 43.813%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT LARGE CAP BLEND FUND
CHARITABLE CLASS
First Union National Bank/EB/INT 99.941%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT LARGE CAP BLEND FUND
INSTITUTIONAL SERVICE CLASS
Thomas F. Hackett 52.394%
c/o Warren S. Beebe Jr., CPA
P.O. Box 849
Oakhurst, NJ 07755-0849
Fubs & Co. 24.566%
First Union Brokerage
Sipes Orchard Home
201 S College Street, 5th Floor
Charlotte, NC 28288-1167
First Union Brokerage Services 23.040%
Essex County Comm American
Legion
29 Newell Drive
Bloomfield, NJ 07003
EVERGREEN SELECT COMMON STOCK FUND
INSTITUTIONAL CLASS
First Union National Bank/EB/INT 99.391%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT COMMON STOCK FUND
INSTITUTIONAL SERVICE CLASS
None
24448
22
<PAGE>
EVERGREEN SELECT STRATEGIC GROWTH FUND
INSTITUTIONAL CLASS
First Union National Bank/EB/INT 87.788%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 12.212%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT STRATEGIC GROWTH FUND
INSTITUTIONAL SERVICE CLASS
Olde Discount 16.656%
751 Griswold Street
Detroit, MI 48226
Suntrust Bank Successor Trustee 6.802%
FBO Barbara S Merry Trust
Attn: Trust Department
P.O. Box 927
Augusta, GA 30903
Olde Discount 6.278%
751 Griswold Street
Detroit, MI 48226
First Union National Bank/EB/INT 5.771%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 5.365%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
Gwyn H Schneider 5.364%
Homeleigh Account
2215 Stephen Long Road
Atlanta, GA 30305-4338
Haynes H Huffard 5.364%
Homeleigh Account
2215 Stephen Long Drive
Atlanta, GA 30305-4338
EVERGREEN SELECT EQUITY INCOME FUND
INSTITUTIONAL CLASS
24448
23
<PAGE>
First Union National Bank/EB/INT 99.815%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT EQUITY INCOME FUND
INSTITUTIONAL SERVICE CLASS
First National Bank Successor 23.448%
Trustee
F/B/O Rose Lawn Cemetery Inc.
Dated 11-06-97
P.O. Box 600
Christensburg, VA 24068-0600
Merrill Lynch Pierce Fenner & Smith 19.993%
Inc.
FBO Hope W Babcock
9601 S Meridian Blvd. 3rd Fl.
Englewood, CO 80112-5905
First National Bank Successor 17.559%
Trustee
F/B/O Mount Rose Cemetery Inc.
Dated 11-06-97
P. O. Box 600
Christensburg, VA 24068-0600
Thomas R Borthwick 11.029%
161 Jim Range Road
Jonesboro, TN 37659
First Union Brokerage Services 8.662%
John T Morris and Joy Robinson
Morris JTWROS
524 Faculty Street
Boone, NC 28607
Helen M Nesbit Trustee 5.810%
U/A dated 1/2/74 Helen Nesbit Trust
2235 Walton Way August, GA 30904
EVERGREEN SELECT SMALL COMPANY VALUE FUND
INSTITUTIONAL CLASS
First Union National Bank/EB/INT 82.466%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
24448
24
<PAGE>
First Union National Bank/EB/INT 17.501%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT SMALL COMPANY VALUE FUND
INSTITUTIONAL SERVICE CLASS
None
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
INSTITUTIONAL CLASS
First Union National Bank/EB/INT 75.481%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 24.519%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl.
Charlotte, NC 28202-1911
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
INSTITUTIONAL SERVICE CLASS
45.177%
Pershing
FBO Michael D Bauer
Attn: Non Acat Department, 14th
Fl.
One Pershing Plaza
Jersey City, NJ 07399
First Union Brokerage Services 20.427%
Susan L Dowtin
708 Sunset Drive
Greensboro, NC 27408
First Union Brokerage Services 17.274%
John J Scinto Trust
80 Grandview Avenue
Port Chester, NY 10573
Thomas F Hackett 17.122%
c/o Warren S Beebe Jr, CPA
P.O. Box 849
Oakhurst, NJ 07755-0849
EVERGREEN SELECT SOCIAL PRINCIPLES FUND
CHARITABLE CLASS
24448
25
<PAGE>
First Union National Bank/EB/INT 98.491%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT BALANCED FUND
INSTITUTIONAL CLASS
First Union National Bank/EB/INT 53.480%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 46.520%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG
1151
Charlotte, NC 28202-1911
EVERGREEN SELECT BALANCED FUND
INSTITUTIONAL SERVICE CLASS
First Union Brokerage Services 100.00%
Fulmer Brothers Inc.
1895 90th Ave.
Vero Beach, Fl 32966
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISERS
Each Fund's investment adviser (the "Adviser") is a subsidiary of First
Union Corporation ("First Union"), a bank holding company headquartered at 301
South College Street, Charlotte, North Carolina 28288-0630. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.
The First Capital Group of First Union National Bank ("FUNB") is the
Adviser to each Fund other than the Evergreen Select Small Company Value Fund
and Evergreen Select Special Equity Fund. FUNB is located at 201 South College
Street, Charlotte North Carolina 28288-0630.
Evergreen Asset Management Corp. ("Evergreen Asset") is the Adviser to
Evergreen Select Small Company Value Fund. Evergreen Asset is located at 2500
Westchester Avenue, Purchase, New York 10577. Lieber and Company, another First
Union subsidiary, is the Fund's subadviser. Lieber and Company is reimbursed by
Evergreen Asset for the direct and indirect costs of providing
24448
26
<PAGE>
subadvisory services to the Fund.
Meridian Investment Company ("Meridian") is the Adviser to Evergreen
Select Special Equity Fund. Meridian is located at 55 Valley Stream Parkway,
Malvern, Pennsylvania 19355
Pursuant to the advisory agreement (the "Advisory Agreement" or,
collectively, the "Advisory Agreements") between the Trust and each Adviser, and
subject to the supervision of the Trust's Board of Trustees, each Adviser
furnishes to each Fund investment advisory, management and administrative
services, office facilities, and equipment in connection with its services for
managing the investment and reinvestment of each Fund's assets. Each Adviser
pays for all of the expenses incurred in connection with the provision of its
services.
The Funds pay for all charges and expenses, other than those
specifically referred to as being borne by the Adviser, including, but not
limited to: (1) custodian charges and expenses; (2) bookkeeping and auditors'
charges and expenses; (3) transfer agent charges and expenses; (4) fees and
expenses of Trustees who are not interested persons of a Fund, as defined in the
1940 Act ("Independent Trustees"); (5) brokerage commissions, brokers' fees and
expenses; (6) issue and transfer taxes; (7) costs and expenses under the
distribution plan; (8) taxes and trust fees payable to governmental agencies;
(9) the cost of share certificates; (10) fees and expenses of the registration
and qualification of Funds' shares with the Securities and Exchange Commission
("SEC") or under state or other securities laws; (11) expenses of preparing,
printing and mailing prospectuses, SAIs, notices, reports and proxy materials to
shareholders; (12) expenses of shareholders' and Trustees' meetings; (13)
charges and expenses of legal counsel for the Funds and for the Independent
Trustees of the Trust; (14) charges and expenses of filing annual and other
reports with the SEC and other authorities; and (15) all extraordinary Fund
charges and expenses.
The Funds have agreed to pay the Adviser a fee for its services,
expressed as a percentage of average net assets, as set forth below. In
addition, each Adviser has voluntarily agreed to reduce its advisory fee,
resulting in the net advisory fees that are also indicated in the table below.
ANNUAL ANNUAL
FUND ADVISORY FEE NET ADVISORY FEE
Evergreen Select Strategic Value Fund 0.70% 0.60%
Evergreen Select Diversified Value Fund 0.60% 0.50%
Evergreen Select Large Cap Blend Fund 0.70% 0.60%
Evergreen Select Common Stock Fund 0.70% 0.60%
Evergreen Select Strategic Growth Fund 0.70% 0.60%
Evergreen Select Equity Income Fund 0.70% 0.60%
Evergreen Select Social Principles Fund 0.80% 0.70%
Evergreen Select Small Company Value Fund 0.90% 0.80%
Evergreen Select Balanced Fund 0.60% 0.50%
Evergreen Select Equity Index Fund 0.40% 0.06%
Evergreen Select Special Equity Fund 1.50% 0.52%
Under the Advisory Agreement, any liability of the Adviser in
connection with rendering services thereunder is limited to situations involving
its willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties.
Each Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the
24448
27
<PAGE>
Trust or by a vote of a majority of a Fund's outstanding shares (as defined in
the 1940 Act). In either case, the terms of the Advisory Agreement and
continuance thereof must be approved by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. Each Advisory Agreement may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. Each Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the Funds
through broker-dealers and other financial representatives. Its address is, 125
W. 55th Street, New York, N.Y. 10019.
DISTRIBUTION PLAN
Rule 12b-1 under the 1940 Act permits investment mutual funds to use
their assets to pay for distributing their shares. However, to take advantage of
Rule 12b-1, the 1940 Act requires that mutual funds comply with various
conditions, including adopting a distribution plan. The Funds have adopted a
distribution plan for their Institutional Service Shares (the "Plan") that
permits a Fund to deduct up to 0.25% of the Institutional Service Class' average
net assets to pay for shareholder services. The Board of Trustees, including a
majority of the Independent Trustees, has approved the plan.
The National Association of Securities Dealers, Inc. ("NASD") limits
the amount that a mutual fund may pay annually in distribution costs for sale of
its shares and shareholder service fees. The NASD limits annual expenditures to
1.00% of the aggregate average daily net asset value of its shares, of which
0.75% may be used to pay such distribution costs and 0.25% may be used to pay
shareholder service fees. The NASD also limits the aggregate amount that a Fund
may pay for such distribution costs to 6.25% of gross share sales since the
inception of the distribution plan, plus interest at the prime rate plus 1.00%
on such amounts remaining unpaid from time to time.
The Independent Trustees or a majority of the outstanding voting shares
of a Fund's Institutional Service Class may terminate the Plan. A Fund cannot
change the Plan in a way that materially increases the distribution expenses of
the Institutional Service Class without obtaining shareholder approval.
Otherwise, the Trustees may amend the Plan. Management must report the amounts
and purposes of expenditures under the Plan to the Independent Trustees
quarterly. While the Institutional Service distribution plan is in effect, a
Fund will be required to commit the selection and nomination of candidates for
Independent Trustees to the discretion of the Independent Trustees. The
Independent Trustees of the Funds have determined that the Funds will benefit
from the Institutional Service shares distribution plan.
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
each Fund, subject to the supervision and control of the Trust's Board of
Trustees. EIS provides the Funds with facilities, equipment and personnel and is
entitled to receive a fee based on the aggregate average daily net assets of the
Funds at a rate based on the total assets of all mutual funds administered by
EIS that are advised by First Union subsidiaries. EIS' fee is calculated in
accordance with the following
24448
28
<PAGE>
schedule: 0.060% on the first $7 billion; 0.0425% on the next $3 billion; 0.035%
on the next $5 billion; 0.025% on the next $10 billion; 0.019% on the next $5
billion and 0.014% on assets in excess of $30 billion.
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union, is the
Funds' transfer agent. The transfer agent issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is 200 Berkeley Street,
Boston, Massachusetts 02116.
Independent auditors
KPMG Peat Marwick LLP audits each Fund's financial statements. The
auditor's address is 99 High Street, Boston, Massachusetts 02110.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank
keeps custody of each Fund's securities and cash and performs other related
duties. The custodian's address is P.O. Box 9021, Boston, Massachusetts
02205-9827.
BROKERAGE
SELECTION OF BROKERS
When buying and selling portfolio securities, each Adviser seeks
brokers who can provide the most benefit to the Fund or Funds for which a trade
is being made. When selecting a broker, an Adviser will primarily look for the
best price at the lowest commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and
analyses concerning issuers, industries, securities and
economic factors and (b) other information useful in making
investment decisions.
Under each Advisory Agreement, each Fund may pay higher brokerage
commissions to a broker providing it with research services, as defined in item
6, above. Pursuant to Section 28(e) of the Securities Exchange Act of 1934, this
practice is permitted if the commission is reasonably in relation to the
brokerage and research services provided. Research services provided by a broker
to an Adviser do not replace, but supplement, the services an Adviser is
required to deliver to a Fund under the Advisory Agreement. It is impracticable
for an Adviser to allocate the cost, value and specific application of such
research services among its clients because research services
24448
29
<PAGE>
intended for one client may indirectly benefit another.
When selecting a broker for portfolio trades, an Adviser may also
consider the amount of Fund shares a broker has sold, subject to the other
requirements described above.
Leiber & Company, an affiliate of Evergreen Asset and a member of the
New York and American Stock Exchanges, will to the extent practicable effect
substantially all of the portfolio transactions for Evergreen Select Small
Company Value Fund.
BROKERAGE COMMISSIONS
Generally, each Fund expects to purchase and sell its equity portfolio
securities through brokerage transactions for which commissions are payable.
Purchases from underwriters will include the underwriting commission or
concession.
The Funds expect to buy and sell their fixed-income securities through
principal transactions, that is, directly from the issuer or from an underwriter
or market maker for the securities. Generally, the Funds will not pay brokerage
commissions for such purchases. Usually, when a Fund buys a security from an
underwriter, the purchase price will include an underwriting commission or
concession.
Prices of both equity and fixed-income securities purchased from
dealers serving as market makers will reflect the dealer's markup or markdown.
GENERAL BROKERAGE POLICIES
Generally, the Fund expects to purchase and sell its securities through
brokerage transactions for which commissions are payable. Where transactions are
made in the over-the-counter market, the Fund will deal with primary market
makers unless more favorable prices are otherwise obtainable.
The Adviser makes investment decisions for the Fund independently from
those of its other clients. It may frequently develop, however, that the Adviser
will make the same investment decision for more than one client. Simultaneous
transactions are inevitable when the same security is suitable for the
investment objective of more than one account. When two or more of its clients
are engaged in the purchase or sale of the same security, the Adviser will
allocate the transactions according to a formula that is equitable to each of
its clients. Although, in some cases, this system could have a detrimental
effect on the price or volume of the Fund's securities, the Fund believes that
in other cases its ability to participate in volume transactions will produce
better executions. In order to take advantage of the availability of lower
purchase prices, the Fund may occasionally participate in group bidding for the
direct purchase from an issuer of certain securities.
The Board of Trustees periodically reviews the Fund's brokerage policy.
Because of the possibility of further regulatory developments affecting the
securities exchanges and brokerage practices generally, the Board of Trustees
may change, modify or eliminate any of the foregoing practices.
TRUST ORGANIZATION
24448
30
<PAGE>
FORM OF ORGANIZATION
The Trust was formed as a Delaware business trust under an Agreement
and Declaration of Trust dated September 18, 1997 (the "Declaration of Trust").
A copy of the Declaration of Trust is on file at the SEC as an exhibit to the
Trust's Registration Statement, of which this SAI is a part. This summary is
qualified in its entirety by reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
a Fund represents an equal proportionate interest with each other share of that
series and/or class. Upon liquidation, shares are entitled to a pro rata share
of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of net asset value applicable to such share. Shares generally vote together as
one class on all matters. Classes of shares of a Fund have equal voting rights.
No amendment may be made to the Declaration of Trust that adversely affects any
class of shares without the approval of a majority of the shares of that class.
Shares have non-cumulative voting rights, which means that the holders of more
than 50% of the shares voting for the election of Trustees can elect 100% of the
Trustees to be elected at a meeting and, in such event, the holders of the
remaining shares voting will not be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES
EXCHANGES
Investors may exchange shares of any Fund for shares of the same class
of any other Evergreen "Select" fund, as described under "Exchanges" in each
Fund's prospectus. Before you make an exchange, you should read the prospectus
of the "Select" fund into which you wish to exchange. The Trust reserves the
right to discontinue, alter or limit the exchange privilege at any time.
24448
31
<PAGE>
HOW AND WHEN THE FUNDS CALCULATE THEIR NET ASSET VALUE PER SHARE ("NAV")
Each Fund computes its net asset value once daily on Monday through
Friday, as described in the prospectus. A Fund will not compute its NAV on the
day the following legal holidays are observed: New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
A Fund calculates its net asset value per share by adding up its
investments and other assets, subtracting its liabilities and then dividing the
result by the number of shares outstanding.
HOW THE FUNDS VALUE THE SECURITIES THEY OWN
Current values for a Fund's portfolio securities are determined in the
following manner:
(1) securities that are traded on a national securities exchange or the
over-the-counter National Market System ("NMS") are valued on the basis of the
last sales price on the exchange where primarily traded or NMS prior to the time
of the valuation, provided that a sale has occurred;
(2) securities traded in the over-the-counter market, other than on
NMS, are valued at the mean of the bid and asked prices at the time of
valuation;
(3) short-term investments maturing in more than sixty days for which
market quotations are readily available, are valued at such quotations;
(4) short-term investments maturing in sixty days or less (including
all master demand notes) are valued at amortized cost (original purchase cost as
adjusted for amortization of premium or accretion of discount), which, when
combined with accrued interest, approximates market;
(5) short-term investments maturing in more than sixty days when
purchased that are held on the sixtieth day prior to maturity are valued at
amortized cost (market value on the sixtieth day adjusted for amortization of
premium or accretion of discount), which, when combined with accrued interest,
approximates market; and
(6) securities, including restricted securities, for which complete
quotations are not readily available; listed securities or those on NMS if, in
the Fund's opinion, the last sales price does not reflect a current market value
or if no sale occurred; and other assets are valued at prices deemed in good
faith to be fair under procedures established by the Board of Trustees.
SHAREHOLDER SERVICES
As described in the Funds' prospectus, a shareholder may elect to
receive his or her dividends and capital gains distributions in cash instead of
shares. However, ESC will automatically convert a shareholder's distribution
option so that the shareholder reinvests all dividends and distributions in
additional shares when it learns that the postal or other delivery service is
unable to deliver checks or transaction confirmations to the shareholder's
address of record. The Fund will hold the returned distribution or redemption
proceeds in a non interest-bearing account in the shareholder's name until the
shareholder updates his or her address. Therefore, no interest will accrue on
amounts represented by uncashed distribution or redemption checks
24448
32
<PAGE>
PRINCIPAL UNDERWRITER
The Distributor, a subsidiary of The BISYS Group, Inc. is the principal
underwriter for each class of shares of each Fund. The Trust has entered into a
Principal Underwriting Agreement ("Underwriting Agreement") with the Distributor
with respect to each class of each Fund.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Declaration of Trust, By-Laws, current prospectuses and SAI.
All orders are subject to acceptance by the Trust and the Trust reserves the
right, in its sole discretion, to reject any order received. Under the
Underwriting Agreement, the Trust is not liable to anyone for failure to accept
any order.
The Distributor has agreed that it will, in all respects, duly comply
with all state and federal laws applicable to the sale of the Funds' shares. The
Distributor and the Funds have both agreed to indemnify and hold each other
harmless and each person who has been, is, or may be a Trustee or officer of the
Trust against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Independent Trustees, and (ii) by vote of a majority of
the Trustees, in each case, cast in person at a meeting called for that purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could benefit
the sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
ADDITIONAL TAX INFORMATION
REQUIREMENTS FOR QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to a regulated investment company (a "RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a RIC, a Fund must, among other things, (i) derive at least 90% of
its gross income from dividends, interest, payments with respect to proceeds
from securities loans, gains from the sale or other disposition of securities or
foreign currencies and other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
securities; and (ii) diversify its holdings so that, at the end of each quarter
of its taxable year, (a) at least 50% of the market value of the Fund's total
assets is represented by cash, U.S. Government securities and other securities
limited in respect of any one issuer, to an amount not greater than 5% of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
and (b) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies). By so qualifying, a Fund is
not subject to federal income tax if it timely distributes its investment
company taxable income and any net realized capital gains. A 4% nondeductible
excise tax will be imposed on a Fund to the extent it does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
33
<PAGE>
TAXES ON DISTRIBUTIONS
Distributions will be taxable to shareholders whether made in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share of a Fund on the
reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net taxable investment income plus net
realized short-term capital gains, if any). The Fund will include dividends it
receives from domestic corporations when the Fund calculates its gross
investment income. The Fund anticipates that all or a portion of ordinary
dividends which it pays will qualify for the 70% dividends-received deduction
for corporations. The Fund will inform shareholders of the amounts that so
qualify.
From time to time, the Fund will distribute the excess of its net
long-term capital gains over its net short-term capital loss to shareholders
(i.e., capital gain dividends). For federal tax purposes, shareholders must
include such capital gain dividends when calculating their net long-term capital
gains. Capital gain dividends are taxable as net long-term capital gains to a
shareholder, no matter how long the shareholder has held the shares. The Fund
will inform shareholders of the portion, if any, of a capital gain distribution
which qualifies for the new 20% maximum federal rate.
34
<PAGE>
Distributions by a Fund reduce its NAV. A distribution that reduces the
Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder may incur
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her federal income tax return. Each shareholder
should consult a tax advisor to determine the state and local tax implications
of Fund distributions.
If more than 50% of the value of a Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and a Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on a Fund's investments.
The shareholder may be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the credit or deduction is subject to a number of
limitations.
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than
twelve months is generally subject to a maximum federal income tax rate of 20%
for an individual. Generally, the Code will not allow a shareholder to realize a
loss on shares he or she has sold or exchanged and replaced within a
sixty-one-day period beginning thirty days before and ending thirty days after
he or she sold or exchanged the shares. The Code will not allow a shareholder to
realize a loss on the sale of Fund shares held by the shareholder for six months
or less to the extent the shareholder received exempt-interest dividends on such
shares. Moreover, the Code will treat a shareholder's loss on shares held for
six months or less as a long-term capital loss to the extent the shareholder
received capital gain dividends on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisors about the applicability of the backup withholding provisions.
OTHER TAX CONSIDERATIONS
The foregoing discussion relates solely to U.S. federal income tax law
as applicable to U.S.
35
<PAGE>
persons (i.e., U.S. citizens and residents and U.S. domestic corporations,
partnerships, trusts and estates). It does not reflect the special tax
consequences to certain taxpayers (e.g., banks, insurance companies, tax exempt
organizations and foreign persons). Shareholders are encouraged to consult their
own tax advisors regarding specific questions relating to federal, state and
local tax consequences of investing in shares of a Fund. Each shareholder who is
not a U.S. person should consult his or her tax advisor regarding the U.S. and
foreign tax consequences of ownership of shares of a Fund, including the
possibility that such a shareholder may be subject to a U.S. withholding tax at
a rate of 30% (or at a lower rate under a tax treaty) on amounts treated as
income from U.S. sources under the Code.
EXPENSES
The information below pertains to expenses incurred by Evergreen Select
Equity Index Fund and Evergreen Select Special Equity Fund. These two Funds were
formerly Equity Index Fund and Special Equity Fund, respectively, portfolios of
CoreFunds, Inc. (the "Predecessor Funds"). They were reorganized into Evergreen
funds in July 1998. Class Y Shares of the Predecessor Funds were reorganized
into Institutional Shares of their respective Evergreen funds. Class A and Class
B Shares of the Predecessor Funds were reorganized into Institutional Service
Shares of their respective Evergreen funds.
ADVISORY FEES
The table below shows amounts paid by the Predecessor Funds to their
investment adviser, CoreStates Investment Advisers, Inc. ("CoreStates
Advisers"), for the fiscal years ended June 30, 1995, 1996 and 1997. The table
also shows advisory fees waived by CoreStates Advisers.
<TABLE>
<CAPTION>
PREDECESSOR FUND ADVISORY FEES PAID ADVISORY FEES WAIVED
1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Special Equity Fund * $25,955 $396,971 * $573,349 $609,289
Equity Index Fund $85,692 $182,967 $283,548 $259,535 $365,435 $516,386
</TABLE>
* Not in operation during such period.
DISTRIBUTION FEES
The table below shows the aggregate sales charges payable for the
fiscal years ended June 30, 1995, 1996 and 1997 to SEI Investments Distribution
Co. ("SEI"), the Predecessor Funds' distributor, with respect to the Predecessor
Funds' Class A and Class B shares. The table also shows amounts retained by SEI.
<TABLE>
<CAPTION>
PREDECESSOR FUND AGGREGATE SALES CHARGE PAYABLE TO SEI AMOUNT RETAINED BY SEI
1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Special Equity Fund 0 $1,933 $39,047 0 $286 $1,529
Equity Index Fund 0 0 $188,470 0 0 $6,846
</TABLE>
The table below shows the distribution fees SEI received for the fiscal
year ended June 30, 1997.
PREDECESSOR FUND AMOUNT FEE AMOUNT PAID TO 3RD PARTIES
RECEIVED BY SEI
Special Equity Fund $3,986 0.25% $9,677
Class A
BROKERAGE COMMISSIONS PAID
The table below shows the brokerage commissions paid by the Predecessor
Funds for the fiscal year ended June 30, 1997.
PREDECESSOR FUND BROKERAGE COMMISSIONS
Special Equity Fund $138, 761
Equity Index Fund $ 89,787
36
<PAGE>
CALCULATION OF PERFORMANCE DATA
Total return quotations for a class of shares of a Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one-, five- and ten-year periods, or the
time periods for which such class of shares has been outstanding, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. All dividends and
distributions are added to the initial investment and all recurring fees charged
to all shareholder accounts are deducted. The ending redeemable value assumes a
complete redemption at the end of the relevant periods.
Current yield quotations as they may appear, from time to time, in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of a Fund, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the base period.
Any given yield or total return quotation should not be considered
representative of a Fund's yield or total return for any future period.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus or required by law, the
Trust reserves the right
37
<PAGE>
to change the terms of the offer stated in its prospectus for each Fund without
shareholder approval, including the right to impose or change fees for services
provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in a Fund's prospectus,
SAI or in supplemental sales literature issued by the Trust or the Distributor,
and no person is entitled to rely on any information or representation not
contained therein.
Each Fund's prospectus and this SAI omit certain information contained
in its registration statement, which may be obtained for a fee from the SEC in
Washington, D.C.
FINANCIAL STATEMENTS
The financial statements for Evergreen Select Equity Index Fund have
been audited by Ernst & Young LLP, independent auditors, for the periods from
inception through June 30, 1997. The financial statements for Evergreen Select
Special Equity Fund have been audited by Ernst & Young LLP for the periods from
November 1, 1995 through June 30, 1997 and by the Fund's prior auditor for the
periods ended October 31, 1994 through October 31, 1995. A report of Ernst &
Young on the financial statements it has audited appears in the Funds' Annual
Report which is incorporated by reference. The Annual Report may be obtained
without charge from ESC by calling 1-800-343-3453 or writing to ESC at 200
Berkeley Street, Boston, Massachusetts 02106-2121.
38
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
The financial statements listed below are included in Part A of this
Amendment to the Registration Statement.
Financial Highlights for:
EVERGREEN SELECT SPECIAL EQUITY FUND
Institutional For the six-month period ended
December 31, 1997; for the year
ended June 30, 1997; for the
eight-month period from November 1,
1995 to June 30, 1996; for the year
from November 1, 1994 to October
31, 1995; and for the period from
March 15, 1994 (Commencement of
Operations) to October 31, 1994
Institutional Service For the six-month period ended
December 31, 1997; for the year
ended June 30, 1997; for the
eight-month period from November 1,
1995 to June 30, 1996; for the year
from November 1, 1994 to October
31, 1995; and for the period from
March 15, 1994 (Commencement of
Operations) to October 31, 1994
EVERGREEN SELECT EQUITY INDEX FUND
Institutional For the six-month period ended
December 31, 1997; For the period
from October 9, 1996 (Commencement
of Operations) to June 30, 1997
Institutional Service For the six-month period ended
December 31, 1997; for each of the
years in the five-year period ended
June 30, 1997; and from the
one-month period from June 1, 1991
(Commencement of Operations) to
June 30, 1991
The financial statements listed below are incorporated by reference in
Part B of this Amendment to the Registration Statement:
Financial Highlights For the same period as included in
Part A
Schedule of Investments As of June 30, 1997
Statement of Assets and As of June 30, 1997
Liabilities
Statement of Operations For the year ended June 30, 1997
Statements of Changes in June 30,1997
Net Assets
Combined Notes to Financial As of June 30, 1997
Statements
Independent Auditors' Report August 12, 1997
Item 24(b). Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- --------
<S> <C> <C>
1 Declaration of Trust Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2
Filed on November 17, 1997
2 By-laws Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2
Filed on November 17, 1997
3 Not applicable
4 Provisions of instruments defining the rights
of holders of the securities being registered
are contained in the Declaration of Trust
Articles II, V, VI, VIII, IX and By-laws
Articles II and VI included as part of Exhibits
1 and 2 of this Registration Statement
5(a) Investment Advisory Agreement between the Incorporated by reference to
Registrantand First Union National Bank Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
5(b) Investment Advisory Agreement between the Incorporated by reference to
Registrant and Evergreen Asset Management Co. Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
5(c) Investment Advisory Agreement between the Incorporated by reference to
Registrant and Keystone Investment Management Registrant's Post-Effective Amendment No. 4
Company Filed on June 30, 1998
5(d) Form of Investment Advisory Agreement between Incorporated by reference to
the Registrant and Meridian Investment Company Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
6 Principal Underwriting Agreement between the Incorporated by reference to
Registrant and Evergreen Distributor, Inc. Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
7 Form of Deferred Compensation Plan Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2
Filed on November 17, 1997
8 Custodian Agreement between the Registrant Incorporated by reference to
and State Street Bank and Trust Company Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
9(a) Administration Agreement between Evergreen Incorporated by reference to
Investment Services, Inc. and the Registrant Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
9(b) Transfer Agent Agreement between the Incorporated by reference to
Registrant and Evergreen Service Company Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
10 Opinion and Consent of Sullivan & Worcester LLP Incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 filed on
November 17, 1997
11(a) Consent of KPMG Peat Marwick LLP Incorporated by reference to
Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
11(b) Consent of Ernst & Young LLP
12 Not applicable
13 Not applicable
14 Not applicable
15 12b-1 Distribution Plan for the Institutional Incorporated by reference to
Service Shares Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
16 Not applicable
17 Not applicable
18 Multiple Class Plan Incorporated by reference to Registrant's
Pre-Effective Amendment No. 2 filed
on November 17, 1997
19 Powers of Attorney Incorporated by reference to
Registrant's Post-Effective Amendment No. 4
Filed on June 30, 1998
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities (as of June 30, 1998)
Evergreen Select Strategic Value Fund
Institutional Shares 3
Institutional Service Shares 19
Evergreen Select Large Cap Blend Fund
Institutional Shares 2
Institutional Service Shares 3
Charitable Shares 2
Evergreen Select Strategic Growth Fund
Institutional Shares 2
Institutional Service Shares 28
Evergreen Select Social Principles Fund
Institutional Shares 2
Institutional Service Shares 4
Charitable Shares 2
Evergreen Select Equity Income Fund
Institutional Shares 4
Institutional Service Shares 16
Evergreen Select Small Company Value Fund
Institutional Shares 3
Institutional Service Shares 0
Evergreen Select Common Stock Fund
Institutional Shares 4
Institutional Service Shares 194
Evergreen Select Balanced Fund
Institutional Shares 2
Institutional Service Shares 1
Evergreen Select Diversified Value Fund
Institutional Shares 2
Item 27. Indemnification.
Provisions for the indemnification of the Registrant's Trustees and
officers are contained the Registrant's Declaration of Trust, incorporated by
reference to Registrant's Pre-Effective Amendment No. 1 filed on November 17,
1997.
Provisions for the indemnification of the Registrant's Investment Advisors
are contained in their respective Investment Advisory and Management Agreements.
Provisions for the indemnification of Evergreen Distributor, Inc., the
Registrant's principal underwriter, are contained in the Principal Underwriting
Agreement between Evergreen Distributor, Inc. and the Registrant, a copy of
which is filed herewith.
Item 28. Business or Other Connections of Investment Advisors.
The Directors and principal executive officers of First Union National Bank
are:
Edward E. Crutchfield, Jr. Chairman and Chief Executive Officer,
First Union Corporation; Chief Executive
Officer and Chairman, First Union National
Bank
John R. Georgius Vice Chairman, First Union Corporation;
Vice Chairman, First Union National Bank
Marion A. Cowell, Jr. Executive Vice President, Secretary &
General Counsel, First Union Corporation;
Secretary and Executive Vice President,
First Union National Bank
Robert T. Atwood Executive Vice President and Chief Financial
Officer, First Union Corporation; Chief
Financial Officer and Executive Vice
President
All of the above persons are located at the following address: First Union
National Bank, One First Union Center, Charlotte, NC 28288.
The information required by this item with respect to Evergreen Asset
Management Corp. is incorporated by reference to the Form ADV (File No.
801-46522) of Evergreen Asset Management Corp.
The information required by this item with respect to Keystone Investment
Management Company is incorporated by reference to the Form ADV (File No.
801-5436) of Keystone Investment Management Company.
The information required by this item with respect to Meridian Investment
Company is incorporated by reference to the Form ADV (File No. 801-23484) of
Meridian Investment Company.
Item 29. Principal Underwriter.
The Directors and principal executive officers of Evergreen Distributor,
Inc. are:
Lynn C. Mangum Director, Chairman and Chief Executive
Officer
J. David Huber President
Kevin J. Dell Vice President, General Counsel and Secretary
All of the above persons are located at the following address: Evergreen
Distributor, Inc., 125 West 55th Street, New York, New York 10019.
Evergreen Distributor, Inc. acts as principal underwriter for each
registered investment company or series thereof that is a part of the Evergreen
"fund complex" as such term is defined in Item 22(a) of Schedule 14A under the
Securities Exchange Act of 1934.
Item 30. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Evergreen Investment Services, Inc., Evergreen Service Company and Keystone
Investment Management Company, all located at 200 Berkeley Street, Boston,
Massachusetts 02110
First Union National Bank, One First Union Center, 301 S. College Street,
Charlotte, North Carolina 28288
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02777
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171
Meridian Investment Company, 55 Valley Stream Parkway, Malvern,
Pennsylvania 19355
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and State of New York, on the 31st day of
July, 1998.
EVERGREEN SELECT EQUITY TRUST
By: /s/ William J. Tomko
-----------------------------
Name: William J. Tomko
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 31st day of July, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ William J. Tomko /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ------------------------- ----------------------------- --------------------------------
William J. Tomko Laurence B. Ashkin* Charles A. Austin III*
President amd Treasurer (Principal Trustee Trustee
Financial and Accounting Officer)
/s/ K. Dun Gifford /s/ James S. Howell /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* James S. Howell* William Walt Pettit*
Trustee Trustee Trustee
/s/Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ------------------------------- ----------------------------- --------------------------------
Gerald M. McDonell* Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Trustee
/s/ David M. Richardson /s/ Russell A. Salton, III MD
- ------------------------------ -------------------------------
David M. Richardson* Russell A. Salton, III MD*
Trustee Trustee
/s/ Richard J. Shima
- ------------------------------
Richard J. Shima*
Trustee
</TABLE>
*By: /s/ Maureen E. Towle
- -------------------------------
Maureen E. Towle
Attorney-in-Fact
*Maureen E. Towle, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
11(b) Consent of Ernst & Young LLP
CONSENT OF ERNST & YOUND LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A (Nos.
333-36047/811-08363) of Evergreen Select Equity Trust (Evergreen Select Equity
Index Fund and Evergreen Select Special Equity Fund), of this reference and of
our report dated August 12, 1997 on the CoreFunds, Inc. Equity Index Fund and
CoreFunds, Inc. Special Equity Fund.
/s/ Ernst & Young LLP
Ernst & Young LLP
Philadelphia, Pennsylvania
July 28, 1998
