EVERGREEN SELECT EQUITY TRUST
1933 Act File No. 333-36047
1940 Act File 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.
2 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2 [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)
Dorothy E. Bourassa, Esquire
200 Berkeley Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
<PAGE>
It is proposed that this filing will become effective: [ ] immediately upon
filing pursuant to paragraph (b) [ ] on (date pursuant to paragraph (b) [ ] 60
days after filing pursuant to paragraph (a)(i) [ ] on (date) pursuant to
paragraph (a)(i) [X] 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 AMENDMENT NO. 2 to
REGISTRATION STATEMENT ON
FORM N-1A
This Post-Effective Amendment No. 2 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 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 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 are
incorporated by reference herein.
Prospectuses for Evergreen Select Small Cap Growth Fund are contained in
Registration Statement No. 33-36047/811-08363 filed on December 12, 1997 are
incorporated by reference herein.
PART B
Statement of Additional Information for Evergreen Select Strategic
Value Fund, Evergreen 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
and Evergreen Select Equity Index Fund and Evergreen Select Special Equity Fund
is contained herein.
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PART C
Exhibits
Number of Security Holders
Indemnification
Business and Other Connections
of Investment Advisers
Principal Underwriter
Location of Accounts and Records
Signatures
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EVERGREEN SELECT EQUITY TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
ITEM OF PART A OF FORM N-1A LOCATION IN PROSPECTUS
<S> <C>
1. Cover Page Cover Page
2. Synopsis and Fee Table Cover Page; Expenses
3. Condensed Financial Not applicable
Information
4. General Description of Cover Page; Fund Details
Registrant
5. Management of the Fund Fund Details
6. Capital Stock and Other Fund Details; Buying and
Securities Selling Shares
7. Purchase of Securities Being Buying and Selling Shares
Offered
8. Redemption or Repurchase Buying and Selling Shares
9. Pending Leal Proceedings Not Applicable
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART B OF FORM N-1A LOCATION IN STATEMENT OF
<S> <C>
ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives and Securities and Investment
Policies Practices; Investment
14. Management of the Fund Investment Advisory Services
15. Control Persons and Control Persons and
Principal Holders of Principal Holders of
Securities Securities
16. Investment Advisory and Investment Advisory and
Other Services Other Services
17. Brokerage Allocation Brokerage Allocation and
Other Practices
18. Capital Stock and Other Description of Shares;
Securities Voting Rights; Limitation of
Trustees' Liability
19. Purchase, Redemption and Purchase, Redemption and
Pricing of Securities Being Pricing of Securities Being
Offered Offered
20. Tax Status Additional Tax Information
21. Underwriters Principal Underwriter
22. Calculation of Performance Calculation of Performance
Data Data
23. Financial Statements Not applicable
</TABLE>
<PAGE>
PROSPECTUS
________, 1998
[GRAPHIC OMITTED]
EVERGREEN SELECT EQUITY TRUST
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 1-800-633-2700 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:
o Not deposits or obligations of any bank.
o Not endorsed or guaranteed by any bank.
o Not insured or otherwise protected by the Federal Deposit Insurance
Corporation or any other agency. o 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
EXPENSES 3
FUND DESCRIPTIONS 4
Investment Objectives 4
Securities and Investment Practices
Used By Each Fund 5
BUYING AND SELLING SHARES 8
How To Buy Shares 8
How to Redeem Shares 9
Additional Transaction Policies 10
Exchanges 10
Dividends 10
Taxes 11
Shareholder Services 11
FUND DETAILS 11
Fund Organization and Service
Providers 11
Other Information And Policies 16
Fund Performance 16
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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
ending 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>
Management Other Total Operating
Fees Expenses Expenses (After
Annual Fund Operating Expenses (After Expense 12b-1 (After Expense Expense Waivers or
(as a percentage of average daily net assets) Reimbursements)1 Fees Reimbursements) Reimbursements)1
<S> <C> <C> <C> <C>
Evergreen Select Strategic Value Fund 0.60% None 0.15 % 0.75%
Evergreen Select Diversified Value Fund 0.50% None 0.10 % 0.60%
Evergreen Select Large Cap Blend Fund 0.60% None 0.11 % 0.71%
Evergreen Select Common Stock Fund 0.60% None 0.10 % 0.70%
Evergreen Select Strategic Growth Fund 0.60% None 0.12 % 0.72%
Evergreen Select Equity Income Fund 0.60% None 0.17 % 0.77%
Evergreen Select Small Company Value Fund 0.80% None 0.20%1 1.00%
Evergreen Select Social Principles Fund 0.70% None 0.16 % 0.86%
Evergreen Select Balanced Fund 0.50% None 0.11 % 0.61%
Evergreen Select Equity Index Fund 0.06% None 0.31 % 0.37%
Evergreen Select Special Equity Fund 0.52 % None 0.32 % 0.84 %
Example of Fund Expenses 1 year 3 years
Evergreen Select Strategic Value Fund $8 $24
Evergreen Select Diversified Value Fund $6 $20
Evergreen Select Large Cap Blend Fund $7 $23
Evergreen Select Common Stock Fund $7 $22
Evergreen Select Strategic Growth Fund $7 $23
Evergreen Select Equity Income Fund $8 $25
Evergreen Select Small Company Value Fund $10 $32
Evergreen Select Social Principles Fund $9 $27
Evergreen Select Balanced Fund $6 $20
Evergreen Select Equity Index Fund $4 $12
Evergreen Select Special Equity Fund $9 $27
</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%. Absent expense waivers and/or reimbursements, the Total
Operating Expenses for each of the Funds would be as follows:
3
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<TABLE>
<CAPTION>
Management Fee Other Expenses (Without Total Fund
Fund (Without Waivers) Reimbursements) Operating Expenses
<S> <C> <C> <C>
Evergreen Select Strategic Value Fund 0.70% 0.15% 0.85%
Evergreen Select Diversified 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 Strategic 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 Balanced Fund 0.60% 0.13% 0.71%
Evergreen Select Equity Index Fund 0.40% 0.31% 0.71%
Evergreen Select Special Equity Fund 1.50% 0.32% 1.82 %
</TABLE>
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., a company with a market
capitalization 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. a company with a market capitalization 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 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., a company with a market capitalization 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 selects securities it thinks
will rise in value sooner than most observers anticipate, increasing the value
of Fund shares.
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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 S&P 500 Index.
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.,
$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, Standard &Poor's Corporation ("S&P") considers market values and
industry diversification.
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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. Evergreen Select Equity Index Fund's investment adviser uses a
computer model that closely monitors the industry weightings of the S&P 500
Index. Although Evergreen Select Equity Index Fund's investment adviser does not
screen securities by traditional methods of financial and market analyses, it
monitors the Evergreen Select Equity Index Fund's investments with a view toward
removing stocks of companies which exhibit extreme financial distress or which
may impair the Evergreen Select Equity Index Fund's ability to achieve its
investment objective. Evergreen Select Equity Index 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.
There are special risks associated with international investing:
o Currency Risk - The possibility that changes in foreign
exchange rates will affect, favorably or unfavorably, the
value of foreign securities.
o 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.
o 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.
o 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.
o 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.
Futures Contracts and Options Transactions. The Evergreen Select Special Equity
Fund may invest in futures contracts and options transactions. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specified security at a specified future time and at a
specified price.
An option on a futures contracts gives the purchaser the right, in exchange for
a premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. A put option on a security gives the
purchaser of the option the right to sell, and the writer of the option the
obligation to buy, the underlying security at any time during the option period.
A call option on a security gives the purchaser of the option the right to buy,
and the writer of the option the obligation to sell, the underlying security at
any time during the option period.
These transactions are used to maintain cash reserves while remaining fully
invested, facilitate trading, reduce transaction costs or seek higher investment
returns when the contract is priced more attractively than the underlying equity
security or index.
The Fund may not use futures contracts or options transactions to leverage its
net assets for speculative purposes. See 'Futures Transactions and Related
Options Transactions' in the Statement of Additional Information.
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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:
o 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.
o 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 Investors Service, L.P. ("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 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 a 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 and
difficult to predict.
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.
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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.
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 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.
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 Fund's 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.
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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.
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 1-800-633-2700
between the hours of 9:00 a.m. and 5:00 p.m. (Eastern time) on each business
day. You may also redeem shares by sending a facsimile to 617-210-2708 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
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<PAGE>
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 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.
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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. 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:
o Income distributions and net short-term capital gains are taxable as
ordinary income.
o 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 1-800-633-2700 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, investment management 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, the Funds' performance and its contractual arrangements with
various service providers.
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Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. 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. If any matters are to be voted on by shareholders, each share owned as
of the record date for the meeting would be entitled to one vote.
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 and FUNB are located 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.
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
by 0.10%, 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. 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 Special Equity Fund is Meridian Investment
Company ("Meridian"). Meridian is an indirect subsidiary of First Union National
Bank ("FUNB"). FUND is a subsidiary of First Union Corporation ("First Union").
Meridian's address is 55 Valley Stream Parkway, Malvern, Pennsylvania 19355.
Both FUNB and First Union are located 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 United
States. Meridian receives an annual fee equal to 1.50% of average daily net
assets of Evergreen 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.
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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)
<S> <C>
Evergreen Select
Common Stock Fund The portfolio managers of the Fund are Mark C. Sipe, 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 Income Fund
Paul A. DiLella. Paul A. DiLella is a Vice President 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
Cap Blend Fund
Eric Wiegand is the team leader of a group of four seasoned
investment professionals who manage this Fund. Managing the
Fund along with Mr. Wiegand are Daryl L. Brown, R. Dean
Hawes, Dillon Harris and Steven J. Hoeft.
Eric M. Wiegand. Eric Wiegand is also responsible
for managing the Evergreen Select Social
Principles Fund. 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
Strategic Growth Fund The portfolio managers of the Fund are W. Shannon 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.
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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 1979-1984.
Evergreen Select
Strategic Value Fund Timothy O'Grady is the team leader of a group of three seasoned professionals who manage the
Strategic Value Fund. Managing the Fund along with Mr. O'Grady are J. Donald Raines, Jack Gray and
Elizabeth Smith.
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 Select Value Fund. He
recently became a Senior Vice President and
Senior Portfolio Manager this year.
Evergreen Select
Small Company The portfolio managers for the Fund are Stephen A. Lieber, Gary R. Buesser and Nola M. Falcone,
Value Fund CFA.
Stephen Lieber. Mr. Lieber is Chairman and Co-Chief Executive Officer of Lieber & Co. and
Evergreen Asset Management Corp. 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. He was a founding General Partner of Vanden
Broeck, Lieber & Co. from 1956 to 1969.
Gary Buesser. Mr. Buesser joined Lieber & Company as an analyst
in 1996. Previously, he was a Portfolio Manager/Analyst with
Cowen Asset Management and Shearson Lehman Brothers. Mr. Buesser
is currently the Portfolio Manager of the Evergreen Growth &
Income Fund. Prior to managing the Growth & Income Fund, Mr.
Buesser worked as an associate portfolio manager on the Evergreen
Foundation Fund and as primary manager for pension and non-profit
portfolios. He is a member of the New York Society of Security
Analysts and The Association for Investment Management and
Research.
Nola Falcone, CFA. Nola Falcone is President and Co-Chief Executive Officer of Lieber & Co. and
Evergreen Asset Management Corp. 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 Fund.
Evergreen Select
Social Principles Fund Eric M. Wiegand. Eric Wiegand is also responsible for managing the Evergreen Select Large Cap
Blend Fund. 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
Balanced Fund Dean Hawes manages the Fund's equity portfolio. Rollin 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
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<PAGE>
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. Since joining First Union, Mr.
Williams has been a Vice President and Senior Portfolio Manager.
Evergreen Select
Diversified
Value Fund David C. Francis, CFA. David Francis joined First 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
Equity Index Fund Lary Aasheim, CFA, a Managing
Director and Director of Research of
CoreStates Advisers, is portfolio manager of
Evergreen Select Equity Index Fund. Prior to
joining CoreStates Advisers in 1990, Mr.
Aasheim worked as an analyst at First Fidelity
Bank/Fidelity Bank, First Pennsylvania
Bank and Bear Stearns in New York.
Evergreen Select
Special Equity
Fund Joseph E. Stocke, CFA. Mr. Stocke is a Senior Investment Manager/Equities with Meridian.
Mr. Stocke has been with Meridian since 1983 and currently manages 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 Corporation.
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. ("EKS") serves as
administrator to each Fund. As administrator, and subject to the supervision and
control of the Trust's Board of Trustees, EKS provides the Funds with
facilities, equipment and personnel. For its services as administrator, EKS 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 advised by First
Union subsidiaries. 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
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
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<PAGE>
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 estimated annual portfolio turnover rate for each Fund
is not expected to exceed the rate set forth below.
Estimated Annual
Fund Name Portfolio Turnover
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%
Evergreen Select Equity Index Fund 25%
Evergreen Select Special Equity Fund 75%
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 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 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.
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.
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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 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 commencing before October 31, 1997, 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.
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 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>
10 Years (Or
since Inception
Fund Name (Predecessor CTF) 1 Year 3 Years 5 Years 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 Management Corp. for Private Accounts Similar to
Evergreen Select Small Company Value Fund. Set forth below is composite
performance information relating to the historical performance of actual,
fee-paying, fully discretionary equity accounts managed by Evergreen Asset
Management Corp. These accounts have investment objectives, policies,
strategies, and risks substantially similar to those of Evergreen Select Small
Cap Value Fund.
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<PAGE>
Evergreen Asset Management Corp.'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.
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 Management Corp.'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 Management Corp. 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
at Accounts 10 Years (Or
9/30/97(SM as of Since Inception
Composite M) for AIMR 9/30/97 1 Year 3 Years 5 Years Inception Date
<S> <C> <C> <C> <C> <C> <C> <C>
Small Cap Value 289.4 2 48.05% 30.22% 22.88% 14.21% 12/1/82
Composite
</TABLE>
Evergreen Select Balanced Fund , Evergreen Select Diversified Value Fund,
Evergreen Select Equity Index Fund and Evergreen Select Special Equity Fund. The
following total return information is provided with reference to Evergreen
Balanced Fund and Evergreen Value Fund , the Class Y shares of which reorganized
into the Institutional Shares of Evergreen Select Balanced Fund and Evergreen
Select Diversified Value Fund, respectively in November of 1997. The total
return information is also provided with reference to CoreFunds Equity Index
Fund and CoreFunds Special Equity Fund, the Institutional Shares of which will
be reorganized into Evergreen Select Equity Index Fund. Evergreen Balanced Fund
and Evergreen Value Fund were series of Evergreen Investment Trust, a registered
investment company managed by Evergreen Asset Management Corp. CoreFunds Equity
Index Fund and CoreFunds Special Equity Fund were a series of CoreFunds, Inc., a
registered investment company managed by CoreStates Investment Advisers, Inc.
Evergreen Balanced Fund, Evergreen Value Fund, CoreFunds Equity Index Fund and
CoreFunds Special Equity Fund have investment objectives, policies and
strategies materially equivalent to those of Evergreen Select Balanced Fund,
Evergreen Select Diversified Value Fund, Evergreen Select Equity Index Fund and
Evergreen Select Special Equity Fund, respectively. Past performance of the
Evergreen Balanced Fund , Evergreen Value Fund, CoreFunds Equity Index Fund and
CoreFunds Special Equity Fund is no guarantee of the future performance of
Evergreen Select Balanced Fund , Evergreen Select Diversified Value Fund,
Evergreen Select Equity Index Fund and Evergreen Select Special Equity Fund. The
performance information set forth below is provided as of March 31, 1997 for
Evergreen Balanced Fund, as of December 31, 1997 for Evergreen Value Fund and as
of June 30, 1997 for CoreFunds Equity Index Fund.
<TABLE>
<CAPTION>
CoreFunds
Period Evergreen Evergreen CoreFunds Equity Special
Balanced Fund Value Index Fund Equity Fund
<S> <C> <C> <C> <C>
One Year 19.97% 27.77% 17.94% 34.44%
Three Years 17.69% 22.49% N/A 28.12 %
Five Years 13.13% 17.04% N/A 18.90%
Ten Years (or since inception) 12.80% 16.95% [ ] 13.43%
Inception Date 4/1/91 1/3/91 11/1/95 2/14/85
</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.
Investment Advisers
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<PAGE>
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, Box 9021, Boston, Massachusetts 02205-9827
Transfer Agent
Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116
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
-24-
<PAGE>
PROSPECTUS
____________, 1998
[GRAPHIC OMITTED]
EVERGREEN SELECT EQUITY TRUST
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 (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 1-800-343-3453 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:
o Not deposits or obligations of any bank.
o Not endorsed or guaranteed by any bank.
o Not insured or otherwise protected by the Federal Deposit Insurance
Corporation or any other agency. o 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-25-
<PAGE>
TABLE OF CONTENTS
EXPENSES 3
FUND DESCRIPTIONS 4
Investment Objectives 4
Securities and Investment Practices
Used By Each Fund 5
BUYING AND SELLING SHARES 8
How To Buy Shares 8
How to Redeem Shares 9
Additional Transaction Policies 10
Exchanges 10
Dividends 10
Taxes 10
Shareholder Services 11
FUND DETAILS 11
Fund Organization and Service
Providers 11
Other Information And Policies 15
Fund Performance 16
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<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 ending 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>
Management Other Total Operating
Fees Expenses Expenses (After
Annual Fund Operating Expenses (After Expense 12b-1 (After Expense Expense Waivers or
(as a percentage of average daily net
assets) Reimbursements)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 0.06% 0.25% 0.31 % 0.62%
Evergreen Select Special Equity Fund 0.52% 0.25% 0.32 % 1.09 %
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 $27 $9
Evergreen Select Equity Index Fund $18 $6
Evergreen Select Special Equity Fund $11 $35
</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%. 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 Total Fund
Fund (Without Waivers) Fees (Without Reimbursement) Operating Expenses
<S> <C> <C> <C> <C>
Evergreen Select Strategic Value Fund 0.70% 0.2 -- 1.10%
Evergreen Select Diversified Value Fund 0.60% 0.2 -- 0.95%
Evergreen Select Large Cap Blend Fund 0.70% 0.2 -- 1.06%
Evergreen Select Common Stock Fund 0.70% 0.2 -- 1.05%
Evergreen Select Strategic Growth Fund 0.70% 0.2 -- 1.07%
Evergreen Select Equity Income Fund 0.70% 0.2 -- 1.12%
Evergreen Select Small Company Value Fund 0.90% 0 0.28% 1.43%
Evergreen Select Social Principles Fund 0.80% 0.2 -- 1.21%
Evergreen Select Balanced Fund 0.60% 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% 0.321% 2.07%
</TABLE>
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<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., a company with a market
capitalization 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. a company with a market capitalization 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 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., a company with a market capitalization 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 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.
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<PAGE>
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 S&P 500 Index.
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.,
$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, Standard & Poor's Corporation ("S&P") considers market values and
industry diversification.
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. Evergreen Select Equity Index Fund's investment adviser uses a
computer model that closely monitors the industry weightings of the S&P 500
Index. Although Evergreen Select Equity Index Fund's investment adviser does not
screen securities by traditional methods of financial and market analyses, it
monitors the Evergreen Select Equity Index Fund's investments with a view toward
removing stocks of companies which exhibit extreme financial distress or which
may impair the Evergreen Select Equity Index Fund's ability to achieve its
investment objective. Evergreen Select Equity Index Fund strives to provide a
total return comparable to the S&P 500 Index. Equity Index Fund is not sponsored
by nor affiliated with S&P.
-29-
<PAGE>
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.
There are special risks associated with international investing:
o Currency Risk - The possibility that changes in foreign
exchange rates will affect, favorably or unfavorably, the
value of foreign securities.
o 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.
o 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.
o 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.
o 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.
Futures Contracts and Options Transactions. The Evergreen Select Special Equity
Fund may invest in futures contracts and options transactions. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specified security at a specified future time and at a
specified price.
An option on a futures contracts gives the purchaser the right, in exchange for
a premium, to assume a position in a futures contract at a specified exercise
price during the term of the option. A put option on a security gives the
purchaser of the option the right to sell, and the writer of the option the
obligation to buy, the underlying security at any time during the option period.
A call option on a security gives the purchaser of the option the right to buy,
and the writer of the option the obligation to sell, the underlying security at
any time during the option period.
These transactions are used to maintain cash reserves while remaining fully
invested, facilitate trading, reduce transaction costs or seek higher investment
returns when the contract is priced more attractively than the underlying equity
security or index.
The Fund may not use futures contracts or options transactions to leverage its
net assets for speculative purposes. See 'Futures Transactions and Related
Options Transactions' in the Statement of Additional Information.
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:
o 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.
o 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),
-30-
<PAGE>
or Fitch Investors Service, L.P. ("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 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 a 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 and
difficult to predict.
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.
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
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<PAGE>
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 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.
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 Fund's 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.
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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 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.
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<PAGE>
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.
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
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Each Fund intends to qualify as a regulated investment company (a "RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended. 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:
o Income distributions and net short-term capital gains are taxable as
ordinary income.
o 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, investment management 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, the Funds' performance and its contractual arrangements with
various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. 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. [If any matters are to be voted on by shareholders, each share owned
as of the record date for the meeting would be entitled to one vote.] [Check]
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 and FUNB are located 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.
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
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voluntarily agreed to reduce its advisory fee by 0.10%, 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 Special Equity Fund is Meridian Investment
Company ("Meridian"). Meridian is an indirect subsidiary of First Union National
Bank ("FUNB"). FUND is a subsidiary of First Union Corporation ("First Union").
Meridian's address is 55 Valley Stream Parkway, Malvern, Pennsylvania 19355.
Both FUNB and First Union are located 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 United
States. Meridian receives an annual fee equal to 1.50% of average daily net
assets of Evergreen Special Equity Fund. Currently Meridian has voluntarily
agreed to limit its advisory fee to .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)
<S> <C>
Evergreen Select
Common Stock Fund The portfolio managers of the Fund are Mark C. Sipe, 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
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<PAGE>
Equity Income Fund Paul A. DiLella. Paul A. DiLella is a Vice President 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
Cap Blend Fund Eric Wiegand is the team leader of a group of
four seasoned investment professionals who manage this
Fund. Managing the Fund along with Mr. Wiegand are Daryl
L. Brown, R. Dean Hawes, Dillon Harris and Steven J.
Hoeft.
Eric M. Wiegand. Eric Wiegand is also responsible for
managing the Evergreen Select Social Principles Fund.
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
Strategic Growth Fund The portfolio managers of the Fund are W. Shannon 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 1979-1984.
Evergreen Select
Strategic Value Fund Timothy O'Grady is the team leader of a group
of three seasoned professionals who manage the Strategic
Value Fund. Managing the Fund along with Mr. O'Grady are
J. Donald Raines, Jack Gray and Elizabeth Smith.
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 Select Value Fund. He recently became
a Senior Vice President and Senior Portfolio Manager
this year.
Evergreen Select
Small Company The portfolio managers for the Fund are Stephen A. Lieber, Gary R. Buesser and Nola Value Fund M. Falcone,
CFA.
Stephen Lieber. Mr. Lieber is Chairman and Co-Chief Executive Officer of Lieber & Co. and Evergreen Asset
Management Corp. 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. He was a founding General Partner of Vanden Broeck, Lieber & Co. from 1956 to
1969.
Gary Buesser. Mr. Buesser joined Lieber & Company as an analyst in 1996. Previously, he was a Portfolio
Manager/Analyst with Cowen Asset Management and Shearson Lehman Brothers. Mr. Buesser is currently the
Portfolio Manager of the Evergreen Growth & Income Fund. Prior to managing the Growth & Income Fund, Mr.
Buesser worked as an associate portfolio manager on the Evergreen Foundation Fund and as primary manager for
pension and non-profit portfolios. He is a member of the New York Society of Security Analysts and The
Association for Investment Management and Research.
Nola Falcone, CFA. Nola Falcone is President and Co-Chief Executive Officer of Lieber & Co. and Evergreen
Asset Management Corp. 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 Fund.
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<PAGE>
Evergreen Select
Social Principles Fund Eric M. Wiegand. Eric Wiegand is also
responsible for managing the Evergreen Select Large Cap
Blend Fund. 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
Balanced Fund Dean Hawes manages the Fund's equity portfolio. Rollin 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. Since joining First Union, Mr. Williams has
been a Vice President and Senior Portfolio Manager.
Evergreen Select Diversified Value Fund David C. Francis, CFA. David
Francis joined First 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
Equity Index Fund Lary Aasheim, CFA, a Managing Director and Director of Research of
CoreStates Advisers, is portfolio manager of
Evergreen Select Equity Index Fund. Prior
to joining CoreStates Advisers in 1990,
Mr. Aasheim worked as an analyst at First
Fidelity Bank/Fidelity Bank, First
Pennsylvania Bank and Bear Stearns in New
York.
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<PAGE>
Evergreen Select
Special Equity
Fund Joseph E. Stocke, CFA. Mr. Stocke is a Senior Investment Manager/Equities with Meridian.
Mr. Stocke has been with Meridian since 1983 and currently manages 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 Corporation.
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. ("EKS") serves as
administrator to each Fund. As administrator, and subject to the supervision and
control of the Trust's Board of Trustees, EKS provides the Funds with
facilities, equipment and personnel. For its services as administrator, EKS 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 advised by First
Union subsidiaries. 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 estimated annual portfolio turnover rate for each Fund
is not expected to exceed the rate set forth below.
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Estimated Annual
Fund Name Portfolio Turnover
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%
Evergreen Select Equity Index Fund 25%
Evergreen Select Special Equity Fund 75%
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 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 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.
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 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 commencing before October 31, 1997, 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.
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
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<PAGE>
is for the larger of the two CTFs. The CTFs were not registered under the 1940
Act and thus were not subject to certain investment restrictions that are
imposed by the 1940 Act. If the CTFs had been 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>
10 Years (Or
since Inception
Fund Name (Predecessor CTF) 1 Year 3 Years 5 Years 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 Management Corp. for Private Accounts Similar to
Evergreen Select Small Company Value Fund. Set forth below is composite
performance information relating to the historical performance of actual,
fee-paying, fully discretionary equity accounts managed by Evergreen Asset
Management Corp. These accounts have investment objectives, policies,
strategies, and risks substantially similar to those of Evergreen Select Small
Cap Value Fund.
Evergreen Asset Management Corp.'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.
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 Management Corp.'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 Management Corp. 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
at Accounts 10 Years (Or
9/30/97(SM as of Since Inception
Composite M) for AIMR 9/30/97 1 Year 3 Years 5 Years Inception Date
<S> <C> <C> <C> <C> <C> <C> <C>
Small Cap Value 289.4 2 48.05% 30.22% 27.88% 14.21% 12/1/82
Composite
</TABLE>
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<PAGE>
Evergreen Select Balanced Fund , Evergreen Select Diversified Value Fund,
Evergreen Select Equity Index Fund and Evergreen Select Special Equity Fund. The
following total return information is provided with reference to Evergreen
Balanced Fund and Evergreen Value Fund , the Class Y shares of which reorganized
into Evergreen Select Balanced Fund and Evergreen Select Diversified Value Fund,
respectively in November 1997. The total return information is also provided
with reference to CoreFunds Equity Index Fund and CoreFunds Special Equity Fund,
the Institutional Service Shares of which will be reorganized into Evergreen
Select Equity Index Fund. Evergreen Balanced Fund and Evergreen Value Fund were
series of Evergreen were series of Evergreen Investment Trust, a registered
investment company managed by Evergreen Asset Management Corp. CoreFunds Equity
Index Fund and Core Funds special Equity Fund were series of CoreFunds, Inc., a
registered investment company managed by CoreStates Investment Advisers, Inc.
Evergreen Balanced Fund, Evergreen Value Fund, CoreFunds Equity Index Fund and
CoreFunds Special Equity Fund have investment objectives, policies and
strategies materially equivalent to those of Evergreen Select Balanced Fund,
Evergreen Select Diversified Value Fund, Evergreen Select Equity Index Fund and
Evergreen Select Special Equity Fund, respectively. Past performance of the
Evergreen Balanced Fund , Evergreen Value Fund, CoreFunds Equity Index Fund and
CoreFunds Special Equity Fund is no guarantee of the future performance of
Evergreen Select Balanced Fund , Evergreen Select Diversified Value Fund,
Evergreen Select Equity Index Fund and Evergreen Select Special Equity Fund. The
performance information set forth below is provided as of March 31, 1997 for
Evergreen Balanced Fund , as of December 31, 1997 for Evergreen Value Fund and
as of June 30, 1997 for CoreFunds Equity Index Fund.
<TABLE>
<CAPTION>
CoreFunds
Period Evergreen Evergreen CoreFunds Equity Special Equity
Balanced Fund Value Fund Index Fund Fund
<S> <C> <C> <C> <C>
One Year 19.97% 27.77% N/A 11.25%
Three Years 17.69% 22.49% N/A 22.83%
Five Years 13.13% 17.04% N/A N/A
Ten Years (or since inception) 12.80% 16.95% 21.51% 15.22%
Inception Date 4/1/91 1/3/91 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.
-42-
<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, Box 9021, Boston, Massachusetts 02205-9827
Transfer Agent
Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116
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
-43-
<PAGE>
EVERGREEN SELECT EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
_________, 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").
This
statement of additional information ("SAI") provides additional information
about all classes of shares of the Funds listed above. It is not a prospectus
and you should read it in conjunction with the prospectus of the Funds , as
supplemented from time to time. You may obtain a copy of the prospectus from,
Evergreen Distributor, Inc.
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<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES.............................................3 ...
Additional Information on Securities and Investment Practices.......3 .
Investment Restrictions And Guidelines.............................15
MANAGEMENT OF THE TRUST..................................................17.....
PRINCIPAL HOLDERS OF FUND SHARES................................21
INVESTMENT ADVISORY AND OTHER SERVICES...................... 25
Investment Advisers............................ 25 ....................
Distributor ................................... 26 ...................
Distribution Plan.............................. 26 ...................
Additional Service Providers................... 27 ...................
BROKERAGE ALLOCATION AND OTHER PRACTICES.................. 28
Selection of Brokers........................... 28 ...................
Brokerage Commissions.......................... 28 ..................
General Brokerage Policies..................... 29 ...................
TRUST ORGANIZATION...................................... 29 ..............
Form of Organization........................... 29 ....................
Description of Shares.......................... 29 ...................
Voting Rights.................................. 29 ....................
Limitation of Trustees' Liability.............. 30 ....................
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES........ 30
Exchanges...................................... 30 ....................
How The Funds Value Their Shares............... 30 .............
Shareholder Services........................... 31 ...................
PRINCIPAL UNDERWRITER........................................... 31 .....
CALCULATION OF PERFORMANCE DATA................................. 32
ADDITIONAL INFORMATION.......................................... 33 ....
FINANCIAL STATEMENTS............................................ 33 ......
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<PAGE>
INVESTMENT POLICIES
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.
Additional Information on Securities and Investment Practices
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. See
"Indexed Commercial Paper" and "Structured Securities" below. 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. See "Mortgage Related Securities," "Collateralized Mortgage
Obligations," "Adjustable Rate Mortgage Securities," "Stripped Mortgage
Securities," "Mortgage Securities - Special Considerations," and "Other
Asset-Backed 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 otherwise inaccessible markets. A
Fund's use derivatives for non-hedging purposes entails greater risks than if a
Fund were to derivatives solely for hedging purposes.
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<PAGE>
Derivatives are a valuable tool which, when used properly, can provide
significant benefit to a Fund's shareholders. The Funds' 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 Adviser's judgment, 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, the Funds and
the 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 exists 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 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
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<PAGE>
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.
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<PAGE>
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, 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. Certain state
authorities may limit the use of options traded in the over-the-counter market.
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.
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<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
and U.S. Treasury notes are backed by the full faith and credit of the U.S.
government and GNMA certificates are guaranteed by a U.S. government agency, 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 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
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<PAGE>
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
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<PAGE>
and the price paid 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)
22828
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<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 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
22828
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<PAGE>
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 Investor 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 Baa or lower by Moody's or BBB 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 a
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 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 Investment Company Act of 1940, as
amended (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's. As a shareholder of
22828
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<PAGE>
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.
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, the Funds 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
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 Investors Service,
L.P.
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
22828
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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 the 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
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 or its custodian 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
the 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.
Rule 144A Securities
Pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A"),
the Board of Trustees the Trusts determines the liquidity of certain restricted
securities Rule 144A is a non-exclusive, safe-harbor for certain secondary
market transactions involving securities subject to restrictions on resale under
federal securities laws. Rule 144A provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
Rule 144A was expected to further enhance the liquidity of the secondary market
for securities eligible for sale under Rule 144A. In determining the liquidity
of certain restricted securities the Trustees consider: (i) the frequency of
trades and quotes for the security; (ii) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (iii)
dealer undertakings to make a market in the security; and (iv) the nature of the
security and the nature of the marketplace trades.
Reverse Repurchase Agreements
Under a reverse repurchase agreement, the Funds would sell securities
and agree to repurchase them at a mutually agreed upon date and price. Reverse
repurchase agreements involve the risk that the market value of the securities
the Fund is obligated to repurchase may decline below the repurchase price.
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<PAGE>
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.
INVESTMENT RESTRICTIONS AND GUIDELINES
Fundamental 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 (the "1940
Act"). Unless otherwise stated, all references to the assets of a Fund are in
terms of current market value.
Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the Investment Company
Act of 1940, as amended (the "1940 Act").
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).
Issuing Senior Securities
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<PAGE>
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Underwriting Securities Issued by Other Persons
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.
Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by law, each Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
companies that invest in real estate.
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
contacts 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.
Loans to Other Persons
Each Fund may not make loans to other persons, except that a 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.
Guidelines
Unlike the Fundamental Policies above, to the extent permitted by law,
the following guidelines may be changed by the Trust's Board of Trustees without
shareholder approval.
Diversification
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to the 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 U.S. Government or its agencies or instrumentalities.
Borrowings
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 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 borrow
up to an additional 5% of its total assets for temporary purposes. 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.
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Illiquid 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 may not dispose of it in
the ordinary course of business within seven days at approximately the value at
which a Fund has the investment on its books.
Investment in other investment companies
Each Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, each Fund may not (1) own more
than 3% of the outstanding voting stock of another investment company, (2)
invest more than 5% of its assets in the securities of any single investment
company, and (3) invest more than 10% of its assets in investment companies.
However, each Fund may invest all of its investable assets in securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and limitations as each Fund.
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>
Position with
Name Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- ------------------------------------------
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction
(DOB: 2/2/28) consultant; and President of Centrum
Equities and Centrum Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton
(DOB: 10/23/34) Partners, Inc.; and former Managing
Director, Seaward Management Corpora
tion (investment advice).
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<PAGE>
Position with
Name Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the
(DOB: 10/12/38) Finance Committee, 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
Har ness
Company;
former
Managing
Partner,
Roscommon
Capital
Corp.;
former
Chief
Executive
Officer,
Gifford
Gifts of
Fine Foods;
former
Chairman,
Gifford,
Drescher &
Associates
(environmental
consulting);
and former
Director,
Keystone
Investments,
Inc.
James S. Howell Chairman of the Former Chairman of the Distribution
(DOB: 8/13/24) Board of Foundation for the Carolinas; and former
Trustees Vice President of Lance Inc. (food
manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief
(DOB: 2/14/39) Executive Officer, Carson 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. Trustee Sales Representative with Nucor-Yamoto,
McDonnell Inc. (steel producer).
(DOB: 7/14/39)
Thomas L. McVerry Trustee Former Vice President and Director of
(DOB: 8/2/39) Rexham Corporation; and former Director
of Carolina Cooperative Federal Credit
Union.
William Walt Trustee Partner in the law firm of Holcomb and
Pettit Pettit, P.A.
(DOB: 8/26/55)
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<PAGE>
Position with
Name Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
David M. Trustee Vice Chair and former Executive Vice
Richardson President, DHR International, Inc. (execu
(DOB: 9/14/41) tive 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 Trustee Medical Director, U.S. Health Care/Aetna
MD (DOB: 6/2/47) Health Services; former Managed Health
Care Consultant; and former President,
Primary Physician Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael S.
(DOB: 2/20/43) Scofield.
Richard J. Shima Trustee Former Chairman, Environmental
(DOB: 8/11/39) Warranty, Inc. (insurance 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.
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<PAGE>
Position with
Name Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
William J. Senior Vice President and
President and Operations Executive, BYSIS Fund
Treasurer Services.
Tomko BISYS
3435 Stelzer Road
Columbus, Ohio
Nimish Bhatt Vice President Vice President, Tax, BISYS Fund Services;
BISYS and Assistant former Assistant Vice President, Evergreen
3435 Stelzer Road Treasurer Asset Management Corp./First Union
Columbus, Ohio National Bank; former Senior Tax
Consulting/Acting Manager, Investment
Companies Group, Price Waterhouse, LLP,
New York
Bryan Haft
BISYS Vice President Team Leader, Fund Administration
3435 Stelzer Road , BISYS Fund Services
Columbus, Ohio
D'Ray Moore
</TABLE>
BISYS Secretary Vice President, Client Services, BISYS 3435 Stelzer Road Fund
Services Columbus, Ohio
The officers of the Trust are all officers and/or employees of BISYS
Fund Services.
-62-
<PAGE>
Listed below is the estimated Trustee compensation for the fiscal year
ended June 30, 1998.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Pension Or Total
Retirement Compensation
Aggregate Benefits Estimated From Registrant
Name Of Person, Compensatio Accrued As Part Annual And Fund
Position n From Of Fund Benefits Upon Complex Paid
Registrant Expenses Retirement To Directors
<S> <C> <C> <C> <C>
Laurence B. $4,930 $0 $0 $67,108
Ashkin
Charles $4,930 $0 $0 $53,099
A. Austin
K. Dun Gifford $4,616 $0 $0 $49,700
James S. Howell $6,264 $0 $0 $88,872
Leroy Keith Jr. $4,616 $0 $0 $49,700
Gerald M. $4,616 $0 $0 $71,596
McDonnell
Thomas L. $5,671 $0 $0 $86,151
McVerry
William Walt Petit $4,616 $0 $0 $77,196
David M. $4,945 $0 $0 $53,099
Richardson
Russell A. Salton, $4,616 $0 $0 $77,450
III
Michael S. $4,616 $0 $0 $49,175
Scofield
Richard J. Shima $4,616 $0 $0 $70,416
</TABLE>
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
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<PAGE>
knowledge, owned beneficially or of record more than 5% of a class of a Fund's
outstanding shares as of March 10, 1998. As of June 1, 1998, no person to
Evergreen Select Equity Index Fund's or Evergreen Select Special Equity Fund's
knowledge owned beneficially or of record more than 5% of a class of each Fund's
outstanding shares.
Evergreen Select Strategic Value Fund
Institutional Class
None
Evergreen Select Strategic Value Fund
Institutional Service Class
None
Evergreen Select Diversified Value Fund
Institutional Class
First Union National Bank/EB/INT 75.901%
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 24.097%
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 Large Cap Blend Fund
Institutional Class
First Union National Bank/EB/INT 50.294%
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 49.706%
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 99.972%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl CMG 1151
Charlotte, NC 28202-1911
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<PAGE>
Evergreen Select Large Cap Blend Fund
Institutional Service Class
None
Evergreen Select Common Stock
Fund
Institutional Class
First Union National Bank/EB/INT 99.585%
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
Claire B. Herring 32.835%
2833 Hillsdale Ave.
Charlotte, NC 28207
Janie C. Choate 18.688%
190 Church Rd.
Devon, PA 19333
First Union National Bank/EB/INT 16.962%
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 15.854%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl CMG 1151
Charlotte, NC 28202-1911
Henry Andrew Dutton, Jr. 7.364%
10810A Old Mt. Savage Rd.
Lavale, MD 21502
Evergreen Select Strategic Growth Fund
Institutional Class
First Union National Bank/EB/INT 87.394%
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 7.876%
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
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<PAGE>
Richard E. Whisnant 99.935%
2600 Bently Rd.
Apt. 2201
Marietta, GA 30067
Evergreen Select Equity Income Fund
Institutional Class
First Union National Bank/EB/INT 99.538%
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
None
Evergreen Select Small Cap Value Fund
Institutional Class
First Union National Bank/EB/INT 99.399%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl CMG 1151
Charlotte, NC 28202-1911
Evergreen Select Small Cap Value Fund
Institutional Service Class
None
Evergreen Select Social Principles Fund
Institutional Service Class
None
Evergreen Select Social Principles Fund
Institutional Class
First Union National Bank/EB/INT 78.042%
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 21.958%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl CMG 1151
Charlotte, NC 28202-1911
Evergreen Select Social Principles Fund
Charitable Class
First Union National Bank/EB/INT 98.446%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl CMG 1151
Charlotte, NC 28202-1911
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<PAGE>
Evergreen Select Balanced Fund
Institutional Class
First Union National Bank/EB/INT 50.160%
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 49.840%
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
None
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisers
The First Capital Group of FUNB is the investment adviser (the
"Adviser") to each Fund other than the Evergreen Select Small Company Fund and
Evergreen Select Special Equity Fund. FUNB is a subsidiary of First Union
Corporation, a bank holding company headquartered in Charlotte, North Carolina.
First Union Corporation and its subsidiaries provide a broad range of financial
services to individuals and businesses throughout the United States. First Union
Corporation and FUNB are located at 201 South College Street, Charlotte North
Carolina 28288.
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.
Meridian Investment Company ("Meridian") is the investment adviser to
Evergreen Select Special Equity Fund. Meridian is located at 55 Valley Stream
Parkway, Malvern, Pennsylvania 19355 and is also a subsidiary of First Union.
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
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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 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
or under state or other securities laws; (11) expenses of preparing, printing
and mailing prospectuses, statements of additional information, 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 ; and (14) charges and expenses of
filing annual and other reports with the Securities and Exchange Commission and
other authorities; and 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.
<TABLE>
<CAPTION>
Annual Annual
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 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 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%
</TABLE>
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.
The 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 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 (Trustees who are not interested
persons of the Fund, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the Fund's Distribution Plan or any agreement
related thereto) cast in person at a meeting called for the purpose of voting on
such approval. The 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. The Advisory Agreement will
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<PAGE>
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
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<PAGE>
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 based on the total assets of all mutual funds advised by First Union
subsidiaries. EIS' fee is calculated in accordance with the following 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
Corporation, 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 audits each Fund's financial statement. The auditor's
address is 99 High Street, Boston, Massachusetts 02110. Will KPMG be Select
Equity Index Fund's accountant?
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank
keeps custody of the Fund's securities and cash and performs other related
duties. The custodian's address is Box 9021, Boston, Massachusetts 02205-9827.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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 Advisor 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;
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<PAGE>
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 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.
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, and purchases from dealers serving as market makers will include a
dealer's mark-up or reflect a dealers' markdown.
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 underwriting commission or
concession. The purchase price for securities bought from dealers serving as
market makers will similarly include the dealer's mark up or reflect a dealer's
mark down.
General Brokerage Policies
Generally, the Fund expects to purchase and sell its securities through
brokerage transactions for which commissions are payable. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's markdown. 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.
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<PAGE>
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
Form of Organization
The Trust was formed as a Delaware business trust on September 18, 1997
(the "Declaration of Trust"). A copy of the Declaration of Trust is on file as
an exhibit to the Trust's Registration Statement, of which this statement of
additional information 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
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<PAGE>
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 50% or
less of the 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.
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
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<PAGE>
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 their 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 their address. Therefore, no interest will accrue on amounts
represented by uncashed distribution or redemption checks
PRINCIPAL UNDERWRITER
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<PAGE>
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 Trust's Declaration of Trust, By-Laws, current prospectuses
and statement of additional information. All orders are subject to acceptance by
the respective Trust and each 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 Trust has agreed under the Underwriting Agreement to pay all
expenses in connection with the registration of its shares with the Securities
and Exchange Commission and auditing.
The Distributor has agreed that it will, in all respects, duly conform
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
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aids, including, but not limited to, personal computers, related software,
and data files.
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 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,
statement of additional information 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
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The audited statement of assets and liabilities and the reports thereon
of KPMG Peat Marwick LLP for each Fund will be filed by amendment.
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EVERGREEN SELECT EQUITY TRUST
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements will be filed by amendment
(b) Exhibits.
Unless otherwise indicated, each of the Exhibits listed below is filed
herewith.
<TABLE>
<CAPTION>
Exhibit
Number Description Location
<S> <C> <C>
1 Declaration of Trust Incorporated by
reference to
Registrant's Pre-
Effective Amendment
No. 1 Filed on
November 17, 1997
2 By-laws Incorporated by
reference to
Registrant's Pre-
Effective Amendment
No. 1 Filed on
November 17, 1997
3 Not applicable
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Exhibit
Number Description Location
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 Investment Advisory Agreement Form of
(a) between the Registrant and First
Union National Bank
Agreement,
incorporated by
reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
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<PAGE>
Exhibit
Number Description Location
5(b) Investment Advisory Agreement Form of
between the Registrant and Agreement, incorporated
Evergreen by reference to
Asset Management Corp. Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
5(c) Form of Agreement filed
Form of herein
Investment
Advisory Agreement between the
6(a) Registrant and Form of Agreement,
incorporated by
Meridian reference to
Investment Company Registrant's Pre-
Effective Amendment No.
Principal Underwriting Agreement 1 Filed on November 17,
for Institutional Shares and 1997
Institutional Service Shares
6(b) between the Registrant and Form of Agreement,
Evergreen Distributor, Inc. incorporated by
reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
Charitable Shares Principal
Underwriting Agreement between
the Registrant and
Evergreen Distributor, Inc.
7 Form of Deferred Compensation Form of Plan,
Plan incorporated by
reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
8 Custodian Agreement between the Form of
Registrant and
State Street Bank and Trust Agreement, incorporated
Company by reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
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Exhibit
Number Description Location
9(a) Transfer Agent Agreement between Form of Agreement,
the Registrant and Evergreen incorporated by
Service Company reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
9(b) Administration Services Agreement Form of Agreement,
between the Registrant and incorporated by
Evergreen Investment Services, reference to
Inc. Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
10 Opinion and Consent of Sullivan & Filed herein
Worcester LLP
11 Not applicable
12 Not applicable
13 Not applicable
14 Not applicable
15 12b-1 Distribution Plan Form of
for Institutional Service Shares Plan, incorporated by
reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
16 Not applicable
17 Not applicable
18 Multiple Class Plan Form of
Plan, incorporated by
reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on
November 17, 1997
19 Powers of Attorney Filed herein
</TABLE>
-81-
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF FEBRUARY
15, 1998).
<TABLE>
<CAPTION>
NUMBER OF
RECORD
TITLE OF CLASS SHAREHOLDERS
<S> <C>
Shares of Beneficial Interest without par value:
Evergreen Select Strategic Value Fund
Institutional Shares 4
Institutional Service Shares 0
Evergreen Select Diversified Value Fund
Institutional Shares 4
Institutional Service Shares 0
Evergreen Large Cap Blend Fund
Institutional Shares 2
Institutional Service Shares 0
Charitable Shares 3
Evergreen Select Common Stock Fund
Institutional Shares 11
Institutional Service Shares 61
Evergreen Select Strategic Growth Fund
Institutional Shares 14
Institutional Service Shares 2
Evergreen Select Equity Income Fund
Institutional Shares 6
Institutional Service Shares 0
Evergreen Select Small Company Value Fund
Institutional Shares 3
0
Institutional Service Shares
Evergreen Select Social Principles Fund
Institutional Shares 2
Institutional Service Shares 0
Charitable Shares 2
Evergreen Select Balanced Fund
Institutional Shares 2
Institutional Service Shares 0
-82-
<PAGE>
NUMBER OF
RECORD
TITLE OF CLASS SHAREHOLDERS
Evergreen Select Equity Index Fund
Institutional Shares 0
Institutional Service Shares 0
Evergreen Select Special Equity Fund
Institutional Shares 0
Institutional Service Shares 0
</TABLE>
-83-
<PAGE>
ITEM 27. INDEMNIFICATION.
Provisions for the indemnification of the Registrant's Trustees and officers are
contained in 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 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 ADVISERS.
(a) For the information required by this item with respect to the
Capital Management Group of First Union National Bank, see the
section entitled "Management of the Fund - Investment Adviser"
in
Part A.
The Directors and principal executive officers of First Union National
Bank are:
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
-84-
<PAGE>
All of the above persons are located at the following address: First
Union National Bank, One First Union Center, Charlotte, NC 28288.
-85-
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS.
Evergreen Distributor, Inc. The Director and principal executive
officers are:
Directors: Lynn J. Mangum
Lynn J. Mangum Chairman/CEO
Officers:
Robert J. McMullan Executive Vice President/Treasurer
J. David Huber President
Kevin J. Dell Vice President/General
Counsel/Secretary
Mark J. Rybarczyk Senior Vice President
Dennis Sheehan Senior Vice President
Vice President
D'Ray
Moore
Dale Smith Vice President
Michael Vice President
Burns
Bruce Treff Assistant Secretary
Annamaria Procaro Assistant Secretary
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 Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034
Evergreen Investment Services, Inc. and Evergreen Service Company, 200
Berkeley Street, Boston, Massachusetts 02116-5034
First Union National Bank, One First Union Center, 301 S. College
Street, Charlotte, North Carolina 28288
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02720
-86-
<PAGE>
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission a Post-Effective Amendment to this
Registration Statement using financial statements of its Evergreen Select Equity
Index Fund series, which need not be audited, within four to six months from the
effective date of Registrant's Registration Statement.
Registrant hereby undertakes to comply with the provisions of Section
16(c) of the Investment Company Act of 1940 with respect to the removal of
Trustees and the calling of special shareholder meetings by shareholders.
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.
Registrant undertakes to have a net worth of at least $100,000 prior to
commencing a public offering.
-87-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of New York and State
of New York, on the ____ day of March, 1998.
EVERGREEN SELECT EQUITY TRUST
By: /s/William J. Tomko
Name: William J. Tomko
Title: President
As required by the Securities Act of 1933, the following persons have
signed this Registration Statement in the capacities on the _____ day of March,
1998.
/s/William J. /s/Thomas L. McVerry*
- ---------------------------- ---------------------
Tomko William Thomas L. McVerry
- ----------------------
J. Tomko Trustee
President and Treasurer
(Principal Financial and
Accounting Officer
/s/Laurence B. Ashkin* /s/William Walt Pettit*
Laurence B. Ashkin William Walt Pettit
Trustee Trustee
/s/Charles A. Austin III* /s/David M. Richardson*
Charles A. Austin III David M. Richardson
Trustee Trustee
/s/K. Dun Gifford* /s/Russell A. Salton III*
K. Dun Gifford Russell A. Salton III
Trusteee Trustee
/s/James S. Howell* /s/Michael S. Scofield*
James S. Howell Michael S. Scofield
Trustee Trustee
-88-
<PAGE>
/s/Leroy Keith, Jr.* /s/Richard J. Shima*
Leroy Keith, Jr. Richard J. Shima
Trustee Trustee
/s/Gerald M. McDonnell*
Gerald M. McDonnell
Trustee
*By:
/s/Dorothy E. Bourassa
Dorothy E. Bourassa
Attorney-in-Fact
Dorothy E. Bourassa, 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 and included as Exhibit 19 to this Registration
Statement.
-89-
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
5 Investment Advisory Agreement between
the Registrant and First Union National Bank
6(a) Principal Underwriting Agreement between
the Registrant and Evergreen Distributor, Inc.
6(b) Principal Underwriting Agreement between
the Registrant and Evergreen Distributor, Inc.
6(c) Principal Underwriting Agreement between
the Registrant and Evergreen Distributor, Inc.
8 Custodian Agreement between the Registrant
and State Street Bank and Trust Company
9(a) Transfer Agent Agreement between the
Registrant and Evergreen Service Company
9(b) Administration Services Agreement between
the Registrant and Evergreen Investment Services, Inc.
10 Opinion and Consent of Sullivan & Worcester
15 Form of 12b-1 Distribution Plan for Institutional
Service Shares
18 Multiple Class Plan
-90-
<PAGE>
-91-
<PAGE>
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 31st day of May 1998, by and between EVERGREEN
SELECT EQUITY TRUST, a Delaware business trust (the "Trust") and MERIDIAN
INVESTMENT COMPANY, a Pennsylvania corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the
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<PAGE>
Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
(i) all fees and expenses involved in registering and
maintaining registrations of the
Trust, its Funds and of their shares with the Securities and Exchange Commission
(the
<PAGE>
"Commission") and registering or qualifying the Funds' shares under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
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6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
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<PAGE>
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN SELECT EQUITY TRUST
By:
Name:
Title:
MERIDIAN INVESTMENT COMPANY
By:
Name:
Title:
5
<PAGE>
Schedule 1
Evergreen Special Equity Fund Fund
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<PAGE>
Schedule 2
As compensation for the Adviser's services to each Fund during
the period of this Agreement, each Fund will pay to the Adviser a fee
at the annual rate of:
I. Evergreen Special Equity Fund
1.50% of the Average Daily Net Assets of the Fund
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<PAGE>
