PROSPECTUS July 1, 1997
As Supplemented January 23, 1998
[EVERGREEN FUNDS LOGO]
EVERGREEN SPECIALTY GROWTH AND BALANCED FUNDS
EVERGREEN FOUNDATION FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN BALANCED FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Specialty Growth and Balanced Funds (the "Funds") are
designed to provide investors with a selection of investment alternatives
which seek to provide current income, capital appreciation or after-tax
"total return." This Prospectus provides information regarding the Class A,
Class B and Class C shares offered by the Funds. Each Fund is, or is a
series of, an open-end, diversified, management investment company. This
Prospectus sets forth concise information about the Funds that a
prospective investor should know before investing. The address of the Funds
is 200 Berkeley Street, Boston, Massachusetts 02116.
A Statement of Additional Information for the Funds dated July 1,
1997, as supplemented from time to time, has been filed with the Securities
and Exchange Commission and is incorporated by reference herein. The
Statement of Additional Information provides information regarding certain
matters discussed in this Prospectus and other matters which may be of
interest to investors, and may be obtained without charge by calling the
Evergreen Funds at 1-800-343-2898. There can be no assurance that the
investment objective of any Fund will be achieved. Investors are advised to
read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSE INFORMATION.................................... 3
FINANCIAL HIGHLIGHTS................................... 5
DESCRIPTION OF THE FUNDS............................... 8
Investment Objectives and Policies............ 8
Investment Practices and Restrictions......... 11
Special Risk Considerations................... 15
ORGANIZATION AND SERVICE PROVIDERS..................... 16
Organization.................................. 16
Service Providers............................. 17
Sub-Adviser................................... 18
Distribution Plans and Agreements............. 18
PURCHASE AND REDEMPTION OF SHARES...................... 19
How to Buy Shares............................. 19
How to Redeem Shares.......................... 22
Exchange Privilege............................ 23
Shareholder Services.......................... 24
Banking Laws.................................. 25
OTHER INFORMATION...................................... 25
Dividends, Distributions and Taxes............ 25
General Information........................... 26
</TABLE>
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A, Class B and Class C shares of each
Fund. For further information see "Purchase and Redemption of Shares" and
"General Information -- Other Classes of Shares."
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a % of offering price) 4.75% None None
Contingent Deferred Sales Charge (as a % of original purchase price or None(1) 5%(2) 1%(2)
redemption proceeds, whichever is lower)
</TABLE>
Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's actual or estimated annual operating expenses for
the fiscal period ending on the date set forth beside the Fund's name. The
examples show 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
THE 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 FUND'S ACTUAL EXPENSES AND RETURNS WILL VARY. For
a more complete description of the various costs and expenses borne by the Funds
see "Organization and Service Providers."
EVERGREEN FOUNDATION FUND (MARCH 31, 1997)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .79% .79% .79%
After 1 Year $ 60 $ 70 $ 30 $ 20 $ 20
12b-1 Fees(3) .25% .75% .75%
After 3 Years $ 85 $ 93 $ 63 $ 63 $ 63
Shareholder Service
Fees -- .25% .25% After 5 Years $ 113 $ 128 $ 108 $ 108 $ 108
After 10 Years $ 191 $ 204 $ 233 $ 204 $ 233
Other Expenses .21% .21% .21%
Total 1.25% 2.00% 2.00%
</TABLE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND (MARCH 31, 1997)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .875% .875% .875%
After 1 Year $ 61 $ 72 $ 32 $ 22 $ 22
12b-1 Fees(3) .25% .75% .75%
After 3 Years $ 89 $ 97 $ 67 $ 67 $ 67
Shareholder Service
Fees -- .250% .250% After 5 Years $ 119 $ 135 $ 114 $ 115 $ 114
After 10 Years $ 205 $ 219 $ 246 $ 219 $ 246
Other Expenses .255% .265% .255%
Total 1.380% 2.140% 2.130%
</TABLE>
EVERGREEN AMERICAN RETIREMENT FUND (MARCH 31, 1997)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES** Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75%
After 1 Year $ 61 $ 71 $ 32 $ 21 $ 22
12b-1 Fees(3) .25% .75% .75%
After 3 Years $ 89 $ 96 $ 66 $ 66 $ 66
Shareholder Service
Fees -- .25% .25% After 5 Years $ 119 $ 133 $ 114 $ 113 $ 114
After 10 Years $ 204 $ 216 $ 245 $ 216 $ 245
Other Expenses .37% .36% .37%
Total 1.37% 2.11% 2.12%
</TABLE>
3
<PAGE>
EVERGREEN BALANCED FUND (MARCH 31, 1998)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .45% .45% .45%
After 1 Year $ 57 $ 67 $ 27 $ 17 $ 17
12b-1 Fees(3) .25% 1.00% 1.00%
After 3 Years $ 77 $ 84 $ 54 $ 54 $ 54
Other Expenses .27% .27% .27%
Total .97% 1.72% 1.72%
</TABLE>
(1) Investments of $1 million or more are not subject to a front-end sales
charge, but may be subject to a contingent deferred sales charge upon
redemption within one year after the month of purchase.
(2) The deferred sales charge on Class B shares declines from 5% to 1% on
amounts redeemed within six years after the month of purchase. The deferred
sales charge on Class C shares is 1% on amounts redeemed within one year
after the month of purchase. No sales charge is imposed on redemptions made
thereafter. See "Purchase and Redemption of Shares" for more information.
(3) Long-term shareholders may pay more than the economic equivalent front-end
sales charges permitted by the National Association of Securities Dealers,
Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter has been audited by the respective Fund's independent
auditors as follows: EVERGREEN FOUNDATION FUND for the three-months ended March
31, 1997 and the fiscal year ended December 31, 1996 by KPMG Peat Marwick LLP
and for the fiscal year ended December 31, 1995 by other auditors; EVERGREEN TAX
STRATEGIC FOUNDATION FUND for the three-months ended March 31, 1997 and the
fiscal year ended December 31, 1996 by KPMG Peat Marwick LLP and for the fiscal
year ended December 31, 1995 by other auditors; EVERGREEN AMERICAN RETIREMENT
FUND for the three-months ended March 31, 1997 and the fiscal year ended
December 31, 1996 by KPMG Peat Marwick LLP and for the fiscal year ended
December 31, 1995 by other auditors. EVERGREEN BALANCED FUND commenced
operations on January 23, 1998. Consequently, no financial highlights are
currently available. A report of KPMG Peat Marwick LLP or other auditors, as the
case may be, on the audited information with respect to each Fund is
incorporated by reference into the Funds' Statement of Additional Information.
The following information for each Fund should be read in conjunction with the
financial statements and related notes which are incorporated by reference into
the Funds' Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN FOUNDATION FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS C
CLASS A CLASS B YEAR
THREE MONTHS THREE MONTHS THREE MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, 31,
1997** 1996 1995* 1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................. $16.13 $15.12 $12.24 $16.07 $15.07 $12.24 $16.06 $15.07
Income (loss) from investment
operations:
Net investment income.............. .12 .50 .44 .09 .40 .36 .09 .40
Net realized and unrealized gain
(loss) on investments............ (.13) 1.16 3.14 (.13) 1.15 3.09 (.13) 1.14
Total from investment
operations................... (.01) 1.66 3.58 (.04) 1.55 3.45 (.04) 1.54
Less distributions to shareholders
from:
Net investment income.............. (.12) (.50) (.47) (.09) (.40) (.39) (.08) (.40)
Net realized gain on investments... -- (.15) (.23) -- (.15) (.23) -- (.15)
Total distributions............ (.12) (.65) (.70) (.09) (.55) (.62) (.08) (.55)
Net asset value, end of period....... $16.00 $16.13 $15.12 $15.94 $16.07 $15.07 $15.94 $16.06
TOTAL RETURN+........................ (.2%) 11.3% 29.7% (.3%) 10.5% 28.7% (.3%) 10.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................ $220 $206 $107 $606 $570 $296 $28 $27
Ratios to average net assets:
Expenses........................... 1.25%++ 1.24% 1.33%++# 2.00%++ 1.99% 2.07%++ 2.00%++ 1.99%
Net investment income.............. 2.83%++ 3.39% 3.73%++# 2.07%++ 2.64% 2.99%++ 2.07%++ 2.64%
Portfolio turnover rate.............. 2% 10% 28% 2% 10% 28% 2% 10%
Average commission rate paid per
share.............................. $.0670 $.0649 N/A $.0670 $.0649 N/A $.0670 $.0649
<CAPTION>
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................. $12.24
Income (loss) from investment
operations:
Net investment income.............. .34
Net realized and unrealized gain
(loss) on investments............ 3.09
Total from investment
operations................... 3.43
Less distributions to shareholders
from:
Net investment income.............. (.37)
Net realized gain on investments... (.23)
Total distributions............ (.60)
Net asset value, end of period....... $15.07
TOTAL RETURN+........................ 28.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................ $11
Ratios to average net assets:
Expenses........................... 2.23%++#
Net investment income.............. 2.83%++#
Portfolio turnover rate.............. 28%
Average commission rate paid per
share.............................. N/A
</TABLE>
* For the period from January 3, 1995 (commencement of operations) to December
31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income to average net assets would
have been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995*
CLASS A CLASS C
SHARES SHARES
<S> <C> <C>
Expenses............................................................ 1.34% 2.37%
Net investment income............................................... 3.72% 2.69%
</TABLE>
5
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS C
CLASS A CLASS B YEAR
THREE MONTHS THREE MONTHS THREE MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, 31,
1997++ 1996 1995* 1997++ 1996 1995* 1997++ 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period....................... $13.50 $12.20 $10.44 $13.49 $12.19 $10.31 $13.47 $12.19
Income from investment
operations:
Net investment income........ .07 .27 .29 .05 .19 .22 .06 .18
Net realized and unrealized
gain on investments........ .06+++ 1.59 2.24 .06+++ 1.59 2.37 .05+++ 1.58
Total from investment
operations............. .13 1.86 2.53 .11 1.78 2.59 .11 1.76
Less distributions to
shareholders from:
Net investment income........ (.06) (.28) (.31) (.04) (.20) (.25) (.05) (.20)
Net realized gain on
investments................ -- (.28) (.46) -- (.28) (.46) -- (.28)
Total distributions...... (.06) (.56) (.77) (.04) (.48) (.71) (.05) (.48)
Net asset value, end of
period....................... $13.57 $13.50 $12.20 $13.56 $13.49 $12.19 $13.53 $13.47
TOTAL RETURN**................. 1.0% 15.4% 24.8% 0.8% 14.7% 25.6% 0.8% 14.5%
<CAPTION>
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period....................... $10.69
Income from investment
operations:
Net investment income........ .22
Net realized and unrealized
gain on investments........ 1.99
Total from investment
operations............. 2.21
Less distributions to
shareholders from:
Net investment income........ (.25)
Net realized gain on
investments................ (.46)
Total distributions...... (.71)
Net asset value, end of
period....................... $12.19
TOTAL RETURN**................. 21.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............ $ 15,039 $11,166 $2,702 $ 38,838 $28,007 $6,559 $ 5,086 $4,108
Ratios to average net assets:
Expenses................... 1.38%+ 1.52%# 1.75%#+ 2.14%+ 2.27%# 2.50%#+ 2.13%+ 2.25%#
Net investment income...... 2.30%+ 2.39%# 2.79%#+ 1.55%+ 1.64%# 2.03%#+ 1.55%+ 1.64%#
Portfolio turnover rate...... 29% 88% 110% 29% 88% 110% 29% 88%
Average commission rate paid
per share.................. $.0656 $.0648 N/A $.0656 $.0648 N/A $.0656 $.0648
<CAPTION>
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............ $496
Ratios to average net assets:
Expenses................... 2.50%#+
Net investment income...... 2.07%#+
Portfolio turnover rate...... 110%
Average commission rate paid
per share.................. N/A
</TABLE>
* For the period from January 17, 1995, January 6, 1995 and March 3, 1995
(commencement of Class A, Class B and Class C operations, respectively) to
December 31, 1995.
** Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
+ Annualized.
++ The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+++ The per share amount is not in accord with the net realized and unrealized
gain for the period due to the timing of the sales of fund shares and the
amount of per share realized and unrealized gains and losses at such time.
# Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C
SHARES
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995* 1996 1995* 1996 1995*
<S> <C> <C> <C> <C> <C> <C>
Expenses....................................... 1.76% 5.02% 2.51% 3.65% 2.48% 18.91%
Net investment income (loss)................... 2.15% (.48%) 1.40% .88% 1.41% (14.34%)
</TABLE>
6
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
THREE THREE THREE YEAR
MONTHS MONTHS MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31 MARCH 31, DECEMBER 31 MARCH 31, 31,
1997** 1996 1995* 1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period... $13.86 $12.82 $10.65 $13.80 $12.80 $10.65 $13.83 $12.81
Income (loss) from investment
operations:
Net investment income................ .11 .45 .41 .09 .36 .35 .09 .36
Net realized and unrealized gain
(loss) on investments.............. (.12) 1.12 2.22 (.13) 1.09 2.20 (.13) 1.11
Total from investment
operations..................... (.01) 1.57 2.63 (.04) 1.45 2.55 (.04) 1.47
Less distributions to shareholders
from:
Net investment income................ (.11) (.42) (.46) (.09) (.34) (.40) (.09) (.34)
Net realized gain on investments..... -- (.11) -- -- (.11) -- -- (.11)
Total distributions.............. (.11) (.53) (.46) (.09) (.45) (.40) (.09) (.45)
Net asset value, end of period......... $13.74 $13.86 $12.82 $13.67 $13.80 $12.80 $13.70 $13.83
TOTAL RETURN+.......................... (.1%) 12.5% 24.9% (.3%) 11.5% 24.1% (.3%) 11.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $14,590 $11,116 $1,335 $76,791 $57,622 $4,839 $ 1,769 $1,487
Ratios to average net assets:
Expenses #........................... 1.37%++ 1.30% 1.37%++ 2.11%++ 2.06% 2.12%++ 2.12%++ 2.05%
Net investment income #.............. 3.43%++ 3.53% 3.73%++ 2.68%++ 2.79% 2.97%++ 2.65%++ 2.80%
Portfolio turnover rate................ 9% 16% 49% 9% 16% 49% 9% 16%
Average commission rate paid per
share................................ $.0606 $.0619 N/A $.0606 $.0619 N/A $ .0606 $.0619
<CAPTION>
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period... $10.65
Income (loss) from investment
operations:
Net investment income................ .36
Net realized and unrealized gain
(loss) on investments.............. 2.19
Total from investment
operations..................... 2.55
Less distributions to shareholders
from:
Net investment income................ (.39)
Net realized gain on investments..... --
Total distributions.............. (.39)
Net asset value, end of period......... $12.81
TOTAL RETURN+.......................... 24.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $110
Ratios to average net assets:
Expenses #........................... 2.10%++
Net investment income #.............. 2.96%++
Portfolio turnover rate................ 49%
Average commission rate paid per
share................................ N/A
</TABLE>
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income (loss) to average net assets
would have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
THREE THREE THREE YEAR
MONTHS MONTHS MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, 31,
1997** 1996 1995* 1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses....................................... 1.68% 1.33% 10.96% 2.43% 2.09% 4.20% 2.43% 2.08%
Net investment income (loss)................... 3.12% 3.50% (5.86%) 2.36% 2.76% .89% 2.34% 2.77%
<CAPTION>
1995*
<S> <C>
Expenses....................................... 103.52%
Net investment income (loss)................... (98.46%)
</TABLE>
7
<PAGE>
DESCRIPTION OF THE FUNDS
Each Fund's investment objective is nonfundamental; as a result, a Fund
may change its objective 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. Each Fund's fundamental policies cannot be changed
without a shareholder vote. See the Statement of Additional Information ("SAI")
for more information regarding a Fund's fundamental investment policies or other
related investment policies. There can be no assurance that a Fund's investment
objective will be achieved.
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below. There can be no assurance that
any Fund's investment objective will be achieved.
INVESTMENT OBJECTIVES AND POLICIES
EVERGREEN FOUNDATION FUND
The investment objectives of EVERGREEN FOUNDATION FUND, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or not
such securities are traded on a national securities exchange. The values of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market values of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the values of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities, including issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress. Some of
these securities are supported by the full faith and credit of the U.S.
government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
8
<PAGE>
2. Corporate obligations rated no lower than A by Moody's Investor's
Service ("Moody's"), A-2 by Standard and Poor's Ratings Service, a division of
McGraw-Hill Companies, Inc. ("S&P").
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's). For a description of such ratings see the Statement of Additional
Information.
Certain obligations may be entitled to the benefit of standby letters of
credit or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
EVERGREEN TAX STRATEGIC FOUNDATION FUND
The investment objective of EVERGREEN TAX STRATEGIC FOUNDATION FUND is to
maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
"Investment Practices and Restrictions -- Municipal Securities and Taxable
Fixed-Income Investments" below.)
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The values of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities). As of
December 31, 1994, 1995, 1996 and March 31, 1997, approximately 54%, 52%, 52%
and 55%, respectively, of the Fund's portfolio consisted of investments in
Municipal Securities.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market values of
the Municipal Securities in the Fund's portfolio can be expected to vary
inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short, medium or long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
In general, the Fund will invest in Municipal Securities only if they are
determined to be of high or upper medium quality. These include bonds rated BBB
or higher by S&P or Baa or higher by Moody's or any other nationally recognized
statistical rating organization ("SRO"). The Fund may purchase Municipal
Securities which are unrated at the time of purchase, if such securities are
determined by the Fund's investment adviser to be of comparable quality to such
rated securities. Certain Municipal Securities (primarily variable rate demand
notes) may be entitled to the benefits of standby letters of credit or similar
commitments issued by banks and, in such instances, the Fund's investment
adviser will take into account the obligations of the banks in assessing the
quality of such securities. Medium grade bonds are more susceptible to adverse
economic conditions or changing circumstances than higher grade bonds. For a
description of such ratings see the Statement of Additional Information.
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Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be subject to the alternative
minimum tax on that part of the Fund's distributions derived from the bonds. As
a matter of fundamental policy, 80% of the Fund's investments in Municipal
Securities will be invested in Municipal Securities, the interest from which is
not subject to the federal alternative minimum tax.
EVERGREEN AMERICAN RETIREMENT FUND
The investment objectives of EVERGREEN AMERICAN RETIREMENT FUND in order
of priority are conservation of capital, reasonable income and capital growth.
The Fund offers a structured investment approach designed specifically for
retirees and persons contemplating retirement which may also be appropriate for
the qualified retirement plans of smaller companies.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock. As of December 31, 1994, 1995, 1996 and
March 31, 1997, approximately 74%, 66%, 59% and 64% respectively, of the Fund's
portfolio consisted of equity securities.
In addition, the Fund may invest up to 20% of its assets in securities of
foreign issuers.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
values.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. The balance will be invested in
corporate obligations rated no lower than A by Moody's or S&P.
EVERGREEN BALANCED FUND
The Fund seeks current income.
The Fund invests in a combination of equity and debt securities chosen
primarily for their potential for current income and secondarily, to the extent
consistent with the Fund's investment objective, for their potential for capital
appreciation. The Fund normally emphasizes securities having a liberal current
yield consistent with investment quality on which the interest or dividend
payments are considered reasonably secure. Under normal
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circumstances, the Fund maintains at least 25% of its total assets in fixed
income senior securities. The Fund will invest, under normal circumstances, at
least 50% of its total assets in equity securities. The Fund may invest in any
type of security, including bonds, debentures and income obligations as well as
common and preferred stocks.
Debt securities, which include both secured and unsecured obligations,
will, at the time of investment, be rated within the four highest categories by
S&P (AAA, AA, A and BBB), by Moody's (Aaa, Aa, A and Baa), by Fitch Investors
Services, L.P. ("Fitch") (AAA, AA, A and BBB), or if not rated or rated under a
different system, will be of comparable quality to obligations so rated, as
determined by the Fund's investment adviser.
Other Eligible Investments. The Fund may also invest in limited partnerships,
including master limited partnerships, and in foreign securities (up to 25% of
its assets). The Fund may also invest up to 25% of its assets in below-
investment grade securities issued by the United States (U.S.) and foreign
issuers having a rating range of BB to CCC by S&P or Fitch and/or Ba to Caa by
Moody's, or if unrated or rated under a different system, believed by the Fund's
investment adviser to be of comparable quality.
Securities rated BB or lower by S&P or Fitch, or Ba or lower by Moody's,
are considered predominantly speculative with respect to the ability of the
issuer to meet principal and interest payments. For more information on
below-investment grade securities, see the SAI.
The Fund's debt securities may include zero coupon bonds and
payment-in-kind securities ("PIKs").
The Fund may invest in certain types of derivative instruments, including
mortgage-related securities, such as collateralized mortgage obligations, and
enter into interest rate transactions, such as "swaps," "caps," and "floors."
These vehicles can also be combined to create more complex products called
hybrid derivatives or structured securities.
The Fund also may invest, for temporary defensive purposes, up to 100% of
its assets in short-term obligations. Such obligations may include master demand
notes, commercial paper and notes, bank deposits and other financial institution
obligations.
In addition to the investment policies detailed above, the Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions."
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of each Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Borrowing. The Funds, except EVERGREEN AMERICAN RETIREMENT FUND, may not borrow
money except as a temporary measure to facilitate redemption requests or for
extraordinary or emergency purposes. The proceeds from borrowings may be used to
facilitate redemption requests which might otherwise require the untimely
disposition of portfolio securities. In addition to borrowing for temporary or
emergency purposes, EVERGREEN AMERICAN RETIREMENT FUND may borrow for purposes
of leverage. The specific limits applicable to borrowing by each Fund are set
forth in the Statement of Additional Information.
Securities Lending. In order to generate income and to offset expenses, the
Funds may lend portfolio securities to brokers, dealers and other financial
institutions. The Funds will only enter into loan arrangements with creditworthy
borrowers and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned. Loans
of securities by the Funds may not exceed 30% of the value of the total assets
of the EVERGREEN FOUNDATION FUND, the EVERGREEN TAX STRATEGIC FOUNDATION FUND,
and the EVERGREEN BALANCED FUND and 30% of the value of the net assets of the
EVERGREEN AMERICAN RETIREMENT FUND. There is a risk that when lending portfolio
securities, the securities may not be available to a Fund on a timely basis and
a Fund may, therefore, lose the opportunity to sell the securities at a
desirable price. Also, if the borrower files for bankruptcy or becomes
insolvent, a Fund's ability to dispose of the securities may be delayed.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purposes of the foregoing 15% limit. The inability of a Fund to dispose
of illiquid or not readily marketable investments readily or at a reasonable
price could impair a Fund's ability to raise cash for redemptions or other
purposes.
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Restricted Securities. The Funds may invest in restricted securities, including
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act"). Generally, Rule 144A establishes a safe harbor from the
registration requirements of the 1933 Act for resale by large institutional
investors of securities not publicly traded in the United States. Each Fund's
investment adviser determines the liquidity of Rule 144A securities according to
guidelines and procedures adopted by the Fund's Board of Trustees. The Board of
Trustees monitors the investment adviser's application of those guidelines and
procedures. Securities eligible for resale pursuant to Rule 144A, which a Fund's
investment adviser has determined to be liquid or readily marketable, are not
subject to the 15% limit on illiquid securities.
Repurchase Agreements. The EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN
BALANCED FUND may invest in repurchase agreements. A repurchase agreement is an
agreement by which the Fund purchases a security (usually U.S. government
securities) for cash and obtains a simultaneous commitment from the seller
(usually a bank or broker/dealer) to repurchase the security at an agreed-upon
price and specified future date. The repurchase price reflects an agreed-upon
interest rate for the time period of the agreement. The Fund's risk is the
inability of the seller to pay the agreed-upon price on the delivery date.
However, this risk is tempered by the ability of the Fund to sell the security
in the open market in the case of a default. In such a case, the Fund may incur
costs in disposing of the security which would increase Fund expenses. The
Fund's investment adviser will monitor the creditworthiness of the firms with
which the Fund enters into repurchase agreements.
Reverse Repurchase Agreements. The EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN BALANCED FUND may enter into reverse repurchase agreements. A reverse
repurchase agreement is an agreement by the Fund to sell a security and
repurchase it at a specified time and price. The Fund could lose money if the
market values of the securities it sold decline below their repurchase prices.
Reverse repurchase agreements may be considered a form of borrowing, and,
therefore, a form of leverage. Leverage may magnify gains or losses of the Fund.
Options and Futures. EVERGREEN AMERICAN RETIREMENT FUND may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Fund
if afterwards securities comprising more than 15% of the market value of the
equity securities of the Fund would be subject to call options. The Fund
realizes income from the premium paid to it in exchange for writing the call
option. Once it has written a call option on a portfolio security and until the
expiration of such option, the Fund forgoes the opportunity to profit from
increases in the market price of such security in excess of the exercise price
of the call option. Should the price of the security on which a call has been
written decline, the Fund retains the risk of loss, which would be offset to the
extent the Fund has received premium income. The Fund will only write "covered"
call options traded on U.S. national securities exchanges. An option will be
deemed covered when either (i) the Fund owns the security (or securities
convertible into such security) on which the option has been written in an
amount sufficient to satisfy the obligations arising under the option, or (ii)
the Fund's custodian maintains cash or high-grade liquid debt securities
belonging to the Fund in an amount not less than the amount needed to satisfy
the Fund's obligations with respect to such options. A "closing purchase
transaction" may be entered into with respect to a call option written by the
Fund for the purpose of closing its position.
EVERGREEN AMERICAN RETIREMENT FUND may also purchase futures contracts,
including futures contracts based on securities indices, and write options on
such contracts. The Fund intends to enter into such contracts and related
options for hedging purposes. The Fund may enter into other types of futures
contracts that may become available and relate to the securities held by the
Fund.
EVERGREEN BALANCED FUND may engage in options and futures transactions.
Options and futures transactions are intended to enable the Fund to manage
market, interest rate or exchange rate risk. The Fund does not use these
transactions for speculation or leverage.
EVERGREEN BALANCED FUND may attempt to hedge all or a portion of its
portfolio through the purchase of both put and call options on its portfolio
securities and listed put options on financial futures contracts for portfolio
securities. The Fund may also purchase call options on financial futures
contracts. The Fund may also write covered call options on its portfolio
securities to attempt to increase its current income. The Fund will maintain its
positions in securities, option rights and segregated cash subject to puts and
calls until the options are exercised, closed or have expired. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series.
EVERGREEN BALANCED FUND may write 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
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exercise price. By writing a put option, a Fund becomes obligated during the
term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. The Funds may also write straddles
(combinations of covered puts and calls on the same underlying security).
EVERGREEN BALANCED FUND may only write "covered" options. This means that
so long as the Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the option or, in the case of call options on
U.S. Treasury bills, the Fund might own substantially similar U.S. Treasury
bills. The Fund will be considered "covered" with respect to a put option it
writes if, so long as 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. The 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, the Fund might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Fund might become obligated to purchase the underlying securities for more than
their current market prices upon exercise.
EVERGREEN BALANCED FUND may also, as previously stated, purchase futures
contracts and options thereon. A futures contract is a firm commitment by two
parties: the seller, who agrees to make delivery of the specific type of
instrument called for in the contract ("going short"), and the buyer, who agrees
to take delivery of the instrument ("going long") at a certain time in the
future. Financial futures contracts call for the delivery of particular debt
instruments issued or guaranteed by the U.S. Treasury or by specific agencies or
instrumentalities of the U.S. government. If the Fund enters into financial
futures contracts directly to hedge its holdings of fixed income securities, it
would enter into contracts to deliver securities at an undetermined price (i.e.,
"go short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would agree to purchase securities in the future at a
predetermined price (i.e., "go long") to hedge against a decline in market
interest rates.
EVERGREEN BALANCED FUND may also enter into currency and other financial
futures contracts and write options on such contracts. The Fund intends to enter
into such contracts and related options for hedging purposes. The Fund will
enter into futures on securities, currencies or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy or
sell securities or currencies during a designated month at whatever price exists
at that time. A futures contract on a securities index does not involve the
actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Fund does not make
payment or deliver securities upon entering into a futures contract. Instead, it
puts down a margin deposit, which is adjusted to reflect changes in the value of
the contract and which remains in effect until the contract is terminated.
The Fund may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Fund sells futures contracts in order to offset a possible decline in
the profit on the securities or currencies. If a futures contract is purchased
by the Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for the
purpose of closing out its options positions. The Fund's ability to enter into
closing transactions depends on 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. As a result, there
can be no assurance that the Fund will be 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, in
which case the Fund would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them could result in poorer performance (i.e., the Funds' returns
may be reduced). The Funds attempts to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the EVERGREEN BALANCED FUND uses financial futures
contracts and options on financial futures
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contracts as hedging devices, there is a risk that the prices of the securities
subject to the financial futures contracts and options on financial futures
contracts may not correlate perfectly with the prices of the securities in the
Fund's portfolios. This may cause the financial futures contract and any related
options to react to market changes differently than the portfolio securities. In
addition, the Funds' investment advisers could be incorrect in their
expectations and forecasts about the direction or extent of market factors, such
as interest rates, securities price movements and other economic factors. Even
if EVERGREEN BALANCED FUND'S investment adviser correctly predicts interest rate
movements, a hedge could be unsuccessful if changes in the value of the Fund's
futures position did not correspond to changes in the value of its financial
futures contracts. It is not certain that a secondary market for positions in
financial futures contracts or for options on financial futures contracts will
exist at all times. Although EVERGREEN BALANCED FUND'S investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
EVERGREEN BALANCED FUND'S ability to establish and close out financial futures
contracts and options on financial futures contracts positions depends on this
secondary market. If the Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, the Fund may lose money on the
futures contract or option, and the losses to the Fund could be significant.
Municipal Securities. As noted above, EVERGREEN TAX STRATEGIC FOUNDATION FUND
may invest in Municipal Securities, which include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed. The
term "municipal bonds" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in municipal bonds, including IDBs and PABs, and floating and variable
rate obligations that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature is
backed by an irrevocable letter of credit or guarantee of the bank. A put bond
is a municipal bond which gives the holder the unconditional right to sell the
bond back to the issuer at a specified price and exercise date, which is
typically well in advance of the bond's maturity date. "Short-term municipal
notes" and "tax exempt commercial paper" include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. The Municipal Securities in which
EVERGREEN TAX STRATEGIC FOUNDATION FUND may invest also include certain variable
rate and floating rate municipal obligations with or without demand features.
These variable rate securities do not have fixed interest rates; rather, the
rates fluctuate based upon changes in specified market rates, such as the prime
rate, or are adjusted at predesignated periodic intervals. Certain of these
obligations may carry a demand feature that gives the EVERGREEN TAX STRATEGIC
FOUNDATION FUND the right to demand prepayment of the principal amount of the
security prior to its maturity date. The demand obligation may or may not be
backed by letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. The
EVERGREEN TAX STRATEGIC FOUNDATION FUND will limit the value of its investments
in any floating or variable rate securities which are not readily marketable and
in all other not readily marketable securities to 15% or less of its net assets.
EVERGREEN TAX STRATEGIC FOUNDATION FUND may invest no more than 5% of its total
assets in variable and floating rate securities.
When Issued, Delayed Delivery and Forward Commitment Transactions. EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN BALANCED 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 the 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, the Fund relies on the other party to
consummate the transaction; if the other party fails to do so, the Fund may be
disadvantaged.
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Stand-By Commitments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
The EVERGREEN TAX STRATEGIC FOUNDATION FUND expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the EVERGREEN TAX STRATEGIC FOUNDATION FUND'S portfolio will not exceed 10% of
the value of the Fund's net assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality short-term
securities in a segregated account with its custodian in an amount equal to such
commitments. The Fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Fund's investment adviser, present
minimal credit risks.
Taxable Fixed-Income Investments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may
temporarily invest up to 20% of its net assets in taxable securities under any
one or more of the following circumstances: (1) pending investment of proceeds
of sale of Fund shares or of portfolio securities, (2) pending settlement of
purchases of portfolio securities, and (3) to maintain liquidity for the purpose
of meeting anticipated redemptions. In addition, the Fund may temporarily invest
more than 20% of its net assets in taxable securities for defensive purposes.
The Fund may invest for defensive purposes during periods when the Fund's assets
available for investment exceed the available Municipal Securities that meet the
Fund's quality and other investment criteria. Taxable securities in which the
Fund may invest on a short-term basis include obligations of the U.S.
government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest ratings assigned by any major rating service; commercial paper rated in
the highest grade by Moody's, S&P or any SRO; and certificates of deposit issued
by United States branches of U.S. banks with assets of $1 billion or more.
Downgrades. If any security invested in by any of the Funds loses its rating or
has its rating reduced after a Fund has purchased it, a Fund is not required to
sell or otherwise dispose of the security, but may consider doing so.
SPECIAL RISK CONSIDERATIONS
Foreign Investments. Investments by EVERGREEN AMERICAN RETIREMENT FUND and
EVERGREEN BALANCED FUND in foreign securities may involve additional risks.
Specifically, they may be affected by the strength of foreign currencies
relative to the U.S. dollar, or by political or economic developments in foreign
countries. Accounting procedures and government supervision may be less
stringent than those applicable to U.S. companies. There may be less publicly
available information about a foreign company than about a U.S. company. Foreign
markets may be less liquid or more volatile than U.S. markets and may offer less
protection to investors. It may also be more difficult to enforce contractual
obligations abroad than would be the case in the United States because of
differences in the legal systems. Foreign securities may be subject to foreign
taxes, which may reduce yield, and may be less marketable than comparable U.S.
securities. All these factors are considered by the Fund's investment adviser
before making any of these types of investments.
Investing in securities of issuers in emerging markets countries involves
exposures to economic systems that are generally less mature and political
systems that are generally less stable than those of developed countries. In
addition, investing in companies in emerging markets countries may also involve
exposure to national policies that may restrict investment by foreigners and
undeveloped legal systems governing private and foreign investments and private
property. The typically small size of the markets for securities issued by
companies in emerging markets countries and the possibility of a low or
nonexistent volume of trading in those securities may also result in a lack of
liquidity and in price volatility of those securities.
Foreign Currency Transactions. As discussed above, the EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN BALANCED FUND may invest in securities of foreign
issuers. When a Fund invests in foreign securities, they usually will be
denominated in foreign currencies, and a Fund temporarily may hold funds in
foreign currencies. Thus, the value of Fund shares will be affected by changes
in exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Funds may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency a Fund will
deliver or
15
<PAGE>
receive when the contract is completed) is fixed when a Fund enters into the
contract. A Fund usually will enter into these contracts to stabilize the U.S.
dollar value of a security it has agreed to buy or sell. A Fund intends to use
these contracts to hedge the U.S. dollar value of a security it already owns,
particularly if a Fund expects a decrease in the value of the currency in which
the foreign security is denominated. Although a Fund will attempt to benefit
from using forward contracts, the success of its hedging strategy will depend on
the investment adviser's ability to predict accurately the future exchange rates
between foreign currencies and the U.S. dollar. The value of a Fund's
investments denominated in foreign currencies will depend on the relative
strength of those currencies and the U.S. dollar, and a Fund may be affected
favorably or unfavorably by changes in the exchange rates or exchange control
regulations between foreign currencies and the U.S. dollar. Changes in foreign
currency exchange rates also may affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to shareholders by a Fund. Although
the Funds do not currently intend to do so, the Funds may also purchase and sell
options related to foreign currencies. The Funds do not intend to enter into
foreign currency transactions for speculation or leverage.
Investments Related to Real Estate. EVERGREEN BALANCED FUND and EVERGREEN
FOUNDATION FUND may invest up to 15% of their net assets in investments related
to real estate, including real estate investment trusts ("REITS"). Risks
associated with investments in securities of companies in the real estate
industry include: declines in the value of real estate; risks related to general
and local economic conditions; overbuilding and increased competition; increases
in property taxes and operating expenses; changes in zoning laws; casualty or
condemnation losses; variations in rental income; changes in neighborhood
values; the appeal of properties to tenants; and increases in interest rates. In
addition, equity real estate investment trusts may be affected by changes in the
values of the underlying property owned by the trusts, while mortgage real
estate investment trusts may be affected by the quality of credit extended.
Equity and mortgage real estate investment trusts are dependent upon management
skills, may not be diversified and are subject to the risks of financing
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption from the Investment Company Act
of 1940, as amended (the "1940 Act"). In the event an issuer of debt securities
collateralized by real estate defaulted, it is conceivable that a Fund could end
up holding the underlying real estate.
Leverage. The utilization of leverage by the EVERGREEN AMERICAN RETIREMENT FUND
involves certain risks described below. For example, leveraging may exaggerate
changes in the net asset value of Fund shares and in the yield on the Fund's
portfolio. Although the principal of the Fund's borrowings will be fixed, the
Fund's assets may change in value during the time the borrowings are
outstanding. Borrowing will create interest expenses for the Fund which can
exceed the income from the assets retained. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were not
used. Conversely, if the income from the assets retained with borrowed funds is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if borrowing were not used, and therefore the amount available for
distribution to shareholders as dividends will be reduced.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
ORGANIZATION AND SERVICE PROVIDERS
ORGANIZATION
Fund Structure. Each Fund is an investment pool, which invests shareholders'
money toward a specified goal. Each Fund is a diversified series of an open-end,
management investment company, called Evergreen Equity Trust (the "Trust"). The
Trust is a Delaware business trust organized on September 17, 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 a Fund's activities, reviewing,
among other things, a Fund's performance and its contractual arrangements with
various service providers.
16
<PAGE>
Shareholder Rights. All shareholders participate in dividends and distributions
from a Fund's assets and 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, shares will be fully paid and nonassessable. Shares of a Fund are
redeemable, transferable and freely assignable as collateral. The Funds may
establish additional classes or series of shares.
The Funds do not hold annual shareholder meetings; the Funds 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 for each dollar of net asset value applicable to each share.
SERVICE PROVIDERS
Investment Adviser. The investment adviser to EVERGREEN FOUNDATION FUND,
EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND
is Evergreen Asset Management Corp. ("Evergreen Asset"). Evergreen Asset is
located at 2500 Westchester Avenue, Purchase, New York 10577 and is a subsidiary
of First Union Corporation ("First Union").
The investment adviser to the EVERGREEN BALANCED FUND is Keystone
Investment Management Company ("Keystone"). Keystone has provided investment
advisory and management services to investment companies and private accounts
since it was organized in 1932. Keystone is an indirect subsidiary of First
Union National Bank ("FUNB"). FUNB is a subsidiary of First Union. Both FUNB and
First Union are located at 201 South College Street, Charlotte, North Carolina
28288-0630. First Union Corporation and its subsidiaries provide a broad range
of financial services to individuals and businesses throughout the United
States.
As investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND, Evergreen
Asset manages each Fund's investments, provides various administrative services
and supervises each Fund's daily business affairs, subject to the authority of
the Trustees. Evergreen Asset is entitled to receive from EVERGREEN AMERICAN
RETIREMENT FUND a fee equal to .75 of 1% of average daily net assets on an
annual basis on the first $750 million and .70 of 1% of average daily net assets
on an annual basis on assets over $750 million; and from each of EVERGREEN
FOUNDATION FUND and EVERGREEN TAX STRATEGIC FOUNDATION FUND a fee equal to .875
of 1% of average daily net assets on an annual basis on the first $750 million
in assets, .75 of 1% of average daily net assets on an annual basis on the next
$250 million in assets, and .70 of 1% of average daily net assets on an annual
basis on assets over $1 billion.
The EVERGREEN BALANCED FUND pays Keystone a fee, calculated on an annual
basis, equal to 1.5% of gross dividend and interest income of the Fund plus
0.60% of the first $100,000,000 of the aggregate net asset value of the shares
of the Fund, plus 0.55% of the next $100,000,000, plus 0.50% of the next
$100,000,000, plus 0.45% of the next $100,000,000, plus 0.40% of the next
$100,000,000, plus 0.35% of the next $500,000,000, plus 0.30% of amounts over
$1,000,000,000, computed as of the close of business each business day and paid
monthly.
The total expenses as a percentage of average daily net assets on an
annual basis of the Funds for the fiscal year ended December 31, 1996 and for
the three months ended March 31, 1997, are set forth in the section entitled
"Financial Highlights." Such expenses reflect all voluntary advisory fee waivers
and expense reimbursements which may be revised or terminated at any time.
Portfolio Managers. Stephen A. Lieber and James T. Colby, III have served as the
portfolio managers for EVERGREEN TAX STRATEGIC FOUNDATION FUND since its
inception. Mr. Lieber and Mr. Colby are assisted in the management of the Fund
by Gary R. Buesser, C.F.A. Mr. Lieber, who is Chairman and Co-Chief Executive
Officer of Evergreen Asset, makes all allocation decisions and investment
decisions for the equity portion of the portfolio, and Mr. Colby manages the
fixed-income portion. Mr. Colby has served as a fixed-income portfolio manager
with Evergreen Asset since 1992. Mr. Buesser joined Lieber & Co. as an analyst
in 1996. Previously, he was a portfolio manager/analyst with Cohen Asset
Management and Shearson Lehman Brothers. Mr. Lieber is also the portfolio
manager for EVERGREEN FOUNDATION FUND.
The portfolio manager for EVERGREEN AMERICAN RETIREMENT FUND is Irene D.
O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal manager since its
inception, and has been associated with Evergreen Asset
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<PAGE>
and its predecessor since 1981. Ms. O'Neill is assisted in the management of the
Fund by Natalie Kucharski, C.F.A. Since 1985 Ms. Kucharski has served as an
analyst at Lieber & Co. in the insurance, health care services and
telecommunications industries.
The portfolio manager for the EVERGREEN BALANCED FUND is Walter
McCormick. Mr. McCormick is a Keystone Senior Vice President and Senior
Portfolio Manager with more than 27 years of experience in equity and
fixed-income investing. Mr. McCormick has served as a balanced fund manager at
Keystone since 1984 and as a growth and income fund manager since 1987.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND. Lieber & Company will be reimbursed by
Evergreen Asset in connection with the rendering of services on the basis of the
direct and indirect costs of performing such services. There is no additional
charge to EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND for the services provided by Lieber &
Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase,
New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of
First Union.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company ("ESC"),
200 Berkeley Street, Boston, Massachusetts 02116, acts as each Fund's transfer
agent and dividend disbursing agent. ESC is an indirect, wholly-owned subsidiary
of First Union Corporation.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as each Fund's custodian.
Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of The
BISYS Group, Inc., located at 125 West 55th Street, New York, New York 10019, is
the principal underwriter of each Fund.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution Plans. Each Fund's Class A, Class B and Class C shares pay for the
expenses associated with the distribution of its shares according to a
distribution plan that it has adopted pursuant to Rule 12b-1 under the 1940 Act
(each a "Plan" or collectively the "Plans"). Under the Plans, each Fund may
incur distribution-related and shareholder servicing-related expenses which are
based upon a maximum annual rate as a percent of each Fund's average daily net
assets attributable to the Class, as follows:
<TABLE>
<S> <C>
Class A shares 0.75%, (currently limited to 0.25%)
Class B shares 1.00%
Class C shares 1.00%
</TABLE>
Of the amount that each Class may pay under its respective Plan, up to
0.25% may constitute a service fee to be used to compensate organizations, which
may include each Fund's investment adviser or their affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts. The Funds may not pay any distribution or service fees during any
fiscal period in excess of the amounts set forth above. Amounts paid under the
Distribution Agreements are used to compensate the Fund's distributor pursuant
to the Distribution Agreements entered into by each Fund.
Distribution Agreements. Each Fund has also entered into a distribution
agreement (each a "Distribution Agreement" or collectively the "Distribution
Agreements") with EDI. Pursuant to the Distribution Agreements, each Fund will
compensate EDI for its services as distributor based upon the maximum annual
rate as a percentage of each Fund's average daily net assets attributable to the
Class, as follows:
<TABLE>
<S> <C>
Class A shares 0.25%
Class B shares 1.00%
Class C shares 1.00%
</TABLE>
The Distribution Agreements provide that EDI will use the distribution
fee received from a Fund for payments (1) to compensate broker-dealers or other
persons for distributing shares of the Fund, including interest
18
<PAGE>
and principal payments made in respect of amounts paid to broker-dealers or
other persons that have been financed (EDI may assign its rights to receive
compensation under the Plans to secure such financings), (2) to otherwise
promote the sale of shares of the Fund, and (3) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Funds'
shareholders. FUNB or its affiliates may finance the payments made by EDI to
compensate broker-dealers or other persons for distributing shares of the Fund.
In the event a Fund acquires the assets of other mutual funds,
compensation paid to EDI under the Distribution Agreements may be paid by EDI to
the distributors of the acquired funds or their predecessors.
Since EDI's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EDI, the amount of compensation
received by it under the Distribution Agreements during any year may be more or
less than its actual expenses and may result in a profit to EDI. Distribution
expenses incurred by EDI in one fiscal year that exceed the level of
compensation paid to EDI for that year may be paid from distribution fees
received from a Fund in subsequent fiscal years.
The Plans are in compliance with the Conduct Rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to an annual rate of 0.75% and 0.25%, respectively, of the average
aggregate annual net assets attributable to that class. The rules also limit the
aggregate of all front-end, deferred and asset-based sales charges imposed with
respect to a class of shares by a mutual fund that also charges a service fee to
6.25% of cumulative gross sales of shares of that class, plus interest on the
unpaid amount at the prime rate plus 1% per annum.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You may purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EDI. In addition, you may
purchase shares of any of the Funds by mailing to that Fund, c/o Evergreen
Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121, a completed
Application and a check payable to the Fund. You may also telephone
1-800-343-2898 to obtain the number of an account to which you can wire or
electronically transfer funds and then send in a completed Application. The
minimum initial investment is $1,000, which may be waived in certain situations.
Subsequent investments in any amount may be made by check, by wiring federal
funds, by direct deposit or by an electronic funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. See the Application
for more information. Only Class A, Class B and Class C shares are offered
through this Prospectus (see "General Information" -- "Other Classes of
Shares").
Class A Shares-Front-End Sales Charge Alternative. You may purchase Class A
shares of each Fund at net asset value plus an initial sales charge on purchases
under $1,000,000. You may purchase $1,000,000 or more of Class A shares without
a front-end sales charge; however, a contingent deferred sales charge ("CDSC")
equal to the lesser of 1% of the purchase price or the redemption value will be
imposed on shares redeemed during the month of purchase and the 12-month period
following the month of purchase. The schedule of charges for Class A shares is
as follows:
Initial Sales Charge
<TABLE>
<CAPTION>
As a % of the Net As a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 4.99% 4.75% 4.25%
$ 50,000 - $ 99,999 4.71% 4.50% 4.25%
$ 100,000 - $ 249,999 3.90% 3.75% 3.25%
$ 250,000 - $ 499,999 2.56% 2.50% 2.00%
$ 500,000 - $ 999,999 2.04% 2.00% 1.75%
1.00% of the amount invested up
to $2,999,999;
.50% of the amount invested over
$1,000,000 or more None None $2,999,999, up to $4,999,999;
and
.25% of the excess over
$4,999,999
</TABLE>
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<PAGE>
No front-end sales charges are imposed on Class A shares purchased by (a)
institutional investors, which may include bank trust departments and registered
investment advisers; (b) investment advisers, consultants or financial planners
who place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; (c) clients
of investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; (d) institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; (e) shareholders of record on October 12, 1990 in any series
of Evergreen Investment Trust in existence on that date, and the members of
their immediate families; (f) current and retired employees of FUNB and its
affiliates, EDI and any broker-dealer with whom EDI has entered into an
agreement to sell shares of the Funds, and members of the immediate families of
such employees; (g) and upon the initial purchase of an Evergreen fund by
investors reinvesting the proceeds from a redemption within the preceding thirty
days of shares of other mutual funds, provided such shares were initially
purchased with a front-end sales charge or subject to a CDSC. Certain broker-
dealers or other financial institutions may impose a fee on transactions in
shares of the Funds.
Class A shares may also be purchased at net asset value by a corporation
or certain other qualified retirement plan or a non-qualified deferred
compensation plan or a Title I tax sheltered annuity or TSA plan sponsored by an
organization having 100 or more eligible employees, or a TSA plan sponsored by a
public education entity having 5,000 or more eligible employees.
In connection with sales made to plans of the type described in the
preceding sentence EDI will pay broker-dealers and others concessions at the
rate of 0.50% of the net asset value of the shares purchased. These payments are
subject to reclaim in the event the shares are redeemed within twelve months
after purchase.
Certain employer-sponsored retirement or savings plans, including
eligible 401(k) plans, may purchase Class A shares at net asset value provided
that such plans meet certain required minimum number of eligible employees or
required amount of assets. The CDSC applicable to Class B shares also is waived
on redemptions of shares by such plans. Additional information concerning the
waiver of sales charges is set forth in the SAI.
When Class A shares are sold, EDI will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EDI may also pay fees to
banks from sales charges for services performed on behalf of the customers of
such banks in connection with the purchase of shares of the Funds. In addition
to compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to 0.25% of the average
daily value on an annual basis of Class A shares held by their clients. Certain
purchases of Class A shares may qualify for reduced sales charges in accordance
with a Fund's Concurrent Purchases, Rights of Accumulation, Letter of Intent,
certain Retirement Plans and Reinstatement Privilege. Consult the Application
for additional information concerning these reduced sales charges.
Class B Shares -- Deferred Sales Charge Alternative. You may purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a CDSC if you redeem shares within six years after the month of purchase. The
amount of the CDSC (expressed as a percentage of the lesser of the current net
asset value or original cost) will vary according to the number of years from
the month of purchase of Class B shares as set forth below.
<TABLE>
<CAPTION>
CDSC
Redemption Timing Imposed
<S> <C>
Month of purchase and the first twelve-month period following the month of purchase............................... 5.00%
Second twelve-month period following the month of purchase........................................................ 4.00%
Third twelve-month period following the month of purchase......................................................... 3.00%
Fourth twelve-month period following the month of purchase........................................................ 3.00%
Fifth twelve-month period following the month of purchase......................................................... 2.00%
Sixth twelve-month period following the month of purchase......................................................... 1.00%
No CDSC is imposed on amounts redeemed thereafter.
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to
EDI. In the event a Fund acquires the assets of other mutual funds, the CDSC may
be paid by EDI to the distributors of the acquired funds. Class B shares are
subject to higher distribution and/or shareholder service fees than Class A
shares for a period of seven years after the month of purchase (after which it
is expected that they will convert to Class A shares without
20
<PAGE>
imposition of a front-end sales charge). The higher fees mean a higher expense
ratio, so Class B shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares. The Funds will not normally accept
any purchase of Class B shares in the amount of $250,000 or more.
At the end of the period ending seven years after the end of the calendar
month in which the shareholder's purchase order was accepted, Class B shares
will automatically convert to Class A shares and will no longer be subject to a
higher distribution services fee imposed on Class B shares. Such conversion will
be on the basis of the relative net asset values of the two Classes, without the
imposition of any sales load, fee or other charge. The purpose of the conversion
feature is to reduce the distribution services fee paid by holders of Class B
shares that have been outstanding long enough for the Distributor to have been
compensated for the expenses associated with the sale of such shares.
Class C Shares -- Level-Load Alternative. Class C shares are only offered
through broker-dealers who have special distribution agreements with EDI. You
may purchase Class C shares at net asset value without any initial sales charge
and, therefore, the full amount of your investment will be used to purchase Fund
shares. However, you will pay a 1.00% CDSC, if you redeem shares during the
month of purchase and the 12-month period following the month of purchase. No
CDSC is imposed on amounts redeemed thereafter. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of a Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. The
Funds will not normally accept any purchase of Class C shares in the amount of
$500,000 or more. No CDSC will be imposed on Class C shares purchased by
institutional investors, and through employee benefit and savings plans eligible
for the exemption from front-end sales charges described under "Class A
Shares-Front End Sales Charge Alternative," above. Broker-dealers and other
financial intermediaries whose clients have purchased Class C shares may receive
a trailing commission equal to 0.75% of the average daily net asset value of
such shares on an annual basis held by their clients more than one year from the
date of purchase. Trailing commissions will commence immediately with respect to
shares eligible for exemption from the CDSC normally applicable to Class C
shares.
Contingent Deferred Sales Charge. Certain shares with respect to which a Fund
did not pay a commission on issuance, including shares obtained from dividend or
distribution reinvestment are not subject to a CDSC. Any CDSC imposed upon the
redemption of Class A, Class B or Class C shares is a percentage of the lesser
of (1) the net asset value of the shares redeemed or (2) the net asset value at
the time of purchase of such shares.
No CDSC is imposed on a redemption of shares of a Fund in the event of
(1) death or disability of the shareholder; (2) a lump-sum distribution from a
401(k) plan or other benefit plan qualified under the Employee Retirement Income
Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA plans if
the shareholder is at least 59 1/2 years old; (4) involuntary redemptions of
accounts having an aggregate net asset value of less than $1,000; (5) automatic
withdrawals under the Systematic Withdrawal Plan of up to 1.00% per month of the
shareholder's initial account balance; (6) withdrawals consisting of loan
proceeds to a retirement plan participant; (7) financial hardship withdrawals
made by a retirement plan participant; or (8) withdrawals consisting of returns
of excess contributions or excess deferral amounts made to a retirement plan
participant.
The Funds may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or a CDSC to certain Directors, Trustees,
officers and employees of the Funds, Keystone, FUNB, Evergreen Asset, EDI and
certain of their affiliates, and to members of the immediate families of such
persons, to registered representatives of firms with dealer agreements with EDI,
and to a bank or trust company acting as a trustee for a single account.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading markets.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A
21
<PAGE>
shares, which incur lower ongoing distribution and/or shareholder service fees,
after seven years. If you are unsure of the time period of your investment, you
might consider Class C shares since there are no initial sales charges and,
although there is no conversion feature, the CDSC only applies to redemptions
made during the first year after the month of purchase. Consult your financial
intermediary for further information. The compensation received by
broker-dealers and agents may differ depending on whether they sell Class A,
Class B or Class C shares. There is no size limit on purchases of Class A
shares.
In addition to the discount or commission paid to broker-dealers, EDI may
from time to time pay to broker-dealers additional cash or other incentives that
are conditioned upon the sale of a specified minimum dollar amount of shares of
a Fund and/or other Evergreen funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a broker-dealer and their
immediate family members to urban or resort locations within or outside the
United States. Such a dealer may elect to receive cash incentives of equivalent
amount in lieu of such payments. EDI may also limit the availability of such
incentives to certain specified dealers. EDI from time to time sponsors
promotions involving First Union Brokerage Services, Inc., an affiliate of each
Fund's investment adviser, and select broker-dealers, pursuant to which
incentives are paid, including gift certificates and payments in amounts up to
1% of the dollar amount of shares of a Fund sold. Awards may also be made based
on the opening of a minimum number of accounts. Such promotions are not being
made available to all broker-dealers. Certain broker-dealers may also receive
payments from EDI or a Fund's investment adviser over and above the usual trail
commissions or shareholder servicing payments applicable to a given Class of
shares.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or a Fund's investment adviser
incurs. If such investor is an existing shareholder, a Fund may redeem shares
from an investor's account to reimburse the Fund or its investment adviser for
any loss. In addition, such investor may be prohibited or restricted from making
further purchases in any of the Evergreen funds. The Funds will not accept third
party checks other than those payable directly to a shareholder whose account
has been in existence at least 30 days.
HOW TO REDEEM SHARES
You may "redeem" ( i.e., sell) your shares for cash, at the net
redemption value on any day the Exchange is open, either directly by writing to
the Fund, c/o ESC, or through your financial intermediary. The amount you will
receive is the net asset value adjusted for fractions of a cent (less any
applicable CDSC) next calculated after a Fund receives your request in proper
form. Proceeds generally will be sent to you within seven days. However, for
shares recently purchased by check, a Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to 15
days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value (less any applicable CDSC). Your
financial intermediary is responsible for furnishing all necessary documentation
to a Fund and may charge you for this service. Certain financial intermediaries
may require that you give instructions earlier than 4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to the Fund, c/o ESC, the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, ESC, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
financial intermediaries, fiduciaries and surviving joint owners. Signature
guarantees are required for all redemption requests for shares with a value of
more than $50,000. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. Each Fund and ESC reserve the
right to withdraw this waiver at any time. A signature guarantee must be
provided by a bank or trust company (not a Notary Public), a member firm of a
domestic stock exchange or by other financial institutions whose guarantees are
acceptable under the Securities Exchange Act of 1934 and ESC's policies.
Shareholders may redeem amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
Prospectus between the hours of 8:00 a.m. and 6:00 p.m. (Eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or ESC's
offices are closed).
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The Exchange is closed on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Redemption requests received after 4:00 p.m.
(Eastern time) will be processed using the net asset value determined on the
next business day. Such redemption requests must include the shareholder's
account name, as registered with a Fund, and the account number. During periods
of drastic economic or market changes, shareholders may experience difficulty in
effecting telephone redemptions. If you cannot reach a Fund by telephone, you
should follow the procedures for redeeming by mail or through a broker-dealer as
set forth herein. The telephone redemption service is not made available to
shareholders automatically. Shareholders wishing to use the telephone redemption
service must complete the appropriate sections on the Application and choose how
the redemption proceeds are to be paid. Redemption proceeds will either (1) be
mailed by check to the shareholder at the address in which the account is
registered or (2) be wired to an account with the same registration as the
shareholder's account in a Fund at a designated commercial bank.
In order to insure that instructions received by ESC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation of
your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if the
address and bank account of record have been the same for a minimum period of 30
days. Each Fund reserves the right at any time to terminate, suspend, or change
the terms of any redemption method described in this Prospectus, except
redemption by mail, and to impose fees.
Except as otherwise noted, the Funds, ESC and EDI will not assume
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Evergreen Express Line, or by telephone.
ESC will employ reasonable procedures to confirm that instructions received over
the Evergreen Express Line or by telephone are genuine. The Funds, ESC and EDI
will not be liable when following instructions received over the Evergreen
Express Line or by telephone that ESC reasonably believes are genuine.
Evergreen Express Line. The Evergreen Express Line offers you specific fund
account information and price and yield quotations as well as the ability to do
account transactions, including investments, exchanges and redemptions. You may
access the Evergreen Express Line by dialing toll free 1-800-346-3858 on any
touch-tone telephone, 24 hours a day, seven days a week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists and
the Funds cannot dispose of their investments or fairly determine their value;
or (4) the Securities and Exchange Commission ("SEC") so orders. The Funds
reserve the right to close an account that through redemption has fallen below
$1,000 and has remained so for 30 days. Shareholders will receive 60 days'
written notice to increase the account value to at least $1,000 before the
account is closed. The Funds have elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which 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 90 day period for any one shareholder.
EXCHANGE PRIVILEGE
How to Exchange Shares. You may exchange some or all of your shares for shares
of the same class in the other Evergreen funds through your financial
intermediary by calling or writing to ESC or by using the Evergreen Express Line
as described above. Once an exchange request has been telephoned or mailed, it
is irrevocable and may not be modified or canceled. Exchanges will be made on
the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. An exchange which represents
an initial investment in another Evergreen fund is subject to the minimum
investment and suitability requirements of each Fund.
Each of the Evergreen funds has different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by a Fund upon 60 days' notice to shareholders and is only available in
states in which shares of a fund being acquired may lawfully be sold.
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No CDSC will be imposed in the event shares are exchanged for shares of
the same class of other Evergreen funds. If you redeem shares, the CDSC
applicable to the shares of the Evergreen fund originally purchased for cash is
applied. Also, Class B shares will continue to age following an exchange for the
purpose of conversion to Class A shares and for the purpose of determining the
amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges By Telephone And Mail. Exchange requests received by a Fund after 4:00
p.m. (Eastern time) will be processed using the net asset value determined at
the close of the next business day. During periods of drastic economic or market
changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach ESC by telephone. If you wish to use the telephone
exchange service you should indicate this on the Application. As noted above,
each Fund will employ reasonable procedures to confirm that instructions for the
redemption or exchange of shares communicated by telephone are genuine. A
telephone exchange may be refused by a Fund or ESC if it is believed advisable
to do so. Procedures for exchanging Fund shares by telephone may be modified or
terminated at any time. Written requests for exchanges should follow the same
procedures outlined for written redemption requests in the section entitled "How
to Redeem Shares"; however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, ESC
or call the toll-free number on the front page of this Prospectus. Some services
are described in more detail in the Application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of a Fund with no minimum initial
investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the Application. Under
this Plan, you may receive (or designate a third party to receive) a monthly or
quarterly fixed-withdrawal payment in a stated amount of at least $75, and as
much as 1.0% per month or 3.0% per quarter of the total net asset value of the
Fund shares in your account when the Plan was opened. Fund shares will be
redeemed as necessary to meet withdrawal payments. All participants must elect
to have their dividends and capital gain distributions reinvested automatically.
Any applicable CDSC will be waived with respect to redemptions occurring under a
Systematic Withdrawal Plan during a calendar year to the extent that such
redemptions do not exceed 12% of (1) the initial value of the account plus (2)
the value, at the time of purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified employee benefit and savings plans may make shares of the Funds
and the other Evergreen funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Evergreen Asset, Keystone or FUNB may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested.
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Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen fund. This results in
more shares being purchased when the selected Fund's net asset value is
relatively low and fewer shares being purchased when the Fund's net asset value
is relatively high and may result in a lower average cost per share than a less
systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen fund. You should designate on the Application (1) the
dollar amount of each monthly or quarterly investment you wish to make and (2)
the Fund in which the investment is to be made. Thereafter, on the first day of
the designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and invested
in shares of the designated fund.
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any Evergreen fund shares you own automatically invested to
purchase the same class of shares of any other Evergreen fund. You may select
this service on your Application and indicate the Evergreen fund(s) into which
distributions are to be invested.
Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Medical
Savings Accounts; Pension and Target Benefit and Money Purchase Plans. For
details, including fees and application forms, call toll free 1-800-247-4075 or
write to ESC.
BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset, since it is a subsidiary of FUNB, and Keystone are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in Keystone or Evergreen Asset being
prevented from continuing to perform the services required under the investment
advisory agreements or from acting as agent in connection with the purchase of
shares of the Funds by its customers. If Keystone or Evergreen Asset were
prevented from continuing to provide the services called for under the
investment advisory agreements, it is expected that the Trustees would identify,
and call upon each Fund's shareholders to approve, new investment advisers. If
this were to occur, it is not anticipated that the shareholders of any Fund
would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to distribute its investment company taxable income
quarterly and net realized capital gains at least annually. Shareholders receive
Fund distributions in the form of additional shares of that class of shares upon
which the distribution is based or, at the shareholder's option, in cash.
Shareholders of a Fund who have not opted to receive cash prior to the payable
date for any dividend from net investment income or the record date for any
capital gains distribution will have the number of such shares determined on the
basis of a Fund's net asset value per share computed at the end of that day
after adjustment for the distribution. Net asset value is used in computing the
number of shares in both capital gains and income distribution investments.
Because Class A shares bear most of the costs of distribution of such
shares through payment of a front-end sales charge, while Class B and, when
applicable, Class C shares bear such expenses through a higher annual
distribution fee, expenses attributable to Class B shares and Class C shares
will generally be higher than those of Class A shares, and income distributions
paid by a Fund with respect to Class A shares will generally be greater than
those paid with respect to Class B and Class C shares.
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Account statements and/or checks, as appropriate, will be mailed within
seven days after a Fund pays a distribution. Unless a Fund receives instructions
to the contrary before the record or payable date, as the case may be, it will
assume that a shareholder wishes to receive that distribution and future capital
gains and income distributions in shares. Instructions continue in effect until
changed in writing.
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). While so qualified, it
is expected that each Fund will not be required to pay any federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as a Fund, to
the extent they do not meet certain distribution requirements by the end of each
calendar year. The Funds anticipate meeting such distribution requirements.
Any taxable dividend declared in October, November or December to
shareholders of record in such a month and paid by the following January 31 will
be includable in the taxable income of shareholders as if paid on December 31 of
the year in which the dividend was declared.
The Funds may be subject to foreign withholding taxes which would reduce
the yield on their investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States federal income tax may be entitled, subject to certain
rules and limitations, to claim a federal income tax credit or deduction for
foreign income taxes paid by the Fund. See the SAI for additional details. The
Fund's transactions in options, futures and forward contracts may be subject to
special tax rules. These rules can affect the amount, timing and characteristics
of distributions to shareholders.
The Funds are required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Application, or on a
separate form supplied by the Fund's transfer agent, that the investor's social
security or taxpayer identification number is correct and that the investor is
not currently subject to backup withholding or is exempt from backup
withholding. A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within ninety days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of a Fund.
The Funds intend to distribute their net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital gains.
The Funds will designate capital gains distributions as such by a written notice
mailed to each shareholder no later than 60 days after the close of a Funds'
taxable year. If a shareholder receives a capital gain dividend and holds his
shares for six months or less, then any allowable loss on disposition of such
shares will be treated as long-term capital loss to the extent of such capital
gain dividend.
The foregoing discussion of federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus and is subject
to change by legislative or administrative action. As the foregoing discussion
is for general information only, you should also review the discussion of
"Additional Tax Information" contained in the SAI. In addition, you should
consult your own tax adviser as to the tax consequences of investments in the
Fund, including the application of state and local taxes which may be different
from the federal income tax consequences described above.
GENERAL INFORMATION
Portfolio Turnover. The estimated annual portfolio turnover rate for each of the
Funds is not expected to exceed 100%. A portfolio turnover rate of 100% would
occur if all of a Fund's portfolio securities were replaced in one year. The
portfolio turnover rate experienced by a Fund directly affects the transaction
costs relating to the purchase and sale of securities which a Fund bears
directly. A high rate of portfolio turnover will increase such costs. See the
SAI for further information regarding the practices of the Funds affecting
portfolio turnover.
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, a Fund may consider sales of its shares as a factor in the selection
of dealers to enter into portfolio transactions with a Fund.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (1) persons who at or prior to December 31, 1994, owned shares in a
mutual fund advised by Evergreen Asset, (2) certain institutional investors and
(3) investment advisory clients of FUNB, Evergreen Asset,
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Keystone or their affiliates. The dividends payable with respect to Class A,
Class B and Class C shares will be less than those payable with respect to Class
Y shares due to the distribution and shareholder servicing-related expenses
borne by Class A, Class B and Class C shares and the fact that such expenses are
not borne by Class Y shares. Investors should telephone (800) 343-2898 to obtain
more information on other classes of shares.
Performance Information. The Funds may quote their "total return" or "yield" for
a specified period in advertisements, reports or other communications to
shareholders. Total return and yield are computed separately for each class of
shares. Performance data for one or more classes may be included in any
advertisement or sales literature using performance data of a Fund.
A Fund's total return for each such period is computed by finding,
through the use of a formula prescribed by the SEC, the average annual
compounded rate of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the period. For
purposes of computing total return, dividends and capital gains distributions
paid on shares of a Fund are assumed to have been reinvested when paid and the
maximum sales charges applicable to purchases of a Fund's shares are assumed to
have been paid.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of a Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in a Fund's financial statements. To calculate yield, a Fund takes the
interest and dividend income it earned from its portfolio of investments (as
defined by the SEC formula) for a 30-day period (net of expenses), divides it by
the average number of shares entitled to receive dividends, and expresses the
result as an annualized percentage rate based on a Fund's share price at the end
of the 30-day period. This yield does not reflect gains or losses from selling
securities.
Performance data may be included in any advertisement or sales literature
of a Fund. These advertisements may quote performance rankings or ratings of a
Fund by financial publications or independent organizations such as Lipper
Analytical Services, Inc. and Morningstar, Inc. or compare a Fund's performance
to various indices. The Funds may also advertise in items of sales literature an
"actual distribution rate" which is computed by dividing the total ordinary
income distributed (which may include the excess of short-term capital gains
over losses) to shareholders for the latest twelve month period by the maximum
public offering price per share on the last day of the period. Investors should
be aware that past performance may not be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen funds, products, and services, which may include: retirement
investing; brokerage products and services; the effects of periodic investment
plans and dollar cost averaging; saving for college; and charitable giving. In
addition, the information provided to investors may quote financial or business
publications and periodicals, including model portfolios or allocations, as they
relate to fund management, investment philosophy, and investment techniques. The
Principal Underwriter may also reprint, and use as advertising and sales
literature, articles from EVERGREEN EVENTS, a quarterly magazine provided to
Evergreen fund shareholders.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trust with
the SEC under the Securities Act of 1933, as amended. Copies of the Registration
Statements may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the offices of the SEC in Washington, D.C.
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Investment Advisers
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
Evergreen Foundation Fund, Evergreen Tax Strategic Foundation Fund,
Evergreen American Retirement Fund
Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034
Evergreen Balanced Fund
Custodian
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
Transfer Agent
Evergreen Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121
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 W. 55th Street, New York, New York 10019
64905 540392REV2
