1933 Act No. 333-37453
1940 Act No. 811-08413
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 9 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 8 [X]
EVERGREEN EQUITY TRUST
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street, Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices)
(617) 210-3200
(Registrant's Telephone Number)
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[X] on January 4, 1999 pursuant to paragraph (a)(ii) of
Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
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EVERGREEN EQUITY TRUST
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 9
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 9 to Registrant's Registration Statement
No. 333-37453/811-08413 consists of the following pages, items of information
and documents:
The Facing Sheet
The Contents Page
The Cross-Reference Sheet
PART A
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Prospectuses for Evergreen Masters Fund as contained herein.
Prospectuses for Evergreen Tax Strategic Equity Fund are contained in
Registration No. 333-37453/811-08413 filed on June 12, 1998.
Prospectuses for Evergreen Aggressive Growth Fund, Evergreen Fund,
Evergreen Micro Cap Fund, Evergreen Omega Fund, Evergreen Small Company Growth
Fund, Evergreen Strategic Growth Fund and Evergreen Stock Selector Fund are
contained in Registration Statement No. 333-37453/811-08413 filed on August 3,
1998.
Prospectuses for the following funds are contained in Registration
Statement No. 333-37453/811-08413 filed on July 31, 1998: Evergreen American
Retirement Fund, Evergreen Foundation Fund, Evergreen Tax Strategic Foundation
Fund and Evergreen Balanced Fund.
Prospectuses for the following funds are contained in Registration
Statement No. 333-37453/811- 08413 filed on December 12, 1997 and September 30,
1998: Evergreen Fund for Total Return, Evergreen Growth and Income Fund,
Evergreen Income and Growth Fund, Evergreen Small Cap Equity Income Fund,
Evergreen Value Fund, Evergreen Utility Fund, and Evergreen Blue Chip Fund.
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PART B
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Statement of Additional Information for Evergreen Aggressive Growth
Fund, Evergreen Fund, Evergreen Micro Cap Fund, Evergreen Omega Fund, Evergreen
Small Company Growth Fund, Evergreen Strategic Growth Fund , Evergreen Stock
Selector Fund, Evergreen Tax Strategic Equity Fund and Evergreen Masters Fund is
contained herein.
Statement of Additional Information for the following funds is contained in
Registration Statement No. 333-37453/811-08413 filed on July 31, 1998: Evergreen
American Retirement Fund, Evergreen Foundation Fund, Evergreen Tax Strategic
Foundation Fund and Evergreen Balanced Fund.
Statement of Additional Information for the following funds is
contained in Registration Statement No. 333-37453/811-08413 filed on December
12, 1997 and September 30, 1998: Evergreen Fund for Total Return, Evergreen
Growth and Income Fund, Evergreen Income and Growth Fund, Evergreen Small Cap
Equity Income Fund, Evergreen Value Fund, Evergreen Utility Fund and Evergreen
Blue Chip Fund.
PART C
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Financial Statements
Exhibits
Number of Holders of Securities
Indemnification
Business and Other Connections of Investment Adviser
Principal Underwriter
Location of Accounts and Records
Undertakings
Signatures
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EVERGREEN EQUITY TRUST
Cross Reference Sheet
pursuant to Rules 404 and 495 under the Securities Act of 1933
<TABLE>
<CAPTION>
N-1A Item No. Location in Prospectus(es)
Part A
<S> <C> <C>
Item 1. Cover Page Cover
Page
Item 2. Synopsis and Fee Expense Information
Table
Financial Highlights
Item 3. Condensed Financial
Information
Item 4. General Description Additional Investment
of Registrant Information; Cover Page;
Fund Description; Fund
Objectives and
Policies; Investment
Restrictions; Risk Factors;
General Information
Item 5. Management of the Fund Management; Expenses
Fund
Item 6. Capital Stock and Fund Description; Dividends
Other Securities and Taxes; Fund Shares;
Shareholder Services
Item 7. Purchase of Distribution Plan; How to
Securities Being Buy Shares; Pricing Shares;
Offered Shareholder Services
Item 8. Redemption or How to Redeem Shares
Repurchase
Item 9. Pending Legal Not Applicable
Proceedings
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Location in Statement of
Additional Information
Part B
Item 10. Cover Page Cover
Page
Item 11. Table of Contents Table of Contents
Item 12. General Information Trust Organization
and History
Item 13. Investment Fund Investments
Objectives and
Policies
Item 14. Management of the Management of the Trust
Fund
Item 15. Control Persons and Management of the Trust;
Principal Holders of Principal Holders of Fund
Securities Shares
Item 16. Investment Advisory Investment Advisory and
and Other Services Other Services
Item 17. Brokerage Allocation Brokerage
Item 18. Capital Stock and Trust Organization
Other Securities
Item 19. Purchase, Redemption Purchase, Redemption and
and Pricing of Pricing of Shares
Securities
Being Offered
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Principal Underwriter
Item 22. Calculation of Financial Information
Performance Data
Item 23. Financial Statements Financial Information
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
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PROSPECTUS January 4, 1999
EVERGREEN DOMESTIC GROWTH FUNDS (Evergreen Funds logo
appears here)
EVERGREEN MASTERS FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Masters Fund (the "Fund") seeks long-term capital
appreciation.
This prospectus provides information regarding the Class A, Class B and
Class C shares offered by the Fund. The Fund is a diversified series of an
open-end, management investment company. This prospectus sets forth concise
information about the Fund that a prospective investor should know before
investing. The address of the Fund is 200 Berkeley Street, Boston, Massachusetts
02116.
A Statement of Additional Information ("SAI") for the Fund dated
February 1, 1998, as amended on August 3, 1998, September 1, 1998 and January 4,
1999 has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated by reference herein. The SAI 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 Fund at (800)
343-2898. There can be no assurance that the investment objective of the Fund
will be achieved. Investors are advised to read this prospectus carefully.
An investment in the Fund is not a deposit or obligation of any bank,
is not endorsed or guaranteed by any bank, and is not insured or otherwise
protected by the U.S. government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency. An investment in the Fund
involves risk, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
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TABLE OF CONTENTS
EXPENSE INFORMATION........................................................3
FINANCIAL HIGHLIGHTS.......................................................5
DESCRIPTION OF THE FUND....................................................5
INVESTMENT OBJECTIVE AND POLICIES.................................5
INVESTMENT PRACTICES AND RESTRICTIONS.............................8
ORGANIZATION AND SERVICE PROVIDERS........................................16
ORGANIZATION.....................................................16
SERVICE PROVIDERS................................................16
DISTRIBUTION PLANS AND AGREEMENTS................................19
PURCHASE AND REDEMPTION OF SHARES.........................................21
HOW TO BUY SHARES................................................21
HOW TO REDEEM SHARES.............................................27
EXCHANGE PRIVILEGE...............................................30
SHAREHOLDER SERVICES.............................................31
BANKING LAWS.....................................................33
OTHER INFORMATION.........................................................34
DIVIDENDS, DISTRIBUTIONS AND TAXES...............................34
GENERAL INFORMATION..............................................36
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EXPENSE INFORMATION
The table and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest in
the Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of the Fund.
<TABLE>
<CAPTION>
Class A Class B Class C
SHAREHOLDER TRANSACTION EXPENSES Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on 4.75% None None
Purchases (as a % of offering
price)
Maximum Contingent Deferred Sales None(1) 5%(2) 1%(2)
Charge (as a % of original
purchase price or 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 estimated annual operating expenses for the fiscal
period ending September 30, 1999. 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 Fund see "Organization and Service Providers."
ANNUAL OPERATING EXPENSES
Class A Class B Class C
Management Fees 0.95% 0.95% 0.95%
12b-1 Fees (3) 0.25% 1.00% 1.00%
Other Expenses 0.38% 0.38% 0.38%
----- ----- -----
Total 1.58% 2.33% 2.33%
===== ===== =====
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Examples
Assuming Redemption at End Assuming no Redemption
of Period
Class A Class B Class C Class B Class C
After 1 Year $63 $77 $34 $24 $24
After 3 Years $95 $103 $73 $73 $73
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(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) Class A shares of the Fund can pay up to 0.75% of average daily net assets
as a 12b-1 fee. For the foreseeable future, the Class A 12b-1 fees will be
limited to 0.25% of average daily net assets. Long-term shareholders may
pay more than the economic equivalent front-end sales charges permitted by
the National Association of Securities Dealers, Inc.
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FINANCIAL HIGHLIGHTS
As of the date of this prospectus, the Fund had not commenced
operations. Therefore, no financial highlights are currently available.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is nonfundamental; as a result, the
Fund may change its objective without a shareholder vote. The Fund has also
adopted certain fundamental investment policies which are mainly designed to
limit the Fund's exposure to risk. The Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
the Fund's fundamental investment policies or other related investment policies.
There can be no assurance that the Fund's investment objective will be achieved.
The Fund's investment objective is to seek long-term capital
appreciation by investing at least 65% of its assets in equity securities. The
Fund's investment program is based on the Manager of Managers Strategy of First
Union National Bank's ("FUNB") Capital Management Group ("CMG"). CMG allocates
the Fund's portfolio assets on an approximately equal basis among a number of
investment management organizations ("Managers") -- currently four in number --
each of which employs a different investment style.
In CMG's opinion, the Manager of Managers strategy may provide
advantages over the use of a single manager because of the following primary
factors:
(i) Most equity investment management firms consistently employ a
distinct investment "style" which causes them to emphasize stocks with
particular characteristics;
(ii) because of changing investor preferences, any given investment
style will move into and out of market favor and will result in better
investment performance under certain market conditions but less successful
performance under other conditions; and
(iii) consequently, by allocating the Fund's portfolio on an
approximately equal basis among Managers employing different styles, the impact
of any one such style on investment
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performance will be diluted, and the investment performance of the total
portfolio will be more consistent and less volatile over the long term than if a
single style were employed throughout the entire period.
CMG, based on the foregoing principles and on its analysis and
evaluation of information regarding the personnel and investment styles and
performance of numerous professional investment management firms, has selected
for appointment by the Fund a group of Managers representing a blending of
different investment styles which, in its opinion, is appropriate to the Fund's
investment objective.
CMG has ultimate responsibility for the investment performance of the
Fund. CMG continuously monitors the performance and investment styles of the
Fund's portfolio Managers and from time to time may recommend changes of
Managers based on factors such as changes in a Manager's investment style or a
departure by a Manager from the investment style for which it had been selected,
a deterioration in a Manager's performance relative to that of other investment
management firms practicing a similar style, or adverse changes in its ownership
or personnel.
The Fund's current Managers are:
Evergreen Asset Management Corp. ("Evergreen Asset")
MFS Institutional Advisors, Inc. ("MFS")
OppenheimerFunds, Inc. ("Oppenheimer")
Putnam Investment Management, Inc. ("Putnam")
The investment styles described below will be those applied by each of
the Managers to the segment of the Fund's portfolio for which that Manager is
responsible.
Evergreen Asset - Evergreen Asset's segment of the portfolio will
primarily be invested, in accordance with its value oriented strategy, in equity
securities of U.S. and foreign companies with market capitalizations between
approximately $500 million and $5 billion. In accordance with the value style of
investing Evergreen asset invests in companies it believes the market has
temporarily undervalued in relation to such factors as the company's assets,
cash flow and earnings potential.
Equity securities include common stocks, preferred stocks, bonds,
warrants or rights that are convertible into stocks, and depositary receipts for
those securities. Investments may also be made to a limited degree in
non-convertible debt securities
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and preferred stocks which offer an opportunity for capital
appreciation.
MFS manages its segment of the portfolio by primarily investing, in
accordance with its growth oriented investment strategy, in equity securities of
companies with market capitalizations between approximately $500 million and $5
billion). Such companies generally would be expected to show earnings growth
over time that is well above the growth rate of the overall economy and the rate
of inflation, and would have the products, management and market opportunities
which are usually necessary to continue sustained growth. MFS may invest up to
25% (and generally expects to invest between 0% and 10%) of its segment of the
Fund's assets in foreign securities (not including American Depositary
Receipts), including foreign growth securities, which are not traded on a U.S.
exchange.
Oppenheimer manages its segment of the portfolio in accordance with a
blended growth and value investment strategy. Investments are primarily in
equity securities of those companies with market capitalizations over $5
billion; however, Oppenheimer may, when it deems advisable, invest in the equity
securities of mid-cap and small-cap companies. In purchasing portfolio
securities, Oppenheimer may invest without limit in foreign securities and may,
to a limited degree, invest in non-convertible debt securities and preferred
stocks which have the potential for capital appreciation.
Putnam's segment of the portfolio will primarily be invested, in
accordance with its growth oriented investment strategy, in equity securities of
U.S. and foreign issuers with market capitalizations of $5 billion or more.
Putnam may also purchase non-convertible debt securities which offer the
opportunity for capital appreciation.
In the evaluation of a company, more consideration is given to growth
potential than to dividend income. Putnam believes that evaluating a company's
probable future earnings, dividends, financial strength, working assets and
competitive position will prove more profitable in the long run than simply
seeking current dividend income.
Each Manager may also invest, for temporary defensive purposes, up to
100% of the assets allocated to its segment in short-term obligations. Such
obligations may include U.S. government securities, master demand notes,
commercial paper and notes, bank deposits and other financial obligations.
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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
Repurchase Agreements. The 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 Managers will monitor the creditworthiness of the firms
with which the Fund enters into repurchase agreements.
Reverse Repurchase Agreements. The 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.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. The 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. The Fund does not intend to purchase when-issued securities
for speculative purposes, but only in furtherance of its investment objective.
Securities Lending. To generate income and offset expenses, the Fund may lend
securities to broker-dealers and other financial institutions. Loans of
securities by the Fund may not exceed 33
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1/3% of the value of the Fund's total assets. While securities are on loan, the
borrower will pay the Fund any income accruing on the security. Also, the Fund
may invest any collateral it receives in additional securities. Gains or losses
in the market value of a lent security will affect the Fund and its
shareholders. When the Fund lends its securities, it runs the risk that it could
not retrieve the securities on a timely basis, possibly losing the opportunity
to sell the securities at a desirable price. Also, if the borrower files for
bankruptcy or becomes insolvent, the Fund's ability to dispose of the securities
may be delayed.
Investing in Securities of Other Investment Companies. The Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, the Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that the
Fund currently bears concerning its own operations and may result in some
duplication of fees.
Borrowing. The Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. The Fund may also borrow an additional 5%
of its total assets from banks and others. The Fund may only borrow as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. The Fund may not purchase additional securities when borrowings
exceed 5% of total assets.
The purchase of securities while borrowings are outstanding will have
the effect of leveraging the Fund. Such leveraging or borrowing increases the
Fund's exposure to capital risk and borrowed funds are subject to interest costs
which will reduce net income.
Illiquid Securities. The Fund may invest up to 15% of its 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
purpose of the foregoing 15% limit. The inability of the Fund to dispose of
illiquid investments readily or at a reasonable price could impair its ability
to raise cash for redemptions or other purposes.
Restricted Securities. The Fund 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
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U.S. The Fund's Managers determine the liquidity of Rule 144A securities
according to the guidelines and procedures adopted by Evergreen Equity Trust's
Board of Trustees. The Board of Trustees monitors the Managers' application of
those guidelines and procedures. Securities eligible for resale pursuant to Rule
144A, which the Fund's Managers have determined to be liquid or readily
marketable, are not subject to the 15% limit on illiquid securities.
Options and Futures. The 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.
The 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
write covered call options on its portfolio securities to attempt to increase
its current income. The Fund will maintain its position 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.
The Fund may write (i.e., sell) covered call and put options. By
writing a call option, the Fund becomes obligated during the term of the option
to deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, the 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 Fund also may write straddles
(combinations of covered puts and calls on the same underlying security). The
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.
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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 price upon exercise.
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 specified 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.
The 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 the Fund, the profit on the
contract will tend to rise when the value of
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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 value of its 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 with respect to a particular contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it 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 Fund to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Fund's use of them can result in poorer performance (i.e., the Fund's return may
be reduced). The Fund's attempt 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 Fund uses financial futures contracts and
options on financial futures 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 portfolio. This may cause the financial
futures contracts and any related options to react to market changes differently
than the portfolio securities. In addition, the Fund's Managers 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 the Fund's Managers correctly predict 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
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its investments. In these events, the Fund may lose money on the financial
futures contracts or the options on 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 the
Fund's Managers will consider liquidity before entering into financial futures
contracts or options on financial futures contracts, 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 Fund's ability to establish and close out financial futures contracts
and options on financial futures contract 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.
Derivatives. Derivatives are financial contracts, such as those described above,
whose value is based on an underlying asset, such as a stock or a bond, or an
underlying economic factor, such as an index or an interest rate.
The Fund may invest in derivatives only if the expected risks and
rewards are consistent with its objectives and policies.
Losses from derivatives can sometimes be substantial. This is true
partly because small price movements in the underlying asset can result in
immediate and substantial gains or losses in the value of the derivative.
Derivatives can also cause the Fund to lose money if the Fund fails to correctly
predict the direction in which the underlying asset or economic factor will
move.
Investment in Small and Mid-Sized Companies. Investments in securities of
little-known, relatively small or mid-sized and special situation companies may
tend to be speculative and volatile. A lack of management depth in such
companies could increase the risks associated with the loss of key personnel.
Also, the material and financial resources of such companies may be limited,
with the consequence that funds or external financing necessary for growth may
be unavailable. Such companies may also be involved in the development or
marketing of new products or services for which there are no established
markets. If projected markets do not materialize or only regional markets
develop, such companies may be adversely affected or may be subject to the
consequences of local events. Moreover, such companies may be
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insignificant factors in their industries and may become subject to intense
competition from larger companies. Securities of companies in which the Fund may
invest will frequently be traded only in the over-the-counter market or on
regional stock exchanges and will often be closely held. Securities of this type
may have limited liquidity and may be subject to wide price fluctuations. As a
result of the risk factors described above, to the extent the Fund invests in
small and mid-sized companies, the net asset value of the Fund's shares can be
expected to vary significantly.
Foreign Investments. 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 U.S. 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 Managers before making any of these
types of investments.
Foreign Currency Transactions. As discussed above, the Fund may invest in
securities of foreign issuers. When the Fund invests in foreign securities, they
usually will be denominated in foreign currencies, and the Fund temporarily may
hold funds in foreign currencies. Thus, the value of the Fund's 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 Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell. The
Fund intends to use these contracts to hedge the U.S. dollar value of a security
it already owns, particularly if the Fund expects a decrease in the value of the
currency in which the foreign security is denominated. Although the Fund will
attempt to benefit from using forward contracts,
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<PAGE>
the success of its hedging strategy will depend on the Managers' ability to
predict accurately the future exchange rates between foreign currencies and the
U.S. dollar. The value of the Fund's investments denominated in foreign
currencies will depend on the relative strength of those currencies and the U.S.
dollar, and the Fund may be affected favorably or unfavorably by changes in the
exchange rates or exchange control regulations between foreign currencies and
the U.S. dollar. Changes in foreign currency exchange rates also may affect the
value of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. The Fund does not intend to enter into foreign
currency transactions for speculation or leverage.
Special Risk Considerations Regarding the Multi-Manager Strategy. CMG oversees
the portfolio management services provided to the Fund by each of the four
Managers. CMG does not, however, determine what investments will be purchased or
sold for any segment of the portfolio. Because each Manager will be managing its
segment of the portfolio independently from the other Managers, the same
security may be held in two different segments of the portfolio, or may be
acquired for one segment of the portfolio at a time when the Manager of another
segment deems it appropriate to dispose of the security from that other segment.
Similarly, under some market conditions, one or more of the Managers may believe
that temporary, defensive investments in short-term instruments or cash are
appropriate when another Manager or Managers believe continued exposure to the
equity markets is appropriate for their segments of the portfolio. Because each
Manager directs the trading for its own segment of the portfolio, and does not
aggregate its transactions with those of the other Managers, the Fund may incur
higher brokerage costs than would be the case if a single investment advisor or
Manager were managing the entire portfolio. Also, because each segment of the
portfolio will perform differently from the other segments depending upon the
investments it holds and changing market conditions, one segment may be larger
or smaller at various times than other segments. Net cash inflows or outflows
resulting from sales and redemptions of the Fund's shares will, however,
continue to be allocated on an equal basis among the four segments of the
portfolio without regard to the relative size of the segments. CMG will not
reallocate assets among the segments to reduce these differences in size until
the assets allocated to one Manager either exceeds 35% or is less than 15% of
the Fund's average daily net assets for a period of three consecutive months. In
such event CMG may, but is not obligated to,
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reallocate assets among Managers to provide for a more equal distribution of the
Fund's assets.
ORGANIZATION AND SERVICE PROVIDERS
ORGANIZATION
Fund Structure. The Fund is an investment pool, which invests shareholders'
money toward a specified goal. The 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 18, 1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Fund's activities, reviewing,
among other things, the Fund's performance and its contractual arrangements with
various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, shares will be fully paid and
nonassessable. Shares of the Fund are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Fund does not hold annual shareholder meetings; the Fund may,
however, hold special meetings for such purposes as electing or removing
Trustees, changing fundamental policies and approving investment advisory
agreements or 12b-1 plans. In addition, the Fund is prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect Trustees.
SERVICE PROVIDERS
Investment Advisor. The investment advisor of the Fund is the CMG of FUNB which
is a wholly-owned subsidiary of First Union Corporation ("First Union"). First
Union is located at 301 South College Street and FUNB is located at 201 South
College Street, Charlotte, North Carolina 28288-0630. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.
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<PAGE>
Pursuant to its Investment Advisory and Management Agreement (the
"Advisory Agreement") CMG oversees the administration of all aspects of the
business and affairs of the Fund and selects, contracts with and compensates
Managers to manage the assets of the Fund's portfolio. CMG monitors the Managers
for compliance with the investment objectives and policies of the Fund, reviews
the performance of the Managers, and periodically reports to the Trust. CMG has
the right under the Advisory Agreement to directly manage any or all of the
Fund's assets.
CMG is entitled to receive from the Fund an annual fee equal to 0.95%
of average daily net assets of the Fund.
The Trust and FUNB have submitted an application requesting an
exemptive order from the Securities and Exchange Commission ("SEC") that would
permit the Manager, subject to certain conditions, and without the approval of
shareholders to: (a) employ a new unaffiliated Manager or Managers for the Fund
pursuant to the terms of a new portfolio management agreement, in each case
either as a replacement for an existing Manager or as an additional Manager; (b)
change the terms of any portfolio management agreement; and (c) continue the
employment of an existing Manager on the same advisory contract terms where a
contract has been assigned because of a change in control of the Manager. In
such circumstances, shareholders would receive notice of such action, including
the information concerning the Manager that normally is provided in a proxy
statement. The exemptive order would also permit disclosure of fees paid to
unaffiliated Managers are on aggregate basis only. There is no assurance that
the SEC will grant the Trust's and FUNB's application.
Shareholders have the right to terminate arrangements with a Manager by
vote of a majority of the outstanding shares of the Fund. In addition,
shareholders have the right to approve, in accordance with current SEC
interpretations, any new portfolio management agreements with affiliated
Managers.
Manager Oversight. The responsibility for overseeing the Managers rests on
certain officers and employees of FUNB. These officers and employees, including
their business experience for the past five years, are identified below.
[Names and Positions - to be added]
Managers. Subject to the supervision of CMG, each Manager manages a segment of
the Fund's portfolio in accordance with the Fund's investment objective and
policies, makes investment decisions for the segment, and places orders to
purchase and sell
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securities for the segment. The Fund pays no direct fees to any of the Managers.
Set forth below is a brief description of the Fund's Managers.
Evergreen Asset, 2500 Westchester Avenue, Purchase, New York 10577 is a
wholly-owned subsidiary of First Union. Evergreen Asset, with its predecessors,
has served as investment advisor to the Evergreen mutual funds since 1971.
MFS, 500 Boylston Street, Boston, Massachusetts 02116, together with
its parent company, is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States. MFS is a
subsidiary of Massachusetts Financial Services Company, which is a subsidiary of
SunLife of Canada (U.S.) Financial Services Holdings, Inc., which in turn is an
indirect wholly-owned subsidiary of SunLife Assurance Company of Canada. As of
July 31, 1998, MFS managed more than $87 billion on behalf of over 3.3 million
investor accounts.
Oppenheimer, Two World Trade Center, New York, New York 10048, has
operated as an investment adviser since 1959. As of August 31, 1998, Oppenheimer
and its subsidiaries managed investment companies with assets of more than $85
billion and with more than 4 million shareholder accounts. Oppenheimer is owned
by Oppenheimer Acquisition Corp., a holding company that is owned in part by
senior officers of Oppenheimer and controlled by Massachusetts Mutual Life
Insurance Company.
Putnam, One Post Office Square, Boston, Massachusetts 02109, has been
managing mutual funds since 1937. As of June 30, 1998, Putnam and its affiliates
managed more than $278 billion of assets. Putnam is a subsidiary of Putnam
Investments, Inc., which is owned by Marsh & McLennan Companies, Inc., a
publicly-owned holding company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit consulting and investment
management.
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company, an indirect wholly-owned subsidiary of First Union, which provides that
Lieber & Company's research department and staff will furnish Evergreen Asset
with information, investment recommendations, advice and assistance, and will
generally be available for consultation on the portfolio of the Fund. Lieber &
Company will be reimbursed by Evergreen
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<PAGE>
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
the Fund for the services provided by Lieber & Company. The address of Lieber &
Company is 2500 Westchester Avenue, Purchase, New York 10577.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company ("ESC"),
200 Berkeley Street, Boston, Massachusetts 02116, acts as the Fund's transfer
agent and dividend disbursing agent. ESC is an indirect, wholly-owned subsidiary
of First Union.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, acts as the 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 the Fund.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to the Fund. As administrator, and subject to the supervision and
control of the Trust's Board of Trustees, EIS provides the Fund with facilities,
equipment and personnel. For its services as administrator, EIS is entitled to
receive a fee based on the aggregate average daily net assets of the Fund at a
rate based on the total assets of all mutual funds administered by EIS for which
any affiliate of FUNB serves as investment advisor. The administration fee is
calculated in accordance with the following schedule.
Administration Fee
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
DISTRIBUTION PLANS AND AGREEMENTS
Distribution Plans. The Fund's Class A, Class B and Class C shares pay for the
expenses associated with the distribution of such shares according to
distribution plans adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940
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<PAGE>
Act") (each a "Plan" or collectively the "Plans"). Under the Plans, the Fund may
incur distribution-related and shareholder servicing-related expenses which are
based upon a maximum annual rate as a percentage of the Fund's average daily net
assets attributable to the class, as follows:
Class A shares 0.75% (currently limited to 0.25%)
Class B shares 1.00%
Class C shares 1.00%
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 the Fund's investment advisor or its affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts. The Fund may not pay any distribution or services fee during any
fiscal period in excess of the amounts set forth above. Amounts paid under the
Plans are used to compensate the Fund's distributor pursuant to the Distribution
Agreements entered into by the Fund.
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.
Distribution Agreements. The Fund has also entered into distribution agreements
(each a "Distribution Agreement" or collectively the "Distribution Agreements")
with EDI. Pursuant to the Distribution Agreements, the Fund will compensate EDI
for its services as distributor based upon the maximum annual rate as a
percentage of the Fund's average daily net assets attributable to the class, as
follows:
Class A shares 0.25%
Class B shares 1.00%
Class C shares 1.00%
The Distribution Agreements provide that EDI will use the distribution
fee received from the Fund for payments (1) to compensate broker-dealers or
other persons for distributing
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<PAGE>
shares of the Fund, including interest 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 Distribution Agreements 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 Fund's 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 the 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 EDI 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 the Fund in subsequent fiscal years.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You may purchase shares of the Fund through broker-dealers, banks or
other financial intermediaries, or directly through EDI. In addition, you may
purchase shares of the Fund by mailing to the Fund, c/o ESC, 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
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<PAGE>
prospectus. (See "General Information - Other Classes of
Shares.")
Class A Shares - Front-End Sales Charge Alternative. You may purchase Class A
shares 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:
<TABLE>
<CAPTION>
Amount of Purchase As a % of As a % of Commission to
the Net the Dealer/Agent
Amount Offering as a % of
Invested Price 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%
$1,000,000 or more None None 1.00% of the
amount
invested up to
$2,999,999;
.50% of the
amount
invested over
$2,999,999, up
to $4,999,999;
and .25% of
the excess
over
$4,999,999
</TABLE>
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 advisors; (b) investment advisors, consultants or
financial planners who place
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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 advisors or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisors 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 the 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 Fund, and members of the immediate families of
such employees; (g) upon the initial purchase of an Evergreen fund by investors
reinvesting the proceeds from a redemption within the preceding 30 days of
shares of other mutual funds, provided such shares were initially purchased with
a front-end sales charge or subject to a CDSC; and (h) all qualified plan
customers holding Evergreen Class Y shares in connection with a rollover into an
individual retirement account. Certain broker-dealers or other financial
institutions may impose a fee on transactions in shares of the Fund.
Class A shares may also be purchased at net asset value by corporate or
certain other qualified retirement plans 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. Additional information concerning the waiver of sales
charges is set forth in the SAI.
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<PAGE>
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 Fund. 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 net asset 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 the Fund's Concurrent Purchases, Rights of
Accumulation, Letters 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.
CDSC
Redemption Timing Imposed Imposed
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.
The CDSC is deducted from the amount of the redemption and is paid to
EDI. In the event the 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 imposition of a
front-end sales charge). The
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<PAGE>
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
Fund 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 the higher distribution and service fees 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 the 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 Fund 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 service fee 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. Service fees 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 the Fund
did not pay a commission on issuance, including
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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 the 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 Fund may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or CDSC to certain Directors, Trustees,
officers and employees of the Fund, FUNB, Evergreen Investment Management
Company ("EIMC"), Meridian Investment Company ("Meridian"), Evergreen Asset,
First International Advisors, Inc. ("First International"), 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 Fund Values Its Shares. The net asset value of each class of shares of
the 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 the Fund are valued at their current market values 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.
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,
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<PAGE>
you might consider Class B shares since 100% of your purchase is invested
immediately and since such shares will convert to Class A 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 incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of the
Fund and/or other Evergreen funds. 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 the
Fund's investment advisor, 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 the 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 the Fund's investment advisor 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 the Fund or its investment advisor
incurs. If such investor is an existing shareholder, the Fund may redeem shares
from an investor's account to reimburse the Fund or its investment advisor for
any loss. In addition, such investor may be prohibited or restricted from making
further purchases in any of the Evergreen funds. The Fund 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 in the Fund to the Fund for
cash at their net redemption value on any day the
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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 the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
the 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. The 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 the 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. You may redeem by mail by
sending a signed letter of instruction or stock power form to the Fund, c/o ESC
(the registrar, transfer agent and dividend-disbursing agent for the 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. The 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). The Exchange is closed on New Years Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
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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 the
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 the 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 section 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 the 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. The 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 Fund, 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 (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Fund, 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.
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General. The sale of shares is a taxable transaction for federal income tax
purposes. The Fund may temporarily suspend the right to redeem its 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 Fund
cannot dispose of its investments or fairly determine their value; or (4) the
SEC so orders. The Fund reserves 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 Fund has elected to be governed by Rule
18f-1 under the 1940 Act pursuant to which the Fund is obligated to redeem
shares solely in cash, up to the lesser of $250,000 or 1% of the 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 other Evergreen funds through your financial intermediary,
by calling or writing to ESC or by using the Evergreen Express Line as described
above. If the shares being tendered for exchange are still subject to a CDSC or
are eligible for conversion in a specified time, such remaining charge or
remaining time will carry over to the shares being acquired in the exchange
transaction. 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 more 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 the Fund
upon 60 days' notice to shareholders and is only available in states in which
shares of the 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. The 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 the Fund and may
charge you for this service.
Exchanges By Telephone and Mail. Exchange requests received by the 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,
the 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 the 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 Fund offers 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 the 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
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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 gains distributions reinvested
automatically.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified employee benefit and savings plans may make shares of the Fund and
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, Meridian 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 the
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.
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 a fund. You should designate on the
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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 Fund has 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 Fund. 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 advisor, 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. FUNB and
its affiliates 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 FUNB or its affiliates being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If FUNB or its affiliates were prevented from
continuing to provide the services called for under the
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<PAGE>
investment advisory agreement, it is expected that the Trustees would identify,
and call upon the Fund's shareholders to approve, a new investment advisor. If
this were to occur, it is not anticipated that the shareholders of the Fund
would suffer any adverse financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to distribute its investment company taxable income
annually and net capital realized 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 the 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 the 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, when
applicable, and 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 the Fund with respect to Class A shares will generally be greater than
those paid with respect to Class B and Class C shares.
Account statements and/or checks, as appropriate, will be mailed within
seven days after the Fund pays a distribution. Unless the 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.
The 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 the 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
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4% nondeductible excise tax on regulated investment companies, such as the Fund,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. The Fund anticipates 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 Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
U.S. may reduce or eliminate such taxes. Shareholders of the Fund who are
subject to U.S. 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 Fund is 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 the Fund and sells or
otherwise disposes of such shares within 90 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 the Fund.
The Fund intends to distribute its net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital gains.
The Fund will designate capital gains distributions as such by a written notice
mailed to each shareholder no later than 60 days after the close of the Fund's
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 a
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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 advisor 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 and Brokerage. The estimated annual portfolio turnover rate
for the Fund is not expected to exceed 100%. A portfolio turnover rate of 100%
would occur if all of the Fund's portfolio securities were replaced in one year.
The portfolio turnover rate experienced by the Fund directly affects the
transaction costs relating to the purchase and sale of securities which the Fund
bears directly. A high rate of portfolio turnover will increase such costs. It
is contemplated that Lieber & Company, an affiliate of Evergreen Asset and a
member of the New York and American Stock Exchanges will, with respect to assets
of the Fund managed by Evergreen Asset and to the extent practicable, effect
substantially all of the portfolio transactions for the Fund effected on those
exchanges. See the SAI for further information regarding the practices of the
Fund affecting portfolio turnover and brokerage allocation practices.
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, the Fund may consider sales of its shares as a factor in the
selection of broker-dealers to enter into portfolio transactions with the Fund.
Other Classes of Shares. The 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, EIMC, Meridian, First
International 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
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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. From time to time, the Fund may quote its "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B, Class C and Class Y shares. The 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 the Fund are assumed to have been
reinvested when paid and the maximum sales charges applicable to purchases of
the Fund's shares are assumed to have been paid.
Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The 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, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the 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 the 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 the Fund. These advertisements may quote performance rankings or
ratings of the Fund by financial publications or independent organizations such
as Lipper Analytical Services, Inc. and Morningstar, Inc. or may compare the
Fund's performance to various indices. The Fund 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 12-month period by the
maximum public offering price per share on the last day of
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the period. Investors should be aware that past performance may
not be indicative of future results.
In marketing the 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. EDI
may also reprint, and use as advertising and sales literature, articles from
Evergreen Events, a quarterly magazine provided free of charge to Evergreen fund
shareholders.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Fund's investment advisor and the
Fund's other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund's investment advisor is
taking steps to address the Year 2000 Problem with respect to the computer
systems that it uses and to obtain assurances that comparable steps are being
taken by the Fund's other major service providers. At this time, however, there
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the Fund.
Additional Information. This prospectus and the SAI, which has been incorporated
by reference herein, do not contain all the information set forth in the
Registration Statement filed by the Trust with the SEC under the 1933 Act.
Copies of the Registration Statement 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 Advisor
Capital Management Group of First Union National Bank, 201 South
College Street, Charlotte, North Carolina 28288
Managers
Evergreen Asset Management Corp., 2500 Westchester Avenue,
Purchase, New York 10577
MFS Institutional Advisors, Inc., 500 Boylston Street, Boston,
Massachusetts 02116
OppenheimerFunds, Inc., Two World Trade Center, New York, New
York 10048
Putnam Investment Management, Inc., One Post Office Square,
Boston, Massachusetts 02109
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
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PROSPECTUS January 4, 1999
EVERGREEN DOMESTIC GROWTH FUNDS [EVERGREEN LOGO APPEARS
HERE]
EVERGREEN MASTERS FUND
CLASS Y SHARES
The Evergreen Masters Fund (the "Fund") seeks long-term capital
appreciation.
This prospectus provides information regarding the Class Y shares
offered by the Fund. The Fund is a diversified series of an open-end, management
investment company. This prospectus sets forth concise information about the
Fund that a prospective investor should know before investing. The address of
the Fund is 200 Berkeley Street, Boston, Massachusetts 02116.
A Statement of Additional Information ("SAI") for the Fund dated
February 1, 1998, as amended on August 3, 1998, September 1, 1998 and January 4,
1999 has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated by reference herein. The SAI 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 Fund at (800)
343-2898. There can be no assurance that the investment objective of the Fund
will be achieved. Investors are advised to read this prospectus carefully.
An investment in the Fund is not a deposit or obligation of any bank,
is not endorsed or guaranteed by any bank, and is not insured or otherwise
protected by the U.S. government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency. An investment in the Fund
involves risk, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
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TABLE OF CONTENTS
EXPENSE INFORMATION......................................................3
FINANCIAL HIGHLIGHTS.....................................................4
DESCRIPTION OF THE FUND..................................................4
INVESTMENT OBJECTIVE AND POLICIES...............................4
INVESTMENT PRACTICES AND RESTRICTIONS...........................7
ORGANIZATION AND SERVICE PROVIDERS......................................15
ORGANIZATION...................................................15
SERVICE PROVIDERS..............................................15
PURCHASE AND REDEMPTION OF SHARES.......................................18
HOW TO BUY SHARES..............................................18
HOW TO REDEEM SHARES...........................................20
EXCHANGE PRIVILEGE.............................................22
SHAREHOLDER SERVICES...........................................23
BANKING LAWS...................................................25
OTHER INFORMATION.......................................................25
DIVIDENDS, DISTRIBUTIONS AND TAXES.............................25
GENERAL INFORMATION............................................27
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EXPENSE INFORMATION
The table and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest in
the Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management and other fees. The table below shows
the Fund's estimated annual operating expenses for the fiscal period ending
September 30, 1999. 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 Fund see "Organization and Service Providers."
Annual Operating
Expenses
---------------------
Management Fees 0.95%
Other Expenses 0.38%
=====
Total 1.33%
Example
---------
After 1 Year $14
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Annual Operating
Expenses
---------------------
After 3 Years $42
FINANCIAL HIGHLIGHTS
As of the date of this prospectus, the Fund had not commenced
operations. Therefore, no financial highlights are currently available.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is nonfundamental; as a result, the
Fund may change its objective without a shareholder vote. The Fund has also
adopted certain fundamental investment policies which are mainly designed to
limit the Fund's exposure to risk. The Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
the Fund's fundamental investment policies or other related investment policies.
There can be no assurance that the Fund's investment objective will be achieved.
The Fund's investment objective is to seek long-term capital
appreciation by investing at least 65% of its assets in equity securities. The
Fund's investment program is based on the Manager of Managers Strategy of First
Union National Bank's ("FUNB") Capital Management Group ("CMG"). CMG allocates
the Fund's portfolio assets on an approximately equal basis among a number of
investment management organizations ("Managers") -- currently four in number --
each of which employs a different investment style.
In CMG's opinion, the Manager of Managers strategy may provide
advantages over the use of a single manager because of the following primary
factors:
(i) Most equity investment management firms consistently employ a
distinct investment "style" which causes them to emphasize stocks with
particular characteristics;
(ii) because of changing investor preferences, any given investment
style will move into and out of market favor and will
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result in better investment performance under certain market conditions but less
successful performance under other conditions; and
(iii) consequently, by allocating the Fund's portfolio on an
approximately equal basis among Managers employing different styles, the impact
of any one such style on investment performance will be diluted, and the
investment performance of the total portfolio will be more consistent and less
volatile over the long term than if a single style were employed throughout the
entire period.
CMG, based on the foregoing principles and on its analysis and
evaluation of information regarding the personnel and investment styles and
performance of numerous professional investment management firms, has selected
for appointment by the Fund a group of Managers representing a blending of
different investment styles which, in its opinion, is appropriate to the Fund's
investment objective.
CMG has ultimate responsibility for the investment performance of the
Fund. CMG continuously monitors the performance and investment styles of the
Fund's portfolio Managers and from time to time may recommend changes of
Managers based on factors such as changes in a Manager's investment style or a
departure by a Manager from the investment style for which it had been selected,
a deterioration in a Manager's performance relative to that of other investment
management firms practicing a similar style, or adverse changes in its ownership
or personnel.
The Fund's current Managers are:
Evergreen Asset Management Corp. ("Evergreen Asset")
MFS Institutional Advisors, Inc. ("MFS")
OppenheimerFunds, Inc. ("Oppenheimer")
Putnam Investment Management, Inc. ("Putnam")
The investment styles described below will be those applied by each of
the Managers to the segment of the Fund's portfolio for which that Manager is
responsible.
Evergreen Asset - Evergreen Asset's segment of the portfolio will
primarily be invested, in accordance with its value oriented strategy, in equity
securities of U.S. and foreign companies with market capitalizations between
approximately $500 million and $5 billion. In accordance with the value style of
investing Evergreen asset invests in companies it believes the market has
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temporarily undervalued in relation to such factors as the company's assets,
cash flow and earnings potential.
Equity securities include common stocks, preferred stocks, bonds,
warrants or rights that are convertible into stocks, and depositary receipts for
those securities. Investments may also be made to a limited degree in
non-convertible debt securities and preferred stocks which offer an opportunity
for capital appreciation.
MFS manages its segment of the portfolio by primarily investing, in
accordance with its growth oriented investment strategy, in equity securities of
companies with market capitalizations between approximately $500 million and $5
billion). Such companies generally would be expected to show earnings growth
over time that is well above the growth rate of the overall economy and the rate
of inflation, and would have the products, management and market opportunities
which are usually necessary to continue sustained growth. MFS may invest up to
25% (and generally expects to invest between 0% and 10%) of its segment of the
Fund's assets in foreign securities (not including American Depositary
Receipts), including foreign growth securities, which are not traded on a U.S.
exchange.
Oppenheimer manages its segment of the portfolio in accordance with a
blended growth and value oriented strategy. Investments are primarily in the
equity securities of those companies with market capitalizations over $5
billion; however, Oppenheimer may, when it deems advisable, invest in the equity
securities of mid-cap and small-cap companies. In purchasing portfolio
securities, Oppenheimer may invest without limit in foreign securities and may,
to a limited degree, invest in non-convertible debt securities and preferred
stocks which have the potential for capital appreciation.
Putnam's segment of the portfolio will primarily be invested, in
accordance with its growth oriented investment strategy, in equity securities of
U.S. and foreign issuers with market capitalizations of $5 billion or more.
Putnam may also purchase non-convertible debt securities which offer the
opportunity for capital appreciation.
In the evaluation of a company, more consideration is given to growth
potential than to dividend income. Putnam believes that evaluating a company's
probable future earnings, dividends, financial strength, working assets and
competitive position will prove more profitable in the long run than simply
seeking current dividend income.
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Each Manager may also invest, for temporary defensive purposes, up to
100% of the assets allocated to its segment in short-term obligations. Such
obligations may include U.S. government securities, master demand notes,
commercial paper and notes, bank deposits and other financial 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
Repurchase Agreements. The 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 Managers will monitor the creditworthiness of the firms
with which the Fund enters into repurchase agreements.
Reverse Repurchase Agreements. The 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.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. The 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. The Fund does not intend to
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purchase when-issued securities for speculative purposes, but
only in furtherance of its investment objective.
Securities Lending. To generate income and offset expenses, the Fund may lend
securities to broker-dealers and other financial institutions. Loans of
securities by the Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any income
accruing on the security. Also, the Fund may invest any collateral it receives
in additional securities. Gains or losses in the market value of a lent security
will affect the Fund and its shareholders. When the Fund lends its securities,
it runs the risk that it could not retrieve the securities on a timely basis,
possibly losing the opportunity to sell the securities at a desirable price.
Also, if the borrower files for bankruptcy or becomes insolvent, the Fund's
ability to dispose of the securities may be delayed.
Investing in Securities of Other Investment Companies. The Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, the Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that the
Fund currently bears concerning its own operations and may result in some
duplication of fees.
Borrowing. The Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. The Fund may also borrow an additional 5%
of its total assets from banks and others. The Fund may only borrow as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. The Fund may not purchase additional securities when borrowings
exceed 5% of total assets.
The purchase of securities while borrowings are outstanding will have
the effect of leveraging the Fund. Such leveraging or borrowing increases the
Fund's exposure to capital risk and borrowed funds are subject to interest costs
which will reduce net income.
Illiquid Securities. The Fund may invest up to 15% of its 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
purpose of the foregoing 15% limit. The inability of the Fund to dispose of
illiquid investments readily or at a reasonable price could impair its ability
to raise cash for redemptions or other purposes.
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Restricted Securities. The Fund 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 U.S. The Fund's Managers
determine the liquidity of Rule 144A securities according to the guidelines and
procedures adopted by Evergreen Equity Trust's Board of Trustees. The Board of
Trustees monitors the Managers' application of those guidelines and procedures.
Securities eligible for resale pursuant to Rule 144A, which the Fund's Managers
have determined to be liquid or readily marketable, are not subject to the 15%
limit on illiquid securities.
Options and Futures. The 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.
The 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
write covered call options on its portfolio securities to attempt to increase
its current income. The Fund will maintain its position 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.
The Fund may write (i.e., sell) covered call and put options. By
writing a call option, the Fund becomes obligated during the term of the option
to deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, the 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 Fund also may write straddles
(combinations of covered puts and calls on the same underlying security). The
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
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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 price upon exercise.
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 specified 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.
The 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
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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 the 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 value of its 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 with respect to a particular contract at a particular time. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it 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 Fund to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Fund's use of them can result in poorer performance (i.e., the Fund's return may
be reduced). The Fund's attempt 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 Fund uses financial futures contracts and
options on financial futures 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 portfolio. This may cause the financial
futures contracts and any related options to react to market changes differently
than the portfolio securities. In addition, the Fund's Managers
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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 the Fund's Managers correctly predict
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
investments. In these events, the Fund may lose money on the financial futures
contracts or the options on 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 the Fund's
Managers will consider liquidity before entering into financial futures
contracts or options on financial futures contracts, 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 Fund's ability to establish and close out financial futures contracts
and options on financial futures contract 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.
Derivatives. Derivatives are financial contracts, such as those described above,
whose value is based on an underlying asset, such as a stock or a bond, or an
underlying economic factor, such as an index or an interest rate.
The Fund may invest in derivatives only if the expected risks and
rewards are consistent with its objectives and policies.
Losses from derivatives can sometimes be substantial. This is true
partly because small price movements in the underlying asset can result in
immediate and substantial gains or losses in the value of the derivative.
Derivatives can also cause the Fund to lose money if the Fund fails to correctly
predict the direction in which the underlying asset or economic factor will
move.
Investment in Small and Mid-Sized Companies. Investments in securities of
little-known, relatively small or mid-sized and special situation companies may
tend to be speculative and volatile. A lack of management depth in such
companies could increase the risks associated with the loss of key personnel.
Also, the material and financial resources of such companies may be limited,
with the consequence that funds or external financing
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necessary for growth may be unavailable. Such companies may also be involved in
the development or marketing of new products or services for which there are no
established markets. If projected markets do not materialize or only regional
markets develop, such companies may be adversely affected or may be subject to
the consequences of local events. Moreover, such companies may be insignificant
factors in their industries and may become subject to intense competition from
larger companies. Securities of companies in which the Fund may invest will
frequently be traded only in the over-the-counter market or on regional stock
exchanges and will often be closely held. Securities of this type may have
limited liquidity and may be subject to wide price fluctuations. As a result of
the risk factors described above, to the extent the Fund invests in small and
mid-sized companies, the net asset value of the Fund's shares can be expected to
vary significantly.
Foreign Investments. 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 U.S. 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 Managers before making any of these
types of investments.
Foreign Currency Transactions. As discussed above, the Fund may invest in
securities of foreign issuers. When the Fund invests in foreign securities, they
usually will be denominated in foreign currencies, and the Fund temporarily may
hold funds in foreign currencies. Thus, the value of the Fund's 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 Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these
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contracts to stabilize the U.S. dollar value of a security it has agreed to buy
or sell. The Fund intends to use these contracts to hedge the U.S. dollar value
of a security it already owns, particularly if the Fund expects a decrease in
the value of the currency in which the foreign security is denominated. Although
the Fund will attempt to benefit from using forward contracts, the success of
its hedging strategy will depend on the Managers' ability to predict accurately
the future exchange rates between foreign currencies and the U.S. dollar. The
value of the Fund's investments denominated in foreign currencies will depend on
the relative strength of those currencies and the U.S. dollar, and the Fund may
be affected favorably or unfavorably by changes in the exchange rates or
exchange control regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. The Fund does not intend to enter into foreign
currency transactions for speculation or leverage.
Special Risk Considerations Regarding the Multi-Manager Strategy. CMG oversees
the portfolio management services provided to the Fund by each of the four
Managers. CMG does not, however, determine what investments will be purchased or
sold for any segment of the portfolio. Because each Manager will be managing its
segment of the portfolio independently from the other Managers, the same
security may be held in two different segments of the portfolio, or may be
acquired for one segment of the portfolio at a time when the Manager of another
segment deems it appropriate to dispose of the security from that other segment.
Similarly, under some market conditions, one or more of the Managers may believe
that temporary, defensive investments in short-term instruments or cash are
appropriate when another Manager or Managers believe continued exposure to the
equity markets is appropriate for their segments of the portfolio. Because each
Manager directs the trading for its own segment of the portfolio, and does not
aggregate its transactions with those of the other Managers, the Fund may incur
higher brokerage costs than would be the case if a single investment advisor or
Manager were managing the entire portfolio. Also, because each segment of the
portfolio will perform differently from the other segments depending upon the
investments it holds and changing market conditions, one segment may be larger
or smaller at various times than other segments. Net cash inflows or outflows
resulting from sales and redemptions of the Fund's shares will, however,
continue to be allocated on an equal basis among the four segments of the
portfolio without regard to the relative size of
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the segments. CMG will not reallocate assets among the segments to reduce these
differences in size until the assets allocated to one Manager either exceeds 35%
or is less than 15% of the Fund's average daily net assets for a period of three
consecutive months. In such event CMG may, but is not obligated to, reallocate
assets among Managers to provide for a more equal distribution of the Fund's
assets.
ORGANIZATION AND SERVICE PROVIDERS
ORGANIZATION
Fund Structure. The Fund is an investment pool, which invests shareholders'
money toward a specified goal. The 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 18, 1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Fund's activities, reviewing,
among other things, the Fund's performance and its contractual arrangements with
various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, shares will be fully paid and
nonassessable. Shares of the Fund are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Fund does not hold annual shareholder meetings; the Fund may,
however, hold special meetings for such purposes as electing or removing
Trustees, changing fundamental policies and approving investment advisory
agreements or 12b-1 plans. In addition, the Fund is prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect Trustees.
SERVICE PROVIDERS
Investment Advisor. The investment advisor of the Fund is the CMG of FUNB which
is a wholly-owned subsidiary of First Union Corporation ("First Union"). First
Union is located at 301 South College Street and FUNB is located at 201 South
College Street,
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Charlotte, North Carolina 28288-0630. First Union and its subsidiaries provide a
broad range of financial services to individuals and businesses throughout the
United States.
Pursuant to its Investment Advisory and Management Agreement (the
"Advisory Agreement") CMG oversees the administration of all aspects of the
business and affairs of the Fund and selects, contracts with and compensates
Managers to manage the assets of the Fund's portfolio. CMG monitors the Managers
for compliance with the investment objectives and policies of the Fund, reviews
the performance of the Managers, and periodically reports to the Trust. CMG has
the right under the Advisory Agreement to directly manage any or all of the
Fund's assets.
CMG is entitled to receive from the Fund an annual fee equal to 0.95%
of average daily net assets of the Fund.
The Trust and FUNB have submitted an application requesting an
exemptive order from the Securities and Exchange Commission ("SEC") that would
permit the Manager, subject to certain conditions, and without the approval of
shareholders to: (a) employ a new unaffiliated Manager or Managers for the Fund
pursuant to the terms of a new portfolio management agreement, in each case
either as a replacement for an existing Manager or as an additional Manager; (b)
change the terms of any portfolio management agreement; and (c) continue the
employment of an existing Manager on the same advisory contract terms where a
contract has been assigned because of a change in control of the Manager. In
such circumstances, shareholders would receive notice of such action, including
the information concerning the Manager that normally is provided in a proxy
statement. The exemptive order would also permit disclosure of fees paid to
unaffiliated Managers are on aggregate basis only. There is no assurance that
the SEC will grant the Trust's and FUNB's application.
Shareholders have the right to terminate arrangements with a Manager by
vote of a majority of the outstanding shares of the Fund. In addition,
shareholders have the right to approve, in accordance with current SEC
interpretations, any new portfolio management agreements with affiliated
Managers.
Manager Oversight. The responsibility for overseeing the Managers rests on
certain officers and employees of FUNB. These officers and employees, including
their business experience for the past five years, are identified below.
[Names and Positions - to be added]
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Managers. Subject to the supervision of CMG, each Manager manages a segment of
the Fund's portfolio in accordance with the Fund's investment objective and
policies, makes investment decisions for the segment, and places orders to
purchase and sell securities for the segment. The Fund pays no direct fees to
any of the Managers.
Set forth below is a brief description of the Fund's Managers.
Evergreen Asset, 2500 Westchester Avenue, Purchase, New York 10577 is a
wholly-owned subsidiary of First Union. Evergreen Asset, with its predecessors,
has served as investment advisor to the Evergreen mutual funds since 1971.
MFS, 500 Boylston Street, Boston, Massachusetts 02116, together with
its parent company, is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States. MFS is a
subsidiary of Massachusetts Financial Services Company, which is a subsidiary of
SunLife of Canada (U.S.) Financial Services Holdings, Inc., which in turn is an
indirect wholly-owned subsidiary of SunLife Assurance Company of Canada. As of
July 31, 1998, MFS managed more than $87 billion on behalf of over 3.3 million
investor accounts.
Oppenheimer, Two World Trade Center, New York, New York 10048, has
operated as an investment adviser since 1959. As of August 31, 1998, Oppenheimer
and its subsidiaries managed investment companies with assets of more than $85
billion and with more than 4 million shareholder accounts. Oppenheimer is owned
by Oppenheimer Acquisition Corp., a holding company that is owned in part by
senior officers of Oppenheimer and controlled by Massachusetts Mutual Life
Insurance Company.
Putnam, One Post Office Square, Boston, Massachusetts 02109, has been
managing mutual funds since 1937. As of June 30, 1998, Putnam and its affiliates
managed more than $278 billion of assets. Putnam is a subsidiary of Putnam
Investments, Inc., which is wholly owned by Marsh & McLennan Companies, Inc., a
publicly-owned holding company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit consulting and investment
management.
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company, an indirect wholly-owned subsidiary of First Union, which provides that
Lieber & Company's research
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department and staff will furnish Evergreen Asset with information, investment
recommendations, advice and assistance, and will generally be available for
consultation on the portfolio of the 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 the Fund for the services provided by Lieber & Company. The
address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company ("ESC"),
200 Berkeley Street, Boston, Massachusetts 02116, acts as the Fund's transfer
agent and dividend disbursing agent. ESC is an indirect, wholly-owned subsidiary
of First Union.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, acts as the 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 the Fund.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to the Fund. As administrator, and subject to the supervision and
control of the Trust's Board of Trustees, EIS provides the Fund with facilities,
equipment and personnel. For its services as administrator, EIS is entitled to
receive a fee based on the aggregate average daily net assets of the Fund at a
rate based on the total assets of all mutual funds administered by EIS for which
any affiliate of FUNB serves as investment advisor. The administration fee is
calculated in accordance with the following schedule.
Administration Fee
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
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Class Y shares are offered at net asset value without a front-end sales
charge or a contingent deferred sales load. Class Y shares are only offered 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, Evergreen Investment
Management Company ("EIMC"), Meridian Investment Company ("Meridian"), First
International Advisors, Inc. ("First International") or their affiliates.
Eligible investors may purchase Class Y shares of the Fund through
broker-dealers, banks or other financial intermediaries, or directly through
EDI. In addition, you may purchase Class Y shares of the Fund by mailing to the
Fund, c/o ESC, 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 Y shares are offered through this prospectus.
(See "General Information -- Other Classes of Shares.")
How the Fund Values Its Shares. The net asset value of each class of shares of
the 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 the Fund are valued at their current market values 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.
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 the Fund or its investment advisor
incurs. If such investor is an existing shareholder, the Fund may redeem shares
from an investor's account to reimburse the Fund or its investment advisor for
any loss. In addition, such investor may be prohibited or restricted from making
further purchases in any
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of the Evergreen funds. The Fund 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 Class Y shares in the Fund to the
Fund for cash at their 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 next calculated after the Fund receives your request in
proper form. Proceeds generally will be sent to you within seven days. However,
for shares recently purchased by check, the 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. The 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. Your financial intermediary is
responsible for furnishing all necessary documentation to the 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. You may redeem by mail by
sending a signed letter of instruction or stock power form to the Fund, c/o ESC
(the registrar, transfer agent and dividend-disbursing agent for the 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. The 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
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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). The Exchange is closed on New Years
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 the 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 the 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 section 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 the 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. The 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 Fund, 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 (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Fund, 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.
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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 Fund may temporarily suspend the right to redeem its 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 Fund
cannot dispose of its investments or fairly determine their value; or (4) the
SEC so orders. The Fund reserves 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 Fund has elected to be governed by Rule
18f-1 under the 1940 Act pursuant to which the Fund is obligated to redeem
shares solely in cash, up to the lesser of $250,000 or 1% of the 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 Class Y shares for
shares of the same class in 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 more 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
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the Fund upon 60 days' notice to shareholders and is only available in states in
which shares of the fund being acquired may lawfully be sold.
Exchanges Through Your Financial Intermediary. The 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 the Fund and may
charge you for this service.
Exchanges By Telephone and Mail. Exchange requests received by the 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,
the 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 the 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 Fund offers 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 the 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.
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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 gains distributions reinvested
automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
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.
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 a 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.
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Tax Sheltered Retirement Plans. The Fund has 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 Fund. 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 advisor, 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. FUNB and
its affiliates 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 FUNB or its affiliates being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of
the Fund by its customers. If FUNB or its affiliates were prevented from
continuing to provide the services called for under the investment advisory
agreement, it is expected that the Trustees would identify, and call upon the
Fund's shareholders to approve, a new investment advisor. If this were to occur,
it is not anticipated that the shareholders of the Fund would suffer any adverse
financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to distribute its investment company taxable income
annually and net capital realized gains at least annually. Shareholders receive
Fund distributions in the form of additional shares of that class of shares upon
which the
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distribution is based or, at the shareholder's option, in cash. Shareholders of
the 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 the
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.
Account statements and/or checks, as appropriate, will be mailed within
seven days after the Fund pays a distribution. Unless the 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.
The 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 the 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 the Fund, to
the extent they do not meet certain distribution requirements by the end of each
calendar year. The Fund anticipates 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 Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
U.S. may reduce or eliminate such taxes. Shareholders of the Fund who are
subject to U.S. 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.
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The Fund is 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.
The Fund intends to distribute its net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital gains.
The Fund will designate capital gains distributions as such by a written notice
mailed to each shareholder no later than 60 days after the close of the Fund's
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 a 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 advisor 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 and Brokerage. The estimated annual portfolio turnover rate
for the Fund is not expected to exceed 100%. A portfolio turnover rate of 100%
would occur if all of the Fund's portfolio securities were replaced in one year.
The portfolio turnover rate experienced by the Fund directly affects the
transaction costs relating to the purchase and sale of securities which the Fund
bears directly. A high rate of portfolio turnover will increase such costs. It
is contemplated that Lieber & Company, an affiliate of Evergreen Asset and a
member of the New York and American Stock Exchanges, will, with respect to the
assets of the Fund managed by Evergreen Asset and to the extent practicable,
effect substantially all of the portfolio transactions for the Fund effected on
those exchanges. See the SAI for further information regarding the practices of
the Fund affecting portfolio turnover and brokerage allocation practices.
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Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, the Fund may consider sales of its shares as a factor in the
selection of broker-dealers to enter into portfolio transactions with the Fund.
Other Classes of Shares. The 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 the only class of shares 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, EIMC, Meridian,
First International 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. From time to time, the Fund may quote its "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B, Class C and Class Y shares. The 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 the Fund are assumed to have been
reinvested when paid and the maximum sales charges applicable to purchases of
the Fund's shares are assumed to have been paid.
Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The 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, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the 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
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the average number of shares entitled to receive dividends, and expresses the
result as an annualized percentage rate based on the 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 the Fund. These advertisements may quote performance rankings or
ratings of the Fund by financial publications or independent organizations such
as Lipper Analytical Services, Inc. and Morningstar, Inc. or may compare the
Fund's performance to various indices. The Fund 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 12-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 indicative of future results.
In marketing the 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. EDI
may also reprint, and use as advertising and sales literature, articles from
Evergreen Events, a quarterly magazine provided free of charge to Evergreen fund
shareholders.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Fund's investment advisor and the
Fund's other service providers do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund's investment advisor is
taking steps to address the Year 2000 Problem with respect to the computer
systems that it uses and to obtain assurances that
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comparable steps are being taken by the Fund's other major service providers. At
this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund.
Additional Information. This prospectus and the SAI, which has been incorporated
by reference herein, do not contain all the information set forth in the
Registration Statement filed by the Trust with the SEC under the 1933 Act.
Copies of the Registration Statement 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 Advisor
Capital Management Group of First Union National Bank, 201 South
College Street, Charlotte, North Carolina 28288
Managers
Evergreen Asset Management Corp., 2500 Westchester Avenue,
Purchase, New York 10577
MFS Institutional Advisors, Inc., 500 Boylston Street, Boston,
Massachusetts 02116
OppenheimerFunds, inc., Two World Trade Center, New York, New
York, 10048
Putnam Investment Management, Inc., One Post Office Square,
Boston, Massachusetts 02109
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
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EVERGREEN EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
DOMESTIC GROWTH FUNDS
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1998, as amended August 3, 1998,
September 1, 1998 and January 4, 1999
Evergreen Fund ("Evergreen")
Evergreen Micro Cap Fund ("Micro")
Evergreen Aggressive Growth Fund ("Aggressive")
Evergreen Omega Fund ("Omega")
Evergreen Small Company Growth Fund ("Small")
Evergreen Strategic Growth Fund ("Strategic")
Evergreen Stock Selector Fund ("Stock")
Evergreen Tax Strategic Equity Fund ("Tax")
Evergreen Masters Fund ("Masters")
(Each a "Fund"; together, the "Funds")
Each Fund is a series of an open-end
management investment company known as
Evergreen Equity Trust (the "Trust").
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This Statement of Additional Information as amended ("SAI") pertains to
all classes of shares of the Funds listed above. It is not a prospectus and
should be read in conjunction with the prospectuses of Evergreen, Micro,
Aggressive, Omega, Small, Strategic and Stock dated February 1, 1998 as amended
August 3, 1998, the prospectuses of Tax dated September 1, 1998 and the
prospectuses of Masters dated January 4, 1999, as supplemented from time to
time. The Funds are offered through two separate prospectuses: one offering
Class A, Class B and Class C shares of each Fund and one offering Class Y shares
of all but Strategic. You may obtain any of these prospectuses from Evergreen
Distributor, Inc.
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TABLE OF CONTENTS
INVESTMENT POLICIES........................................................... 3
FUNDAMENTAL INVESTMENT POLICIES...................................... 3
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES........ 4
MANAGEMENT OF THE TRUST..................................................... 10
PRINCIPAL HOLDERS OF FUND SHARES..............................................13
INVESTMENT ADVISORY AND OTHER SERVICES...................................... 18
INVESTMENT ADVISORS................................................ 18
INVESTMENT ADVISORY AGREEMENTS..................................... 19
DISTRIBUTOR........................................................ 20
DISTRIBUTION PLANS AND AGREEMENTS.................................. 21
ADDITIONAL SERVICE PROVIDERS....................................... 22
BROKERAGE................................................................... 23
BROKERAGE COMMISSIONS.............................................. 23
SELECTION OF BROKERS............................................... 23
SIMULTANEOUS TRANSACTIONS.......................................... 24
TRUST ORGANIZATION.......................................................... 24
FORM OF ORGANIZATION............................................... 24
DESCRIPTION OF SHARES.............................................. 24
VOTING RIGHTS...................................................... 24
LIMITATION OF TRUSTEES' LIABILITY.................................. 24
PURCHASE, REDEMPTION AND PRICING OF SHARES.................................. 25
HOW THE FUNDS OFFER SHARES TO THE PUBLIC........................... 25
CONTINGENT DEFERRED SALES CHARGE................................... 26
SALES CHARGE WAIVERS OR REDUCTIONS................................. 26
EXCHANGES.......................................................... 28
CALCULATION OF NET ASSET VALUE PER SHARE ("NAV") .................. 28
VALUATION OF PORTFOLIO SECURITIES.................................. 28
SHAREHOLDER SERVICES............................................... 29
PRINCIPAL UNDERWRITER....................................................... 29
ADDITIONAL TAX INFORMATION.................................................. 30
REQUIREMENTS FOR QUALIFICATION AS A REGULATED INVESTMENT COMPANY... 30
TAXES ON DISTRIBUTIONS............................................. 30
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES....................... 31
OTHER TAX CONSIDERATIONS........................................... 32
FINANCIAL INFORMATION....................................................... 32
EXPENSES .......................................................... 32
BROKERAGE COMMISSIONS PAID......................................... 33
COMPUTATION OF CLASS A OFFERING PRICE.............................. 34
PERFORMANCE........................................................ 34
ADDITIONAL INFORMATION...................................................... 38
-79-
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APPENDIX A...................................................................A-1
-80-
<PAGE>
INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"). Where necessary, an explanation beneath a fundamental policy
describes a Fund's practices with respect to that policy, as allowed by current
law. If the law governing a policy changes, the Fund's practices may change
accordingly without a shareholder vote. Unless otherwise stated, all references
to the assets of the Fund are in terms of current market value.
1. DIVERSIFICATION
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
FURTHER EXPLANATION OF DIVERSIFICATION POLICY
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States ("U.S.") government or its agencies or
instrumentalities.
2. CONCENTRATION
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S.
government or its agencies or instrumentalities).
FURTHER EXPLANATION OF CONCENTRATION POLICY
Each Fund may not invest more than 25% of its total assets, taken at
market value, in the securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities).
3. ISSUING SENIOR SECURITIES
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4.
Each Fund may not borrow money, except to the extent permitted by
applicable law.
FURTHER EXPLANATION OF BORROWING POLICY
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<PAGE>
Each Fund may borrow from banks or enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets (including the amount
borrowed), taken at market value. Each Fund may also borrow up to an additional
5% of its total assets from banks or others. Each Fund may borrow only as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. Each Fund may not purchase additional securities when borrowings
exceed 5% of its total assets. Each Fund may obtain such short-term credit as
may be necessary for the clearance of purchases and sales of portfolio
securities. Each Fund may purchase securities on margin and engage in short
sales to the extent permitted by applicable law.
5. UNDERWRITING
Each Fund may not underwrite securities of other issuers, except
insofar as each Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
6. REAL ESTATE
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, each Fund may invest in (a) securities that
are directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. COMMODITIES
Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that each Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.
8. LENDING
Each Fund may not make loans to other persons, except that each Fund
may lend its portfolio securities in accordance with applicable law. The
acquisition of investment securities or other investment instruments shall not
be deemed to be the making of a loan.
FURTHER EXPLANATION OF LENDING POLICY
To generate income and offset expenses, each Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay a Fund any income accruing on the security. Each
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect a Fund and its shareholders.
When a Fund lends it securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. A Fund has the right to call a
loan and obtain the securities lent at any time on notice of not more than five
business days. A Fund may pay reasonable fees in connection with such loans.
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<PAGE>
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES
U.S. Government Securities
Each Fund may invest in securities issued or guaranteed by U.S.
Government agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the
U.S. Government to purchase certain obligations of agencies or instrumentalities
or (2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive financial
support from the U.S. Government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Securities Issued by the Government National Mortgage Association ("GNMA")
The Funds may invest in securities issued by the GNMA, a corporation
wholly-owned by the U.S. Government. GNMA securities or "certificates" represent
ownership in a pool of underlying mortgages. The timely payment of principal and
interest due on these securities is guaranteed.
Unlike conventional bonds, the principal on GNMA certificates is not
paid at maturity but over the life of the security in scheduled monthly
payments. While mortgages pooled in a GNMA certificate may have maturities of up
to 30 years, the certificate itself will have a shorter average maturity and
less principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due
not only to market fluctuations, but also to early prepayments of mortgages
within the pool. Since prepayment rates vary widely, it is impossible to
accurately predict the average maturity of a GNMA pool. In addition to the
guaranteed principal payments, GNMA certificates may also make unscheduled
principal payments resulting from prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. Government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would
-83-
<PAGE>
in response to same decline. In addition, these prepayments can cause the price
of a GNMA certificate originally purchased at a premium to decline in price
compared to its par value, which may result in a loss.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Funds may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.
The Funds may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, a Fund may be required to pay more
at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued,
delayed delivery or forward commitment basis, a Fund will hold liquid assets
worth at least the equivalent of the amount due. The liquid assets will be
monitored on a daily basis and adjusted as necessary to maintain the necessary
value.
Purchases made under such conditions are a form of leveraging and may
involve the risk that yields secured at the time of commitment may be lower than
otherwise available by the time settlement takes place, causing an unrealized
loss to the Fund. Leverage may cause any gains or losses of a Fund to be
magnified. In addition, when a Fund engages in such purchases, it relies on the
other party to consummate the sale. If the other party fails to perform its
obligations, the Fund may miss the opportunity to obtain a security at a
favorable price or yield.
Loans of Securities
To generate income, each Fund may lend to broker-dealers and other
financial institutions portfolio securities valued at up to 33 1/3% of a Fund's
total assets. A Fund will require borrowers to provide collateral in cash or
government securities at least equal to the value of the securities loaned. A
Fund may invest such collateral in additional portfolio securities, such as U.S.
Treasury notes, certificates of deposit, other high-grade, short-term
obligations or interest-bearing cash equivalents. While securities are on loan,
the borrower will pay a Fund any income accruing on the security.
Each Fund may make loans only to borrowers which meet credit standards
set by the Board of Trustees. Income to be earned from the loan must justify the
attendant risks. If a borrower fails financially, a Fund may have difficulty
recovering the securities lent or may lose its right to the collateral.
Each Fund has the right to call a loan and obtain the securities lent
upon giving notice of not more than five business days.
Repurchase Agreements
The Funds may enter into repurchase agreements with entities that are
registered as U.S. Government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. Government securities or other financial institutions
-84-
<PAGE>
believed by the Advisor (as defined later) to be creditworthy. In a repurchase
agreement, a Fund obtains a security and simultaneously commits to return the
security to the seller at a set price (including principal and interest) within
a period of time usually not exceeding seven days. The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated to
the coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
A Fund or its custodian will take possession of the securities subject
to repurchase agreements, and these securities will be marked to market daily.
To the extent that the original seller does not repurchase the securities from a
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. Each Fund's Advisor or Manager believes that under the
regular procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of such
securities. The Funds will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker-dealers, which are
deemed by the Advisor or Manager to be creditworthy pursuant to guidelines
established by the Board of Trustees.
Reverse Repurchase Agreements
Each Fund may enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Fund transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Options
The Funds may buy or sell (i.e., write) put and call options on
securities they hold or intend to acquire. The Funds may also buy and sell
options on financial futures contracts. The Funds will use options as a hedge
against decreases or increases in the value of securities they hold or intends
to acquire. The Funds may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series.
The Funds may write only covered options. With regard to a call option,
this means that a Fund will own, for the life of the option, the securities
subject to the call option. Each Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If a Fund is unable to effect a
closing
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<PAGE>
purchase transaction with respect to the covered options it has sold, it will
not be able to sell the underlying securities or dispose of assets held in a
segregated account until the options expire or are exercised.
Futures Transactions
Each Fund may enter into financial futures contracts and write options
on such contracts. Each Fund intends to enter into such contracts and related
options for hedging purposes. Each Fund will enter into futures contracts on
securities or indices in order to hedge against changes in interest or exchange
rates or securities prices. A futures contract on securities is an agreement to
buy or sell securities at a specified price during a designated month. 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. A 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 continues until the contract is terminated.
Each Fund may sell or purchase futures contracts. When a futures
contract is sold by a Fund, the value of the contract will tend to rise when the
value of the underlying securities declines and to fall when the value of such
securities increases. Thus, each Fund sells futures contracts in order to offset
a possible decline in the value of its securities. If a futures contract is
purchased by a Fund, the value of the contract will tend to rise when the value
of the underlying securities increases and to fall when the value of such
securities declines. Each Fund intends to purchase futures contracts in order to
establish what is believed by the Advisor or Manager to be a favorable price and
rate of return for securities the Fund intends to purchase.
Each Fund also intends to purchase put and call options on futures
contracts for hedging purposes. A put option purchased by a Fund would give it
the right to assume a position as the seller of a futures contract. A call
option purchased by a Fund would give it the right to assume a position as the
purchaser of a futures contract. The purchase of an option on a futures contract
requires a Fund to pay a premium. In exchange for the premium, a Fund becomes
entitled to exercise the benefits, if any, provided by the futures contract, but
is not required to take any action under the contract. If the option cannot be
exercised profitably before it expires, a Fund's loss will be limited to the
amount of the premium and any transaction costs.
Each Fund may enter into closing purchase and sale transactions in
order to terminate a futures contract and may sell put and call options for the
purpose of closing out its options positions. A 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 a Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If a
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.
Although futures and options transactions are intended to enable a Fund
to manage market or interest rate risk, unanticipated changes in interest rates
or market prices could result in poorer performance than if it had not entered
into these transactions. Even if the Advisor or Manager correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
investments. This lack of correlation between a Fund's futures and securities
positions may be caused by differences
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<PAGE>
between the futures and securities markets or by differences between the
securities underlying a Fund's futures position and the securities held by or to
be purchased for a Fund. Each Fund's Advisor or Manager will attempt to minimize
these risks through careful selection and monitoring of the Fund's futures and
options positions.
The Funds do not intend to use futures transactions for speculation or
leverage. Each Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by a Fund.
Each Fund will not change these policies without supplementing the information
in the prospectus and SAI.
The Funds will not maintain open positions in futures contracts they
have sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of their securities portfolio plus or minus the unrealized
gain or loss on those open positions, adjusted for the correlation of volatility
between the hedged securities and the futures contracts. If this limitation is
exceeded at any time, each Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and options
positions within this limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Funds do not pay or
receive money upon the purchase or sale of a futures contract. Rather, each Fund
is required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract initial margin does not involve
the borrowing of funds by a Fund to finance the transactions. Initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to a Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day, a Fund pays or
receives cash, called "variation margin," equal to the daily change in value of
the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by a Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. The Funds are also required to
deposit and maintain margin when they write call options on futures contracts.
Foreign Securities (Omega, Small, Strategic, Stock, Tax and Masters)
Each Fund may invest in foreign securities or U.S. securities traded in
foreign markets. Permissible investments may consist of obligations of foreign
branches of U.S. banks and of foreign banks, including European certificates of
deposit, European time deposits, Canadian time deposits and Yankee certificates
of deposit, and investments in Canadian commercial paper, foreign securities and
Europaper. These instruments may subject a Fund to investment risks that differ
in some respects from those related to investments in obligations of U.S.
issuers. Such risks include future adverse political and economic developments;
the possible imposition of withholding taxes on interest or other income; the
possible seizure, nationalization, or expropriation of foreign deposits; the
possible establishment of exchange controls or taxation at the source; greater
fluctuations in value due to changes in exchange rates; or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic
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investments. Foreign issuers of securities or obligations are often subject to
accounting treatment and engage in business practices different from those
respecting domestic issuers of similar securities or obligations. Foreign
branches of U.S. banks and foreign banks may be subject to less stringent
reserve requirements than those applicable to domestic branches of U.S. banks.
Foreign Currency Transactions (Omega, Small, Strategic, Tax and Masters)
As one way of managing exchange rate risk, each Fund may enter into
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). The exchange rate for the transaction (the
amount of currency a Fund will deliver and receive when the 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. Each 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 each Fund will attempt to benefit from using forward
contracts, the success of its hedging strategy will depend on the Advisor'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 strengths 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 each Fund. Each Fund may also purchase and sell
options related to foreign currencies in connection with hedging strategies.
Illiquid and Restricted Securities
Each Fund may not invest more than 15% of its net assets in securities
that are illiquid. A security is illiquid when a Fund cannot dispose of it in
the ordinary course of business within seven days at approximately the value at
which each Fund has the investment on its books.
Each Fund may invest in "restricted securities," i.e., securities
subject to restrictions on resale under federal securities laws. Rule 144A under
the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining a Fund's
compliance with the limit on illiquid securities indicated above. In determining
the liquidity of Rule 144A securities, the Trustees will consider: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
buyers; (3) dealer undertakings to make a market in the security; and (4) the
nature of the security and the nature of the marketplace trades.
Investment in Other Investment Companies
Each Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, each Fund may not (1) own more
than 3% of the outstanding voting stock of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, each Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as each Fund.
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<PAGE>
Short Sales
Each Fund may not make short sales of securities or maintain a short
position unless, at all times when a short position is open, it owns an equal
amount of such securities or of securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short. Each Fund may
effect a short sale in connection with an underwriting in which a Fund is a
participant.
MANAGEMENT OF THE TRUST
Set forth below are the Trustees and officers of the Trust and their
principal occupations and some of their affiliations over the last five years.
Unless otherwise indicated, the address for each Trustee and officer is 200
Berkeley Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee of
each of the other Trusts in the Evergreen fund complex.
<TABLE>
<CAPTION>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant;
(DOB: 2/2/28) and President of Centrum Equities
and Centrum Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton Partners, Inc.;
(DOB: 10/23/34) and former Managing Director,
Seaward
Management
Corporation (investment advice);
Director, the Andover Companies (Insurance);
and Trustee, Arthritis Foundation of New England.
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<PAGE>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of the Finance
(DOB: 10/12/38) Committee,
Cambridge
College;
Chairman
Emeritus
and
Director,
American
Institute
of Food and
Wine;
Chairman
and
President,
Oldways
Preservation
and
Exchange
Trust
(education);
former
Chairman of
the Board,
Director,
and Execu
tive Vice
President,
The London
Harness
Company;
former
Managing
Partner,
Roscommon
Capital
Corp.;
former
Chief
Executive
Officer,
Gifford
Gifts of
Fine Foods;
and former
Chairman,
Gifford,
Drescher &
Associates
(environmental
consulting).
James S. Howell Chairman of the Former Chairman of the Distribution Foundation for
(DOB: 8/13/24) Board of Trustees
the Carolinas;
and former Vice President of Lance Inc. (food
manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer,
(DOB: 2/14/39) Carson
Products Company; Director of
Phoenix Total Return Fund and Equifax, Inc.;
Trustee of Phoenix Series Fund, Phoenix Multi-
Portfolio Fund, and The Phoenix Big Edge Series
Fund; and former President, Morehouse College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc.
(DOB: 7/14/39) (steel
producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham
(DOB: 8/2/39) Corporation; and former Director of
Carolina Cooperative Federal Credit Union.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
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Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
Trustee Vice Chair and former Executive Vice President,
DHR
International, Inc. (executive
David M. Richardson recruitment); former Senior Vice President, Boyden
(DOB: 9/14/41) International Inc. (executive recruitment); and
Director,
Commerce
and
Industry
Association
of New
Jersey, 411
International,
Inc., and
J&M Cumming
Paper Co.
Russell A. Salton, III MD Trustee Medical Director, U.S. Health Care/Aetna Health
(DOB: 6/2/47) Services; former Managed Health
Care Consultant; and former President, Primary
Physician Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)
Trustee Former Chairman, Environmental Warranty, Inc.
(insurance
agency); Executive Consultant,
Richard J. Shima Drake Beam Morin, Inc. (executive outplacement);
(DOB: 8/11/39) Director of Connecticut Natural Gas Corporation,
Hartford
Hospital,
Old State
House
Association,
Middlesex
Mutual
Assurance
Company,
and Enhance
Financial
Services,
Inc.;
Chairman,
Board of
Trustees,
Hartford
Graduate
Center;
Trustee,
Greater
Hartford
YMCA;
former
Director,
Vice
Chairman
and Chief
Investment
Officer,
The
Travelers
Corporation;
former
Trustee,
Kingswood-
Oxford
School; and
former
Managing
Director
and
Consultant,
Russell
Miller,
Inc.
William J. Tomko* President and Senior Vice President and Operations Executive,
(DOB: 8/30/58) Treasurer BYSIS Fund
Services.
Nimish S. Bhatt* Vice President and Vice President, Tax, BISYS Fund Services; former
(DOB: 6/6/63) Assistant Treasurer Assistant Vice
President,
Evergreen
Asset
Management
Corp./First
Union
National
Bank;
former
Senior Tax
Consulting/Acting
Manager,
Investment
Companies
Group,
PricewaterhouseCoopers,
LLP, New
York.
Bryan Haft * Vice President Team Leader, Fund Administration, BISYS Fund
(DOB: 1/23/65) Services.
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Name Position with Trust Principal Occupations for Last Five Years
- ------------------------------- -------------------------- -------------------------------------------------------------
D'Ray Moore* Secretary Vice President, Client Services, BISYS Fund
(DOB: 3/30/59) Services.
</TABLE>
*Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
Trustee Compensation
Listed below is the Trustee compensation for the twelve-month period
ended September 30, 1998.
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation
from Trust from Trust and Fund
Trustee Complex
<S> <C> <C>
Laurence B. Ashkin $ $
Charles A. Austin III
Foster Bam*
K. Dun Gifford
James S. Howell
Robert J. Jeffries*
Leroy Keith Jr.
Gerald M. McDonnell**
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<PAGE>
Aggregate Compensation Total Compensation
from Trust from Trust and Fund
Trustee Complex
Thomas L. McVerry**
William Walt Pettit**
David M. Richardson
Russell A. Salton, III**
Michael
S. Scofield
Richard J. Shima
</TABLE>
(a) $_________ of this amount payable in later years as deferred compensation.
(b) $_________ of this amount payable in later years as deferred compensation.
(c) $_________ of this amount payable in later years as deferred compensation.
(d) $_________ of this amount payable in later years as deferred compensation.
* Former Trustee; retired as of December 31, 1997.
** Entire amount payable in later years as deferred compensation.
PRINCIPAL HOLDERS OF FUND SHARES
As of the date of this SAI, the officers and Trustees of the Trust
owned as a group less than 1% of the outstanding of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of a
Fund's outstanding shares as of August 31, 1998.
Evergreen Class A
None
Evergreen Class
B
None
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Evergreen Class
C
Turtle & Co 8.781%
P.O. Box 9427
Boston, MA 02209 -9427
MLPF&S for the sole benefit of 5.836%
its customers
Attn: Fund Administration #
97JB1
4800 Deer Lake Dr E. 2nd Fl.
Jacksonville, FL 32246 -6484
Evergreen Class Y
First Union National 27.604%
Bank/EB/INT
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl.
CMG 1151
Charlotte, NC 28202 -1911
First Union National 10.311%
Bank/EB/INT
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl.
CMG 1151
Charlotte, NC 28202 -1911
Micro Class A
Charles Schwab & Company Inc. 5.940%
Special Custody Account
FBO Exclusive Benefit of
Customers
Reinvest Account, Attn: Mutual
Fund
101 Montgomery Street
San Francisco, CA 94104 -4122
First Union Brokerage Services 5.120%
Vince Vitti and Susan Vitti
JTWROS LN Account
Attn: Bob Lemaire
266 Harridstown Road, 3rd Fl.
NJ 07452
Micro Class B
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<PAGE>
MLPF&S for the 5.716%
sole
benefit of its
customers.
Attn: Fund Administration #97H76
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
Micro Class C
MLPF&S for the sole benefit of its 5.343%
customers
Attn: Fund Administration #97H76
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
Micro Class Y
Stephen A. Lieber 12.455%
1210 Greacen Point Rd.
Mamaroneck, NY 10543-4693
Charles Schwab & Company Inc. 9.312%
Special Custody Account
FBO Exclusive Benefit of
Customers
Reinvest Account, Attn: Mutual
Fund
101 Montgomery Street
San Francisco, CA 94104 -4122
Constance E. Lieber 8.910%
1210 Greacen Point Rd.
Mamaroneck, NY 10543-4693
Citibank NA 7.911%
Delta Airlines Master Trust 308235
Joe Villella Citicorp Services
1410 N. Westshore Blvd. Fl. 5
Tampa, FL 33607-4519
Omega Class
A
None
Omega Class B
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<PAGE>
MLPF&S for the 7.253%
sole
benefit of its
customers.
Attn: Fund Administration #97BP1
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
Omega Class C
MLPF&S for the 26.710%
sole
benefit of its
customers.
Attn: Fund Administration #97BP5
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
Omega Class Y
First Union National Bank 41.636%
Trust Accounts
Attn: Ginny Batten
11th Floor, CMG-1151
301 S. Tryon St.
Charlotte, NC 28828-0002
State Street Bank & Trust Co. 15.689%
Cust.
SEP IRA FBO
Timothy L. Bell
9914 McGee St.
Elberta, AL 36530-6539
Herbert R. Kosow 6.993%
Wilma J. Kosow
JTTEN
4 Meadow Lane
Freeport, NY 11520-1003
Juliana Guazzo 6.199%
38 Bath St.
Lido Beach, NY 11561-5007
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Strategic Class A
None
Strategic Class B
None
Strategic Class C
State Street Bank and Trust Co. 20.619%
Cust.
Edward W. Sparrow Hosp. TSA
FBO
Dennis Allen Swan
3741 Chippendale
Okemos, MI 48864-3861
Douglas M. Ellingson 8.780%
1833 East Carver St.
Tempe, AZ 85284-2509
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Raymond James & Assoc. Inc. 8.526%
CSDN
Zsolt H B Koppany I IRA
6560 Mallard Dr.
Midland, GA 31820
Bear Stearns Securities Corp. 8.116%
1 Metrotech Center North
Brooklyn, NY 11201-3859
Daniel D. Bennett 5.571%
Amy L. Bennett Jt. WROS
2778 W. Greens Drive
Littleton, CO 80123
Mitchell J. 5.278%
Ives C/F
Nicole Ives
UTTMA/AL
2109
Caldwell Mill Trace.
Birmingham,
AL 35243-1755
Aggressive Class A
MLPF&S for the 10.795%
sole
benefit of its
customers.
Attn: Fund Administration #97212
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
Aggressive Class B
None
Aggressive Class C
MLPF&S for the 23.704%
sole
benefit of its
customers.
Attn: Fund Administration #97JA1
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
Lavedna Ellingson 10.255%
Douglas Ellingson JT WROS
8510 McClintock
Tempe, AZ 85284 -2527
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Smith Barney Inc. 6.194%
388 Greenwich Street
New York, NY 10013
Aggressive Class
Y
First Union National Bank 79.570%
Trust Accounts
Attn: Ginny Batten
11th Floor, CMG-1151
301 S. Tryon St.
Charlotte, NC 28288-0002
Small Class
A
ROFE & Company 6.153%
C/O State Street Bank & Trust Co.
For Sub Account
Kokusai Securities Co. LTD.
P.O. Box 5061
Boston, MA 02206-5061
Small Class B
MLPF&S for the sole benefit of 22.219%
its customers
Attn: Fund Administration #98302
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
Small Class C
MLPF&S for the sole benefit of 55.953%
its customers
Attn: Fund Administration #
97TU0
4800 Deer Lake Dr. E. 2nd
Fl.
Jacksonville, FL 32246 -6484
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State Street Bank and Trust Co. 7.227%
Cust.
Rollover IRA FBO
Mark Loveland
2701 Westheimer Rd. #12H
Houston, TX 77098-1238
Small Class Y
First Union National Bank 91.678%
Cash Account
Attn: Trust Operations Fund Group
401 South Tryon St. 3rd
Fl.
Charlotte, NC 28202-1911
Stock Class A
None
Stock Class B
Peter E. Grumblatt 13.719%
Lisa M. Young JTTEN
1302 Village Green Dr.
Gilbertsville, PA 19525-9593
First Union Brokerage Services 10.405%
Diane Digisi Viser
305 Inverness Road
Clinton, NC 28328
First Union Brokerage Services 6.520%
John R. Heller
4916 Boudinot St.
Philadelphia, PA 19120-4307
First Union Brokerage Services 6.076%
Alfred J. Zysk IRA
4230 Meridian St.
Philadelphia, PA 19136-3121
Phyllis L. Cowherd 5.295%
61 W. Market St.
Bethlehem, PA 18018-5797
Stock Class Y
Patterson & Co. 85.584%
PNB Personal Trust Acctg.
P.O. Box 7829
Philadelphia, PA 19101-7829
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORS
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The investment advisor to each Fund (the "Advisor") is a subsidiary of
First Union Corporation ("First Union"). First Union is a bank holding company
headquartered at 301 South College Street, Charlotte, North Carolina 28288.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses throughout the United States.
The Advisor to Evergreen , Micro and Tax is Evergreen Asset Management
Corp. ("Evergreen Asset"), 2500 Westchester Avenue, Purchase, New York 10577.
Evergreen Asset is entitled to receive from Evergreen and Micro an annual fee
based on each Fund's average daily net assets, as follows: 1.00% of the first
$750 million; plus 0.90% of the next $250 million; plus 0.80% of assets over $1
billion. Evergreen Asset is entitled to receive from Tax an annual fee equal to
0.95% of the Fund's average daily net assets. Under an agreement with Evergreen
Asset, Lieber & Company, a First Union subsidiary at the same address as
Evergreen Asset, serves as subadvisor to each Fund at no additional cost to
either Fund. Lieber & Company is paid for its services by Evergreen Asset.
The Advisor to Aggressive and Masters is the Capital Management Group
("CMG") of First Union National Bank ("FUNB"). CMG is entitled to receive from
Aggressive and Masters an annual fee equal to 0.60% and 0.95%, respectively, of
each Fund's average daily net assets.
The Advisor to Omega, Small and Strategic is Evergreen Investment
Management Company ("EIMC"), 200 Berkeley Street, Boston, Massachusetts 02116.
EIMC was formerly known as Keystone Investment Management Company. EIMC is
entitled to receive from Omega an annual fee based on the aggregate net asset
value of the Fund's shares, as follows: 0.75% of the first $250 million; plus
0.675% of the next $250 million; plus 0.60% of the next $500 million; plus 0.50%
of assets over $1 billion, all computed as of the close of business each
business day and payable monthly. EIMC is entitled to receive from Small and
Strategic an annual fee based on the aggregate net asset value of each Fund's
shares, as follows: 0.70% of the first $100 million; plus 0.65% of the next $100
million; plus 0.60% of the next $100 million; plus 0.55% of the next $100
million; plus 0.50% of the next $100 million; plus 0.45% of the next $500
million; plus 0.40% of the next $500 million; plus 0.35% of assets over $1.5
billion, all computed as of the close of business each business day and payable
monthly.
The Advisor to Stock is Meridian Investment Company ("Meridian"), 550
Valley Stream Parkway, Malvern, Pennsylvania 19355. Meridian is entitled to
receive from Stock an annual fee equal to 0.74% of the Fund's average daily net
assets.
INVESTMENT ADVISORY AGREEMENTS
On behalf of each of its Funds, the Trust has entered into an
investment advisory agreement with the Advisor (the "Advisory Agreements") .
Under the Advisory Agreements with respect to Funds other than Masters, and
subject to the supervision of the Trust's Board of Trustees, the Advisor
furnishes to the appropriate Fund investment advisory, management and
administrative services, office facilities, and equipment in connection with its
services for managing the investment and reinvestment of the Fund's assets. The
Advisor pays for all of the expenses incurred in connection with the provision
of its services. The Advisory Agreement with respect to Masters is similar to
the Trust's other Advisory Agreements except that the Advisor selects
sub-advisors (hereinafter referred to as "Managers") for the Fund and monitors
each Manager's investment program and results. The Advisor has primary
responsibility under the multi-manager strategy to oversee the Managers,
including making recommendations to the Trust regarding the hiring, termination
and replacement of Managers.
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<PAGE>
Each Fund pays for all charges and expenses, other than those
specifically referred to as being borne by the Advisor, including, but not
limited to, (1) custodian charges and expenses; (2) bookkeeping and auditors'
charges and expenses; (3) transfer agent charges and expenses; (4) fees and
expenses of Independent Trustees (Trustees who are not interested persons of a
Fund as defined in the 1940 Act); (5) brokerage commissions, brokers' fees and
expenses; (6) issue and transfer taxes; (7) costs and expenses under the
Distribution Plan (as applicable) (8) taxes and trust fees payable to
governmental agencies; (9) the cost of share certificates; (10) fees and
expenses of the registration and qualification of such Fund and its shares with
the Securities and Exchange Commission ("SEC") or under state or other
securities laws; (11) expenses of preparing, printing and mailing prospectuses,
SAIs, notices, reports and proxy materials to shareholders of each Fund; (12)
expenses of shareholders' and Trustees' meetings; (13) charges and expenses of
legal counsel for each Fund and for the Independent Trustees of the Trust on
matters relating to such Fund; (14) charges and expenses of filing annual and
other reports with the SEC and other authorities; and (15) all extraordinary
charges and expenses of such Fund. (See also the section entitled "Financial
Information.")
Each Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of
each Fund's outstanding shares. In either case, the terms of the Advisory
Agreement and continuance thereof must be approved by the vote of a majority of
the Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreements may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. Each Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Managers
Masters' investment program is based upon the Advisor's multi-manager
concept. The Advisor allocates the Fund's portfolio assets on an equal basis
among a number of investment management organizations - currently four in number
- - each of which employs a different investment style, and periodically
rebalances the Fund's portfolio among the Managers so as to maintain an
approximate equal allocation of the portfolio among them throughout all market
cycles. Each Manager provides these services under a Portfolio Management
Agreement. Each Manager has discretion, subject to oversight by the Trustees and
the Advisor, to purchase and sell portfolio assets consistent with the Fund's
investment objectives, policies and restrictions and specific investment
strategies developed by the Advisor. The Fund's current Managers are: Evergreen
Asset Management Corp., MFS Institutional Advisors, Inc., OppenheimerFunds, Inc.
and Putnam Investment Management, Inc.
The Trust and FUNB have filed an exemptive application with the SEC
that would permit the Advisor to employ a "manager of managers" strategy in
connection with its management of the Fund. The exemptive order would permit the
Advisor, subject to certain conditions, and without shareholder approval, to:
(a) select new Managers who are unaffiliated with the Advisor with the approval
of the Trust's Board of Trustees; (b) change the material terms of the Portfolio
Management Agreements with the Managers; and (c) continue the employment of a
Manager after an event which would otherwise cause the automatic termination of
a Portfolio Management Agreement. Shareholders would be notified of any Manager
changes. Shareholders have the right to terminate arrangements with a Manager by
vote of a majority of the outstanding shares of the Fund. The order would also
permit the Fund to disclose the Manager's fees only in the aggregate. There is
no assurance that the SEC will grant the Trust's and FUNB's application.
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<PAGE>
With respect to affiliated Managers such as Evergreen Asset,
shareholder approval is required by the employment of an affiliated Manager as a
replacement for an unaffiliated Manager or change in the material terms of the
Portfolio Management Agreement.
Transactions Among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit a Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union is an investment advisor. The Rule 17a-7 Procedures also allow the Funds
to buy or sell securities from other advisory clients for whom a subsidiary of
First Union is an investment advisor. The Funds may engage in such transactions
if they are equitable to each participant and consistent with each participant's
investment objective.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the Funds through
broker-dealers and other financial representatives. Its address is 125 W. 55th
Street, New York, NY 10019.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution fees are accrued daily and paid monthly on Class A, Class
B and Class C shares and are charged as class expenses, as accrued. The
distribution fees attributable to the Class B and Class C shares are designed to
permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, while at the same time permitting the
Distributor to compensate broker-dealers in connection with the sale of such
shares. In this regard, the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class B shares are
the same as those of the front-end sales charge and distribution fee with
respect to the Class A shares in that in each case the sales charge and/or
distribution fee provide for the financing of the distribution of the Fund's
shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of the Trust reports the
amounts expended under the Plans for each Fund and the purposes for which such
expenditures were made to the Trustees of the Trust for their review on a
quarterly basis. Also, each Plan provides that the selection and nomination of
the Independent Trustees are committed to the discretion of such Independent
Trustees then in office.
Each Advisor may from time to time from its own funds or such other
resources as may be permitted by rules of the SEC make payments for distribution
services to the Distributor; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Trust or by vote
of the holders of a majority of the outstanding voting securities of that class
and, in either case, by a majority of the Independent Trustees of the Trust who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative
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<PAGE>
support services to each Fund and holders of Class A, Class B and Class C shares
and (ii) stimulate administrators to render administrative support services to
the Fund and holders of Class A, Class B and Class C shares. The administrative
services are provided by a representative who has knowledge of the shareholder's
particular circumstances and goals, and include, but are not limited to
providing office space, equipment, telephone facilities, and various personnel
including clerical, supervisory, and computer, as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding Class A, Class B and
Class C shares; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests for its Class A, Class B and Class C shares, as applicable.
FUNB or its affiliates may finance the payments made by the Distributor
to compensate broker-dealers or other persons for distributing shares of a Fund.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that class or classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such class or classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of the Trust or the holders of the Fund's
outstanding voting securities, voting separately by class, and in either case,
by a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. Any Plan or Distribution
Agreement may be terminated (i) by a Fund without penalty at any time by a
majority vote of the holders of the outstanding voting securities of the Fund,
voting separately by class or by a majority vote of the Independent Trustees, or
(ii) by the Distributor. To terminate any Distribution Agreement, any party must
give the other parties 60 days' written notice; to terminate a Plan only, the
Fund need give no notice to the Distributor. Any Distribution Agreement will
terminate automatically in the event of its assignment. (See also the section
entitled "Financial Information.")
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
Aggressive , Stock, Tax and Masters, subject to the supervision and control of
the Trust's Board of Trustees. EIS provides each Fund with facilities, equipment
and personnel and is entitled to receive a fee from the Fund based on the total
assets of all mutual funds administered by EIS for which any affiliate of FUNB
serves as investment advisor, as follows: 0.050% of the first $7 billion; 0.035%
of the next $3 billion; 0.030% of the next $5 billion; 0.020% of the next $10
billion; 0.015% of the next $5 billion and 0.010% of assets in excess of $30
billion.
Transfer Agent
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<PAGE>
Evergreen Service Company ("ESC"), a subsidiary of First Union, is the
Funds' transfer agent. The transfer agent issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is Box 2121, Boston,
Massachusetts 02106-2121.
Independent Auditors
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110,
audits the annual financial statements of Omega, Small , Strategic and Masters.
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York, 10036, audits the annual financial statements of Evergreen, Micro,
Aggressive , Stock and Tax.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank
keeps custody of each Fund's securities and cash and performs other related
duties. The custodian's address is 225 Franklin Street, Boston, Massachusetts
02110.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds. Its address
is1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
BROKERAGE
Due to regulatory developments affecting the securities exchanges and
brokerage practices, the Board of Trustees may modify or eliminate any of the
following policies.
BROKERAGE COMMISSIONS
Generally, each Fund expects to purchase and sell its equity securities
through brokerage transactions for which commissions are payable. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's mark-down.
Each Fund expects to buy and sell its fixed income securities directly
from the issuer or an underwriter or market maker for the securities. Generally,
each Fund will not pay brokerage commissions for such purchases. When a Fund
buys a security from an underwriter, the purchase price will usually include an
underwriting commission or concession. The purchase price for securities bought
from dealers serving as market makers will similarly include the dealer's mark
up or reflect a dealer's mark down. When a Fund executes transactions in the
over-the-counter market, it will deal with primary market makers unless more
favorable prices are otherwise obtainable.
SELECTION OF BROKERS
When buying and selling portfolio securities, each Advisor or Manager,
as applicable, seeks brokers who can provide the most benefit to the Fund or
Funds for which a trade is being made. When selecting a broker, an Advisor or
Manager primarily will look for the best price at the lowest commission, but in
the context of the broker's:
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<PAGE>
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and
analyses
concerning issuers, industries, securities and economic
factors and (b) other information useful in making investment
decisions.
Under each Advisory Agreement and, with respect to Masters, each
Portfolio Management Agreement, each Fund may pay higher brokerage commissions
to a broker providing it with research services, as defined in item 6, above.
Pursuant to Section 28(e) of the Securities Exchange Act of 1934, this practice
is permitted if the commission is reasonable in relation to the brokerage and
research services provided. Research services provided by a broker to an Advisor
or Manager do not replace, but supplement, the services an Advisor under the
Advisory Agreement or the Manager under the Portfolio Management Agreement is
required to deliver to a Fund . It is impracticable for an Advisor or Manager to
allocate the cost, value and specific application of such research services
among its clients because research services intended for one client may
indirectly benefit another.
When selecting a broker for portfolio trades, an Advisor or Manager may
also consider the amount of Fund shares a broker has sold, subject to the other
requirements described above.
Lieber & Company, an affiliate of Evergreen Asset, and a member of the
New York and American Stock Exchanges, will, to the extent practicable, effect
substantially all of the portfolio transactions for Evergreen , Micro, Tax and
Masters (only with respect to assets managed by Evergreen Asset) effected on
those exchanges.
SIMULTANEOUS TRANSACTIONS
Each Advisor or Manager, as the case may be, makes investment decisions
for a Fund independently of decisions made for its other clients. When a
security is suitable for the investment objective of more than one client, it
may be prudent for an Advisor or Manager to engage in a simultaneous
transaction, that is, buy or sell the same security for more than one client.
Each Advisor and Manager strives for an equitable result in such transactions by
using an allocation formula. The high volume involved in some simultaneous
transactions can result in greater value to the Funds, but the ideal price or
trading volume may not always be achieved for an individual Fund. In order to
take advantage of the availability of lower purchase prices, the Funds may
occasionally participate in group bidding for the direct purchase from an issuer
of certain securities.
TRUST ORGANIZATION
FORM OF ORGANIZATION
Each Fund is a series of an open-end management investment company,
known as "Evergreen Equity Trust" (the "Trust"). The Trust was formed as a
Delaware business trust on September 18, 1997 pursuant to an Agreement and
Declaration of Trust (the "Declaration of Trust"). A copy of the Declaration of
Trust is on file at the SEC as an exhibit to the Trust's Registration Statement,
of which this SAI is a part. This summary is qualified in its entirety by
reference to the Declaration of Trust.
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<PAGE>
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
each Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of net asset value applicable to such share. Shares generally vote together as
one class on all matters. Classes of shares of each Fund have equal voting
rights. No amendment may be made to the Declaration of Trust that adversely
affects any class of shares without the approval of a majority of the votes
applicable to the shares of that class. Shares have non-cumulative voting
rights, which means that the holders of more than 50% of the votes applicable to
shares voting for the election of Trustees can elect 100% of the Trustees to be
elected at a meeting and, in such event, the holders of the remaining shares
voting will not be able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
PURCHASE, REDEMPTION AND PRICING OF SHARES
HOW THE FUNDS OFFER SHARES TO THE PUBLIC
You may buy shares of a Fund through the Distributor, broker-dealers
that have entered into special agreements with the Distributor or certain other
financial institutions. Each Fund offers four classes of shares (except
Strategic, which offers three) that differ primarily with respect to sales
charges and distribution fees. Depending upon the class of shares, you will pay
an initial sales charge when you buy a Fund's shares, a contingent deferred
sales charge (a "CDSC") when you redeem a Fund's shares or no sales charges at
all.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay
a maximum sales charge of 4.75%. (The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. See also the section in this SAI entitled
"Financial Information" for an example of the method of computing
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the offering price of Class A shares.) If you purchase Class A shares in the
amount of $1 million or more, without an initial sales charge, the Funds will
charge a CDSC of 1.00% if you redeem during the month of your purchase and the
12-month period following the month of your purchase. See "Contingent Deferred
Sales Charge," below.
Class B Shares
The Funds offer Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Funds will charge a CDSC on
shares you redeem within 72 months after the month of your purchase, in
accordance with the following schedule:
REDEMPTION TIMING CDSC RATE
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%
Thereafter...............................................................0.00%
Class B shares that have been outstanding for seven years after the
month of purchase will automatically convert to Class A shares without
imposition of a front-end sales charge or exchange fee. (Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificate to ESC.)
Class C Shares
Class C shares are available only through broker-dealers who have
entered into special distribution agreements with the Distributor. The Funds
offer Class C shares at net asset value without an initial sales charge. With
certain exceptions, however, the Funds will charge a CDSC of 1.00% on shares you
redeem within 12-months after the month of your purchase. See "Contingent
Deferred Sales Charge" below.
Class Y Shares (Not Offered by Strategic)
No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only 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 CMG, Evergreen Asset, Keystone, Meridian or their affiliates. Class Y
shares are offered at net asset value without a front-end or back-end sales
charge and do not bear any Rule 12b-1 distribution expenses.
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CONTINGENT DEFERRED SALES CHARGE
The Funds charge a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that they have incurred in connection
with the sale of their shares (see "Distribution Plans and Agreements," above).
If imposed, the Funds deduct the CDSC from the redemption proceeds you would
otherwise receive. The CDSC is a percentage of the lesser of (1) the net asset
value of the shares at the time of redemption or (2) the shareholder's original
net cost for such shares. Upon request for redemption, to keep the CDSC a
shareholder must pay as low as possible, a Fund will first seek to redeem shares
not subject to the CDSC and/or shares held the longest, in that order. The CDSC
on any redemption is, to the extent permitted by the National Association of
Securities Dealers, Inc. ("NASD"), paid to the Distributor or its predecessor.
SALES CHARGE WAIVERS OR REDUCTIONS
Reducing Class A Front-end Loads
With a larger purchase, there are several ways that you can combine
multiple purchases of Class A shares in the Evergreen funds and take advantage
of lower sales charges.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen funds. For example, if you invested $75,000 in each
of two different Evergreen funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares
of Evergreen funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.
Letter of Intent
You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen fund during the period will qualify as Letter of
Intent purchases.
Waiver of Initial Sales Charges
The Funds may sell their shares at net asset value without an initial
sales charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1 tax
sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");
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3. institutional investors, which may include bank trust
departments and registered investment advisors;
4. investment advisors, 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;
5. clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to
the master account of such investment advisors or financial
planners on the books of the broker-dealer through whom shares
are purchased;
6. 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;
7. employees of FUNB, its affiliates, the Distributor, any
broker-dealer with whom the Distributor has entered into an
agreement to sell shares of the Funds, and members of the
immediate families of such employees;
8. certain Directors, Trustees, officers and employees of the
Evergreen funds, the Distributor or their affiliates and to
the immediate families of such persons; or
9. a bank or trust company in a single account in the name of
such bank or trust company as trustee if the initial
investment in or any Evergreen fund made pursuant to this
waiver is at least $500,000 and any commission paid at the
time of such purchase is not more than 1% of the amount
invested.
With respect to items 8 and 9 above, each Fund will only sell shares to
these parties upon the purchasers' written assurance that the purchases are for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Funds will not charge any
CDSC on redemptions by such purchasers.
Waiver of CDSCs
The Funds do not impose a CDSC when the shares you are redeeming
represent:
1. an increase in the share value above the net cost of such
shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died
or become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security
Act of 1974 ("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder
who is a least 59 1/2 years old;
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6. shares in an account that we have closed because the account
has an aggregate net asset value of less than $1,000;
7. an automatic withdrawal under an Systematic Income Plan of up
to 1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. financial hardship withdrawals made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).
EXCHANGES
Investors may exchange shares of a Fund for shares of the same class of
any other Evergreen fund, as described under the section entitled "Exchanges" in
a Fund's prospectus. Before you make an exchange, you should read the prospectus
of the Evergreen fund into which you want to exchange. The Trust's Board of
Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
CALCULATION OF NET ASSET VALUE PER SHARE ("NAV")
Each Fund computes its NAV once daily on Monday through Friday, as
described in the prospectus. A Fund will not compute its NAV on the day the
following legal holidays are observed: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The NAV of each class of shares of a Fund is calculated by dividing the
value of a Fund's net assets attributable to that class by the number of all
shares issued for that class.
VALUATION OF PORTFOLIO SECURITIES
Current values for a Fund's portfolio securities are determined as
follows:
(1) Securities that are traded on a national securities exchange
or the over-the-counter National Market System ("NMS") are
valued on the basis of the last sales price on the exchange
where primarily traded or on the NMS prior to the time of the
valuation, provided that a sale has occurred.
(2) Securities traded on a national securities exchange or in the
over-the-counter market for which there has been no sale and
other securities traded in the over-the-counter market are
valued at the mean of the bid and asked prices at the time of
valuation.
(3) Short-term investments maturing in more than 60 days, for
which market quotations are readily available, are valued at
current market value.
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(4) Short -term investments maturing in 60 days or less are valued
at amortized cost, which approximates market.
(5) Securities, including restricted securities, for which market
quotations are not readily available; listed securities or
those on NMS if, in a Fund's opinion, the last sales price
does not reflect a current market value; and other assets are
valued at prices deemed in good faith to be fair under
procedures established by the Board of Trustees.
SHAREHOLDER SERVICES
As described in the prospectuses, a shareholder may elect to receive
his or her dividends and capital gains distributions in cash instead of shares.
However, ESC will automatically convert a shareholder's distribution option so
that the shareholder reinvests all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. The Funds will hold the returned distribution or redemption proceeds in
a non interest-bearing account in the shareholder's name until the shareholder
updates his or her address. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with
respect to each class of each Fund. The Trust has entered into a Principal
Underwriting Agreement ("Underwriting Agreement") with the Distributor with
respect to each class of each Fund. The Distributor is a subsidiary of The BISYS
Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and SAI. All orders are subject to acceptance by the Trust and the Trust
reserves the right, in its sole discretion, to reject any order received. Under
the Underwriting Agreement, the Trust is not liable to anyone for failure to
accept any order.
The Distributor has agreed that it will, in all respects, duly comply
with all state and federal laws applicable to the sale of the shares. The
Distributor has also agreed that it will indemnify and hold harmless the Trust
and each person who has been, is, or may be a Trustee or officer of the Trust
against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.
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The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Independent Trustees, and (ii) by vote of a majority of
the Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment" as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could benefit
the sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
ADDITIONAL TAX INFORMATION
REQUIREMENTS FOR QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund other than Masters has qualified and intends to continue to
qualify, and Masters intends to qualify, for and elect the tax treatment
applicable to a regulated investment company (a "RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). (Such qualification does
not involve supervision of management or investment practices or policies by the
Internal Revenue Service.) In order to qualify as a RIC, a Fund must, among
other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to proceeds from securities loans, gains from
the sale or other disposition of securities or foreign currencies and other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in such securities; and (ii) diversify its
holdings so that, at the end of each quarter of its taxable year, (a) at least
50% of the market value of the Fund's total assets is represented by cash, U.S.
Government securities and other securities limited in respect of any one issuer,
to an amount not greater than 5% of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies). By so qualifying, a Fund is not subject to federal income tax if it
timely distributes its investment company taxable income and any net realized
capital gains. A 4% nondeductible excise tax will be imposed on a Fund to the
extent it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
TAXES ON DISTRIBUTIONS
Distributions will be taxable to shareholders whether made in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share of a Fund on the
reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net taxable investment income plus net
realized short-term capital gains, if any). The Fund will include dividends it
receives from domestic corporations when the Fund calculates its gross
investment income. The Fund anticipates that all or a portion of ordinary
dividends which it pays will qualify for the 70%
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dividends-received deduction for corporations. The Fund will inform shareholders
of the amounts that so qualify.
From time to time, the Fund will distribute the excess of its net
long-term capital gains over its net short-term capital loss to shareholders
(i.e., capital gain dividends). For federal tax purposes, shareholders must
include such capital gain dividends when calculating their net long-term capital
gains. Capital gain dividends are taxable as net long-term capital gains to a
shareholder, no matter how long the shareholder has held the shares. The Fund
will inform shareholders of the portion, if any, of a capital gain distribution
which qualifies for the new 20% maximum federal rate.
Distributions by a Fund reduce its NAV. A distribution that reduces the
Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder may incur
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her federal income tax return. Each shareholder
should consult a tax advisor to determine the state and local tax implications
of Fund distributions.
If more than 50% of the value of a Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and a Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on a Fund's investments.
The shareholder may be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the credit or deduction is subject to a number of
limitations.
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than
twelve months is generally subject to a maximum federal income tax rate of 20%
for an individual. Generally, the Code will not allow a shareholder to realize a
loss on shares he or she has sold or exchanged and replaced within a
sixty-one-day period beginning thirty days before and ending thirty days after
he or she sold or exchanged the shares. The Code will not allow a shareholder to
realize a loss on the sale of Fund shares held by the shareholder for six months
or less to the extent the shareholder received exempt-interest dividends on such
shares. Moreover, the Code will treat a shareholder's loss on shares held for
six months or less as a long-term capital loss to the extent the shareholder
received capital gain dividends on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption
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proceeds paid to them by the Fund. If the withholding provisions are applicable,
any such dividends or capital gain distributions to these shareholders, whether
taken in cash or reinvested in additional shares, and any redemption proceeds
will be reduced by the amounts required to be withheld. Investors may wish to
consult their own tax advisors about the applicability of the backup withholding
provisions.
OTHER TAX CONSIDERATIONS
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisors regarding specific questions relating to federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax advisor
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
FINANCIAL INFORMATION
The financial information below pertains to each Fund that has
commenced operating as of the date of this SAI except Stock. A separate section
entitled "Financial Information for Stock " follows this section.
EXPENSES
The table below shows the total dollar amounts paid by each Fund for
services rendered during the fiscal periods specified. For more information on
specific expenses, see "Investment Advisory and Other Services," "Distribution
Plans and Agreements," "Principal
Underwriter" and "Purchase, Redemption and Pricing of Shares."
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<TABLE>
<CAPTION>
1998 Fund Expenses
Class C Total Underwriting
Underwriting Commissions
Commissions Retained
Class B
Class A
Advisory
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
<S> <C> <C> <C> <C> <C> <C>
Evergreen $ $ $ $ $ $
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<PAGE>
1998 Fund Expenses
Class C Total Underwriting
Underwriting Commissions
Commissions Retained
Class B
Class A
Advisory
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
Aggressive $ $ $ $ $ $
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<PAGE>
1998 Fund Expenses
Class C Total Underwriting
Underwriting Commissions
Commissions Retained
Class B
Class A
Advisory
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
Micro $ $ $ $ $ $
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<PAGE>
1998 Fund Expenses
Class C Total Underwriting
Underwriting Commissions
Commissions Retained
Class B
Class A
Advisory
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
Omega $ $ $ $ $ $
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<PAGE>
1998 Fund Expenses
Class C Total Underwriting
Underwriting Commissions
Commissions Retained
Class B
Class A
Advisory
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
Small $ $ $ $ $ $
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<PAGE>
1998 Fund Expenses
Class C Total Underwriting
Underwriting Commissions
Commissions Retained
Class B
Class A
Advisory
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
Strategic $ $ $ $ $ $
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<PAGE>
1998 Fund Expenses
Class C Total Underwriting
Underwriting Commissions
Commissions Retained
Class B
Class A
Advisory
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
Tax (1) $ $ $ $ $ $
(1) One month ended 9/30/98
</TABLE>
<TABLE>
<CAPTION>
1997 Fund Expenses
Total Underwriting
Advisory Class A Class B Class C Underwriting Commissions
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees Commissions Retained
===================== ================ ================ ================= ================ =============== ================
<S> <C> <C> <C> <C> <C> <C>
Evergreen (1) $13,089,112 $299,430 $3,629,968 $72,777 $1,464,361 $129,417
Aggressive (1) $1,013,344 $251,302 $289,795 $19,048 $278,145 $21,472
Micro (1) $428,047 $3,314 $13,933 $400 $2,223 $300
Omega (2) $1,480,178 $153,219 $739,237 $120,064 $254,113 $19,806
Small (3a) $2,387,425 N/A $4,928,079* N/A $878,274 $22,796
=========
Small (3b) $7,788,033 N/A $16,641,755* N/A $17,885,604 $13,187,854
Strategic (4) $3,205,753 N/A $1,790,675* N/A -- --
(1) Year ended 9/30/97
(2) Nine months ended 9/30/97
(3a) Four months ended 9/30/97
(3b) Year ended 5/31/97
(4) Eleven months ended 9/30/97
* Not multiple class during this period; amount reflects all 12b-1 fees.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
1996 Fund Expenses
Total Underwriting
Underwriting Commissions
Advisory Class A Class B Class C Commissions Retained
Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
===================== ================ ================ ================= ================ =============== ================
<S> <C> <C> <C> <C> <C> <C>
Evergreen (1) $9,145,287 $149,922 $1,185,957 $10,292 $1,462,012 $157,233
Aggressive (1) $612,492 $197,507 $26,469 $3,308 $185,835 $22,742
Micro (1) $510,421 $2,471 $12,608 $310 $2,963 $188
Omega (2) $1,831,142 $186,596 $814,977 $168,748 $983,621 $759,394
Small (3) $8,473,139 N/A $18,458,861* N/A $15,690,812 ($5,933,719)
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Strategic (4) $2,994,500 N/A $4,845,352* N/A $4,093,912 $2,049,519
(1) Year ended 9/30/96
(2) Year ended 12/31/96
(3) Year ended 5/31/96
(4) Year ended 10/31/96
* Not multiple class during this period; amount reflects all 12b-1 fees.
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</TABLE>
<PAGE>
BROKERAGE COMMISSIONS PAID
The following chart shows: (1) for each of the last three fiscal years
the amount of brokerage commissions paid by each Fund to all brokers and the
commissions, if any, paid to Lieber & Company; (2) for the fiscal year ended
September 30, 1998, the percentage of all commissions paid to Lieber & Company;
and (3) for the fiscal year ended September 30, 1998, the percentage of the
total dollar amount of all portfolio transactions with respect to which
commissions have been paid which were effected by Lieber & Company.
<TABLE>
<CAPTION>
Evergreen Aggressive Micro Omega Small Strategic Tax
<S> <C> <C> <C> <C> <C> <C> <C>
1998 Aggregate $ -- $ $ $ $ $
Dollar Amount
1998 Dollar $ -- $ -- -- -- $ (__%)
Amount Paid to (__%) (___%)
Lieber
1997 Aggregate $ 503,276 $677,860 $ 91,568 $403,294 $1,891,397 $1,144,065 ---
Dollar Amount
1997 Dollar $ 416,953 -- $ 61,717 -- -- -- ---
Amount Paid to
Lieber
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<PAGE>
1996 Aggregate $590,105 -- $ 317,058 $829,479 $2,853,950 $1,990,208 ---
Dollar Amount
1996 Dollar $515,522 -- $153,596 -- -- -- ---
Amount Paid to
Lieber
1998 Percent of % -- % -- -- -- %
Transactions
Effected by
Lieber
</TABLE>
COMPUTATION OF CLASS A OFFERING PRICE
Class A shares are sold at the NAV plus a sales charge. Below is an
example of the method of computing the offering price of Class A shares of each
Fund. The example assumes a purchase of Class A shares of each Fund aggregating
less than $100,000 based upon the NAV of each Fund's Class A shares at the end
of each Fund's latest fiscal period.
<TABLE>
<CAPTION>
Date Net Asset Value Per Share Sales Offering Price Per
Charge Share
Fund*
<S> <C> <C> <C> <C>
Evergreen $ 4.75% $
9/30/98
Aggressive $ 4.75% $
9/30/98
Micro $ 4.75% $
9/30/98
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<PAGE>
Omega $ 4.75% $
9/30/98
Strategic 9/30/98 $ 4.75% $
Small 9/30/98 $ 4.75% $
Tax 9/30/98 $ 4.75% $
</TABLE>
PERFORMANCE
Total Return
Total return quotations for a class of shares of a Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. All dividends and
distributions are added to the initial investment, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.
The annual total returns as of September 30, 1998 for each class of
shares of the Funds (including applicable sales charges) are as follows:
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<PAGE>
<TABLE>
<CAPTION>
Ten Years or
Since Inception
One Year Five Years Inception Date
<S> <C> <C> <C> <C>
Evergreen
Class A % -- % Jan. 3, 1995
Class B % -- % Jan. 3, 1995
Class C % -- % Jan. 3, 1995
Class Y % % % Oct. 15, 1971
Aggressive
Class A % % % Apr. 15, 1983
Class B % -- % July 7, 1995
Class C % -- % Aug. 3, 1995
Class Y % -- % July 11, 1995
Micro
Class A % -- % Jan. 3, 1995
Class B % -- % Jan. 3, 1995
Class C % -- % Jan. 3, 1995
Class Y % % % June 1, 1983
Omega
Class A % % % Apr. 29, 1968
-128-
<PAGE>
Ten Years or
Since Inception
One Year Five Years Inception Date
Class B % % % Aug. 2, 1993
Class C % % % Aug. 2, 1993
Class Y -- -- -- Jan. 13, 1997
Strategic
Class A -- -- % Jan. 30, 1998
Class B % % % Jul. 15, 1935
Class C -- -- % Jan. 22, 1998
Small
Class A -- -- % Jan. 20, 1998
%
Class B % % Jul. 15, 1935
Class C -- -- % Jan. 26, 1998
Class Y -- -- % Jan. 26, 1998
TAX
Class Y -- -- % Sept. 1, 1998
</TABLE>
FINANCIAL INFORMATION FOR STOCK
The information below pertains to Stock, formerly Core Equity Fund, a
portfolio of CoreFunds, Inc. Core Equity Fund was reorganized into Stock in July
1998.
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<PAGE>
ADVISORY FEES
The table below shows amounts paid by Stock to its former investment advisor,
CoreStates Investment Advisers, Inc. ("CoreStates Advisers"), for the fiscal
years ended June 30, 1996, 1997 and 1998.
ADVISORY FEES PAID
1996 1997 1998
$1,973,776 $3,459,108 $4,270,615
For the three month fiscal period ended September 30, 1998, Stock paid an
aggregate of $_______ to CoreStates Advisers and Meridian.
DISTRIBUTION FEES
The table below shows the aggregate sales charges payable for the fiscal
years ended June 30, 1996 , 1997 and 1998 to SEI Investments Distribution Co.
("SEI"), Stock's former distributor. The table also shows amounts retained by
SEI.
<TABLE>
<CAPTION>
AGGREGATE SALES CHARGE AMOUNT RETAINED BY SEI
PAYABLE TO SEI
1996 1997 1998 1996 1997 1998
<S> <C> <C> <C> <C> <C>
$12,612 $96,837 $1,710 $4,819 $
$49,441
</TABLE>
For the three month fiscal period ended September 30, 1998, Stock paid an
aggregate of $_______ to SEI and the Distributor, $_______ of which was retained
by SEI and the Distributor.
The table below shows the distribution fees SEI received with respect to
Class A shares of Core Equity Fund for the fiscal year ended June 30, 1998.
AMOUNT RECEIVED AMOUNT PAID TO 3RD PARTIES
$ $
BROKERAGE COMMISSIONS PAID
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<PAGE>
For the three month fiscal period ended September 30, 1998 and for the fiscal
years ended June 30, 1998, 1997 and 1996 Core Equity Fund paid $_______,
$916,196, $1,026,435, and $1,422,984, respectively, in brokerage commissions.
PERFORMANCE
The average annual total returns as of September 30, 1998 of each class of
Stock (including its predecessor Core Equity Fund), including applicable sales
charges, are as follows:
<TABLE>
<CAPTION>
SINCE
CLASS ONE YEAR FIVE YEAR INCEPTION
<S> <C> <C> <C>
Y % % %
A % % %
B -- -- %
C -- -- %
</TABLE>
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
General
From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, Russell 2000
Index, or any other commonly quoted index of common stock prices. The Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average and the
Russell 2000 Index are unmanaged indices of selected common stock prices. A
Fund's performance may also be compared to those of other mutual funds having
similar objectives. This comparative performance would be expressed as a ranking
prepared by Lipper Analytical Services, Inc. or similar independent services
monitoring mutual fund performance. A Fund's performance will be calculated by
assuming, to the extent applicable, reinvestment of all capital gains
distributions and income dividends paid. Any such comparisons
-131-
<PAGE>
may be useful to investors who wish to compare a Fund's past performance with
that of its competitors. Of course, past performance cannot be a guarantee of
future results.
Financial Statements
The financial statements for Stock for the periods from November 1, 1995
through June 30, 1998 have been audited by Ernst & Young, LLP, independent
auditors and the financial statements of Stock for the three month period ended
September 30, 1998 have been audited by PricewaterhouseCoopers LLP, independent
auditors. Reports of Ernst & Young LLP and PricewaterhouseCoopers LLP on the
financial statements for Stock appears in the Fund's Annual Report which is
incorporated by reference. The financial statements for Omega, Small and
Strategic have been audited by KPMG Peat Marwick LLP, independent auditors. A
report of KPMG Peat Marwick LLP on the financial statements for those Funds
appears in the Funds' Annual Report which is incorporated by reference. The
financial statements for Evergreen, Micro , Aggressive and Tax have been audited
by PricewaterhouseCoopers LLP, independent auditors. A report of
PricewaterhouseCoopers LLP on the financial statements for those Funds appears
in the Funds' Annual Report which is incorporated by reference. Annual Reports
may be obtained without charge by writing to ESC, P.O. Box 2121, Boston,
Massachusetts 02106-2121, or by calling ESC toll-free at 1-800-343-2898.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectuses or required by law, each Fund
reserves the right to change the terms of the offer stated in its prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
No dealer, salesman or other person is authorized to give any information or
to make any representation not contained in a Fund's prospectuses, SAI or in
supplemental sales literature issued by such Fund or the Distributor, and no
person is entitled to rely on any information or representation not contained
therein.
Each Fund's prospectuses and SAI omit certain information contained in the
Trust's registration statement, which you may obtain for a fee from the SEC in
Washington, D.C.
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<PAGE>
APPENDIX A
S&P AND MOODY'S BOND RATINGS
S&P Bond Ratings
An S&P bond rating is a current assessment of the creditworthiness of an
obligor, including obligors outside the U.S., with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers or lessees. Ratings of foreign obligors do not take into
account currency exchange and related uncertainties. The ratings are based on
current information furnished by the issuer or obtained by S&P from other
sources it considers reliable.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default and capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
2. Nature of and provisions of the obligation; and
3. Protection afforded by and relative position of the obligation in the
event of bankruptcy reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
PLUS (+) OR MINUS (-): To provide more detailed indications of credit
quality, ratings from "AA" to "BBB" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
A provisional rating is sometimes used by S&P. It assumes the successful
completion of the project being financed by the debt being rated and indicates
that payment of debt service requirements is largely or entirely dependent upon
the successful and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion.
S&P bond ratings are as follows:
1. AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
2. AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
3. A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
4. BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic
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<PAGE>
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in
higher rated categories.
5. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
Moody's Bond Ratings
Moody's ratings are as follows:
1. Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
2. Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
3. A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
4. Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
5. Ba - Bonds which are rated Ba are judged to have speculative elements.
Their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
6. B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
7. Caa - Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
8. Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other market
shortcomings.
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<PAGE>
9. C - Bonds which are rated as C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Baa in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
MONEY MARKET INSTRUMENTS
Money market securities are instruments with remaining maturities of one year
or less such as bank certificates of deposit, bankers' acceptances, commercial
paper (including variable rate master demand notes), and obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities, some of
which may be subject to repurchase agreements.
Commercial Paper
Commercial paper will consist of issues rated at the time of purchase A-1, by
S&P, or Prime-1 by Moody's or F-1 by Fitch; or, if not rated, will be issued by
companies which have an outstanding debt issue rated at the time of purchase
Aaa, Aa or A by Moody's, or AAA, AA or A by S&P or Fitch, or will be determined
by a Fund's investment advisor to be of comparable quality.
A. S&P Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The top category is as follows:
1. A: Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers 1, 2 and 3 to indicate the relative degree of safety.
2. A-1: This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
B. Moody's Ratings
The term "commercial paper" as used by Moody's means promissory obligations
not having an original maturity in excess of nine months. Moody's commercial
paper ratings are opinions of the ability of issuers to repay punctually
promissory obligations not having an original maturity in excess of nine months.
Moody's employs the following designation, judged to be investment grade, to
indicate the relative repayment capacity of rated issuers.
1. The rating Prime-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated Prime-1 (or related supporting institutions) are deemed
to have a superior capacity for repayment of short term promissory obligations.
Repayment capacity of Prime-1 issuers is normally evidenced by the following
characteristics:
1) leading market positions in well-established industries;
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<PAGE>
2) high rates of return on funds employed;
3) conservative capitalization structures with moderate reliance on debt
and ample asset protection;
4) broad margins in earnings coverage of fixed financial charges and high
internal cash generation; and
5) well established access to a range of financial markets and assured
sources of alternate liquidity.
In assigning ratings to issuers whose commercial paper obligations are
supported by the credit of another entity or entities, Moody's evaluates the
financial strength of the affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment.
22987
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<PAGE>
EVERGREEN EQUITY TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
There are no financial statements for Evergreen Tax Strategic Equity
Fund or Evergreen Masters Fund.
The information required by this item for Evergreen Aggressive Growth
Fund, Evergreen Fund, Evergreen Micro Cap Fund, Evergreen Small Company Growth
Fund, Evergreen Strategic Growth Fund and Evergreen Stock Selector Fund is
contained in Registration Statement No. 333-37453/811-08413 filed on August 3,
1998.
The information required by this item for Evergreen American Retirement
Fund, Evergreen Foundation Fund, Evergreen Tax Strategic Foundation Fund and
Evergreen Balanced Fund is contained in Registration No. 333-37453/811-08413
filed on July
31, 1998.
The information required by this item for Evergreen Fund for Total
Return, Evergreen Growth and Income Fund, Evergreen Income and Growth Fund,
Evergreen Small Cap Equity Income Fund, Evergreen Value Fund, Evergreen Utility
Fund and Evergreen Blue Chip Fund is contained in Registration No.
333-37453/811-08413 filed on December 12, 1997 and September 30, 1998.
22987
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<PAGE>
22987
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<PAGE>
The financial statements listed below are incorporated by reference in
Part B of this Amendment to the Registration Statement:
Schedule of Investments of Evergreen Aggressive Growth Fund, Evergreen
Fund, Evergreen Micro Cap Fund, Inc., Evergreen Omega Fund, Evergreen
Small Company Growth Fund, Evergreen Strategic Growth Fund as of
September 30, 1997.
Schedule of Investments of Evergreen Stock Selector Fund as
of June 30, 1998
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<PAGE>
Statement of Assets and Liabilities of Evergreen Aggressive Growth
Fund, Evergreen Fund, Evergreen Micro Cap Fund, Inc., Evergreen Omega
Fund, Evergreen Small Company Growth Fund, Evergreen Strategic Growth
Fund as of September 30, 1997.
Statement of Assets and Liabilities of Evergreen Stock Selector Fund as
of June 30, 1997
Statement of Operations of Evergreen Aggressive Growth Fund, Evergreen
Fund, Evergreen Micro Cap Fund, Inc., Evergreen Omega Fund, Evergreen
Small Company Growth Fund, Evergreen Strategic Growth Fund as of
September 30, 1997.
Statement of Operations of Evergreen Stock Selector Fund as
of June 30, 1997
Statement of Changes in Net Assets of Evergreen Aggressive Growth Fund,
Evergreen Fund, Evergreen Micro Cap Fund, Inc., Evergreen Omega Fund,
Evergreen Small Company Growth Fund, Evergreen Strategic Growth Fund as
of September 30, 1997.
Notes to Financial Statements of Evergreen Aggressive Growth Fund,
Evergreen Fund, Evergreen Micro Cap Fund, Inc., Evergreen Omega Fund,
Evergreen Small Company Growth Fund, Evergreen Strategic Growth Fund
and Evergreen Stock Selector Fund.
Report of Independent Accountants for Evergreen Aggressive
Growth Fund, Evergreen Fund, and Evergreen Micro Cap Fund,
Inc. as of November 11, 1997.
Independent Auditors' Report for Evergreen Omega Fund as of
October 31, 1997.
Independent Auditors' Report for Evergreen Strategic Growth
Fund as of October 31, 1997.
Independent Auditors' Report for Evergreen Small Company Growth Fund as
of October 31, 1997.
Independent Auditors' Report for Evergreen Stock Selector
Fund as of August 21, 1997
The information required by this item for Evergreen American Retirement
Fund, Evergreen Foundation Fund, Evergreen Tax Strategic Foundation Fund and
Evergreen Balanced Fund is contained in Registration Statement No.
333-37453/811-08413 filed on July 31, 1998.
22987
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<PAGE>
The information required by this item for Evergreen Fund for Total
Return, Evergreen Growth and Income Fund, Evergreen Income and Growth Fund,
Evergreen Small Cap Equity Income Fund, Evergreen Value Fund, Evergreen Utility
Fund and Evergreen Blue Chip Fund is contained in Registration Statement No.
333-37453/811-08413 filed on December 12, 1997 and September 30, 1998.
Item 24(b). Exhibits
<TABLE>
<CAPTION>
Number Description Location
<S> <C> <C>
1 Declaration of Trust Incorporated by reference
to Registrant's
Registration Statement
Filed on October 8, 1997
2 By -laws Incorporated by reference
to Registrant's
Registration Statement
Filed on October 8, 1997
3 Not applicable
4 Provisions of instruments
defining the rights of holders
of the securities being
registered are contained in
the Declaration of Trust
Articles II, III.(6)(c),
VI.(3), IV.(8), V, VI, VII,
VIII and By -laws Articles II,
III and VIII included as part
of Exhibits 1 and 2 of this
Registration Statement
5(a) Investment Advisory and Incorporated by reference
Management Agreement between to Post-Effective
the Registrant and First Union Amendment No. 4 to
National Bank Registrant's Registration
Statement filed on
March 12, 1998 ("Post-
Effective Amendment No.
4")
22987
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<PAGE>
Number Description Location
5(b) Investment Advisory and Incorporated by reference
Management Agreement between to Post-Effective
the Registrant and Evergreen Amendment No. 4
Asset Management Corp.
.
5(c) Investment Advisory and Incorporated by reference
Management Agreement between to Post-Effective
the Registrant and Keystone Amendment No. 4
Investment Management Company
5(d) Form of Investment Advisory Incorporated by reference
and Management Agreement to Post-Effective
between the Registrant and Amendment No. 4
Meridian Investment Company
5(e) Sub-advisory Agreement between Filed herein
Evergreen Asset Management
Corp. and Lieber & Company
5(f) Form of Portfolio Management Filed
Agreement between sub-advisers herein
to
Evergreen Masters
Fund and First Union National
Bank
6(a) Class A and Class C Principal Incorporated by reference
Underwriting Agreement between to Post-Effective
the Registrant and Evergreen Amendment No. 4
Distributor, Inc.
6(b) Class B Principal Underwriting Incorporated by reference
Agreement between the to Post-Effective
Registrant and Evergreen Amendment No. 4
Investment Services, Inc. (B-
1)
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<PAGE>
Number Description Location
6(c) Class B Principal Underwriting Incorporated by reference
Agreement between the to Post-Effective
Registrant and Evergreen Amendment No. 4
Distributor, Inc. (B-2)
6(d) Class B Principal Underwriting Incorporated by reference
Agreement between the to Post-Effective
Registrant and Evergreen Amendment No. 4
Distributor, Inc.
(Evergreen/KCF)
6(e) Class Y Principal Underwriting Incorporated by reference
Agreement between the to Post-Effective
Registrant and Evergreen Amendment No. 4
Distributor, Inc.
6(f) Principal Underwriting Incorporated by reference
Agreement between the to Post-Effective
Registrant and Kokusai Amendment No. 6 to
Securities Company Limited Registrant's Registration
Statement filed on
July 31, 1998 ("Post-
Effective Amendment No.
6")
6(g) Specimen Copy of Dealer Incorporated by reference
Agreement used by Evergreen to Pre-
Distributor, Inc. Effective Amendment No. 1
to Registrant's
Registration Statement
filed on November 10,
1997 ("Pre-Effective
Amendment No. 1")
6(h) Principal Underwriting Incorporated by reference
Agreement between the to Post-Effective
Registrant and Nomura Amendment No. 6
Securities Company
22987
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<PAGE>
Number Description Location
7 Form of Deferred Compensation Incorporated by reference
Plan to Pre-
Effective Amendment No. 1
8 Custodian Agreement between Incorporated by reference
the Registrant and State to Post-Effective
Street Bank and Trust Company Amendment No. 4
9(a) Administrative Incorporated by reference
Services Agreement between to Post-Effective
Evergreen Investment Services, Amendment No. 4
Inc. and the Registrant
9(b) Master Transfer and Incorporated by reference
Recordkeeping Agreement to Post-Effective
between the Registrant and Amendment No. 4
Evergreen Service Company
10 Opinion and Consent of Incorporated by reference
Sullivan & Worcester LLP to Post-
Effective Amendment No. 2
to Registrant's
Registration Statement
filed on December 12,
1997
11(a) Consent of Incorporated by reference
PricewaterhouseCoopers LLP to Post-
Effective Amendment No. 3
to Registrant's
Registration Statement
filed on January 30, 1998
("Post-Effective
Amendment No. 3")
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<PAGE>
Number Description Location
11(b) Consent of KPMG Peat Marwick Incorporated by reference
LLP to Post-
Effective Amendment No. 3
11(c) Consent of Ernst & Young LLP
Incorporated by
reference to Post-
Effective Amendment No.
7 to Registrant's
Registration Statement
filed on
August 3, 1998
("Post-Effective
Amendment No. 7")
12 Not applicable
13 Not applicable
15(a) 12b-1 Distribution Plan for Incorporated by reference
Class A to Post-Effective
Amendment No. 4
15(b) 12b-1 Distribution Plan for Incorporated by reference
Class B (KAF B- 1) to Post-Effective
Amendment No. 4
12b-1 Distribution Plan for Incorporated by reference
15(c) Class B (KAF B- to Post-Effective
2) Amendment No. 4
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<PAGE>
Number Description Location
15(d) 12b-1 Distribution Plan for Incorporated by reference
Class B (KCF/Evergreen) to Post-Effective
Amendment No. 4
12b-1 Distribution Plan for Incorporated by reference
15(e) Class C to
Post-Effective Amendment
No. 4
16 Not applicable
17 Not applicable
18 Multiple Class Plan Incorporated by reference
to Pre-
Effective Amendment No. 1
19 Powers of Attorney Incorporated by reference
to Post-Effective
Amendment No. 7
</TABLE>
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None
Item 26. Number of Holders of Securities (as of August
31, 1998)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------- ------------------------
Evergreen Fund
Class A 27,606
Class B 87,360
Class C 1,017
Class Y 19,777
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<PAGE>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------- ------------------------
Evergreen Aggressive Growth Fund
Class A
Class B 10,298
Class C 4,924
Class Y 226
493
Evergreen Omega Fund
Class A 10,249
Class B 9,345
Class C 1,096
Class Y 17
Evergreen Micro Cap Fund
Class A 664
Class B 757
Class C 484
Class Y 926
Evergreen Small Company Growth
Fund
Class A 42,041
Class B 29,394
Class C 288
Class Y 14
Evergreen Strategic Growth Fund
Class A 34,199
Class B 12,068
Class C 53
Evergreen Stock Selector Fund
Class A 1,886
Class B 48
Class C 0
Class Y 49
Evergreen Tax Strategic Equity
Fund
Class A 0
Class B 0
Class C 0
Class Y 0
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<PAGE>
Evergreen Masters Fund
Class A 0
Class B 0
Class C 0
Class Y 0
Item 27. Indemnification.
Provisions for the indemnification of the Registrant's Trustees and
officers are contained the Registrant's Declaration of Trust.
Provisions for the indemnification of the Registrant's Investment
Advisors are contained in their respective Investment Advisory and Management
Agreements.
Provisions for the indemnification of Evergreen Distributor, Inc., the
Registrant's principal underwriter, are contained in each Principal Underwriting
Agreement between Evergreen Distributor, Inc. and the Registrant.
Item 28. Business or Other Connections of Investment Adviser.
The Directors and principal executive officers of First Union National
Bank are:
<TABLE>
<CAPTION>
<S> <C>
Edward E. Crutchfield, Jr. Chairman and Chief Executive
Officer, First Union
Corporation; Chief Executive
Officer and Chairman, First
Union National Bank
Anthony P. Terracciano President, First Union
Corporation; President First
Union National Bank
John R. Georgius Vice Chairman, First Union
Corporation; Vice Chairman,
First Union National Bank
Marion A. Cowell, Jr. Executive Vice President,
Secretary & General Counsel,
First Union Corporation;
Secretary and Executive Vice
President, First Union
National Bank
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<PAGE>
Edward E. Crutchfield, Jr. Chairman and Chief Executive
Officer, First Union
Corporation; Chief Executive
Officer and Chairman, First
Union National Bank
Robert T. Atwood Executive Vice President and
Chief Financial Officer,
First Union Corporation;
Chief Financial Officer and
Executive Vice President
First Union National Bank
</TABLE>
All of the above persons are located at the following address: First Union
National Bank, One First Union Center, Charlotte, NC 28288.
The information required by this item with respect to Evergreen Asset
Management Corp. is incorporated by reference to the Form ADV (File No.
801-46522) of Evergreen Asset Management Corp.
The information required by this item with respect to Keystone Investment
Management Company is incorporated by reference to the Form ADV (File No.
801-8327) of Keystone Investment Management Company.
The information required by this item with respect to Meridian
Investment Company is incorporated by reference to the Form ADV (File No.
801-23484) of Meridian Investment
Company.
The information required by this item with respect to Lieber & Company
is incorporated by reference to the Form ADV (File No.
801-5923) of Lieber & Company.
The information required by this item with respect to OppenheimerFunds,
Inc. is incorporated by reference to the Form ADV (File No. 801-8253) of
OppenheimerFunds, Inc.
The information required by this item with respect to Massachusetts
Financial Services Company is incorporated by reference to the Form ADV (File
No. 801-17352) of Massachusetts
Financial Services Company.
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<PAGE>
The information required by this item with respect to Putnam
Investment Management, Inc. is incorporated by reference to the
Form ADV (File No. 801-7974) of Putnam Investment Management,
Inc.
Item 29. Principal Underwriters.
The Directors and principal executive officers of Evergreen
Distributor, Inc. are:
Lynn C. Mangum Director, Chairman and Chief
Executive Officer
J. David Huber President
Kevin J. Dell Vice President, General
Counsel and Secretary
All of the above persons are located at the following address: Evergreen
Distributor, Inc., 125 West 55th Street, New York, New York 10019.
Evergreen Distributor, Inc. acts as principal underwriter for each
registered investment company or series thereof that is a part of the Evergreen
"fund complex" as such term is defined in Item 22(a) of Schedule 14A under the
Securities Exchange Act of 1934.
Item 30. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Evergreen Investment Services, Inc., Evergreen Service
Company and Keystone Investment Management Company, all
located at 200 Berkeley Street, Boston, Massachusetts 02110
First Union National Bank, One First Union Center, 201
S. College Street, Charlotte, North Carolina 28288
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Evergreen Asset Management Corp., 2500 Westchester Avenue,
Purchase, New York 10577
Meridian Investment Company, 55 Valley Stream Parkway,
Malvern, Pennsylvania 19355
OppenheimerFunds, Inc., Two World Trade Center, New York,
New York 10048
Massachusetts Financial Services Company, 500 Boylston
Street, Boston, Massachusetts 02116
Putnam Investment Management, Inc., One Post Office Square,
Boston, Massachusetts 02109
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts
02777
State Street Bank and Trust Company, 2 Heritage Drive, North
Quincy, Massachusetts 02171
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Columbus, and State of Ohio, on the 30th day of
September, 1998.
EVERGREEN EQUITY TRUST
By: /s/ William J. Tomko
------------------------
Name: William J. Tomko
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 30th day of September, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William J. Tomko /s/Laurence B. Ashkin /s/Charles A. Austin, III
- --------------- ----------------- ------------
William J. Tomko Laurence B. Ashkin*
President and Treasurer Trustee
(Principal Financial and
Accounting Officer)
Charles A. Austin III*
Trustee
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<PAGE>
/s/James S. Howell /s/William Walt Pettit
------------------ ----------------------
James S. Howell* William Walt Pettit*
Trustee Trustee
/s/K. Dun Gifford
- ----------------------
K. Dun Gifford*
Trustee
/s/Thomas L. McVerry /s/Michael S. Scofield
- ----------------------- ----------------------
Thomas L. McVerry
/s/Gerald M. McDonnell Michael S. Scofield
- ----------------- Trustee
Gerald M. McDonnell*
Trustee
/s/Russell A. Salton, III MD
/s/David M. /s/Richard J.
Richardson Shima
- ---------------- ------------------
David M. Richardson* -------------------- Richard J. Shima*
Trustee Russell A. Salton, III MD* Trustee
Trustee
/s/Leroy Keith, Jr.
- ----------------------
Leroy Keith, Jr.*
Trustee
*By:
/s/William J. Tomko
- -----------------------
William J. Tomko
Attorney-in-Fact
</TABLE>
*William J. Tomko, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons.
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<PAGE>
September 18, 1997
Lieber & Company
2500 Westchester Avenue
Purchase, New York 10577
Ladies and Gentlemen:
We have entered into an agreement with Evergreen Equity Trust, a
Delaware business trust (the "Trust"), pursuant to which we act as investment
adviser to the series under the Trust listed on Schedule A attached hereto (each
a "Fund"). We hereby agree with you as follows:
1. You agree for the duration of this Agreement that you will provide us
with office facilities and, through your research personnel, furnish us with all
such factual information and investment recommendations and such other services
as we shall reasonably request. We shall expect of you, and you shall give us,
the benefit of your best judgment and efforts in rendering these services to us,
and we agree as an inducement to your undertaking these services that you shall
not be liable to us under this paragraph for any mistake of judgment or in any
event whatsoever, except for lack of good faith. However, nothing herein shall
be deemed to protect or purport to protect you against any liability to the Fund
or its shareholders to which you would otherwise be subject by reason of wilful
misfeasance, bad faith, or gross negligence in the performance of your duties,
or by reason of your reckless disregard of your obligations and duties
hereunder.
2. We agree to reimburse you on the basis of your direct and indirect costs
of performing the services set forth in paragraph 1 above. Indirect costs shall
be allocated on a basis mutually satisfactory to you and us.
3. As used in this Agreement, the terms "assignment" and "vote of a
majority of the outstanding voting securities" shall have the meanings given to
them by Sections 2(a) (4) and 2(a) (42), respectively, of the Investment Company
Act of 1940, as amended (the "Act").
This Agreement will terminate automatically in the event of its
assignment, or upon termination of the above-mentioned agreement between the
Trust and the undersigned.
This Agreement may be terminated at any time, without the payment of
any penalty, (a) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the
1
<PAGE>
Fund or by the undersigned, on sixty days' written notice addressed to you at
your principal place of business; and (b) by you, without payment of any
penalty, on sixty days' written notice addressed to the Trust and the
undersigned at the Trust's principal place of business.
This Agreement shall be in effect for two years from the date set forth
above. This Agreement shall continue in effect from year to year thereafter so
long as such continuance is specifically approved at least annually by a
majority of the Trustees of the Trust who are not interested persons (as such
term is defined in the Act) of any party to this Agreement, voting in person at
a meeting called for the purpose of voting on such approval, and by a vote of
the Trustees of the Trust or a majority of the outstanding voting securities of
the Fund.
You agree to advise us of any change in your partnership within a
reasonable time after such a change.
4. This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged by you.
5. It is expected that you will provide brokerage services to the Fund.
Accordingly, you agree to comply with Section 11(a)(1) of the Securities
Exchange Act of 1934 and any rules prescribed by the Securities and Exchange
Commission thereunder, as amended from time to time, with respect to brokerage
transactions effected and/or executed by you on behalf of the Fund. In addition,
you shall furnish at least annually to us a statement setting forth the total
amount of all compensation retained by you in connection with effecting and/or
executing transactions for the account during the period covered by the
statement, as required by Section 11(a)(1).
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart hereof and return the same to us.
Very truly yours,
EVERGREEN ASSET MANAGEMENT CORP.
The foregoing Agreement is By:
hereby accepted as of the Name:
date first above written Title:
LIEBER & COMPANY
By:
Name:
Title:
2
<PAGE>
SCHEDULE A
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Small Cap Equity Income Fund
Evergreen Growth and Income Fund
Evergreen Income and Growth Fund
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Masters Fund
3
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this ___ day of ______, 1998, by and between First Union
National Bank, a national banking association, (the "Advisor"), and
______________________________ , ___________________corporation (the "Manager").
WHEREAS, the Advisor has been organized to serve as investment manager
of the Evergreen Masters Fund ("Fund"), a series of Evergreen Equity Trust (the
"Trust"), a Delaware business trust which has filed a registration statement
under the Investment Company Act of 1940, as amended (the "1940 Act") and the
Securities Act of 1933 (the "Registration Statement"); and
WHEREAS, the Trust is comprised of several separate investment portfolios,
one of which is the Fund; and
WHEREAS, the Advisor desires to avail itself of the services, advice
and assistance of the Manager to assist the Advisor in providing investment
advisory services to the Fund; and
WHEREAS, the Manager is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), is engaged in the business of rendering
investment advisory services to investment companies and other institutional
clients and desires to provide such services to the Advisor;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follow:
1. Employment of the Advisor. The Advisor hereby employs the Manager to
manage the investment and reinvestment of that portion of the Fund which the
Advisor allocates to the Manager from time to time (the "Account"), subject to
the control and direction of the Trust's Board of Trustees, for the period and
on the terms hereinafter set forth. The Manager hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth for the compensation herein provided. The Manager
shall for all purposes herein be deemed to be an independent contractor and
shall, except as expressly provided or authorized (whether herein or otherwise),
have no authority to act for or represent the Advisor, the Fund or the Trust in
any way. The Manager may execute account documentation, agreements, contracts
and other documents requested by brokers, dealers, counterparties and other
persons in connection with its management of the Account.
2. Rebalancing of the Fund. In addition to the Manager, the Advisor
intends to appoint three other sub-advisers to assist in the management of the
Fund's assets, and to allocate to each sub-adviser 25% of all Fund inflows from
share sales and distribution reinvestments and 25% of all Fund outflows from
share redemptions and cash distributions. The Advisor and the Manager
acknowledge that market action may result in each sub-adviser managing more or
less than 25%
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of the Fund's assets at any point in time. The Advisor agrees that it will not
actively reallocate Fund assets among the sub-advisers unless average daily net
assets allocated to one sub-adviser (i) exceeds 35% or (ii) is less than 15%, in
each case of average daily net assets of the Fund for three consecutive calendar
months. Upon the occurrence of such an event, then Advisor may, but shall not be
obligated to, reallocate Fund assets among the sub-advisers so as to provide for
more equal distribution of Fund assets among sub-advisers. The Advisor shall
provide each sub- adviser affected by such reallocation with at least 30 days
prior notice thereof.
3. Obligations of Services to be Provided by the Manager. The Manager
undertakes to provide the following services and to assume the following
obligations:
a. The Manager shall manage the investment and reinvestment of the
portfolio assets of the Account, all without prior consultation with the
Advisor, subject to and in accordance with (i) the investment objective and
policies of the Fund set forth in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect (the "Governing
Documents") (ii) the requirements applicable to registered investment companies
under applicable laws, including without limitation the Investment Company Act
of 1940 ("1940 Act") and Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code") and (iii) any written instructions which the Advisor or the
Trust's Board of Trustees may issue from time-to-time; provided, however, that
for purposes of determining compliance with the Governing Documents and with
applicable law, the Manager may treat the Account as if it constituted the
entire Fund. The Manager also agrees to conduct its activities hereunder in
accordance with any applicable procedures or policies adopted by the Trust's
Board of Trustees as from time to time in effect (the "Procedures"). The Advisor
has provided to the Manager copies of all Governing Documents and Procedures and
shall promptly provide to the Manager any amendments or supplements thereto.
Subject to and in pursuance of the foregoing, the Manager shall make all
determinations with respect to the purchase and sale of portfolio securities and
shall take such action necessary to implement the same. The Manager shall render
such reports to the Trust's Board of Trustees and the Advisor as they may
reasonably request concerning the investment activities of the Account. Unless
the Advisor gives the Manager written instructions to the contrary, the Manager
shall, in good faith and in a manner which it reasonably believes best serves
the interests of the Account's shareholders, direct the Account's custodian as
to how to vote such proxies as may be necessary or advisable in connection with
any matters submitted to a vote of shareholders of securities held in the
Account.
b. Absent instructions of the Advisor to the contrary, the Manager
shall, in the name of the Fund, place orders for the execution of portfolio
transactions with or through such brokers, dealers or other financial
institutions as it may select. The Manager shall use its best efforts to obtain
"best execution" on all portfolio transactions executed on behalf of the Fund,
provided that, so long as the Manager has complied with Section 28(e) of the
Securities Exchange Act of 1934, the Manager may cause the Fund to pay a
commission on a transaction in excess of the amount of commission another
broker-dealer would have charged.
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<PAGE>
c. In connection with the placement of orders for the execution of the
portfolio transactions of the Account, the Manager shall create and maintain all
necessary records pertaining to the purchase and sale of securities by the
Manager on behalf of the Account in accordance with all applicable laws, rules
and regulations, including but not limited to records required by Section 31(a)
of the 1940 Act. All records shall be the property of the Trust and shall be
available for inspection and use by the Securities and Exchange Commission
("SEC"), the Trust, the Advisor or any person retained by the Trust at all
reasonable times. Where applicable, such records shall be maintained by the
Manager for the periods and in the places required by Rule 31a-2 under the 1940
Act.
d. The Manager shall bear its expenses of providing services pursuant
to this Agreement.
4. Compensation of the Manager. In full consideration of services
rendered pursuant to this Agreement, the Advisor will pay the Manager a fee at
the annual rate set forth in Schedule A hereto of the value of the Account's
average daily net assets. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month. If the Manager shall serve for
less than the whole of any month, the foregoing compensation shall be prorated.
For the purpose of determining fees payable to the Manager, the value of the
Account's net assets shall be computed at the times and in the manner that the
Fund's net assets are computed, as specified in the Governing Documents.
5. Other Activities of the Manager. The services of the Manager
hereunder are not to be deemed exclusive, and the Manager shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired.
6. Use of Names. The Advisor shall not use the name of the Manager or
any of its affiliates in any prospectus, sales literature or other material
relating to the Trust or the Fund in any manner not approved prior thereto by
the Manager; provided, however, that the Advisor may use the name of the Manager
and its affiliates in any such material that merely refers in accurate terms to
the Manager's appointment hereunder. The Manager shall not use the name of the
Trust or the Advisor in any material relating to the Manager in any manner not
approved prior thereto by the Advisor; provided, however, that the Manager may
use the name of the Advisor or the Trust in any material that merely refers in
accurate terms to the appointment of the Manager hereunder.
7. Liability of the Manager. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder on
the part of the Manager, the Manager shall not be liable for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
Subject to the foregoing, nothing herein shall constitute a waiver of any rights
or remedies which the Trust may have under any federal or state securities laws.
8. Limitation of Trust's Liability. The Manager acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Agreement and
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<PAGE>
Declaration of Trust. The Manager agrees that any of the Trust's obligations
shall be limited to the assets of the Fund and that the Manager shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trust officer, employee or agent of the Trust.
9. Renewal, Termination and Amendment. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and shall continue in full force and effect for
successive periods of one year thereafter, but only so long as each such
continuance is specifically approved at least annually by vote of the holders of
a majority of the outstanding voting securities of the Fund or by vote of a
majority of the Trustees who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. This Agreement may be terminated at any time without
payment of any penalty, by the Trust's Board of Trustees, by the Advisor, or by
a vote of a majority of the outstanding voting securities of the Fund upon 60
days' prior written notice to the Manager or by the Manager upon 90 days' prior
written notice to the Advisor, or upon such shorter notice as may be mutually
agreed upon. This Agreement shall terminate automatically and immediately upon
termination of the Investment Advisory and Management Agreement between the
Advisor and the Trust. This Agreement shall terminate automatically and
immediately in the event of its assignment. The terms "assignment" and "vote of
a majority of the outstanding voting securities" shall have the meaning set
forth for such terms in the 1940 Act. This Agreement may be amended at any time
by the Manager and the Advisor, subject to approval by the Trust's Board of
Trustees and, if required by applicable SEC rules and regulations, a vote of a
majority of the Fund's outstanding voting securities.
10. Confidential Relationship. Any information and advice furnished by
either party to this Agreement to the other shall be treated as condidential and
shall not be disclosed to third parties without the consent of the other party
hereto except as requiredby law, rule or regulation. The Advisor hereby consents
to the disclosure to third parties of investment results and other data of the
Account in connection with providing composite investment results and related
information of the Manager.
11. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statue, rule or otherwsise, the remainder of
this Agreement shall not be affected thereby.
12. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the
Commonwealth of Massachusetts. The captions in this Agreement are included for
convience only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed in
several counterparts, all of which together shall for all purposes constitute
one Agreement, binding on the parties.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
FIRST UNION NATIONAL BANK
By: _______________________________
Authorized Officer
[MANAGER]
By: _______________________________
Authorized Officer
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SCHEDULE A
Evergreen Masters Fund ____% of average daily net assets of the
Account
-6-
<PAGE>
