1933 Act No. 333-37453
1940 Act No. 811-8413
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. 4 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 3 [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)
[X] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
<PAGE>
EVERGREEN EQUITY TRUST
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 4
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 4 to Registrant's Registration Statement
No. 333-37453/811-8413 consists of the following pages, items of information and
documents:
The Facing Sheet
The Contents Page
The Cross-Reference Sheet
PART A
------
Prospectuses for Evergreen Core Stock Fund are contained
herein.
Prospectuses for Evergreen Aggressive Growth Fund, Evergreen Fund,
Evergreen Micro Cap Fund, Evergreen Omega Fund, Evergreen Small Company Growth
Fund and Evergreen Strategic Growth Fund are contained in Registration Statement
No.
333-37453/811-8413 filed on January 30, 1998.
Prospectuses for the following funds are contained in Registration
Statement No. 333-37453/811-8413 filed on December 12, 1997: Evergreen American
Retirement Fund, Evergreen Foundation Fund, Evergreen Tax Strategic Foundation
Fund, 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.
Prospectuses for Evergreen Balanced Fund are contained in Registration
Statement No. 333-37453/811-8413 filed on November 10, 1997.
PART B
------
Statement of Additional Information for Evergreen Core Stock Fund,
Evergreen Aggressive Growth Fund, Evergreen Fund, Evergreen Micro Cap Fund,
Evergreen Omega Fund, Evergreen Small Company
<PAGE>
Growth Fund and Evergreen Strategic Growth Fund is contained herein.
Statement of Additional Information for the following funds are
contained in Registration Statement No. 333-37453/811-8413 filed on December 12,
1997:
Evergreen American Retirement Fund, Evergreen Foundation Fund,
Evergreen Tax Strategic Foundation Fund, 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.
Statement of Additional Information for Evergreen Balanced Fund is
contained in Registration Statement No.
333-37453/811-8413 filed on November 10, 1997.
PART C
------
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
<PAGE>
EVERGREEN EQUITY TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
<TABLE>
<CAPTION>
ITEM OF PART A OF FORM N-1A LOCATION IN PROSPECTUS
<S> <C>
1. Cover Page Cover Page
2. Synopsis and Fee Table Cover Page; Expense
Information
Not
3. Condensed Financial applicable
Information
4. General Description of
Registrant Cover Page;
Description
of the Funds;
Organization; General
Information
5. Management of the Fund
Service Providers
6. Capital Stock and Other
Securities Dividends, Distributions
and Taxes;
General Information
7. Purchase of Securities
Being Offered Purchase and Redemption
of Shares
Purchase and
Redemption of Shares
8. Redemption or Repurchase
9. Pending Legal Proceedings Not Applicable
</TABLE>
<TABLE>
<CAPTION>
ITEM IN PART B OF FORM N-1A LOCATION IN STATEMENT OF
ADDITIONAL INFORMATION
<S> <C>
10. Cover Page
Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives and Securities and
Policies Investment Practices;
Investment Restrictions
and Guidelines
14. Management of the Fund
Investment Advisory
Services
15. Control Persons and
Principal Holders of Control Persons and
Securities Principal Holders of
Securities
16. Investment Advisory and
Other Services
Investment
Advisory
and Other Services
17. Brokerage Allocation Brokerage Allocation and
Other Practices
18. Capital Stock and Other Description of
Securities Shares;
Voting Rights; Limitation
of Trustees' Liability
19. Purchase, Redemption and Purchase,
Pricing of Securities Redemption and Pricing of
Being Offered Securities
Being Offered
20. Tax Status
Additional Tax Information
21. Underwriters Principal Underwriter
22. Calculation of
Performance Data
Calculation of Performance
Data
<PAGE>
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
PROSPECTUS June 1, 1998
EVERGREEN DOMESTIC GROWTH FUNDS
Evergreen Core Stock Fund (Evergreen Tree Logo)
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Core Stock Fund (the "Fund") seeks maximum total return
by investing in a diversified portfolio of common stocks.
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 for the Fund dated February 1,
1998, as amended June 1, 1998, and as supplemented from time to time, has been
filed with the Securities and Exchange Commission and is incorporated by
reference herein. The Statement of Additional Information provides information
regarding certain matters discussed in this prospectus and other matters which
may be of interest to investors, and may be obtained without charge by calling
the 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 and involves risk,
including the
possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Keep This Prospectus For Future Reference
<PAGE>
TABLE OF CONTENTS
EXPENSE INFORMATION.......................................................4
FINANCIAL HIGHLIGHTS......................................................6
DESCRIPTION OF THE FUND...................................................6
INVESTMENT OBJECTIVE AND POLICIES................................6
INVESTMENT PRACTICES AND RESTRICTIONS............................7
ORGANIZATION AND SERVICE PROVIDERS.......................................14
ORGANIZATION....................................................14
SERVICE PROVIDERS...............................................15
DISTRIBUTION PLANS AND AGREEMENTS...............................16
PURCHASE AND REDEMPTION OF SHARES........................................17
HOW TO BUY SHARES...............................................17
HOW TO REDEEM SHARES............................................24
EXCHANGE PRIVILEGE..............................................26
SHAREHOLDER SERVICES............................................28
BANKING LAWS....................................................29
OTHER INFORMATION........................................................30
DIVIDENDS, DISTRIBUTIONS AND TAXES..............................30
GENERAL INFORMATION.............................................32
<PAGE>
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>
SHAREHOLDER TRANSACTION Class A Class B Class C
EXPENSES Shares Shares Shares
<S> <C> <C> <C>
Maximum Sales Charge 4.75% None None
Imposed on Purchases
(as a % of offering
price)
Maximum Sales Charge None None None
Imposed on Reinvested
Dividends (as a % of
offering price)
Maximum Contingent None(1) 5%(2) 1%(2)
Deferred Sales 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, 1998. 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 a Fund see "Organization and Service Providers."
<PAGE>
<TABLE>
<CAPTION>
Evergreen Core Stock Fund
Annual Operating Expenses
Class A Class B Class C
<S> <C> <C> <C>
Management Fees (After .69% .69% .69%
Waiver)(3)
12b-1 Fees(4) .25% 1.00% 1.00%
Other Expenses .29% .29% .29%
---- ---- ----
Total(3) 1.23% 1.98% 1.98%
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Examples
Assuming Redemption at Assuming no
End of Period Redemption
Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C>
After 1 Year $59 $70 $30 $20 $20
After 3 Years $85 $92 $62 $62 $62
- ---------------
</TABLE>
(1) Investments of $1 million or more are not subject to a front-end sales
charge, but may be subject to a contingent deferred sales charge upon
redemption within one year after the month of purchase.
(2) The deferred sales charge on Class B shares declines from 5%
to 1% on amounts redeemed within six years after the month
of purchase. The deferred sales charge on Class C shares is
1% on amounts redeemed within one year after the month of
purchase. No sales charge is imposed on redemptions made
thereafter. See "Purchase and Redemption of Shares" for
more information.
(3) The management fee has been reduced from .74% to reflect the
voluntary waiver by the investment adviser. This voluntary
waiver can be terminated at any time. The investment
adviser has undertaken to limit the Fund's Total Annual
Operating Expenses for a period of at least two years from
the date of this prospectus to 1.27%, 2.02% and 2.02% of the
average daily net assets of the Fund's Class A, Class B and
Class C shares, respectively. Absent the management fee
waiver and the limitation on Total Annual Operating
Expenses, such estimated expenses for the fiscal period
ended September 30, 1998 will be 1.28%, 2.03% and 2.03% of
<PAGE>
the average daily net assets of the Fund's Class A, Class B and Class C
shares, respectively.
(4) Long-term shareholders may pay more than the economic equivalent
front-end sales charges permitted by the National Association of
Securities Dealers, Inc.
FINANCIAL HIGHLIGHTS
As of the date of this prospectus the Fund had not commenced
operations. Consequently, 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 Statement of Additional Information
("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 Evergreen Core Stock Fund seeks maximum total return. The Evergreen
Core Stock Fund strives to provide a total return greater than broad stock
market indices such as the Standard & Poor's 500 Composite Stock Price Index by
investing principally in a diversified portfolio of common stocks of companies
that its investment adviser expects will experience growth in earnings and price
including stocks of companies with large market capitalizations (i.e., over $5
billion), medium market capitalizations (i.e., $1 billion and $5 billion) and
small market capitalizations (i.e., under $1 billion). In addition, up to 20% of
the Evergreen Core Stock Fund's total assets may be invested in preferred
stocks, securities convertible into common stock, corporate bonds and notes,
warrants (up to 5% of total assets), short-term obligations and foreign
securities represented by sponsored and unsponsored American Depositary
Receipts.
Debt securities, which include both secured and unsecured obligations,
will, at the time of investment, be rated within the three highest categories by
S&P (AAA, AA and A), by Moody's (Aaa, Aa and A), by Fitch (AAA, AA and A), or if
not rated or rated
<PAGE>
under a different system, will be of comparable quality to obligations so rated,
as determined by the Fund's investment adviser.
The Evergreen Core Stock Fund may invest in certain types of derivative
instruments, including options and futures contracts, provided that the Fund may
neither purchase futures contracts or options where premiums and margin deposit
exceed 5% of total assets nor enter into futures contracts or options where its
obligations would exceed 20% of its total assets.
The Evergreen Core Stock Fund also may invest, for temporary defensive
purposes, up to 100% of its assets in short-term obligations. Such obligations
may include master demand notes, U.S. government securities, commercial paper
and notes, bank deposits and other financial institution obligations.
In addition to the investment policies detailed above, the Evergreen
Core Stock Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions."
INVESTMENT PRACTICES AND RESTRICTIONS
Investment in Small and Mid-Sized Companies. Investments in securities of
little-known, relatively small or mid-sized 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 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 that the Fund invests in the securities of small and mid-sized companies,
the net asset value of the Fund's shares can be expected to vary significantly.
Accordingly, the Fund should not be considered suitable for investors who are
unable or unwilling to assume the associated risks, nor should investment in the
Fund be considered a balanced or complete investment program.
<PAGE>
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 United States because of
differences in the legal systems. Foreign securities may be subject to foreign
taxes, which may reduce yield, and may be less marketable than comparable U.S.
securities. All these factors are considered by the Fund's investment adviser
before making any of these types of investments.
Investing in securities of issuers in emerging markets countries
involves exposure to economic systems that are generally less mature and
political systems that are generally less stable than those of developed
countries. In addition, investing in companies in emerging markets countries may
also involve exposure to national policies that may restrict investment by
foreigners and undeveloped legal systems governing private and foreign
investments and private property. The typically small size of the markets for
securities issued by companies in emerging markets countries and the possibility
of a low or nonexistent volume of trading in those securities may also result in
a lack of liquidity and in price volatility of those securities.
Downgrades. If any security in which the Fund invests loses its rating or has
its rating reduced after the Fund has purchased it, the Fund is not required to
sell or otherwise dispose of the security, but may consider doing so.
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 investment adviser will
<PAGE>
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.
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 30% 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
<PAGE>
extraordinary or emergency purposes such as the redemption of Fund shares. The
Fund will not purchase securities while borrowings are outstanding except to
exercise prior commitments and to exercise subscription rights. The Fund does
not intend to leverage.
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 the Fund's
ability to raise cash for redemptions or other purposes.
Restricted Securities. The Fund may invest up to 15% of its net assets in
restricted securities, including securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933 (the "1933 Act"). Generally, Rule 144A
establishes a safe harbor from the registration requirements of the 1933 Act for
resale by large institutional investors of securities not publicly traded in the
United States. The Fund's investment adviser determines the liquidity of Rule
144A securities according to guidelines and procedures adopted by Evergreen
Equity Trust's Board of Trustees. The Board of Trustees monitors the investment
adviser's application of those guidelines and procedures. Securities eligible
for resale pursuant to Rule 144A, which the Fund's investment adviser has
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 their 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
their 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.
<PAGE>
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.
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
<PAGE>
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, they put 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 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
<PAGE>
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 contract and any related options
to react to market changes differently than the portfolio securities. In
addition, the Fund's investment adviser could be incorrect in its 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 investment adviser correctly predicts interest rate movements, a hedge
could be unsuccessful if changes in the value of the Fund's futures position did
not correspond to changes in the value of its 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 investment adviser 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 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.
ORGANIZATION AND SERVICE PROVIDERS
<PAGE>
ORGANIZATION
Fund Structure. The Fund is an investment pool, which invests shareholders'
money toward a specified goal. In technical terms, 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 participate in dividends and distributions
from the Fund's assets and have equal voting, liquidation and other rights.
Shareholders may exchange shares as described under "Exchanges," but will have
no other preference, conversion, exchange or preemptive rights. When issued and
paid for, shares will be fully paid and nonassessable. Shares of the Fund are
redeemable, transferable and freely assignable as collateral. The Fund 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. If any matters are to be voted on by shareholders,
each share owned as of the record date for the meeting would be entitled to one
vote for each dollar of net asset value applicable to each share.
SERVICE PROVIDERS
Investment Adviser. The investment adviser of Evergreen Core Stock Fund is
Meridian Investment Company ("Meridian"). Meridian is an indirect subsidiary of
First Union National Bank ("FUNB"). FUNB is a subsidiary of First Union
Corporation ("First Union"). Meridian's address is 55 Valley Stream Parkway,
Malvern, Pennsylvania 19355. Both FUNB and First Union are located at 201 South
College Street, Charlotte, North Carolina 28288-0630. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.
<PAGE>
Meridian receives an annual fee equal to 0.74% of average daily net
assets of Evergreen Core Stock Fund.
Portfolio Manager. The Portfolio Manager of the Fund is Joseph E. Stocke, CFA.
Mr. Stocke is a Senior Investment Manager/Equities with Meridian and has been
with Meridian since 1983. Mr. Stocke currently manages the Special Equity Fund
and Core Equity Fund of CoreFunds, Inc.
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 the mutual funds advised by First Union
subsidiaries. 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 Act") (each a "Plan" or collectively the "Plans"). Under
the
<PAGE>
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 adviser or its affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts. The Fund may not pay any distribution or service fees during any
fiscal period in excess of the amounts set forth above. Amounts paid under the
Distribution Plans are used to compensate the Fund's distributor pursuant to the
Distribution Agreements entered into by the Fund.
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 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 Plans to secure such financings), (2) to otherwise
promote the sale of shares of the Fund, and (3) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the 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
<PAGE>
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 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>
Initial Sales Charge
<PAGE>
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 advisers; (b) investment advisers, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory or
other fee; (c) clients of investment advisers or financial planners who place
trades for their own accounts if the accounts are linked to the master account
of such investment advisers or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with 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) and upon the initial purchase of an
Evergreen fund by
<PAGE>
investors reinvesting the proceeds from a redemption within the preceding thirty
days of shares of other mutual funds, provided such shares were initially
purchased with a front-end sales charge or subject to a CDSC. Certain
broker-dealers or other financial institutions may impose a fee on transactions
in shares of the 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.
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.
<TABLE>
<CAPTION>
CDSC
Redemption Timing Imposed
<S> <C>
Month of purchase and the first twelve-month
<PAGE>
period following the month of purchase..........................................................5.00%
Second twelve-month period following the
month of purchase...............................................................................4.00%
Third twelve-month period following the
month of purchase...............................................................................3.00%
Fourth twelve-month period following the
month of purchase...............................................................................3.00%
Fifth twelve-month period following the
month of purchase...............................................................................2.00%
Sixth twelve-month period following the
month of purchase...............................................................................1.00%
No CDSC is imposed on amounts redeemed thereafter.
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to
EDI. In the event 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 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.
<PAGE>
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 trailing commission equal to 0.75% of the average daily net asset
value of such shares on an annual basis held by their clients more than one year
from the date of purchase. Trailing commissions will commence immediately with
respect to shares eligible for exemption from the CDSC normally applicable to
Class C shares.
Contingent Deferred Sales Charge. Certain shares with respect to which the Fund
did not pay a commission on issuance, including shares obtained from dividend or
distribution reinvestment, are not subject to a CDSC. Any CDSC imposed upon the
redemption of Class A, Class B or Class C shares is a percentage of the lesser
of (1) the net asset value of the shares redeemed or (2) the net asset value at
the time of purchase of such shares.
No CDSC is imposed on a redemption of shares of 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, Meridian, Keystone Investment
Management Company ("Keystone"), Evergreen Asset Management Corp. ("Evergreen
Asset"), EDI and certain of their affiliates, and to members of the immediate
families of such persons, to registered representatives of firms with dealer
agreements with EDI, and to a bank or trust company acting as a trustee for a
single account.
<PAGE>
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, 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 or other incentives
that are conditioned upon the sale of a specified minimum dollar amount of
shares of the Fund and/or other Evergreen funds. Such incentives will take the
form of payment for attendance at seminars, lunches, dinners, sporting events or
theater performances, or payment for travel, lodging and entertainment incurred
in connection with travel by persons associated with a broker-dealer and their
immediate family members to urban or resort locations within or outside the
United States. Such a dealer may elect to receive cash incentives of equivalent
amount in lieu of such payments. EDI may also limit the availability of such
incentives to certain specified dealers. EDI from time to time sponsors
promotions involving First Union Brokerage Services, Inc., an affiliate of the
Fund's investment adviser, and select broker-dealers, pursuant to which
incentives are paid, including gift certificates and payments in amounts up to
1% of the dollar amount of shares of 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
<PAGE>
broker-dealers. Certain broker-dealers may also receive payments from EDI or the
Fund's investment adviser over and above the usual trail commissions or
shareholder servicing payments applicable to a given class of shares.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Fund's investment
adviser 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
adviser 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 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. Send a signed letter of
instruction or stock power form to the Fund, c/o ESC, the registrar, transfer
agent and dividend-disbursing agent for 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
<PAGE>
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. 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.
<PAGE>
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, 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.
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
Securities and Exchange Commission ("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 the other Evergreen funds through your financial
intermediary by calling or writing to ESC or by using the Evergreen Express Line
as described above. Once an exchange request has been telephoned or mailed, it
is irrevocable and may not be modified or canceled. Exchanges will be made on
the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. An exchange which represents
an initial investment in another Evergreen fund is subject to the minimum
investment and suitability requirements of each fund.
Each of the Evergreen funds has different investment
objectives and policies. For complete information, a prospectus
<PAGE>
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.
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
<PAGE>
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.
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
the other Evergreen funds available to their participants. Investments made by
such employee benefit plans may be exempt from front-end sales charges if they
meet the criteria set forth under "Class A Shares - Front-End Sales Charge
Alternative." Evergreen Asset, Keystone, 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.
<PAGE>
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.
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 adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. FUNB and
its affiliates are subject to and in compliance with the aforementioned laws and
regulations.
<PAGE>
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 adviser. 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 realized capital gains at least annually. Shareholders receive
Fund distributions in the form of additional shares of that class of shares upon
which the distribution is based or, at the shareholder's option, in cash.
Shareholders of 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 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
<PAGE>
"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 it does 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
United States may reduce or eliminate such taxes. Shareholders of the Fund who
are subject to United States federal income tax may be entitled, subject to
certain rules and limitations, to claim a federal income tax credit or deduction
for foreign income taxes paid by the Fund. See the SAI for additional details.
The Fund's transactions in options, futures and forward contracts may be subject
to special tax rules. These rules can affect the amount, timing and
characteristics of distributions to shareholders.
The 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 ninety days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of 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
<PAGE>
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 adviser as to the tax consequences of investments in the
Fund, including the application of state and local taxes which may be different
from the federal income tax consequences described above.
GENERAL INFORMATION
Portfolio Turnover. The estimated annual portfolio turnover rate for 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. See the SAI for
further information regarding the practices of the Fund affecting portfolio
turnover.
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, 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, Meridian, Evergreen Asset, Keystone or
their affiliates. The dividends payable with respect to Class A, Class B and
Class C shares will be less than those payable with respect to Class Y shares
due to the distribution and shareholder servicing-related expenses borne by
Class A, Class B and Class C shares and the fact that such expenses are not
borne by Class Y shares. Investors should telephone (800) 343-2898 to obtain
more information on other classes of shares.
<PAGE>
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 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 twelve-month period by the
maximum public offering price per share on the last day of the period. Investors
should be aware that past performance may not be 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
<PAGE>
tolerance, and goal setting; a questionnaire designed to help create a personal
financial profile; and an action plan offering investment alternatives. The
information provided to investors may also include discussions of other
Evergreen funds, products, and services, which may include: retirement
investing; brokerage products and services; the effects of periodic investment
plans and dollar cost averaging; saving for college; and charitable giving. In
addition, the information provided to investors may quote financial or business
publications and periodicals, including model portfolios or allocations, as they
relate to fund management, investment philosophy, and investment techniques. The
materials 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.
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.
<PAGE>
Investment Adviser
Meridian Investment Company, 55 Valley Stream Parkway, Malvern,
Pennsylvania 19355
Custodian
State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827
Transfer Agent
Evergreen Service Company, 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
<PAGE>
PROSPECTUS June 1, 1998
EVERGREEN DOMESTIC GROWTH FUNDS
Evergreen Core Stock Fund (Evergreen Tree Logo)
CLASS Y SHARES
The Evergreen Core Stock Fund (the "Fund") seeks maximum total return
by investing in a diversified portfolio of common stocks.
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 for the Fund dated February 1,
1998, as amended June 1, 1998, and as supplemented from time to time, has been
filed with the Securities and Exchange Commission and is incorporated by
reference herein. The Statement of Additional Information provides information
regarding certain matters discussed in this prospectus and other matters which
may be of interest to investors, and may be obtained without charge by calling
the 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 and involves risk,
including the
possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
<PAGE>
TABLE OF CONTENTS
EXPENSE INFORMATION.........................................................3
FINANCIAL HIGHLIGHTS........................................................4
DESCRIPTION OF THE FUND.....................................................4
INVESTMENT OBJECTIVE AND POLICIES..................................4
INVESTMENT PRACTICES AND RESTRICTIONS..............................5
ORGANIZATION AND SERVICE PROVIDERS.........................................12
ORGANIZATION......................................................12
SERVICE PROVIDERS.................................................13
PURCHASE AND REDEMPTION OF SHARES..........................................14
HOW TO BUY SHARES.................................................14
HOW TO REDEEM SHARES..............................................15
EXCHANGE PRIVILEGE................................................18
SHAREHOLDER SERVICES..............................................19
BANKING LAWS......................................................20
OTHER INFORMATION..........................................................21
DIVIDENDS, DISTRIBUTIONS AND TAXES................................21
GENERAL INFORMATION...............................................23
<PAGE>
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 Class Y
Shares
Sales Charge Imposed on Purchases None
Sales Charge Imposed on Dividend None
Reinvestments
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, 1998. 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."
<PAGE>
<TABLE>
<CAPTION>
Evergreen Core Stock Fund
Annual Operating Expenses Example
------------------------- -------
<S> <C> <C> <C>
Management Fees After 1
(After Waiver)(1) 0.69% Year $10
Other Expenses 0.29%
Total (1) 0.98% After 3 $31
Years
</TABLE>
- -----------------
(1) The management fee has been reduced from 0.74% to reflect
the voluntary waiver by the investment adviser. This
voluntary waiver can be terminated at any time. The
investment adviser has undertaken to limit the Fund's Total
Annual Operating Expenses for a period of at least two years
from the date of this Prospectus to 1.02% of Class Y shares'
average daily net assets. Absent the management fee waiver
and the limitation on Total Annual Operating Expenses, such
estimated expenses for the fiscal period ended September 30,
1998 will be 1.03% of Class Y shares' average daily net
assets.
FINANCIAL HIGHLIGHTS
As of the date of this prospectus the Fund had not commenced
operations. Consequently, 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 Statement of Additional Information
("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 Evergreen Core Stock Fund seeks maximum total return. The Evergreen
Core Stock Fund strives to provide a total return greater than broad stock
market indices such as the Standard & Poor's 500 Composite Stock Index by
investing principally in a
<PAGE>
diversified portfolio of common stocks of companies that its investment adviser
expects will experience growth in earnings and price including stocks of
companies with large market capitalizations (i.e., over $5 billion), medium
market capitalizations (i.e., $1 billion and $5 billion) and small market
capitalizations (i.e., under $1 billion). In addition, up to 20% of the
Evergreen Core Stock Fund's total assets may be invested in preferred stocks,
securities convertible into common stock, corporate bonds and notes, warrants
(up to 5% of total assets), short-term obligations and foreign securities
represented by sponsored and unsponsored American Depositary Receipts.
Debt securities, which include both secured and unsecured obligations,
will, at the time of investment, be rated within the three highest categories by
S&P (AAA, AA and A), by Moody's (Aaa, Aa and A), by Fitch (AAA, AA and A), or if
not rated or rated under a different system, will be of comparable quality to
obligations so rated, as determined by the Fund's investment adviser.
The Evergreen Core Stock Fund may invest in certain types of derivative
instruments, including options and futures contracts, provided that the Fund may
neither purchase futures contracts or options where premiums and margin deposit
exceed 5% of total assets nor enter into futures contracts or options where its
obligations would exceed 20% of its total assets.
The Evergreen Core Stock Fund also may invest, for temporary defensive
purposes, up to 100% of its assets in short-term obligations. Such obligations
may include master demand notes, U.S. government securities, commercial paper
and notes, bank deposits and other financial institution obligations.
In addition to the investment policies detailed above, the Evergreen
Core Stock Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions."
INVESTMENT PRACTICES AND RESTRICTIONS
Investment in Small and Mid-Sized Companies. Investments in securities of
little-known, relatively small or mid-sized 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
<PAGE>
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 that the Fund invests in
securities of small and mid-sized companies, the net asset value of the Fund's
shares can be expected to vary significantly. Accordingly, the Fund should not
be considered suitable for investors who are unable or unwilling to assume the
associated risks, nor should investment in the Fund be considered a balanced or
complete investment program.
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 United States because of
differences in the legal systems. Foreign securities may be subject to foreign
taxes, which may reduce yield, and may be less marketable than comparable U.S.
securities. All these factors are considered by the Fund's investment adviser
before making any of these types of investments.
Investing in securities of issuers in emerging markets countries
involves exposure to economic systems that are generally less mature and
political systems that are generally less stable than those of developed
countries. In addition, investing in companies in emerging markets countries may
also involve exposure to national policies that may restrict investment by
foreigners and undeveloped legal systems governing private and foreign
investments and private property. The typically small size of the markets for
securities issued by companies in emerging markets countries and the possibility
of a low or nonexistent volume of trading in those securities may also result in
a lack of liquidity and in price volatility of those securities.
<PAGE>
Downgrades. If any security in which the Fund invests loses its rating or has
its rating reduced after the Fund has purchased it, the Fund is not required to
sell or otherwise dispose of the security, but may consider doing so.
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 investment adviser 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.
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 30% 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
<PAGE>
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 will not purchase securities while borrowings are
outstanding except to exercise prior commitments and to exercise subscription
rights. The Fund does not intend to leverage.
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 the Fund's
ability to raise cash for redemptions or other purposes.
Restricted Securities. The Fund may invest up to 15% of its net assets in
restricted securities, including securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933 (the "1933 Act"). Generally, Rule 144A
establishes a safe harbor from the registration requirements of the 1933 Act for
resale by large institutional investors of securities not publicly traded in the
United States. The Fund's investment adviser determines the liquidity of Rule
144A securities according to guidelines and procedures adopted by Evergreen
Equity Trust's Board of Trustees. The Board of Trustees monitors the investment
adviser's application of those guidelines and procedures. Securities eligible
for resale pursuant to Rule 144A, which the Fund's investment adviser has
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
<PAGE>
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 their 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 positions in securities, option
rights, and segregated cash subject to puts and calls until the options are
exercised, closed, or have expired. An option position may be closed out only on
an exchange which provides a secondary market for an option of the same series.
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.
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
<PAGE>
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 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
<PAGE>
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 they 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 returns
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 contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Fund's investment adviser could
be incorrect in its 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 investment adviser correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of the Fund's futures position did not correspond to changes in the value of its
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
investment adviser 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.
<PAGE>
Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate.
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.
ORGANIZATION AND SERVICE PROVIDERS
ORGANIZATION
Fund Structure. The Fund is an investment pool, which invests shareholders'
money toward a specified goal. In technical terms, 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 participate in dividends and distributions
from the Fund's assets and have equal voting, liquidation and other rights.
Shareholders may exchange shares as described under "Exchanges," but will have
no other preference, conversion, exchange or preemptive rights. When issued and
paid for, shares will be fully paid and nonassessable. Shares of the Fund are
redeemable, transferable and freely assignable as collateral. The Fund 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.
<PAGE>
If any matters are to be voted on by shareholders, each share owned as of the
record date for the meeting would be entitled to one vote for each dollar of net
asset value applicable to each share.
SERVICE PROVIDERS
Investment Adviser. The investment adviser of Evergreen Core Stock Fund is
Meridian Investment Company ("Meridian"). Meridian is an indirect subsidiary of
First Union National Bank ("FUNB"). FUNB is a subsidiary of First Union
Corporation ("First Union"). Meridian's address is 55 Valley Stream Parkway,
Malvern, Pennsylvania 19355. Both FUNB and First Union are located at 201 South
College Street, Charlotte, North Carolina 28288-0630. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.
Meridian receives an annual fee equal to 0.74% of average daily net
assets of Evergreen Core Stock Fund.
Portfolio Manager. The Portfolio Manager of the Fund is Joseph E. Stocke, CFA.
Mr. Stocke is a Senior Investment Manager/Equities with Meridian and has been
with Meridian since 1983. Mr. Stocke currently manages the Special Equity Fund
and Core Equity Fund of CoreFunds, Inc.
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 the mutual
<PAGE>
funds advised by First Union subsidiaries. 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
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 Management Corp. ("Evergreen Asset"), (2) certain
institutional investors and (3) investment advisory clients of FUNB, Meridian,
Evergreen Asset, Keystone Investment Management Company ("Keystone") 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
<PAGE>
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 the Fund's investment
adviser 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
adviser 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 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. Send a signed letter of
instruction or stock power form to the Fund, c/o ESC, the registrar, transfer
agent and dividend-disbursing agent for 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
<PAGE>
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. 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.
<PAGE>
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, 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.
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
Securities and Exchange Commission ("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 the other Evergreen funds through your financial
intermediary by calling or writing to ESC or by using the Evergreen Express Line
as described above. Once an exchange request has been telephoned or mailed, it
is irrevocable and may not be modified or canceled. Exchanges will be made on
the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. An exchange which represents
an initial investment in another Evergreen fund is subject to the minimum
investment and suitability requirements of each fund.
Each of the Evergreen funds has different investment objectives and
policies. For complete information, a prospectus
<PAGE>
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.
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.
<PAGE>
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the application. Under
this Plan, you may receive (or designate a third party to receive) a monthly or
quarterly fixed-withdrawal payment in a stated amount of at least $75 and as
much as 1.0% per month or 3.0% per quarter of the total net asset value of the
Fund shares in your account when the Plan was opened. Fund shares will be
redeemed as necessary to meet withdrawal payments. All participants must elect
to have their dividends and capital 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
<PAGE>
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 adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. 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 adviser. 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 realized capital gains at least annually. Shareholders receive
Fund distributions in the form of
<PAGE>
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.
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 it does 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
United States may reduce or eliminate such taxes. Shareholders of the Fund who
are subject to United States federal income tax may be entitled, subject to
certain rules and limitations, to claim a federal income tax credit or deduction
for foreign income taxes paid by the Fund. See the SAI for additional details.
The Fund's transactions in options, futures and forward contracts may be subject
to special tax rules. These rules can affect the amount, timing and
characteristics of distributions to shareholders.
The Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains
<PAGE>
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 adviser as to the tax consequences of investments in the
Fund, including the application of state and local taxes which may be different
from the federal income tax consequences described above.
GENERAL INFORMATION
Portfolio Turnover. The estimated annual portfolio turnover rate for 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. See the SAI for
further information regarding the practices of the Fund affecting portfolio
turnover.
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, 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
<PAGE>
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,
Meridian, Evergreen Asset, Keystone or their affiliates. The dividends payable
with respect to Class A, Class B and Class C shares will be less than those
payable with respect to Class Y shares due to the distribution and shareholder
servicing-related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares. Investors should
telephone (800) 343-2898 to obtain more information on other classes of shares.
Performance Information. 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 compare the
<PAGE>
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 twelve-month period by
the maximum public offering price per share on the last day of the period.
Investors should be aware that past performance may not be 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. The
materials 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.
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.
<PAGE>
Investment Adviser
Meridian Investment Company, 55 Valley Stream Parkway, Malvern,
Pennsylvania 19355
Custodian
State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827
Transfer Agent
Evergreen Service Company, 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
<PAGE>
EVERGREEN EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
DOMESTIC GROWTH FUNDS
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1998 as Amended June 1, 1998
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 Core Stock Fund ("Stock")
(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").
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 and Strategic dated February 1, 1998 and the
prospectuses of Stock dated June 1, 1998, 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.
<PAGE>
TABLE OF CONTENTS
FUND
INVESTMENTS
............................................................................4
GENERAL INFORMATION................................................4
FUNDAMENTAL POLICIES...............................................9
INVESTMENT GUIDELINES..............................................10
MANAGEMENT OF THE
TRUST
..................................................................11
PRINCIPAL HOLDERS OF FUND
SHARES
..................................................................14
INVESTMENT ADVISORY AND OTHER
SERVICES
...........................................................................17
INVESTMENT ADVISER................................................17
INVESTMENT ADVISORY AGREEMENTS....................................18
DISTRIBUTOR.......................................................19
DISTRIBUTION PLANS AND AGREEMENTS.................................19
ADDITIONAL SERVICE PROVIDERS......................................21
<PAGE>
BROKERAGE...............................................................21
BROKERAGE COMMISSIONS..........................................21
SELECTION OF BROKERS...........................................22
SIMULTANEOUS TRANSACTIONS......................................22
TRUST ORGANIZATION
...........................................................................23
FORM OF ORGANIZATION............................................23
DESCRIPTION OF SHARES...........................................23
VOTING RIGHTS...................................................23
LIMITATION OF TRUSTEES' LIABILITY...............................23
PURCHASE, REDEMPTION AND PRICING OF
SHARES
...........................................................................23
HOW THE FUNDS OFFER SHARES TO THE PUBLIC............................24
CONTINGENT DEFERRED SALES CHARGE....................................25
SALES CHARGE WAIVERS OR REDUCTIONS..................................25
EXCHANGES...........................................................27
CALCULATION OF NET ASSET VALUE PER SHARE............................27
VALUATION OF PORTFOLIO SECURITIES...................................27
SHAREHOLDER SERVICES................................................28
PRINCIPAL
UNDERWRITER
.................................................................28
ADDITIONAL TAX
INFORMATION
<PAGE>
............................................................................29
REQUIREMENTS FOR QUALIFICATION AS A REGISTERED INVESTMENT COMPANY..29
TAXES ON DISTRIBUTIONS.............................................29
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES.......................30
OTHER TAX CONSIDERATIONS...........................................31
FINANCIAL
INFORMATION
.............................................................................31
EXPENSES ......................................................31
BROKERAGE COMMISSIONS PAID.....................................33
COMPUTATION OF CLASS A OFFERING PRICE..........................33
PERFORMANCE....................................................34
ADDITIONAL
INFORMATION
...........................................................................36
APPENDIX A..................................................................1
<PAGE>
FUND INVESTMENTS
GENERAL INFORMATION
The investment objective of each Fund and a description of the
securities in which each Fund may invest are set forth in each Fund's
prospectus. The following expands upon the discussion in the prospectuses
regarding certain investments of the Fund.
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.
<PAGE>
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 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. 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 30% 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.
<PAGE>
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 believed by the
Adviser (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, a 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 Adviser 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
investment adviser 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 (Evergreen, Omega, Small , Strategic and
Stock)
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
<PAGE>
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 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 (Evergreen, Omega, Small ,
Strategic and Stock)
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 Adviser 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
<PAGE>
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 Adviser 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 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 Adviser 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 (Evergreen, Omega, Small
, Strategic and Stock)
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
<PAGE>
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 and
Stock)
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 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 and Small Strategic)
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 Adviser's
ability to predict accurately the future exchange rates between foreign
currencies and the U.S. dollar. The value of a Fund's investments denominated in
foreign currencies will depend on the relative 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.
FUNDAMENTAL POLICIES
The Funds have adopted the fundamental investment restrictions set
forth below which may not be changed without the vote of a majority of each
<PAGE>
Fund's outstanding shares, as defined in the Investment Company Act of 1940 (the
"1940 Act"). Unless otherwise stated, all references to the assets of a Fund are
in terms of current market value.
Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Concentration
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in a particular industry (other than securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities).
Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
Underwriting
Each Fund may not underwrite securities of other issuers, except
insofar as each Fund may be deemed an underwriter in connection with the
disposition of its portfolio securities.
Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by 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.
Commodities
Each Fund may not purchase or sell commodities or contracts on
commodities except to the extent that each Fund may engage in financial futures
contacts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law, and without registering as a
commodity pool operator under the Commodity Exchange Act.
Loans to Other Persons
Each Fund may not make loans to other persons, except that a Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.
INVESTMENT GUIDELINES
Unlike the Fundamental Policies above, the following guidelines may be
changed by the Trust's Board of Trustees without shareholder approval.
<PAGE>
Unless otherwise stated, all references to the assets of a Fund are in terms of
current market value.
Diversification
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 U.S. Government or its agencies or instrumentalities.
Borrowings
Each Fund may borrow money from banks or enter into reverse repurchase
agreements in an amount up to one third of its total assets. Each Fund may also
borrow 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. Each
Fund will not purchase securities while borrowings are outstanding except to
exercise prior commitments and to exercise subscription rights. 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
to the extent permitted by applicable law.
Concentration
For purposes of the investment restriction on concentration, the phrase
"securities of issuers primarily engaged in any particular industry" includes
industrial development bonds from the same facility or similar types of
facilities. Otherwise, each Fund may invest more than 25% of its assets in
industrial development bonds. Also, governmental issuers are not considered to
be members of an industry for concentration purposes.
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
<PAGE>
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.
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>
Principal Occupations for Last
Name Position with Trust Five Years
- ------------------------------------ --------------------------------- ------------------------------------------------
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and
(DOB: 2/2/28) construction consultant; and
President of Centrum Equities
and Centrum Properties, Inc.
Charles A. Austin III Trustee Investment Counselor to Appleton
(DOB: 10/23/34) Partners, Inc.; and former
Managing Director, Seaward
Management Corporation (invest
ment advice).
<PAGE>
Principal Occupations for Last
Name Position with Trust Five Years
- ------------------------------------ --------------------------------- ------------------------------------------------
K. Dun Gifford Trustee Trustee, Treasurer and Chairman
(DOB: 10/12/38) of the Finance Committee, Cam
bridge
College;
Chairman
Emeri
tus
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;
former
Chairman,
Gifford,
Drescher
&
Associates
(environ
mental
consulting);
and
former
Director,
Keystone
Investments,
Inc.
James S. Howell Chairman of the Former Chairman of the
(DOB: 8/13/24) Board of Trustees Distribution Foundation for the
Carolinas; and former Vice
President of Lance Inc. (food
manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief
(DOB: 2/14/39) Executive Officer, Carson
Products
Company;
Director
of
Phoenix
Total
Return
Fund
and
Equifax,
Inc.;
Trustee
of
Phoenix
Series
Fund,
Phoenix
Multi-Portfolio
Fund,
and
The
Phoenix
Big
Edge
Series
Fund;
and
former
President,
Morehouse
College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-
(DOB: 7/14/39) Yamoto, Inc. (steel producer).
Thomas L. McVerry Trustee Former Vice President and
(DOB: 8/2/39) Director of Rexham Corporation;
and former Director of Carolina
Cooperative Federal Credit
Union.
William Walt Pettit Trustee Partner in the law firm of
(DOB: 8/26/55) William Walt Pettit, P.A.
<PAGE>
Principal Occupations for Last
Name Position with Trust Five Years
- ------------------------------------ --------------------------------- ------------------------------------------------
David M. Richardson Trustee Vice Chair and former Executive
(DOB: 9/14/41) Vice President, DHR Interna
tional, Inc. (executive recruit
ment); former Senior Vice
President, Boyden International
Inc. (executive recruitment);
and Director, Commerce and
Industry Association of New
Jersey, 411 International, Inc.,
and J&M Cumming Paper Co.
Russell A. Salton, III Trustee Medical Director, U.S. Health
MD Care/Aetna Health Services;
(DOB: 6/2/47) former Managed Health Care
Consultant; and former
President, Primary Physician
Care.
Michael S. Scofield Trustee Attorney, Law Offices of Michael
(DOB: 2/20/43) S. Scofield.
Richard J. Shima Trustee Former Chairman, Environmental
(DOB: 8/11/39) Warranty, Inc. (insurance
agency);
Executive
Consultant,
Drake
Beam
Morin,
Inc.
(executive
outplacement);
Director
of
Connecticut
Natural
Gas
Corporation,
Hartford
Hospi
tal,
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
(DOB:8/30/58) Treasurer Operations Executive, BYSIS Fund
Services.
Vice President and Vice President, Tax, BISYS Fund
Nimish S. Bhatt* Services; former Assistant Vice
(DOB: 6/6/63) Assistant Treasurer President, Evergreen Asset Management
Corp./First
Union
National
Bank;
former
Senior
Tax
Consulting/Acting
Manager,
Investment
Companies
Group,
Price
Waterhouse,
LLP,
New
York.
<PAGE>
Principal Occupations for Last
Name Position with Trust Five Years
- ------------------------------------ --------------------------------- -----------------------------------------------
Bryan Haft * Vice President Team Leader, Fund Administration
(DOB: 1/23/65) , BISYS Fund
Services.
D'Ray Moore* Secretary Vice President, Client Services,
(DOB: 3/30/59) BISYS Fund Services
.
</TABLE>
*Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
The officers of the Trust are all officers and/or employees of BISYS
Fund Services.
Trustee Compensation
Listed below is the Trustee compensation for the twelve-month period
ended September 30, 1997.
<TABLE>
<CAPTION>
Compensation from
Trustee Compensation from Trust and Fund
Trust Complex
<S> <C> <C>
Laurence B. Ashkin $29,301 $63,400
Charles A. Austin III $14,709 $41,400
K. Dun Gifford $13,462 $38,700
James S. Howell $38,651 $100,542
Leroy Keith Jr. $13,504 $37,800
Gerald M. McDonnell $34,939 $87,051
Thomas L. McVerry $36,363 $91,101
William Walt Pettit $35,613 $89,101
David M. Richardson $14,709 $41,400
Russell A. Salton, III $34,876 $90,701
Michael S. Scofield $34,052 $87,801
Richard J. Shima $21,849 $61,125
</TABLE>
PRINCIPAL HOLDERS OF FUND SHARES
As of the date of this SAI, the officers and Trustees of the Trust
owned as a group less than 1% of the outstanding of any class of each Fund.
<PAGE>
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 December 31, 1997. As of June 1, 1998, no person
to Stock's knowledge owned beneficially or of record more than 5% of a class of
the Fund's outstanding shares.
Evergreen Class A
None
Evergreen Class B
None
Evergreen Class C
None
Evergreen Class Y
First Union National Bank/EB/INT 23.667%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl CMG 1151
Charlotte, NC 28202-1911
<PAGE>
First Union National Bank/EB/INT 8.399%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl CMG 1151
Charlotte, NC 28202-1911
Micro Class A
Charles Schwab & Co. Inc. 6.524%
Special Custody Account for the
Exclusive Benefit of Customers
Reinvest Account Mut Fds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
First Union Brokerage Services 5.787%
The B Scott White Trust
A/C 8685-5058
Rt 2 Box 181A
Castlewood, VA 24224
Micro Class B
MLPF&S for the sole 6.591%
benefit of its customers.
Attn: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
Micro Class C
None
Micro Class Y
Stephen A. Lieber 12.168%
1210 Greacen Point Rd.
Mamaroneck, NY 10543-4693
Constance E. Lieber 8.705%
1210 Greacen Point Rd.
Mamaroneck, NY 10543-4693
Citibank NA 7.729%
Delta Airlines Master Trust 308235
Joe Villella Citicorp Services
1410 N. Westshore Blvd. Fl 5
Tampa, FL 33607-4519
Charles Schwab & Co. Inc. 7.571%
Special Custody Account for the
Exclusive Benefit of Customers
Reinvest Account Mut Fds Dept
101 Montgomery St.
San Francisco, CA 94104-4122
Omega Class A
None
Omega Class B
<PAGE>
MLPF&S for the sole 7.725%
benefit of its customers.
Attn: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
Omega Class C
MLPF&S for the sole 28.770%
benefit of its customers.
Attn: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
Omega Class Y
SSB C/F IRA Regular 99.550%
Nancy A. Lavalley
2048 Clairmont Terrace
Atlanta, GA 30345-2312
Strategic Class A
None
Strategic Class B
None
Strategic Class C
None
Aggressive Class A
MLPF&S for the sole 11.525%
benefit of its customers.
Attn: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
Aggressive Class B
None
Aggressive Class C
MLPF&S for the sole 23.805%
benefit of its customers.
Attn: Fund Administration
4800 Deer Lake Dr E 3rd Fl
Jacksonville, FL 32246-6484
Michael J. Grimaldi 7.775%
7 Edgeworth Pl.
New Brunswick, NJ 08902-3021
Lavedna Ellingson 7.255%
Douglas Ellingson Jt Wros
8510 McClintock
Tempe, AZ 85284-2527
Aggressive Class Y
<PAGE>
First Union National Bank 82.163%
Trust Accounts
Attn: Ginny Batten
11th Floor, CMG-1151
301 S. Tryon St.
Charlotte, NC 28288-0002
Small Class A
N/A
Small Class B
MLPF&S For the Sole benefit of its customers. 9.524%
Attn: Fund Administration
4800 Deer Lake Drive E, 3rd Floor
Jacksonville, FL 32246-6484
ROFE & Co.
C/O State Street Bank & Trust Co. 5.394%
For Sub Account
Kokusai Securities Co. Ltd.
P.O. Box 5061
Boston, MA 02206-5061
Small Class C
None
Small Class Y
None
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The investment adviser to each Fund (the "Adviser") 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 Adviser to Evergreen and Micro is Evergreen Asset Management Corp.
("Evergreen Asset"), 2500 Westchester Avenue, Purchase, New York 10577.
Evergreen Asset is entitled to receive from each Fund 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. Under an agreement with Evergreen Asset, Lieber & Company, a First
Union subsidiary at the same address as Evergreen Asset, serves as subadviser to
each Fund at no additional cost to either Fund. Lieber & Company is paid for its
services by Evergreen Asset.
The Adviser to Aggressive is the Capital Management Group ("CMG") of
First Union National Bank ("FUNB"). CMG is entitled to receive from Aggressive
an annual fee equal to 0.60% of the Fund's average daily net assets.
<PAGE>
The Adviser to Omega, Small and Strategic is Keystone Investment
Management Company ("Keystone"), 200 Berkeley Street, Boston, Massachusetts
02116. Keystone 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. Keystone 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 Adviser 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 Adviser (the "Advisory Agreements") .
Under the Advisory Agreements, and subject to the supervision of the Trust's
Board of Trustees, the Adviser 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 Adviser pays for all of the expenses
incurred in connection with the provision of its services. Each Fund pays for
all charges and expenses, other than those specifically referred to as being
borne by the Adviser, including, but not limited to, (1) custodian charges and
expenses; (2) bookkeeping and auditors' charges and expenses; (3) transfer agent
charges and expenses; (4) fees and expenses of Independent Trustees; (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
<PAGE>
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 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 (Trustees who are not interested persons of a Fund, as
defined in the 1940 Act) 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.
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 adviser. 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 adviser. 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.
<PAGE>
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.
The Adviser 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 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.
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
<PAGE>
Fund's outstanding voting securities, voting separately by class, and in either
case, by a majority of the disinterested 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 disinterested 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 and Stock, 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 advised by First Union subsidiaries, 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
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 Stock.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York,
10036, audits the annual financial statements of Evergreen, Micro and
Aggressive.
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
<PAGE>
Sullivan & Worcester LLP provides legal advice to the Funds. Its
address is 1025 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. Where transactions are made in the
over-the-counter market, each Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
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 Adviser seeks
brokers who can provide the most benefit to the Fund or Funds for which a trade
is being made. When selecting a broker, an Adviser primarily will look for the
best price at the lowest commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and
analyses concerning issuers, industries, securities and
economic factors and (b) other information useful in making
investment decisions.
Under each Advisory Agreement, each Fund may pay higher brokerage
commissions to a broker providing it with research services, as defined in item
6, above. Pursuant to Section 28(e) of the Securities Exchange Act of 1934, this
practice is permitted if the commission is reasonable in relation to the
brokerage and research services provided. Research services provided by a broker
to an Adviser do not replace, but supplement, the services an Adviser is
required to deliver to a Fund under the Advisory Agreement. It is impracticable
for an Adviser to allocate the cost, value and specific
<PAGE>
application of such research services among its clients because research
services intended for one client may indirectly benefit another.
When selecting a broker for portfolio trades, an Adviser may also
consider the amount of Fund shares a broker has sold, subject to the other
requirements described above.
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 and Micro effected
on those exchanges.
SIMULTANEOUS TRANSACTIONS
Each Adviser makes investment decisions for each 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 Adviser
to engage in a simultaneous transaction, that is, buy or sell the same security
for more than one client. Each Adviser 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.
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 17, 1997 (the "Declaration of Trust"). A
copy of the Declaration of Trust is on file as an exhibit to the Trust's
Registration Statement, of which this SAI is a part. This summary is qualified
in its entirety by reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
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
<PAGE>
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 50% or less of the shares voting will not be
able to elect any Trustees.
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, 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 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
<PAGE>
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.
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.
<PAGE>
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");
3. institutional investors, which may include bank trust
departments and registered investment advisers;
<PAGE>
4. investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;
5. clients of investment advisers or financial planners who place
trades for their own accounts if the accounts are linked to
the master account of such investment advisers or financial
planners on the books of the broker-dealer through whom shares
are purchased;
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;
<PAGE>
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
the 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
<PAGE>
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 sixty days, for which
market quotations are readily available, are valued at current market
value.
(4) Short-term investments maturing in sixty 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 prospectus, a shareholder may elect to receive his
or her dividends and capital grains 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
<PAGE>
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 conform
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.
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 REGISTERED INVESTMENT COMPANY
Each Fund intends to qualify for and elect the tax treatment applicable
to a regulated investment company (a "RIC") under Subchapter M of the
<PAGE>
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% 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
<PAGE>
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 adviser 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 gains on assets held for more than
eighteen months are generally subject to a maximum federal income tax rate of
20% for an individual. The maximum capital gains tax rate for capital assets
held by an individual for more than twelve months but not more than eighteen
months is generally 28%. Generally, the Code will not allow a shareholder to
realize a loss on shares he or she has sold or exchanged and replaced within a
sixty-one-day period beginning thirty days before and ending thirty days after
he or she sold or exchanged the shares. The Code will not allow a shareholder to
realize a loss on the sale of Fund shares held by the shareholder for six months
or less to the extent the shareholder received exempt-interest dividends on such
shares. Moreover, the Code will treat a shareholder's loss on shares held for
six months or less as a long-term capital loss to the extent the shareholder
received capital gain dividends on such shares.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
<PAGE>
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 advisers 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 adviser 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
EXPENSES
The table below shows the total dollar amounts paid by each Fund for
services rendered during the fiscal periods specified. It is anticipated that
Stock will commence operations on or about July 24, 1998. 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."
<PAGE>
<TABLE>
<CAPTION>
1997 Fund Expenses
Advisory Class A Class B Class C
Fund Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees
============================= ========================= ====================== ========================= =======================
<S> <C> <C> <C> <C>
Evergreen (1) $13,089,112 $299,430 $3,629,968 $72,777
Aggressive (1) $1,013,344 $251,302 $289,795 $19,048
Micro (1) $428,047 $3,314 $13,933 $400
Omega (2) $1,480,178 $153,219 $739,237 $120,064
Small (3a) $2,387,425 N/A $4,928,079* N/A
Small (3b) $7,788,033 N/A $16,641,755* N/A
Strategic (4) $3,205,753 N/A $1,790,675* N/A
============================= ========================= ====================== ========================= =======================
Total Underwriting
Underwriting Commissions
Commissions Retained
========================= =============================
$1,464,361 $129,417
$278,145 $21,472
$2,223 $300
$254,113 $19,806
$878,274 $22,796
$17,885,604 $13,187,854
-- --
========================= =============================
</TABLE>
(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.
<PAGE>
<TABLE>
<CAPTION>
1996 Fund Expenses
Class A Total Underwriting
Advisory 12b-1 Class B Class C Underwriting Commissions
Fund Fees Fees 12b-1 Fees 12b-1 Fees Commissions Retained
============= ============= ============ =============== ============ ============= ===============
<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)
Strategic $2,994,500 N/A $4,845,352* N/A $4,093,912 $2,049,519
(4)
============= ============= ============ =============== ============ ============= ===============
</TABLE>
(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.
<PAGE>
<TABLE>
<CAPTION>
1995 Fund Expenses
Total Underwriting
Underwriting Commissions
Fund Advisory Fees Commissions Retained
========================== ============================ ============================ ==========================
<S> <C> <C> <C>
Evergreen (1) $5,472,439 $586,701 $72,923
Aggressive (2) $106,041 $70,327 $89,909
Micro (1) $800,642 $3,418 $495
Omega (3) $1,280,436 $548,386 $1,167,486
Small (4) $6,037,504 $10,076,379 $2,257,795
Strategic (5) $2,799,544 $3,911,744 $288,671
</TABLE>
(1) Nine months ended 9/30/95
(2) Two months ended 9/30/95
(3) Year ended 12/31/95
(4) Year ended 5/31/95
(5) Year ended 10/31/95
BROKERAGE COMMISSIONS PAID
The table below shows (1) total amounts paid by each Fund in brokerage
commissions and (2) amounts paid to Lieber and Company, an affiliate of FUNB,
during each of the last three years.
<TABLE>
<CAPTION>
Evergreen Aggres- Micro Omega Small Strategic
sive
============= ============= ============ =========== ========== ============ ===========
<S> <C> <C> <C> <C> <C> <C>
1997 $ 503,276 $677,860 $ 91,568 $403,294 $1,891,397 $1,144,065
Aggregate
Dollar
Amount
1997 $ 416,953 -- $ 61,717 -- -- --
Dollar
Amount
Paid to
Lieber
<PAGE>
1996 $590,105 -- $ 317,058 $829,479 $2,853,950 $1,990,208
Aggregate
Dollar
Amount
1996 $515,522 -- $153,596 -- -- --
Dollar
Amount
Paid to
Lieber
1995 $342,559 -- $414,048 $735,203 $1,445,066 $871,000
Aggregate
Dollar
Amount
1995 $252,069 -- $125,347 -- -- --
Dollar
Amount
Paid to
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>
Fund* Date Net Asset Per Share Offering Price
Value Sales Charge Per Share
<S> <C> <C> <C> <C>
Evergreen 9/30/97 $22.96 4.75% $24.10
Aggressive 9/30/97 $23.48 4.75% $24.65
Micro 9/30/97 $26.68 4.75% $28.01
Omega Fund 9/30/97 $22.69 4.75% $23.82
========================= ========================= ======================== ======================== ========================
</TABLE>
*Excludes Strategic and Small, which did not offer Class A at the end of their
latest fiscal periods and Stock which is expected to commence operations on or
about July 24, 1998.
PERFORMANCE
<PAGE>
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. To the initial
investment all dividends and distributions are added, 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, 1997 for each class of shares of
the Funds (including applicable sales charges) are as follows:
<TABLE>
<CAPTION>
Ten Years
or Since Inception
One Year Five Years Inception Date
<S> <C> <C> <C> <C>
Evergreen
Class A 27.37% -- 27.63% Jan. 3, 1995
Class B 27.69% -- 28.32% Jan. 3, 1995
Class C 31.67% -- 29.01% Jan. 3, 1995
Evergreen
Class Y 34.08% 19.88% 12.64% Oct. 15, 1971
Aggressive
Class A 6.30% 16.77% 14.73% Apr. 15, 1983
Class B 5.96% -- 19.49% July 7, 1995
Class C 9.92% -- 19.22% Aug. 3, 1995
Class Y 11.76% -- 21.67% July 11, 1995
Micro
Class A 46.81% -- 20.43% Jan. 3, 1995
Class B 48.13% -- 20.91% Jan. 3, 1995
Class C 52.07% -- 21.72% Jan. 3, 1995
Class Y 54.64% 14.19% 11.46% June 1, 1983
Omega
Class A 20.60% 16.86% 14.31% Apr. 29, 1968
Class B 20.45% -- 15.45% Aug. 2, 1993
Class C 24.41% -- 15.78% Aug. 2, 1993
Class Y -- -- -- Jan. 13, 1997
Strategic
Class B 37.33% 18.73% 11.76% Jul. 15, 1935
<PAGE>
Ten Years
or Since Inception
One Year Five Years Inception Date
===============================
Small 20.55% 13.95% Jul. 15, 1935
Class B
15.48%
=============================== =================== ===================== ====================== ========================
</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 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 audited financial statements and the reports thereon are hereby
incorporated by reference to each Fund's Annual Report, a copy of which may be
obtained without charge from ESC, P.O. Box 2121, Boston, Massachusetts 02106-
2121.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectus 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 prospectus,
SAI or in supplemental sales literature issued by such Fund or
<PAGE>
the Distributor, and no person is entitled to rely on any information or
representation not contained therein.
Each Fund's prospectus 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.
<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
<PAGE>
protection parameters, adverse economic 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.
<PAGE>
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.
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 adviser 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.
<PAGE>
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;
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.
<PAGE>
EVERGREEN EQUITY TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
<PAGE>
<PAGE>
There are no financial statements for Evergreen Core Stock Fund.
The information required by this item for Evergreen Aggressive Growth
Fund, Evergreen Fund, Evergreen Micro Cap Fund, Evergreen Small Company Growth
Fund and Evergreen Strategic Growth Fund is contained in Registration Statement
No. 333- 37453/811-08413 filed on January 30, 1998.
<PAGE>
The information required by this item for Evergreen American Retirement
Fund, Evergreen Foundation Fund, Evergreen Tax Strategic Foundation Fund,
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.
The information required by this item for Evergreen
Balanced Fund is
contained in Registration Statement No. 333-
37435/811-08413 filed on November
10, 1997.
Item 24(b). Exhibits
<PAGE>
<TABLE>
<CAPTION>
Exhibit
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.(b)(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 Management Agreement
between the Registrant and
First Union National Bank Filed
herein
5(b) Investment Advisory
and Management Agreement
between the Registrant and
Evergreen Asset Management Filed
Corp. herein
5(c) Investment Advisory and Filed herein
Management Agreement between
the Registrant and Keystone
Investment Management Company
<PAGE>
Exhibit
Number Description Location
- ------- ----------- --------
5(d) Form of Investment Advisory
and Management Agreement
between the Registrant and
Meridian Investment Filed
Company herein
6(a) Class A and Class C
Principal Underwriting Filed
Agreement between the herein
Registrant and Evergreen
Distributor, Inc.
6(b) Class B-1 Shares Principal Underwriting Filed
Agreement between the herein
Registrant and Evergreen
Investment Services,
Inc.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- --------
<S> <C> <C>
6(c) Class B-2 Shares Principal Filed herein
Underwriting Agreement between
the Registrant and Evergreen
Distributor, Inc.
6(d) Class B Shares Principal Filed herein
Underwriting Agreement between
the Registrant and Evergreen
Distributor, Inc.
6(e) Class Y Shares Principal Filed herein
Underwriting Agreement between
the Registrant and Evergreen
Distributor, Inc.
6(f) Form of Principal Underwriting Incorporated by reference
Agreement between the to Registrant's Pre-
Registrant and Kokusai Effective Amendment No. 1
Securities Filed on November 10,
Co., Ltd. 1997
6(g) Form of Dealer Agreement used Incorporated
by Evergreen Distributor, Inc. by reference to
Registrant's Pre-
Effective Amendment No. 1
Filed on November 10,
1997
7 Form of Deferred Compensation Incorporated
Plan by reference to
Registrant's Pre-
Effective Amendment No. 1
Filed on November 10,
1997
8 Custodian Agreement
between the Registrant and
State Street Bank and Trust
Company Filed
herein
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- --------
<S> <C> <C>
9(a)
Administrative Services
Agreement between Evergreen
Investment Services, Inc. and Filed
the Registrant herein
9(b) Master Transfer
and Recordkeeping Agreement
between the Registrant and
Evergreen Service Company Filed
herein
10 Opinion and Consent of Incorporated
Sullivan & Worcester LLP by reference to
Registrant's Post-
Effective Amendment No. 2
Filed on December 12,
1997
11(a) Consent of Price Waterhouse Incorporated by reference
LLP to Registrant's Post-
Effective Amendment No. 3
filed on January 30, 1998
11(b) Consent of KPMG Peat Marwick Incorporated by reference
LLP to Registrant's Post-
Effective Amendment No. 3
filed on January 30, 1998
12 Not applicable
13 Not applicable
15(a) Distribution Filed
Plan of Class A Shares herein
15(b) Distribution Filed
Plan for Class B- herein
1 Shares
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- --------
<S> <C> <C>
15(c) Distribution Filed
Plan for Class B-2 herein
Shares
15(d) Distribution Filed
Plan for Class B
Shares herein
15(e) Distribution Plan for Class C Filed
Shares herein
16 Not applicable
17 Not applicable
18 Multiple Class Plan Incorporated
by reference to
Registrant's Pre-
Effective Amendment No. 1
Filed on November 10,
1997
19 Powers of Attorney Incorporated
by reference to
Registrant's Pre-
Effective Amendment No. 1
Filed on November 10,
1997
</TABLE>
Item 25. Persons Controlled by or Under Common Control with
Registrant.
None
Item 26. Number of Holders of Securities (as of
February 28, 1998)
<PAGE>
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------- ------------------------
<S> <C>
Evergreen Aggressive Growth Fund
Class A 10,943
Class B 4,675
Class C 257
Class Y 530
Evergreen Fund
Class A 23,607
Class B 67,641
Class C 783
Class Y 20,630
Evergreen Micro Cap Fund
Class A 433
Class B 406
Class C 310
Class Y 960
Evergreen Omega Fund
Class A 9,954
Class B 8,247
Class C 1,218
Class Y 2
Evergreen Small Company Growth
Fund 46,533
Class A 34,814
Class B 308
Class C 8
Class Y
Evergreen Strategic Growth Fund
Class A 36,085
Class B 12,416
Class C 13
Evergreen Core Stock Fund
Class A 0
Class B 0
Class C 0
Class Y 0
</TABLE>
Item 27. Indemnification.
<PAGE>
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:
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
Robert T. Atwood Executive Vice President and
Chief Financial Officer,
First Union Corporation;
Chief Financial Officer and
Executive Vice President
First Union National Bank
<PAGE>
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.
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. President
David Huber
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.
<PAGE>
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, 301 S.
College Street, Charlotte, North Carolina 28288
Evergreen Asset Management Corp., 2500 Westchester Avenue,
Purchase, New York 10577
Meridian Investment Company, 55 Valley Stream Parkway,
Malvern, Pennsylvania 19355
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.
(a) 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.
(b) The Registrant hereby undertakes to file a post-effective
amendment using financial statements of its Evergreen Core
Stock Fund series which need not be certified, within four to
six months of the effective date of this Post-Effective
Amendment to its Registration Statement.
<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 12th day of
March, 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 12th day of March, 1998.
/s/William J. Tomko /s/Laurence B. Ashkin /s/Charles A. Austin, III
- ---------------------- ---------------------- -------------------------
William J. Tomko Laurence B. Ashkin* Charles A. Austin III*
President and Treasurer Trustee Trustee
(Principal Financial and
Accounting Officer)
/s/K. Dun Gifford /s/James S. Howell /s/William Walt Pettit
- ---------------------- ------------------ ----------------------
K. Dun Gifford* James S. Howell* William Walt Pettit*
Trustee Trustee Trustee
/s/Gerald M. McDonnell /s/Thomas L. McVerry /s/Michael S. Scofield
- ---------------------- -------------------- -----------------------
Gerald M. McDonnell* Thomas L. McVerry* Michael S. Scofield
Trustee Trustee Trustee
/s/David M. Richardson /s/Russell A. Salton, III MD /s/Richard J. Shima
- ---------------------- ---------------------------- --------------------
David M. Richardson* Russell A. Salton, III MD* Richard J. Shima*
Trustee Trustee Trustee
<PAGE>
/s/Leroy Keith, Jr.
- ----------------------
Leroy Keith, Jr.*
Trustee
*By:
/s/Dorothy L. Bourassa
- -----------------------
- ----
Dorothy L.
Bourassa
Attorney-in-Fact
*Dorothy L. Bourassa, by signing her name hereto, does hereby sign this document
on behalf of each of the above-named individuals pursuant to powers of attorney
duly executed by such persons.
<PAGE>
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
EQUITY TRUST, a Delaware business trust (the "Trust") and FIRST UNION NATIONAL
BANK, a national banking association (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the
<PAGE>
Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
(i) all fees and expenses involved in registering and
maintaining registrations of the Trust, its Funds and of their shares with the
Securities and Exchange Commission (the
<PAGE>
"Commission") and registering or qualifying the Funds' shares under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
<PAGE>
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
<PAGE>
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN EQUITY TRUST
By: /s/John J. Pileggi
-------------------------
Name: John J. Pileggi
Title: President
FIRST UNION NATIONAL BANK
By: /s/T. Hal Clarke
--------------------------
Name: T. Hal Clarke
Title: Senior Vice President
<PAGE>
Schedule 1
Evergreen Aggressive Growth Fund
Evergreen Value Fund
Evergreen Utility Fund
<PAGE>
Schedule 2
As compensation for the Adviser's services to each Fund during the
period of this Agreement, each Fund will pay to the Adviser a fee at the annual
rate of:
I. Evergreen Aggressive Growth Fund
- -------------------------------------------------------------------------
0.60 of 1% of Daily Net Assets of the Fund
II. Evergreen Utility Fund
Evergreen Value Fund
- --------------------------------------------------------------------------
0.50 of 1% of Daily Net Assets of the Fund
<PAGE>
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
EQUITY TRUST, a Delaware business trust (the "Trust") and EVERGREEN ASSET
MANAGEMENT CORP., a New York corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the
<PAGE>
Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
(i) all fees and expenses involved in registering and
maintaining registrations of the Trust, its Funds and of their shares with the
Securities and Exchange Commission (the
<PAGE>
"Commission") and registering or qualifying the Funds' shares under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
<PAGE>
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
<PAGE>
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN EQUITY TRUST
By: /s/John J. Pileggi
----------------------------
Name: John J. Pileggi
Title: President
EVERGREEN ASSET MANAGEMENT
CORP.
By: /s/Stephen A. Lieber
----------------------------
Name: Stephen A. Lieber
Title: Chairman & CEO
<PAGE>
Schedule 1
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Fund
Evergreen Growth and Income Fund
Evergreen Income and Growth Fund
Evergreen Micro Cap Fund
Evergreen Small Cap Equity Income Fund
Evergreen Tax Strategic Foundation Fund
<PAGE>
Schedule 2
As compensation for the Adviser's services to each Fund during the
period of this Agreement, each Fund will pay to the Adviser a fee at the annual
rate of:
I. Evergreen Fund, Evergreen Micro Cap Fund, Evergreen Small Cap Equity Income
Fund, Evergreen Growth and Income Fund, and Evergreen Income and Growth Fund
----------------------------------------------------------------------------
Management Fee Daily Net Assets of The Fund
1% on the first $750,000,000; plus
0.90 of 1% on the next $250,000,000; plus
0.80 of 1% on amounts over $1,000,000,000
II. Evergreen American Retirement Fund
--------------------------------------------------------------------------
Management Fee Daily Net Assets of the Fund
0.75 of 1% of the first $750,000,000; and
0.70 of 1% of amounts over $750,000,000
III. Evergreen Foundation Fund and Evergreen Tax Strategic Foundation Fund
---------------------------------------------------------------------
Mangement Fee Daily Net Assets of the Fund
0.875 of 1% of the first $750,000,000; and
0.75 of 1% of the next $250,000,000; and
0.70 of 1% of amounts over $1,000,000,000
<PAGE>
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
EQUITY TRUST, a Delaware business trust (the "Trust") and KEYSTONE INVESTMENT
MANAGEMENT COMPANY, a Delaware Corporation, (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the
<PAGE>
Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
(i) all fees and expenses involved in registering and
maintaining registrations of the Trust, its Funds and of their shares with the
Securities and Exchange Commission (the
<PAGE>
"Commission") and registering or qualifying the Funds' shares under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
<PAGE>
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
<PAGE>
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN EQUITY TRUST
By: /s/John J. Pileggi
--------------------------
Name: John J. Pileggi
Title: President
KEYSTONE INVESTMENT
MANAGEMENT COMPANY
By: /s/Albert H. Elfner III
--------------------------
Name: Albert H. Elfner III
Title: CEO
<PAGE>
Schedule 1
Evergreen Balanced Fund
Evergreen Fund for Total Return
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Keystone Growth and Income Fund (S-1)
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
Keystone Strategic Growth Fund (K-2)
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
<PAGE>
Schedule 2
As compensation for the Adviser's services to each Fund during the period
of this Agreement, each Fund will pay to the Adviser a fee at the annual rate
of:
I. Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2)
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
Keystone Growth and Income Fund (S-1)
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
- -------------------------------------------------------------------------------
Aggregate Net Asset Value
Management Fee Of the Shares of the Fund
-------------- -------------------------
0.70% of the first $ 100,000,000, plus
0.65% of the next $ 100,000,000, plus
0.60% of the next $ 100,000,000, plus
0.55% of the next $ 100,000,000, plus
0.50% of the next $ 100,000,000, plus
0.45% of the next $ 500,000,000, plus
0.40% of the next $ 500,000,000, plus
0.35% of amounts over $1,500,000,000,
computed as of the close of business each business day and paid monthly.
II. Evergreen Omega Fund
- -------------------------------------------------------------------------------
Aggregate Net Asset Value
Management Fee Of the Shares of the Fund
0.75% of the first $ 250,000,000, plus
0.675% of the next $ 250,000,000, plus
0.60% of the next $ 500,000,000, plus
0.50% of amounts over $1,000,000,000,
computed as of the close of business each business day and paid monthly.
<PAGE>
III. Evergreen Fund for Total Return
Evergreen Balanced Fund
- ---------------------------------------------------------------------------
1.5% of Gross Dividend and Interest Income plus,
Aggregate Net Asset Value
Management Fee Of the Shares of the Fund
-------------- -------------------------
0.60% of the first $100,000,000, plus
0.55% of the next $100,000,000, plus
0.50% of the next $100,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $500,000,000, plus
0.30% of amounts over $1,000,000,000,
computed as of the close of business each business day and paid monthly.
<PAGE>
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 31st day of May 1998, by and between EVERGREEN
EQUITY TRUST, a Delaware business trust (the "Trust") and MERIDIAN INVESTMENT
COMPANY, a Pennsylvania corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the
<PAGE>
Securities Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or
other accounts over which the Adviser or an affiliate of the Adviser exercises
investment discretion. The Adviser is authorized to pay a broker-dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for a Fund which is in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction if, but
only if, the Adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer viewed in terms of that particular transaction or
in terms of all of the accounts over which investment discretion is so
exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
(i) all fees and expenses involved in registering and
maintaining registrations of the Trust, its Funds and of their shares with the
Securities and Exchange Commission (the
<PAGE>
"Commission") and registering or qualifying the Funds' shares under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
<PAGE>
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
<PAGE>
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN EQUITY TRUST
By:
Name:
Title:
MERIDIAN INVESTMENT COMPANY
By:
Name:
Title:
<PAGE>
Schedule 1
Evergreen Core Stock Fund
<PAGE>
Schedule 2
As compensation for the Adviser's services to each Fund during the
period of this Agreement, each Fund will pay to the Adviser a fee at the annual
rate of:
I. Evergreen Core Stock Fund
- -----------------------------------------------------------------------------
Management Fee
.74%
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN EQUITY TRUST
CLASS A AND C SHARES
AGREEMENT made this 18th day of September, 1997 by and between
Evergreen Equity Trust on behalf of its series listed on Exhibit A attached
hereto and made a part hereof (such Trust and series referred to herein as
"Fund" individually or "Funds" collectively) and Evergreen Distributor, Inc., a
Delaware corporation ("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the Class A and Class C shares of beneficial interest of the Fund
("Shares") as an independent contractor upon the terms and conditions
hereinafter set forth. Except as the Fund may from time to time agree, Principal
Underwriter will act as agent for the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers
for the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such broker,
dealer or other person shall have any authority to act as agent for the Fund;
such dealer, broker or other person shall act only as principal in the sale of
Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares; provided that Principal
Underwriter also shall have the right to sell Shares at net asset value, if such
sale is permissible under and consistent with applicable statutes, rules,
regulations and orders. All orders shall be subject to acceptance by the Fund,
and the Fund reserves the right in its sole discretion to reject any order
received. The Fund shall not be liable to anyone for failure to accept any
order.
4. On all sales of Shares, the Fund shall receive the current net asset
value, and Principal Underwriter shall be entitled to receive fees for sales of
Class A and C Shares as set forth on Exhibit B attached hereto and made a part
hereof.
5. The payment provisions of this Agreement shall be applicable to the
extent necessary to enable the Fund to comply with the obligation of the Fund to
pay Principal Underwriter in accordance with this Agreement in respect of Class
C Shares and shall remain in effect so long as any payments are required to be
made by the Fund pursuant to the irrevocable payment instruction under the
Master Sale Agreement between Principal Underwriter and Mutual Fund Funding
1994-1 dated as of December 6, 1996 (the "Master Sale Agreement").
<PAGE>
6. Payment to the Fund for Shares shall be in New York or Boston
Clearing House funds received by Principal Underwriter within (3) business days
after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such 3-day period, the Fund reserves the right,
without further notice, forthwith to cancel its acceptance of any such order.
The Fund shall pay such issue taxes as may be required by law in connection with
the issue of the Shares.
7. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information will be supplied by the Fund to Principal Underwriter in
reasonable quantities upon request.
8. Principal Underwriter agrees to comply with the Business Conduct
Rules of the National Association of Securities Dealers, Inc.
9. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
10. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal
<PAGE>
Underwriter, its officers and Directors or any controlling person would
otherwise be subject to liability by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason
of the reckless disregard of its obligations and duties under this
Agreement.
11. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
12. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund and the direct expenses of the issue of
Shares.
13. To the extent required by the Fund's 12b-1 Plans, Principal
Underwriter shall provide to the Board of Trustees of the Fund in connection
with such 12b-1 Plans, not less than quarterly, a written report of the amounts
expended pursuant to such 12b-1 Plans and the purposes for which such
expenditures were made.
14. This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force for two years
unless sooner terminated or continued as provided below. This Agreement shall
continue in effect after such term if its
<PAGE>
continuance is specifically approved by a majority of the Trustees of the Fund
and a majority of the 12b-1 Trustees referred to in the 12b-1 Plans of the Fund
("Rule 12b-1 Trustees") at least annually in accordance with the 1940 Act and
the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of any Rule 12b-1 Trustees or by a vote of
a majority of the Fund's outstanding Shares on not more than sixty (60) days
written notice to any other party to the Agreement; and shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
15. This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts. All sales hereunder are to be made, and title
to the Shares shall pass, in Boston, Massachusetts.
16. The Fund is a series of a Delaware business trust established under
a Declaration of Trust, as it may be amended from time to time. The obligations
of the Fund are not personally binding upon, nor shall recourse be had against,
the private property of any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN EQUITY TRUST
By: /s/John J. Pileggi
--------------------------------
EVERGREEN DISTRIBUTOR, INC.
By: /s/William J. Tomko
---------------------------------
<PAGE>
EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Aggressive Growth Fund
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2)*
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
Specialty Growth and Balanced Funds
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund
Growth and Income Funds 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 Keystone Growth and Income Fund
(S-1)*
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
* Class A Shares and Class C Shares authorized but not issued
<PAGE>
EXHIBIT B
TO
PRINCIPAL UNDERWRITING AGREEMENT
DATED
SEPTEMBER 18, 1997
Schedule of Payments
Class A Shares Up to 0.25% annually of the average daily net
asset value of Class A shares of a Fund
A sales charge, the difference between the
current offering price of Shares, as set
forth in the current prospectus for each
Fund, and the net asset value, less any
reallowance that is payable in accordance
with the sales charge schedule in effect at
any given time with respect to the Shares
Class C Shares Up to 1.00% annually of the average
daily net asset value of Class C shares of a
Fund, consisting of 12b-1 fees at the annual
rate of 0.75% of the average daily net asset
value of a Fund and service fees of 0.25% of
the average daily net asset value of a Fund
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
EVERGREEN EQUITY TRUST
AGREEMENT made this 18th day of September 1997 by and between Evergreen
Equity Trust, a Delaware business trust , on behalf of its series listed on
Exhibit A attached hereto (such Trust and series referred to herein as "Fund"
individually, or "Funds" collectively), and Evergreen Investment Services, Inc.,
a Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the "Fund"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"). Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-1 shares of beneficial interest of the Fund ("B-1
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Fund may from time to time
agree, the Principal Underwriter will act as agent for the Fund and not as
principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-1 Shares and to promote distribution of the B-1 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-1 Shares to them.
No such broker, dealer or other person shall have any authority to act as agent
for the Fund; such broker, dealer or other person shall act only as principal in
the sale of B-1 Shares.
3. Sales of B-1 Shares by the Principal Underwriter shall be at the public
offering price determined in the manner set forth in the prospectus and/or
statement of additional information of the Fund current at the time of the
Fund's acceptance of the order for B-1 Shares. All orders shall be subject to
acceptance by the Fund and the Fund reserves the right in its sole discretion to
reject any order received. The Fund shall not be liable to anyone for failure to
accept any order.
<PAGE>
4. On all sales of B-1 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-1 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
the Principal Underwriter by other classes of Shares of the Fund to the extent
required in order to comply with Section 14 hereof, and shall pay over to the
Principal Underwriter contingent deferred sales charges ("CDSCs") (as defined in
Section 14 hereof) as set forth in the Fund's current prospectus and statement
of additional information, and as required by Section 14 hereof. The Principal
Underwriter shall also receive payments consisting of shareholder service fees
("Service Fees") at the rate of .25% per annum of the average daily net asset
value of the Class B-1 Shares. The Principal Underwriter may allow all or a part
of said Distribution Fees and CDSCs received by it (not paid to others as
hereinafter provided) to such brokers, dealers or other persons as the Principal
Underwriter may determine.
5. Payment to the Fund for B-1 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such period, the Fund reserves the right, without
further notice, forthwith to cancel its acceptance of any such order. The Fund
shall pay such issue taxes as may be required by law in connection with the
issue of the B-1 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-1 Shares any representations concerning the B-1
Shares except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information and any such printed supplemental information will be
supplied by the Fund to the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the Conduct Rules of the
National Association of Securities Dealers, Inc. (formerly Rules of Fair
Practice) (as defined in the Purchase and Sale Agreement, dated as of May 31,
1995 (the "Purchase Agreement"), between the Principal Underwriter, Citibank,
N.A. and Citicorp North America, Inc., as agent (the "Business Conduct Rules")).
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-1 Shares at values and in the manner
<PAGE>
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a. any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement, prospectus or statement of
additional information (including amendments and supplements thereto) or
b. any omission or alleged omission to state a material fact required to be
stated in the Fund's registration statement, prospectus or statement of
additional information necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance and in conformity with
information furnished to the Fund by the Principal Underwriter for use in the
Fund's registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall the Fund
indemnify the Principal Underwriter or its controlling person as to any amounts
incurred for any liability arising out of or based upon any action for which the
Principal Underwriter, its officers and Directors or any controlling person
would otherwise be subject to liability by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement. 10. The
Principal Underwriter agrees to indemnify and hold harmless the Fund, its
officers and Trustees and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act against any loss, claims, damages,
liabilities and expenses (including the cost of any legal fees incurred in
connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which (a) may be based upon any wrongful act by the Principal Underwriter
or any of its employees or representatives, or (b) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the Fund's
registration statement, prospectus or statement of additional information
(including amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
<PAGE>
make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished or confirmed in writing to the Fund
by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-1 Shares for sale under the so-called "blue
sky" laws of any state or for registering B-1 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-1 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-1 Shares for sale under
the so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to holders of B-1 Shares, and the direct expenses of the issue of
B-1 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees or Directors (together herein called the "Directors") of
the Fund in connection with sales of B-1 Shares not less than quarterly a
written report of the amounts received from the Fund therefor and the purposes
for which such expenditures by the Fund were made.
13. The term of this Agreement shall begin on the date hereof and, unless
sooner terminated or continued as provided below, shall expire after one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-1 of the Fund or by a majority of the Directors of the Fund and a
majority of the Directors who are not parties to this Agreement or "interested
persons," as defined in the 1940 Act, of any such party and who have no direct
or indirect financial interest in the operation of the Fund's Rule 12b-1 plan
for Class B-1 Shares or in any agreements related to the plan at least annually
in accordance with the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Directors of the Fund, or a majority of
such Directors who are not parties to this Agreement or "interested persons," as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-1
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-1 on not more than sixty days written
<PAGE>
notice to any other party to the agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act), which shall not
include assignment of the Principal Underwriter's Allocable Portion of
Distribution Fees (as hereinafter defined) and its Allocable Portion of CDSCs
(as hereinafter defined) provided for hereunder and/or rights related to such
Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of Shares while the Fund is required to do so pursuant to the Principal
Underwriting Agreement, of even date herewith, in respect of Class B-1 Shares,
and shall remain in effect so long as any payments are required to be made by
the Fund pursuant to the irrevocable payment instruction (as defined in the
Purchase Agreement (the "Irrevocable Payment Instruction")).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Business Conduct Rules as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall be equal to the portion of the Asset
Based Sales Charge allocable to Distributor Shares (as defined in Schedule I
hereto) in accordance with Schedule I hereto. The Fund agrees to cause its
transfer agent to maintain the records and arrange for the payments on behalf of
the Fund at the times and in the amounts and to the accounts required by
Schedule I hereto, as the same may be amended from time to time. It is
acknowledged and agreed that by virtue of the operation of Schedule I hereto,
the Principal Underwriter's Allocable Portion of Distribution Fees paid by the
Fund in respect of Shares, may, to the extent provided in Schedule I hereto,
take into account Distribution Fees payable by the Fund in respect of other
existing and future classes and/or sub-classes of shares of the Fund which would
be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid
to any subsequent principal underwriters of Shares to the portion of the Asset
Based Sales Charge paid in respect of Shares which is allocable to
Post-distributor Shares (as defined in Schedule I hereto) in accordance with
Schedule I hereto. The Fund's payments to the Principal Underwriter in
consideration of its services in connection with the sale of B-1 Shares shall be
the Distribution Fees attributable to B-1 Shares which are Distributor Shares
(as defined in Schedule I hereto), and all other amounts constituting the
Principal Underwriter's Allocable Portion of Distribution Fees shall be the
<PAGE>
Distribution Fees related to the sale of other Shares which are Distributor
Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current prospectus and/or statement of additional information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter the Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall be equal to the portion thereof allocable to Distributor Shares (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution
Fees and the right to payment over to it of its Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby, notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and payment of
such Distribution Fees. The obligation and the method of computing such payment
shall not be changed or terminated except to the extent required by any change
in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules, in each case enacted or promulgated after June 1, 1995,
or in connection with a Complete Termination (as hereinafter defined). For the
purposes of this Section 14.5, "Complete Termination" means a termination of the
Fund's Rule 12b-1 plan for B-1 Shares involving the cessation of payments of the
Distribution Fees, and the cessation of payments of distribution fees pursuant
<PAGE>
to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of-Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-1 Shares which are Distributor Shares pursuant to Schedule I
hereto shall have been redeemed or converted or (ii) June 1, 2005. For purposes
of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of
Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of
shares of the Fund hereafter issued which would be treated as Shares under
Schedule I hereto or which has substantially similar economic characteristics to
the B-1 or B-2 Classes of Shares taking into account the total sales charge,
CDSC or other similar charges borne directly or indirectly by the holder of the
shares of such class. The parties agree that the existing C Class of Shares of
the Fund does not have substantially similar economic characteristics to the B-1
or B-2 Classes of Shares taking into account the total sales charge, CDSC or
other similar charges borne directly or indirectly by the holder of such shares.
For purposes of clarity the parties to this agreement hereby state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing B-1 or B-2 Classes of Shares taking
into account the total sale charge, CDSC or other similar charges borne directly
or indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
14.6 The Principal Underwriter may assign any part of its Allocable
Portions and obligations of the Fund related thereto (but not the Principal
Underwriter's obligations to the Fund provided for in this Agreement) to any
person (an "Assignee"), and any such assignment shall be effective as to the
Fund upon written notice to the Fund by the Principal Underwriter. In connection
therewith the Fund shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Principal Underwriter in the Irrevocable Payment Instruction, as the same may be
amended from time to time with the consent of the Fund, and the Fund shall be
without liability to any person if it pays such amounts when and as so directed,
except for underpayments of amounts actually due, without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fees and CDSCs
results in an increase in the maximum Sales Charge allowable under the Business
Conduct Rules, which increases daily at a rate of prime plus one percent per
<PAGE>
annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-1 Shares, except as provided in
the Fund's prospectus or statement of additional information, without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-1 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
15. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts. All sales hereunder are to be made, and title to
the Shares shall pass, in Boston, Massachusetts.
16. The Fund is a series of a Delaware business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against, the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN EQUITY TRUST
/s/John J. Pileggi
-------------------------
President:
EVERGREEN INVESTMENT SERVICES, INC.
/s/Gordon Forrester
---------------------------
Chief Administrative Officer
<PAGE>
SCHEDULE I
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
EVERGREEN EQUITY TRUST
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts (in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of May 31, 1995 and the successor Agreement
dated December 11, 1996 between the Instant Fund and the Distributor.
<PAGE>
"Asset Based Sales Charge" shall have the meaning set forth in Section
26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes
of this Exhibit I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and the New York Stock
Exchange are not authorized or required to close in New York City.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued prior to December 11, 1996 under circumstances where a CDSC would be
payable upon the redemption of such Share if such CDSC is not waived or shall
have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Evergreen Investment Distributors Company, its
successors and assigns.
"Distributor's Account" shall mean the account of the Distributor, account
no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with
State Street Bank & Trust Company or such other account as the Distributor may
designate in a notice to the Transfer Agent.
<PAGE>
"Distributor Inception Date" shall mean, in respect of any Fund, the date
identified as the date Shares of such Fund are first sold by the Distributor.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Inception
Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
issued prior to December 11, 1996 other than a Commission Share, including,
without limitation: (i) Shares issued in connection with the automatic
reinvestment of Capital Gain Dividends or Other Dividends by such Fund, (ii)
Special Free Shares issued by such Fund and (iii) Shares (or portion thereof)
issued by such Fund in connection with an exchange whereby a Free Share (or
portion thereof) of another Fund is redeemed and the Net Asset Value of such
redeemed Free Share (or portion thereof) is invested in such Shares (or portion
thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Schedule II to the
Irrevocable Payment Instruction, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean Evergreen Equity Trust.
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
<PAGE>
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be the Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
<PAGE>
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
<PAGE>
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Program Agent" shall mean Citicorp North America, Inc., as Program Agent
under the Purchase Agreement, and its successors and assigns in such capacity.
"Purchase Agreement" shall mean that certain Purchase and Sale Agreement
dated as of May 31, 1995, among Keystone Investment Distributors Company, as
Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as
Program Agent.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Schedule II to the Irrevocable Payment Instruction opposite
the name of such Fund, as the same may be amended from time to time by notice
from the Distributor and the Program Agent to the Fund and the Transfer Agent;
provided, that such term shall include, after the Distributor Last Sale Cut-off
Date, a share of a new class of shares of such Fund: (i) with respect to each
record owner of Shares which is not treated in the records of each Transfer
Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct
class of shares from the classes of shares specified Schedule II to the
Irrevocable Payment Instruction or (ii) the shares of which class may be
exchanged for shares of another Fund of the classes of shares specified on
Schedule II to the Irrevocable Payment Instruction of any class existing on or
prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can
be reinvested in shares of the classes specified on Schedule II to the
Irrevocable Payment Instruction under the automatic dividend reinvestment
options; or (iv) which is otherwise treated as though it were of the same class
as the class of shares specified on Schedule II to the Irrevocable Payment
Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
"Sub-shareholder Account" shall have the meaning set forth in clause
(B)(1) hereof.
<PAGE>
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND
AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) Shareholder Accounts and Sub-shareholder Accounts. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) Commission Shares. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the Sub-
transfer Agent in respect thereof maintain daily records of such Sub-shareholder
Account which records shall identify each Commission Share of such Fund
reflected in such Sub- shareholder Account by the Month of Original Purchase;
provided, that until the Sub- transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
<PAGE>
(3) Free Shares. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain daily records for each Sub-shareholder Account in
the manner described in the immediately preceding paragraph for Shareholder
Accounts(other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post-distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the
Distributor Last Sale Cut-off Date for such Fund shall be
identified as Distributor Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date
for such Fund shall be identified as Distributor Shares in a
number computed as follows:
<PAGE>
A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of
business in the last day of the immediately preceding
calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date
for such Fund shall be identified as Post-distributor Shares
in a number computed as follows:
(A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the
close of business in the last day of the immediately
preceding calendar month (or portion thereof)
<PAGE>
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a Class
A Share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Distributor Shares in a number computed as follows:
A X (B/C)
Where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a class
A share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Post-distributor Shares in a number computed as follows:
<PAGE>
A X (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(4) Appreciation Amount and Cost Accumulation Amount. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
<PAGE>
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account; provided, that until the Sub- transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) NASD Cap. On the date the distribution fees paid in respect of any
class of Shares equals the maximum amount thereon under the Rules of Fair
Practice, in respect of such class, all outstanding Shares of such class of such
Fund shall be converted into Class A shares of such Fund and will be deemed to
have been redeemed for their Net Asset Value for purposes of this Schedule I.
(6) Identification of Redeemed Shares. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
<PAGE>
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(7) Identification of Exchanged Shares. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the Redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post-distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post- distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
<PAGE>
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(8) Identification of Converted Shares. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
<PAGE>
(1) Receivables Constituting CDSCs: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub- shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) Receivables Constituting Asset Based Sales Charges:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A X (B/C)
where:
A. = Total amount of Asset Based Sales Charge
accrued in respect of such Shareholder
Account (other than an Omnibus Account) on
such day.
B. = Number of Distributor Shares reflected in
such Shareholder Account (other than an
Omnibus Account) on the close of business
on such day
C. = Total number of Distributor Shares and
Post- Distributor Shares reflected in such
Shareholder Account (other than an Omnibus
Account) and outstanding as of the close of
business on such day.
<PAGE>
The Portion of the Asset Based Sales Charges of such Fund accruing in
respect of such Shareholder Account for such day allocated to Post-distributor
Shares will be obtained using the same formula but substituting for "B" the
number of Post-distributor Shares, as the case may be, reflected in such
Shareholder Account and outstanding on the close of business on such day. The
foregoing allocation formula may be adjusted from time to time by notice to the
Fund and the transfer agent for the Fund from the Seller and the Program Agent
pursuant to Section 8.18 of the Purchase Agreement.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
such Sub- shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub- shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to
Distributor Shares shall be computed as follows:
A X ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
<PAGE>
B = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as of
the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as of
the close of business on the last day of such calendar
month (or portion thereof), times Net Asset Value per
Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per
Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of such calendar month (or portion
thereof), times Net Asset Value per Share as of such
time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed s follows:
A X ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
<PAGE>
B = Shares of such Fund in the ML Omnibus Account and
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of such
calendar month (or portion thereof), times Net Asset
Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per
Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus
Account outstanding as of the close of business on the
last day of such calendar month, times Net Asset Value
per Share as of such time.
(3) Payments on behalf of each Fund.
On the close of business on each day the Transfer Agent shall cause payment
to be made of the amount of the Asset Based Sales Charge and CDSCs accruing on
such day in respect of the Shares of such Fund owned of record by Shareholder
Accounts (other than Omnibus Accounts) by two separate wire transfers, directly
from accounts of such Fund as follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to Distributor
Shares in accordance with the preceding rules shall be paid to the Distributor's
Account, unless the Distributor otherwise instructs the Fund in any irrevocable
payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
<PAGE>
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to the
Distributor's Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in any
irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant Fund.
F:\RNH\SALEM23\EVEQB1.DIS:1/27/98
<PAGE>
EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Growth and Income Funds
Evergreen Fund for Total Return
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-2 SHARES
OF
EVERGREEN EQUITY TRUST
AGREEMENT made this 18th day of September, 1997 by and between Evergreen
Equity Trust, a Delaware business trust, on behalf of its series listed on
Exhibit A attached hereto (such Trust and series referred to herein as "Fund"
individually or "Funds" collectively), and Evergreen Distributor, Inc., a
Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the "Fund'"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act'"), Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-2 shares of beneficial interest of the Fund ("B-2
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Principal Underwriter and
the Fund may from time to time agree, the Principal Underwriter will act as
agent for the Fund and not as principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-2 Shares and to promote distribution of the B-2 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-2 Shares to them.
No such dealer, broker or other person shall have any authority to act as agent
for the Fund; such dealer, broker or other person shall act only as principal in
the sale of B-2 Shares.
3. Sales of B-2 Shares by Principal Underwriter shall be at the public
offering price determined in the manner set forth in the Prospectus and/or
Statement of Additional Information of the Fund current at the time of the
Fund's acceptance of the order for B-2 Shares. All orders shall be subject to
acceptance by the Fund and the Fund reserves the right in its sole discretion to
reject any order received. The Fund shall not be liable to anyone for failure to
accept any order.
<PAGE>
4. On all sales of B-2 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-2 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
Evergreen Investment Services Company, Inc. ("EKISC") by other classes of Shares
of the Fund to the extent required in order to comply with Section 14 hereof,
and shall pay over to the Principal Underwriter CDSCs (as defined in Section 14
hereof) as set forth in the Fund's current Prospectus and Statement of
Additional Information, and as required by Section 14 hereof. The Principal
Underwriter shall also receive payments consisting of shareholder service fees
("Service Fees") at the rate of .25% per annum of the average daily net asset
value of the Class B-2 Shares. The Principal Underwriter may allow all or a part
of said Distribution Fees and CDSCs received by it (not paid to others as
hereinafter provided) to such brokers, dealers or other persons as Principal
Underwriter may determine.
5. Payment to the Fund for B-2 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three Business
Days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such period, the Fund reserves the right, without
further notice, forthwith to cancel its acceptance of any such order. The Fund
shall pay such issue taxes as may be required by law in connection with the
issue of the B-2 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-2 Shares any representations concerning the B-2
Shares except those contained in the then current Prospectus and/or Statement of
Additional Information covering the Shares and in printed information approved
by the Fund as information supplemental to such Prospectus and Statement of
Additional Information. Copies of the then current Prospectus and Statement of
Additional Information and any such printed supplemental information will be
supplied by the Fund to the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the National Association
of Securities Dealers, Inc. ("NASD") Business Conduct Rule 2830 (d) (2) (the
"Business Conduct Rules") or any successor rule (which succeeds the Rules of
Fair Practice of the NASD defined in the Purchase and Sale Agreement, dated as
of May 31, 1995 (the "Citibank Purchase Agreement"), between Evergreen Keystone
Investment Services Company (formerly Keystone Investment Distributors Company),
Citibank, N.A. and Citicorp North America, Inc., as agent).
<PAGE>
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-2 Shares at values and in the manner
determined in accordance with the then current Prospectus and/or Statement of
Additional Information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Trustees and each person, if any, who controls the
Principal Underwriter within the meaning of Section 15 of the Securities Act of
1933 ("1933 Act"), against any losses, claims, damages, liabilities and expenses
(including the cost of any legal fees incurred in connection therewith) which
the Principal Underwriter, its officers, Trustees or any such controlling person
may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon:
a. any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement, Prospectus or Statement of
Additional Information (including amendments and supplements thereto); or
b. any omission or alleged omission to state a material fact required to be
stated in the Fund's registration statement, Prospectus or Statement of
Additional Information necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance and in conformity with
information furnished to the Fund by the Principal Underwriter for use in the
Fund's registration statement, Prospectus or Statement of Additional
Information, such indemnification is not applicable. In no case shall the Fund
indemnify the Principal Underwriter or its controlling person as to any amounts
incurred for any liability arising out of or based upon any action for which the
Principal Underwriter, its officers and Trustees or any controlling person would
otherwise be subject to liability by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers and Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
<PAGE>
(a) may be based upon any wrongful act by the Principal Underwriter or any
of its employees or representatives, or
(b) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement, Prospectus or
Statement of Additional Information (including amendments and supplements
thereto), or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
if such statement or omission was made in reliance upon information furnished or
confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-2 Shares for sale under the so-called "blue
sky'" laws of any state or for registering B-2 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-2 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-2 Shares for sale under
the so called "blue sky" laws of any state, the preparation and printing of
Prospectuses, Statements of Additional Information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of Prospectuses and Statements of Additional
Information to holders of B-2 Shares, and the direct expenses of the issue of
B-2 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees of the Fund in connection with sales of B-2 Shares not
less than quarterly a written report of the amounts received from the Fund
therefor and the purpose for which such expenditures by the Fund were made.
13. The term of this Agreement shall begin on the date hereof and, unless
sooner terminated or continued as provided below, shall expire after one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-2 of the Fund or by a majority of the Trustees of the Fund and a
majority of the Trustees who are not parties to this Agreement or "interested
persons", as defined in the 1940 Act, of any such party and who have no direct
or indirect financial interest in the operation of the Fund's Rule 12b-l plan
for Class B-2 Shares or in any agreements related to the plan at least annually
in accordance with the 1940 Act and the rules and regulations thereunder.
-4-
<PAGE>
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees of the Fund, or a majority of
such Trustees who are not parties to this Agreement or "interested persons", as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-2
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-2 on not more than sixty days written
notice to any other party to the Agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act), which shall not
include assignment of the Principal Underwriter's Allocable Portion of
Distribution Fees (as hereinafter defined) and Allocable Portion of CDSCs
provided for hereunder and/or rights related to such Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of B-2 Shares and also permit the Fund to pay, pursuant to the Principal
Underwriting Agreement dated as of December 11, 1996, between the Fund and EKISC
in respect of Class B-2 Shares, the Allocable Portion of Distribution Fees due
EKISC in respect of B-2 Shares and, pursuant to the Principal Underwriting
Agreement dated as of December 11, 1996 between the Fund and EKISC in respect of
Class B-1 Shares, the Allocable Portion of Distribution Fees due EKISC in
respect of B-1 Shares (together the "EKISC Underwriting Agreements"), and shall
remain in effect so long as any payments are required to be made by the Fund
pursuant to the irrevocable payment instructions pursuant to the Citibank
Purchase Agreement and the Master Sale Agreement between the Principal
Underwriter and Mutual Fund Funding 1994-1 dated as of December 6, 1996 (the
"Master Sale Agreement") (the "Irrevocable Payment Instructions")).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Business Conduct Rules as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall mean the portion of the Asset Based
Sales Charge allocable to Distributor Shares (as defined in Schedule I hereto to
this Agreement) in accordance with Schedule I hereto. The Fund agrees to cause
its transfer agent (the "Transfer Agent") to maintain the records and arrange
for the payments on behalf of the Fund at the times and in the amounts and to
the accounts required by Schedule I hereto, as the same may be amended from time
to time. It is acknowledged and agreed that by virtue of the operation of
-5-
<PAGE>
Schedule I hereto the Principal Underwriter's Allocable Portion of Distribution
Fees paid by the Fund in respect of Shares, may, to the extent provided in
Schedule I hereto, take into account Distribution Fees payable by the Fund in
respect of other existing and future classes and/or subclasses of shares of the
Fund which would be treated as "Shares" under Schedule I hereto. The Fund will
limit amounts paid to any subsequent principal underwriters of Shares to the
portion of the Asset Based Sales Charge paid in respect of Shares which is
allocable to Post-distributor Shares (as defined in Schedule I hereto) in
accordance with Schedule I hereto. The Fund's payments to the Principal
Underwriter in consideration of its services in connection with the sale of B-2
Shares shall be the Distribution Fees attributable to B-2 Shares which are
Distributor Shares (as defined in Schedule I hereto) and all other amounts
constituting the Principal Underwriter's Allocable Portion of Distribution Fees
shall be the Distribution Fees related to the sale of other Shares which are
Distributor Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current Prospectus and/or Statement of Additional Information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter the Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall mean the portion thereof allocable to Distributor Shares (as defined in
Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution Fee
and the right to payment over to it of its Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
-6-
<PAGE>
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and such payment
of such Distribution Fees, and that obligation and the method of computing such
payment, shall not be changed or terminated except to the extent required by any
change in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules, in each case enacted or promulgated after December 1,
1996, or in connection with a Complete Termination (as hereinafter defined). For
the purposes of this Section 14.5, "Complete Termination" means a termination of
the Fund's Rule 12b-l plan for B-2 Shares involving the cessation of payments of
the Distribution Fees, and the cessation of payments of distribution fees
pursuant to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the date upon which all of the B-2
Shares which are Distributor Shares pursuant to Schedule I hereto shall have
been redeemed or converted. For purposes of this Section 14.5, the term
B-Class-of-Shares means each of the B-1 Class of Shares of the Fund, the B-2
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as Shares under Schedule I hereto or which has
substantially similar economic characteristics to the B-1 or B-2 Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of the shares of such class. The
parties agree that the existing C Class of Shares of the Fund does not have
substantially similar economic characteristics to the B-1 or B-2 Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of such shares. For purposes of
clarity the parties to this agreement hereby state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it
has economic characteristics substantially similar to the economic
characteristics of the existing B-1 or B-2 Classes of Shares taking into account
the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
-7-
<PAGE>
14.6 The Principal Underwriter may assign, sell or otherwise transfer any
part of its Allocable Portions and obligations of the Fund related thereto (but
not the Principal Underwriter's obligations to the Fund provided for in this
Agreement, provided, however, the Principal Underwriter may delegate and
sub-contract certain functions to other broker-dealers so long as it remains
employed by the Fund) to any person (an "Assignee") and any such assignment
shall be effective as to the Fund upon written notice to the Fund by the
Principal Underwriter. In connection therewith the Fund shall pay all or any
amounts in respect of its Allocable Portions directly to the Assignee thereof as
directed in a writing by the Principal Underwriter in the Irrevocable Payment
Instruction, as the same may be amended from time to time with the consent of
the Fund, and the Fund shall be without liability to any person if it pays such
amounts when and as so directed, except for underpayments of amounts actually
due, without any amount payable as consequential or other damages due to such
underpayment and without interest except to the extent that delay in payment of
Distribution Fees and CDSCs results in an increase in the maximum Sales Charge
allowable under the Business Conduct Rules, which increases daily at a rate of
prime plus one percent per annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-2 Shares, except as provided in
the Fund's Prospectus or Statement of Additional Information without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-2 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
14.8 Notwithstanding anything contained herein in this Agreement to the
contrary, the Fund shall comply with its obligations under the EKISC
Underwriting Agreements and the attached Schedule I and any replacement
Agreement, provided that such replacement agreement does not increase the
Allocable Portion currently payable to EKISC, to pay to EKISC its Allocable
Portion (as defined in the EKISC Underwriting Agreement) of the Distribution
Fees (as defined in the EKISC Underwriting Agreement) in respect of Class B-2
Shares as required therein and to comply with its obligations under the
Irrevocable Payment Instructions (as defined in the Citibank Purchase Agreement,
as defined therein).
15. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts. All sales hereunder are to be made, and title to
the Shares shall pass, in Boston, Massachusetts.
-8-
<PAGE>
16. The Fund is a series of a Delaware business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN EQUITY TRUST EVERGREEN DISTRIBUTOR, INC.
By: /s/John J. Pileggi By: /s/J. David Huber
----------------------- -------------------------------
Title: President Title: President
-9-
<PAGE>
EXHIBIT A
TO PRINCIPAL UNDERWRITING AGREEMENT
DATED SEPTEMBER 18, 1997
BETWEEN EVERGREEN EQUITY TRUST AND
EVERGREEN DISTRIBUTOR, INC.
Evergreen Equity Trust (the "Fund") and Evergreen Distributor, Inc. ("EDI")
agree that the Collection Rights of EDI, as such term is defined in the
Principal Underwriting Agreement dated as of September 18, 1997 between the Fund
and EDI (the "Agreement"), paid by the Fund pursuant to the Agreement with
respect to Distributor Shares, as that term is defined in Schedule I to the
Agreement, sold on or after December 1, 1996 will be utilized by EDI as follows:
(a) to the extent that the total amount of Collection Rights received by
EDI with respect to Distributor Shares of all Funds, as that term is defined in
Schedule I, does not exceed 4.25% (except that in the case of Evergreen Capital
Preservation and Income Fund, the amount shall be 3%) of the aggregate net asset
value at the time of sale of the Distributor Shares sold on or after December 1,
1996, plus any interest and other fees, costs and expenses that may be paid in
accordance with the financing of commissions paid to selling brokers regarding
such Distributor Shares of such Funds (the "Brokers Commission and Expenses"),
the entire amount of the Collection Rights with respect to such Distributor
Shares may only be used by the Principal Underwriter for payment of the Brokers
Commission and Expenses and may not be used for any other purpose.
(b) to the extent that there is no longer any unrecovered Brokers
Commission and Expenses with respect to the Distributor Shares sold on or after
December 1, 1996 (including shares purchased in connection with the reinvestment
of dividends on such Distributor Shares as determined in accordance with
Schedule I ) as provided in (a), above, the Fund will pay the Principal
Underwriter a fee in an amount up to the remaining Collection Rights
attributable to such Shares to compensate Evergreen Investment Services, Inc.,
as marketing services agent for the Principal Underwriter (the "Marketing
Services Agent").
The foregoing calculations shall be the responsibility of the Transfer
Agent and Administrator and not the responsibility of the Principal Underwriter.
-10-
<PAGE>
SCHEDULE I
TO
PRINCIPAL UNDERWRITING AGREEMENT
RELATING TO CLASS B-2 SHARES
OF
EVERGREEN EQUITY TRUST
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
Notwithstanding anything herein to the contrary, no amounts relating to the
EKISC Allocable Portion (as defined in the EKISC Underwriting Agreements) shall
be allocated hereunder and no Shares attributable to EKISC pursuant to the EKISC
Underwriting Agreements shall constitute Distributor Shares or Post-distributor
Shares or otherwise be allocated to any person or entity except as contemplated
by the EKISC Underwriting Agreements and the Irrevocable Payment Instructions.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
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<PAGE>
"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of September 18, 1997 between the Instant
Fund and the Distributor.
"Asset Based Sales Charge" shall have the meaning set forth in National
Association of Securities Dealers, Inc. ("NASD") Business Conduct Rule 2830 (d)
(2) or any successor rule (the "Business Conduct Rules) it being understood that
for purposes of this Schedule I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and The New York Stock
Exchange are not authorized or required to close in New York City or the State
of North Carolina.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued under circumstances where a CDSC would be payable upon the redemption of
such Share if such CDSC is not waived or shall have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Evergreen Distributor, Inc., its successors and
assigns.
-12-
<PAGE>
"Distributor's Account" shall mean the account designated in the
Irrevocable Payment Instructions of the Distributor.
"Distributor Inception Date" shall mean, in respect of any Fund and solely
for the purpose of making the calculations contained herein, December 1, 1996.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Distributor
Inception Date and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
other than a Commission Share, including, without limitation: (i) Shares issued
in connection with the automatic reinvestment of Capital Gain Dividends or Other
Dividends by such Fund; (ii) Special Free Shares issued by such Fund; and (iii)
Shares (or portion thereof) issued by such Fund in connection with an exchange
whereby a Free Share (or portion thereof) of another Fund is redeemed and the
Net Asset Value of such redeemed Free Share (or portion thereof) is invested in
such Shares (or portion thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Exhibit J to the
Master Sale Agreement, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean Evergreen Equity Trust.
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<PAGE>
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be The Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
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<PAGE>
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
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<PAGE>
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Buyer" shall mean Mutual Fund Funding, as Buyer under the Master Sale
Agreement, and its successors and assigns in such capacity.
"Master Sale Agreement" shall mean that certain Master Sale Agreement dated
as of December 6, 1996 between Evergreen Keystone Distributor, Inc., as Seller,
and Mutual Fund Funding, as Buyer.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Exhibit G to the Master Sale Agreement under the designation
"Keystone America Funds", as the same may be amended from time to time by notice
from the Distributor and the Buyer to the Fund and the Transfer Agent; provided,
that such term shall include, after the Distributor Last Sale Cut-off Date, a
share of a new class of shares of such Fund: (i) with respect to each record
owner of Shares which is not treated in the records of each Transfer Agent and
Sub-transfer Agent for such Fund as an entirely separate and distinct class of
shares from the classes of shares specified Exhibit G to the Master Sale
Agreement or (ii) the shares of which class may be exchanged for shares of
another Fund of the classes of shares specified in Exhibit G to the Master Sale
Agreement under the designation "Keystone America Funds" of any class existing
on or prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on
which can be reinvested in shares of the classes specified on Exhibit G to the
Master Sale Agreement under the automatic dividend reinvestment options; or (iv)
which is otherwise treated as though it were of the same class as the class of
shares specified on Schedule II to the Irrevocable Payment Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(l)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
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<PAGE>
"Sub-shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) Shareholder Accounts and Sub-shareholder Accounts. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) Commission Shares. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub-shareholder Account by the Month of Original
Purchase; provided, that until the Sub-transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
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<PAGE>
(3) Free Shares. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect
of each Omnibus Account maintain daily records for each Sub-shareholder Account
in the manner described in the immediately preceding paragraph for Shareholder
Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post- distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the
Distributor Last Sale Cutoff Date for such Fund shall be
identified as Distributor Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cutoff Date
for such Fund shall be identified as Distributor Shares in a
number computed as follows:
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<PAGE>
A * (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of
business in the last day of the immediately preceding
calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cutoff Date
for such Fund shall be identified as Post-distributor Shares
in a number computed as follows:
(A * (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the
close of business in the last day of the immediately
preceding calendar month (or portion thereof)
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<PAGE>
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a Class
A Share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Distributor Shares in a number computed as follows:
A * (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a class
A share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cutoff Date for such Fund shall be identified as
Post-distributor Shares in a number computed as follows:
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<PAGE>
A * (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last to day of the immediately
preceding calendar month.
(4) Appreciation Amount and Cost Accumulation Amount. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
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<PAGE>
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account); provided, that until the Sub-transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) Identification of Redeemed Shares. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
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<PAGE>
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(6) Identification of Exchanged Shares. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post- distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post-distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
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<PAGE>
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(7) Identification of Converted Shares. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a Class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a Class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCs AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
(1) Receivables Constituting CDSCs: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
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<PAGE>
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub-shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) Receivables Constituting Asset Based Sales Charges:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A * (B/C)
where:
A = Total amount of Asset Based Sales Charge accrued in respect
of such Shareholder Account (other than an Omnibus Account) on
such day.
B = Number of Distributor Shares reflected in such Shareholder
Account (other than an Omnibus Account) on the close of
business on such day
C = Total number of Distributor Shares and Post-distributor
Shares reflected in such Shareholder Account (other than an
Omnibus Account) and outstanding as of the close of business
on such day.
The Portion of the Asset Based Sales Charges of such Fund accruing in
respect of such Shareholder Account for such day allocated to Post-distributor
Shares will be obtained using the same formula but substituting for "B" the
number of Post-distributor Shares, as the case may be, reflected in such
Shareholder Account and outstanding on the close of business on such day. The
foregoing allocation formula may be adjusted from time to time by notice to the
Fund and the transfer agent for the Fund from the Seller and the Buyer.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
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<PAGE>
such Sub-shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub-shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to
Distributor Shares shall be computed as follows:
A * ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
B = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as
of the close of business on the last day of such
calendar month (or portion thereof), times Net Asset
Value per Share as of such time
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<PAGE>
D = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month (or portion thereof), times Net Asset
Value per Share as of such time.
E = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of such calendar month (or
portion thereof), times Net Asset Value per Share as
of such time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed as follows:
A * ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
B = Shares of such Fund in the ML Omnibus Account and
identified as Post- distributor Shares and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof), times Net Asset Value per Share as
of such time
C = Shares of such Fund in the ML Omnibus Account and
identified as Post- distributor Shares and
outstanding as of the close of business on the last
day of such calendar month (or portion thereof),
times Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month (or portion thereof), times Net Asset
Value per Share as of such time.
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<PAGE>
E = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of such calendar month (or
portion thereof), times Net Asset Value per Share as
of such time.
(3) Payments on behalf of each Fund.
On the close of business on each day, or to the extent the parties agree
less frequently, the Transfer Agent shall cause payment to be made of the amount
of the Asset Based Sales Charge and CDSCs accruing on such day in respect of the
Shares of such Fund owned of record by Shareholder Accounts (other than Omnibus
Accounts) by two separate wire transfers, directly from accounts of such Fund as
follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to Distributor
Shares in accordance with the preceding rules shall be paid to the Distributor's
Account, unless the Distributor otherwise instructs the Fund in any irrevocable
payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to Post-
distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall he paid to the
Distributor's Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
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<PAGE>
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in any
irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant Fund.
<PAGE>
EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Growth and Income Funds
Evergreen Fund for Total Return
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN EQUITY TRUST
CLASS B SHARES
AGREEMENT, made as of the 18th day of September, 1997, by and between
Evergreen Equity Trust (the "Trust") and Evergreen Distributor, Inc. ("EDI")
WHEREAS, The Trust, has adopted one or more Plans of Distribution with
respect to certain Classes of shares of its separate investment series (each a
"Plan", or collectively the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") which Plans authorize the Trust
on behalf of the Funds to enter into agreements regarding the distribution of
such Classes of shares (the "Shares") of the separate investment series of the
Trust (the "Funds") set forth on Exhibit A; and
WHEREAS, the Trust has agreed that Evergreen Distributor, Inc. (the
"Distributor"), a Delaware corporation, shall act as the distributor of the
Shares; and
WHEREAS, the Distributor agrees to act as distributor of the Shares for the
period of this Distribution Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the agreements hereinafter contained,
it is agreed as follows:
1. SERVICES AS DISTRIBUTOR.
1.1. The Distributor agrees to use appropriate efforts to promote each Fund
and to solicit orders for the purchase of Shares and will undertake such
advertising and promotion as it believes reasonable in connection with such
solicitation. The services to be performed hereunder by the Distributor are
described in more detail in Section 7 hereof. In the event that the Trust
establishes additional investment series with respect to which it desires to
retain the Distributor to act as distributor for Class B shares hereunder, it
shall promptly notify the Distributor in writing. If the Distributor is willing
to render such services it shall notify the Trust in writing whereupon such
portfolio shall become a Fund and its Class B shares shall become Shares
hereunder.
1.2. All activities by the Distributor and its agents and employees as the
distributor of Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission") or any securities association registered under the Securities
Exchange Act of 1934, as amended.
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1.3 In selling the Shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor, any selected
dealer or any other person is authorized by the Trust to give any information or
to make any representations, other than those contained in the Trust's
registration statement (the "Registration Statement") or related Fund prospectus
and statement of additional information ("Prospectus and Statement of Additional
Information") and any sales literature specifically approved by the Trust.
1.4 The Distributor shall adopt and follow procedures, as approved by the
officers of the Trust, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
1.5. The Distributor will transmit any orders received by it for purchase
or redemption of Shares to the transfer agent and custodian for the applicable
Fund.
1.6. Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of
Shares until such time as those officers deem it advisable to accept such orders
and to make such sales.
1.7. The Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others. The
Distributor shall offer and sell Shares only to such selected dealers as are
members, in good standing, of the NASD.
1.8 The Distributor agrees to adopt compliance standards, in a form
satisfactory to the Trust, governing the operation of the multiple class
distribution system under which Shares are offered.
2. DUTIES OF THE TRUST.
2.1. The Trust agrees at its own expense to execute any and all documents
and to furnish, at its own expense, any and all information and otherwise to
take all actions that may be reasonably necessary in connection with the
qualification of Shares for sale in such states as the Trust and the Distributor
may designate.
2.2. The Trust shall furnish from time to time, for use in connection with
the sale of Shares such information with respect to the Funds and the Shares as
the Distributor may reasonably request; and the Trust warrants that any such
information shall be true and correct. Upon request, the Trust shall also
provide or cause to be provided to the Distributor: (a) unaudited semi-annual
statements of each Fund's books and accounts, (b) quarterly earnings statements
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<PAGE>
of each Fund, (c) a monthly itemized list of the securities in each Fund, (d)
monthly balance sheets as soon as practicable after the end of each month, and
(e) from time to time such additional. information regarding each Fund's
financial condition as the Distributor may reasonably request.
3. REPRESENTATIONS OF THE TRUST.
3.1. The Trust represents to the Distributor that it is registered under
the 1940 Act and that the Shares of each of the Funds have been registered under
the Securities Act of 1933, as amended (the "Securities Act"). The Trust will
file such amendments to its Registration Statement as may be required and will
use its best efforts to ensure that such Registration Statement remains
accurate.
4. INDEMNIFICATION.
4.1 The Trust shall indemnify and hold harmless the Distributor, its
Officers and Directors, and each person, if any, who controls the Distributor
within the meaning of Section 15 of the Securities Act against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith), which the
Distributor or such Officer and Director or controlling person may incur under
the Securities Act or under common law or otherwise, arising out of or based
upon any untrue statement, or alleged untrue statement, of a material fact
contained in the Registration Statement, as from time to time amended or
supplemented, any prospectus or annual or interim report to shareholders of the
Trust, or arising out of or based upon any omission, or alleged omission, to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Distributor, provided, however, that
in no case (i) is the indemnification of the Trust in favor of the Distributor,
its Officer and Directors, or any such controlling persons to be deemed to
protect such Distributor, any Officer or Director thereof, or any such
controlling persons thereof against any liability to the Trust of each Fund or
any securities holders thereof to which the Distributor any Officer or Director
thereof, or any such controlling persons would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of the reckless disregard of their obligations and duties
under this Agreement; or (ii) is the Trust to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling person, as the case maybe, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Trust of any such claim shall not relieve it
from any liability which it may have to the person
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<PAGE>
against whom such action it brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Trust will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Trust elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Trust elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust shall promptly notify the Distributor of the commencement of any
litigation or proceeding against it or any of its officers or directors in
connection with the issuance or sale of any of the shares.
4.2 The Distributor shall indemnify and hold harmless the Trust and each of
its directors and officers and each person, if any, who controls the Trust
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in paragraph 4.1, but only with respect to statements or
omissions made in reliance upon , and in conformity with, information furnished
to the Trust in writing by or on behalf of the Distributor for uses in
connection with the Registration Statement, as from time to time amended, or the
annual or interim reports to shareholders. In case any action shall be brought
against the Trust or any persons so indemnified, in respect of which indemnity
may be sought against the Distributor, the Distributor shall have rights and
duties given to the Trust, and the Trust and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
paragraph 4.1.
5. OFFERING OF SHARES.
5.1. None of the Shares shall be offered by either the Distributor or the
Trust under any of the provisions of this Agreement, and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust, if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus and statement of
additional information as required by Section 10(b)(2) of the Securities Act, as
amended, is not on file with the Commission; provided, however, that nothing
contained in this paragraph 5.1 shall in any way restrict or have any
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus of each Fund
or the Trust's prospectus or Declaration of Trust.
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<PAGE>
6. AMENDMENTS TO REGISTRATION STATEMENT AND OTHER MATERIAL EVENTS.
6.1. The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor: (a) of any
request or action taken by the Commission which is material to the Distributor's
obligations hereunder or (b) any material fact of which the Trust becomes aware
which affects the Distributor's obligations hereunder.
For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission.
7. COMPENSATION OF DISTRIBUTOR.
7.1 (a) On all sales of Shares of the Fund shall receive the current net
asset value. The Trust in respect of each Fund shall pay to the Distributor the
Distributor's Allocable Portion (as defined below) of a fee (the "Distribution
Fee") in respect of the Shares of each such Fund at the rate of .75% per annum
of the average daily net asset value of the Shares of such Fund, subject to the
limitation on the maximum amount of such fees under the Business Conduct Rules
as applicable to such Distribution Fee on the date hereof, as compensation to
the Distributor for its services in connection with the offer and sale of Shares
and shall also pay to the Distributor contingent deferred sales charges ("CDSC")
as set forth in the Fund's current Prospectus and Statement of Additional
Information, and as required by this Agreement. The Distributor shall also
receive payments consisting of shareholder service fees ("Service Fees") at the
rate of .25% per annum of the average daily net asset value of the Shares. The
Distributor may allow all or a part of said Distribution Fee and CDSCs received
by it (and not paid to others as hereinafter provided) to such brokers, dealers
or other persons as Distributor may determine. The Distributor may also pay
Service Fees to brokers, dealers or other persons providing services to
shareholders.
(b) The provisions of this Section 7.1 shall be applicable to the extent
necessary to enable the Trust to comply with its obligations in respect of each
Fund to pay Distributor its Allocable Portion (as hereinafter described) of the
Distribution Fee paid in respect of Shares of such Fund, and shall remain in
effect with respect to the Shares so long as any payments are required to be
made by the Trust with respect to the Shares of a Fund pursuant to the
irrevocable payment instructions as defined in the Purchase and Sale Agreement
dated as of May 31, 1995 (as amended and supplemented, the "Purchase Agreement")
among the Distributor, Evergreen Keystone Investment Services, Inc., Citibank,
N.A. and Citicorp North America, Inc. and the Amended and Restated Master Sale
Agreement between the Distributor and Mutual Fund Funding 1994-1 dated as of May
5, 1997, as amended and supplemented from time to time (the "Master Sale
Agreement") (the "Irrevocable Payment Instructions").
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<PAGE>
(c) As promptly as possible after the first Business Day (as defined in the
Prospectus) following the twentieth day of each month, the Trust shall pay to
the Distributor the Distributor's Allocable Portion of the Distribution Fee, any
CDSCs and any Service Fees that may be due in respect of each Fund.
(d) The Distributor's Allocable Portion of the Distribution Fee paid by the
Trust in respect of Shares of a Fund shall mean the portion of the Asset Based
Sales Charge allocable to Distributor Shares of such Fund (as defined in
Schedule I to this Agreement) in accordance with Schedule I hereto. The Trust
agrees to cause its transfer agent to maintain the records and arrange for the
payments on behalf of the trust in respect of each Fund at the times and in the
amounts and to the accounts required by Schedule I hereto, as the same may be
amended from time to time. It is acknowledged and agreed that by virtue of the
operation of Schedule I hereto the Distributor's Allocable Portion of the
Distribution Fee paid by the Trust in respect of Shares of each Fund, may, to
the extent provided in Schedule I hereto, take into account the Distribution Fee
payable by such Fund in respect of other existing and future classes and/or
sub-classes of shares of such Fund which would be treated as "Shares: under
Schedule I hereto. The trust will limit amounts paid to any subsequent principal
underwriters of Shares of a Fund to the portion of the Asset Based Sales Charge
paid in respect of Shares attributable to such Shares which are Post-Distributor
Shares (as defined in Schedule I hereto) in accordance with Schedule I hereto.
The Trust shall cause the transfer agent and sub-transfer agents for each
Fund to withhold from redemption proceeds payable to holders of Shares of such
Fund on redemption thereof the CDSCs payable upon redemption thereof as set
forth in the then current Prospectus and/or Statement of Additional Information
of such Fund and to pay to the Distributor the Distributor's Allocable Portion
of such CDSCs paid in respect of Class B Shares of such Fund which shall be
equal to the portion thereof allocable to Distributor Shares of such Fund (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
(e) The Distributor shall be considered to have completely earned the right
to the payment of its Allocable Portion of the Distribution Fee and the right to
payment over to it of its Allocable Portion of the CDSC in respect of Shares of
a Fund as provided for hereby upon the completion of the sales of each
Commission Share of such Fund (as defined in Schedule I hereto) taken into
account as a Distributor Share in computing the Distributor's Allocable Portion
in accordance with Schedule I hereto.
(f) Except as provided in Section 7(g) below in respect of the Distribution
Fee only, the Trust's obligation to pay the Distributor the Distribution Fee in
respect of a Fund and to pay over to the Distributor CDSCs provided for hereby
shall be absolute and unconditional and shall not be subject to dispute, offset,
counterclaim or any defense whatsoever (it being understood that nothing in this
sentence shall be deemed a waiver by the trust of its right separately to pursue
any claims it may have against the Distributor with respect to a Fund and
enforce such claims against any assets (other than the Distributor's right to
its Allocable
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<PAGE>
Portion of the Distribution Fee and CDSCs (the "Collection Rights")) of the
Distributor.
(g) Notwithstanding anything in this Agreement to the contrary, the Trust
in respect of each Fund shall pay to the Distributor its Allocable Portion of
the Distribution Fee provided for hereby notwithstanding its termination as
Distributor for the Shares of such Fund or any termination of this Agreement and
such payment of such Distribution fee, and that obligation and the method of
computing such payment, shall not be changed or terminated except to the extent
required by any change in applicable law, including, without limitation, the
1940 Act, the Rules promulgated thereunder by the Securities and Exchange
Commission and the Business Conduct Ruled, in each case enacted or promulgated
after May 1, 1997, or in connection with a Complete Termination (as hereinafter
defined). For the purposes of this Section 7, "Complete Termination" means in
respect of a Fund a termination of such Fund's Rule 12b-1 plan for Class B
Shares involving the cessation of payments of the Distribution Fee, and the
cessation of payments of Distribution Fee pursuant to every other Rule 12b-1
plan of such Fund for every existing or future B-Class-of-Shares (as hereinafter
defined) and the Fund's discontinuance of the offering of every existing or
future B-Class-of-Shares, which conditions shall be deemed satisfied when they
are first complied with hereafter and so long thereafter as they are complied
with prior to the date upon which all of the Shares which are Distributor Shares
pursuant to Schedule I hereto shall have been redeemed or converted. For
purposes of this Section 7, the term B-Class-of-Shares means the Shares of each
Fund and each other class of shares of such Fund hereafter issued which would be
treated as Shares under Schedule I hereto or which has substantially similar
economic characteristics to the B Class of Shares taking into account the total
sales charge, CDSC or other similar charges borne directly or indirectly by the
holder of the shares of such class. The parties agree that the existing C Class
of Shares of any Fund does not have substantially similar economic
characteristics to the B-Class-of-Shares taking into account the total sales
charges, CDSCs or other similar charges borne directly or indirectly by the
holder of such shares. For purposes of clarity the parties to the Agreement
hereby state that they intend that a new installment load class of shares which
may be authorized by amendment to Rule 6(c)-10 under the 1940 Act will be
considered to be a B-class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing Class B
Shares taking into account the total sale charge, CDCSs or other similar charges
borne directly or indirectly by the holder of such charges and will not be
considered to be a B-Class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing Class C
shares of the Fund taking into account the total sales charge, CDSCs or other
similar charges home directly or indirectly by the holder of such shares.
(h) The Distributor may assign, sell or otherwise transfer any part of its
Allocable Portions of the Distribution Fees and CDSCs and obligations of the
Trust with respect to a Fund related thereto (but not the Distributor's
obligations to the Trust with respect to such Fund provided for in this
Agreement) to any person (an "assignee") and any such assignment shall be
effective upon written notice to the Trust by the Distributor. In connection
therewith the Trust shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Distributor in the Irrevocable Payment
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<PAGE>
Instructions, as the same may be amended from time to time with the consent of
the Trust, and the trust shall be without liability to any person of it pays
such amounts when and as so directed, except for underpayments of amounts
actually due without any amount payable as consequential or other damages due to
such underpayment and without interest except to the extent that delay in
payment of Distribution Fee and CDSCs results in an increase in the maximum
amount allowable under the NASD Business Conduct Rules, which increases daily at
a rate of prime plus one percent per annum.
Each Fund will not, to the extent it may otherwise be empowered to do so,
change or waive any CDSC with respect to Class B Shares, except as provided in
the Fund's Prospectus or Statement of Additional Information without the
Distributor's or Assignee's consent, as applicable. Notwithstanding anything to
the contrary in this Agreement or any termination of this Agreement or the
Distributor as principal underwriter for the Shares of the Funds, the
Distributor shall be entitled to be paid its Allocable Portion of the CDSCs
whether or not a Fund's Rule 12b- 1 plan for B Shares is terminated and whether
or not any such termination is a Complete Termination, as defined above.
(i) Under this Agreement, the Distributor shall: (i) make payments to
securities dealers and others engaged in the sale of Shares; (ii) make payments
of principal and interest in connection with the financing of commission
payments made by the Distributor in connection with the sale of Shares (iii)
incur the expense of obtaining such support services, telephone facilities and
shareholder services as may reasonably be required in connection with its duties
hereunder; (iv) formulate and implement marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (v) prepare, print and
distribute sales literature; (vi) prepare, print and distribute Prospectuses of
the Funds and reports for recipients other than existing shareholders of the
Funds; and (vii) provide to the Trust such information, analyses and opinions
with respect to marketing and promotional activities as the Trust may, from time
to time, reasonably request.
(j) The Distributor shall prepare and deliver reports to the Treasurer of
the Trust on a regular, at least monthly, basis, showing the distribution
expenditures incurred by the Distributor in connection with its services
rendered pursuant to this Agreement and the Plan and the purposes therefor, as
well as any supplemental reports as the Trustees, from time to time, may
reasonably request.
(k) The Distributor may retain the difference between the current offering
price of Shares, as set forth in the current prospectus for each Fund, and net
asset value, less any reallowance that is payable in accordance with the sales
charge schedule in effect at any given time with respect to the Shares.
(l) The Distributor may retain any CDSCs payable with respect to the
redemption of any Shares, provided however, that any CDSCs received by the
Distributor shall first be applied by the Distributor or its Assignee to any
outstanding amounts payable or which may in the
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future be payable by the Distributor or its Assignee under financing
arrangements entered into in connection with the payment of commissions on the
sale of Shares.
8. CONFIDENTIALITY, NON-EXCLUSIVE AGENCY.
8.1. The Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information relative to the Funds and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and to obtain approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
8.2. Nothing contained in this Agreement shall prevent the Distributor, or
any affiliated person of the Distributor, from performing services similar to
those to be performed hereunder for any other person, firm, or corporation or
for its or their own accounts or for the accounts of others.
9. TERM.
9.1. This Agreement shall continue for two years from the date of
commencement of operations and thereafter for successive annual periods,
provided such continuance is specifically approved at least annually by (i) a
vote of the majority of the Trustees of the Trust and (ii) a vote of the
majority of those Trustees of the Trust who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation of
the Plan, in this Agreement or any agreement related to the Plan (the
"Independent Trustees") by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable at any time,
with respect to the Trust, without penalty, (a) on not less than 60 days'
written notice by vote of a majority of the Independent Trustees, or by vote of
the holders of a majority of the outstanding voting securities of the Trust, or
(b) upon not less than 60 days' written notice by the Distributor. This
Agreement may remain in effect with respect to a Fund even if it has been
terminated in accordance with this paragraph with respect to one or more other
Funds of the Trust. This Agreement will also terminate automatically in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons," and "assignment" shall
have the same meaning as such terms have in the 1940 Act.)
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10. MISCELLANEOUS.
10.1. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Shares shall
pass, in Boston, Massachusetts.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their constructions or effect.
10.3 The obligations of the Trust hereunder are not personally binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust and only the Trust's
property shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below.
EVERGREEN EQUITY TRUST
By: /s/John J. Pileggi
-------------------
EVERGREEN DISTRIBUTOR, INC.
By: /s/J. David Huber
-------------------
-10-
<PAGE>
EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Aggressive Growth Fund
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2)
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
Specialty Growth and Balanced Funds
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund
Growth and Income Funds 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 Keystone Growth and Income Fund
(S-1)
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
<PAGE>
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN EQUITY TRUST
CLASS Y SHARES
AGREEMENT made this 18th day of September, 1997 by and between
Evergreen Equity Trust on behalf of its series listed on Exhibit A attached
hereto (such Trust and series referred to herein as "Fund" individually or
"Funds" collectively) and Evergreen Distributor, Inc., a Delaware corporation
("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the Class Y shares of beneficial interest of the Fund ("Shares")
as an independent contractor upon the terms and conditions hereinafter set
forth. Except as the Fund may from time to time agree, Principal Underwriter
will act as agent for the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers
for the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such brokers,
dealers or other persons shall have any authority to act as agent for the Fund;
such brokers, dealers or other persons shall act only as principal in the sale
of Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares. Principal Underwriter shall have
the right to sell Shares at net asset value, if such sale is permissible under
and consistent with applicable statutes, rules, regulations and orders. All
orders shall be subject to acceptance by the Fund, and the Fund reserves the
right, in its sole discretion, to reject any order received. The Fund shall not
be liable to anyone for failure to accept any order.
4. On all sales of Shares, the Fund shall receive the current net asset
value.
5. Payment to the Fund for Shares shall be in New York or Boston
Clearing House funds received by Principal Underwriter within three (3) business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such three-day period, the Fund reserves the
right, without further notice, forthwith to cancel its acceptance of any such
order. The Fund shall pay such issue taxes as may be required by law in
connection with the issuance of the Shares.
6. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then
1
<PAGE>
current prospectus and/or statement of additional information covering the
Shares and in printed
information approved by the Fund as information supplemental to such prospectus
and statement of additional information. Copies of the then current prospectus
and statement of additional information and any such printed supplemental
information will be supplied by the Fund to Principal Underwriter in reasonable
quantities upon request.
7. Principal Underwriter agrees to comply with the Business Conduct
Rules of the National Association of Securities Dealers, Inc.
8. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal Underwriter, its officers and
Directors or any controlling person would otherwise be subject to
liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost
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of any legal fees incurred in connection therewith) which the Fund, its
officers, Trustees or any such controlling person may incur under the 1933 Act,
under any other statute, at common law or otherwise arising out of the
acquisition of any Shares by any person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund, and the direct expenses of the issuance
of Shares.
12. This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force for two years
unless sooner terminated or continued as provided below. This Agreement shall
continue in effect after such term if its continuance is specifically approved
by a majority of the Trustees of the Fund at least annually in accordance with
the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees or by a vote of a majority of the
Fund's outstanding Shares on not more than sixty (60) days written notice to any
other party to the Agreement; and shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
13. This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts. All sales hereunder are to be made, and title
to the Shares shall pass, in Boston, Massachusetts.
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14. The Fund is a series of a Delaware business trust established under
a Declaration of Trust, as it may be amended from time to time. The obligations
of the Fund are not personally binding upon, nor shall recourse be had against,
the private property of any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN EQUITY TRUST
By: /s/John J. Pileggi
----------------------------
EVERGREEN DISTRIBUTOR, INC.
By: /s/William J. Tomko
-----------------------------
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EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Aggressive Growth Fund
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2)*
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
Specialty Growth and Balanced Funds
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund
Growth and Income Funds 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 Keystone Growth and Income Fund
(S-1)*
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
*authorized but not issued
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Custodian Agreement
This Agreement between EVERGREEN EQUITY TRUST, a business trust
organized and existing under the laws of Delaware with its principal place of
business at 200 Berkeley Street, Boston, Massachusetts 02116 (the "Fund"), and
STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company with its
principal place of business at 225 Franklin Street, Boston, Massachusetts 02110
(the "Custodian"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to the
series set forth on Schedule C hereto (such series together with all other
series subsequently established by the Fund and made subject to this Agreement
in accordance with Section 18, be referred to herein as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Fund's
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (as such term is defined in
Section 6 hereof), the Custodian shall on behalf of the applicable Portfolio(s)
from time to time employ one or more sub-custodians located in the United
States, but only in accordance with an applicable vote by the Board of Trustees
of the Fund (the "Board of Trustees") on behalf of the applicable Portfolio(s),
and provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian. The
Custodian may employ as sub-custodian for the Fund's foreign securities
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on behalf of the applicable Portfolio(s) the foreign banking institutions and
foreign securities depositories designated in Schedules A and B hereto but only
in accordance with the applicable provisions of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
HELD BY THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. Securities System") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("Direct Paper")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "Direct Paper System") pursuant to Section 2.9.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.8 hereof;
4) To the depository agent in connection with tender or other similar offers
for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such
case, the cash or other consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to Section
2.7 or into the name or nominee name of any sub-custodian appointed
pursuant to Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
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aggregate face amount or number of units; provided that, in any such case, the
new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such case,
the Custodian shall have no responsibility or liability for any loss
arising from the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own negligence or
willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the securities of the
issuer of such securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash, if any, are
to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar securities or
the surrender of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but --- only against receipt of adequate collateral as agreed
upon from time to time by the ---- Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowing by the Fund on
behalf of the Portfolio requiring a pledge of assets by the Fund on behalf
of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among the
Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of the Fund;
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<PAGE>
13) For delivery in accordance with the provisions of any agreement among the
Fund on behalf of the Portfolio, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the Portfolio
of the Fund;
14) Upon receipt of instructions from the transfer agent for the Fund (the
"Transfer Agent") for delivery to such Transfer Agent or to the holders of
Shares in connection with distributions in kind, as may be described from
time to time in the currently effective prospectus and statement of
additional information of the Fund related to the Portfolio (the
"Prospectus"), in satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper trust purpose, but only upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the applicable Portfolio,
a copy of a resolution of the Board of Trustees or of the Executive
Committee thereof signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary thereof (a "Certified Resolution"),
specifying the securities of the Portfolio to be delivered, setting forth
the purpose for which such delivery is to be made, declaring such purpose
to be a proper trust purpose, and naming the person or persons to whom
delivery of such securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended (the "1940 Act"). Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other banks or trust
companies as
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<PAGE>
it may in its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a custodian under
the 1940 Act and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall on behalf of each
applicable Portfolio be approved by vote of a majority of the Board of Trustees.
Such funds shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as may
be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or
options on futures contracts for the account of the Portfolio but only (a)
against the delivery of such securities or evidence of title to such
options, futures contracts or options on futures contracts to the Custodian
(or any bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to act as a
custodian and has been designated by the Custodian as its agent for this
purpose) registered in the name of the Portfolio or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof or in proper
form for transfer; (b) in the case of a purchase effected through a U.S.
Securities System, in accordance with the conditions set forth in Section
2.8 hereof; (c) in the case of a purchase involving the Direct Paper
System, in accordance with the conditions set forth in Section 2.9; (d) in
the case of repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a broker-dealer
which is a member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's account at
the Federal Reserve Bank with such securities or (ii) against delivery of
the receipt evidencing purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the agreement
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<PAGE>
by the Custodian to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a confirmation from a
broker and/or the applicable bank pursuant to Proper Instructions from the Fund
as defined herein;
2) In connection with conversion, exchange or surrender of securities owned by
the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued as set forth in Section 5
hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of the
Portfolio: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of securities
sold short;
7) For any other proper trust purpose, but only upon receipt of, in addition
to Proper Instructions from the Fund on behalf of the Portfolio, a copy of
a Certified Resolution specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such purpose to
be a proper trust purpose, and naming the person or persons to whom such
payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the United States Securities and Exchange
Commission (the "SEC") under Section 17A of the Exchange Act , which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively referred
to herein as "U.S. Securities System" in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S. Securities
System provided that such securities are represented in an account of the
Custodian in the U.S. Securities System (the "U.S. Securities System
Account") which account shall
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not include any assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the Portfolio
which are maintained in a U.S. Securities System shall identify by
book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System that
such securities have been transferred to the U.S. Securities System
Account, and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Portfolio. The
Custodian shall transfer securities sold for the account of the Portfolio
upon (i) receipt of advice from the U.S. Securities System that payment for
such securities has been transferred to the U.S. Securities System Account,
and (ii) the making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Portfolio. Copies of all
advices from the U.S. Securities System of transfers of securities for the
account of the Portfolio shall identify the Portfolio, be maintained for
the Portfolio by the Custodian and be provided to the Fund at its request.
Upon request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall furnish to
the Fund on behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities System for the
account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained by the
Custodian on the U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in
the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the Portfolio
the initial or annual certificate, as the case may be, required by Section
15 hereof;
6) Anything to the contrary in this Agreement notwithstanding, the Custodian
shall be liable to the Fund for the benefit of the Portfolio for any loss
or damage to the Portfolio resulting from use of the U.S. Securities System
by reason of any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from failure of
the Custodian or any such agent to enforce effectively such rights as it
may have against the U.S. Securities System; at the election of the Fund,
it shall be entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any other person
which the Custodian may have as a consequence of any such loss or damage if
and to the extent that the Portfolio has not been made whole for any such
loss or damage.
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SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will be
effected in the absence of Proper Instructions from the Fund on behalf of
the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in the Direct Paper System
Account, which account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the Portfolio
which are maintained in the Direct Paper System shall identify by
book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of the
Portfolio upon the making of an entry on the records of the Custodian to
reflect such payment and transfer of securities to the account of the
Portfolio. The Custodian shall transfer securities sold for the account of
the Portfolio upon the making of an entry on the records of the Custodian
to reflect such transfer and receipt of payment for the account of the
Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the Portfolio, in
the form of a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account of the
Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with any
report on its system of internal accounting control as the Fund may
reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt of
Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.8 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of segregating
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cash or government securities in connection with options purchased, sold or
written by the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the SEC relating to the
maintenance of segregated accounts by registered investment companies and (iv)
for other proper trust purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a copy of a Certified Resolution setting forth the purpose
or purposes of such segregated account and declaring such purpose(s) to be a
proper trust purpose.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject
to the provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1. DEFINITIONS. The following capitalized terms shall
have the indicated meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including financial institutions such as any Mandatory Securities Depositories
operating in the country); prevailing or developing custody and
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settlement practices; and laws and regulations applicable to the safekeeping and
recovery of Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"Foreign Assets" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolios' behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
SECTION 3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by the Board of Trustees, hereby delegates to
the Custodian with respect to the Portfolios, subject to Section (b) of Rule
17f-5, the responsibilities set forth in this Section 3 with respect to Foreign
Assets of the Portfolios held outside the United States, and the Custodian
hereby accepts such delegation, as Foreign Custody Manager with respect to the
Portfolios.
SECTION 3.3. COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A of this Contract, which may be amended from time to time by
the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule
A the Eligible Foreign Custodians selected by the Foreign Custody Manager to
maintain the assets of the Portfolios. Mandatory Securities Depositories are
listed on Schedule B to this Contract, which may be amended from time to time by
the Foreign Custody Manager. The Foreign Custody Manager will provide amended
versions of Schedules A and B in accordance with Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions
to open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening
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requirements for the country, the Foreign Custody Manager shall be deemed to
have been delegated by the Board of Trustees on behalf of the Portfolios
responsibility as Foreign Custody Manager with respect to that country and to
have accepted such delegation. Following the receipt of Proper Instructions
directing the Foreign Custody Manager to close the account of a Portfolio with
the Eligible Foreign Custodian selected by the Foreign Custody Manager in a
designated country, the delegation by the Board of Trustees on behalf of the
Portfolios to the Custodian as Foreign Custody Manager for that country shall be
deemed to have been withdrawn and the Custodian shall immediately cease to be
the Foreign Custody Manager of the Portfolios with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
SECTION 3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. Selection of Eligible Foreign Custodians. Subject to the
provisions of this Section 3, the Portfolios' Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager
to place or maintain Foreign Assets with an Eligible Foreign Custodian, the
Foreign Custody Manager shall determine that the Foreign Assets will be subject
to reasonable care, based on the standards applicable to custodians in the
country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation:
(i) the Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated securities (if
applicable), its methods of keeping custodial records, and its
security and data protection practices;
(ii) whether the Eligible Foreign Custodian has the financial
strength to provide reasonable care for Foreign Assets;
(iii) the Eligible Foreign Custodian's general reputation and
standing and, in the case of a foreign securities depository
or clearing agency which is not a Mandatory Securities
Depository, the foreign securities depository's or clearing
agency's operating history and the number of participants in
the foreign securities depository or clearing agency; and
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(iv) whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such
as by virtue of the existence of any offices of the Eligible
Foreign Custodian in the United States or the Eligible Foreign
Custodian's consent to service of process in the United
States.
3.4.2. Contracts With Eligible Foreign Custodians. The Foreign Custody
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will provide reasonable care for the Foreign Assets held by that
Eligible Foreign Custodian based on the standards applicable to custodians in
the particular country.
Each such contract shall include provisions that provide:
(i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that each Portfolio will be
adequately protected against the risk of loss of the Foreign
Assets held in accordance with such contract;
(ii) that the Foreign Assets will not be subject to any right,
security interest, or lien or claim of any kind in favor of
the Eligible Foreign Custodian or its creditors except a claim
of payment for their safe custody or administration or, in the
case of cash deposits, liens or rights in favor of creditors
of the Eligible Foreign Custodian arising under bankruptcy,
insolvency, or similar laws;
(iii) that beneficial ownership of the Foreign Assets will be freely
transferable without the payment of money or value other than
for safe custody or administration;
(iv) that adequate records will be maintained identifying the
Foreign Assets as belonging to the applicable Portfolio or as
being held by a third party for the benefit of such Portfolio;
(v) that the independent public accountants for each Portfolio
will be given access to those records or confirmation of the
contents of those records; and
(vi) that the Fund will receive periodic reports with respect to
the safekeeping of the Foreign Assets, including, but not
limited to, notification of any transfer of the Foreign Assets
to or from a Portfolio's account or a third party account
containing the Foreign Assets held for the benefit of the
Portfolio,
or, in lieu of any or all of the provisions set forth in (i) through (vi) above,
such other provisions that the Foreign Custody Manager determines will provide,
in their entirety, the same or greater level of care and protection for the
Foreign Assets as the provisions set forth in (i) through (vi) above, in their
entirety.
3.4.3. Monitoring. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the
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Foreign Custody Manager shall establish a system to monitor (i) the
appropriateness of maintaining the Foreign Assets with such Eligible Foreign
Custodian and (ii) the contract governing the custody arrangements established
by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event
the Foreign Custody Manager determines that the custody arrangements with an
Eligible Foreign Custodian it has selected are no longer appropriate, the
Foreign Custody Manager shall notify the Board of Trustees in accordance with
Section 3.7 hereunder.
SECTION 3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board of Trustees shall be deemed to have
considered and determined to accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Portfolios. The Fund, on behalf of the
Portfolios, and the Custodian each expressly acknowledge that the Foreign
Custody Manager shall not be delegated any responsibilities under this Section 3
with respect to Mandatory Securities Depositories.
SECTION 3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE
PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
SECTION 3.7. REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board of Trustees amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager shall make written reports notifying the Board of
Trustees of any other material change in the foreign custody arrangements of the
Portfolios described in this Article 3 after the occurrence of the material
change.
SECTION 3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board of Trustees has determined that it is reasonable for the Board of Trustees
to rely on the Custodian to perform the responsibilities delegated pursuant to
this Agreement to the Custodian as the Foreign Custody Manager of the
Portfolios.
SECTION 3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board of Trustees' delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date of execution
of this Agreement and shall remain in effect until terminated at any time,
without penalty, by written notice from the terminating party to the
non-terminating party. Termination will become effective thirty (30) days after
receipt by the non-terminating party of such notice. The provisions of Section
3.3
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hereof shall govern the delegation to and termination of the Custodian as
Foreign Custody Manager of the Portfolios with respect to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4
shall have the following meanings:
"Foreign Securities System" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii) the Custodian shall require that securities so held by the
Foreign Sub-Custodian be held separately from any assets of such Foreign
Sub-Custodian or of other customers of such Foreign Sub-Custodian.
SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. Delivery of Foreign Securities. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in accordance
with reasonable market practice in the country where such foreign
securities are held or traded, including, without limitation: (A) delivery
against expectation of receiving later payment; or (B) in the case of a
sale effected through a Foreign Securities System in accordance with the
rules governing the operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign securities;
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(iii)to the depository agent in connection with tender or other similar offers
for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign securities are called,
redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of the
Custodian (or the name of the respective Foreign Sub-Custodian or of any
nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for
a different number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for examination or
trade execution in accordance with market custom; provided that in any such
case the Foreign Sub-Custodian shall have no responsibility or liability
for any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from the Foreign
Sub-Custodian's own negligence or willful misconduct;
(vii)for exchange or conversion pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the securities of the
issuer of such securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the
surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary securities for
definitive securities;
(ix) or delivery as security in connection with any borrowing by the Portfolios
requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts, including
delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii)for any other proper trust purpose, but only upon receipt of, in addition
to Proper Instructions, a copy of a Certified Resolution specifying the
foreign securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper trust
purpose, and naming the person or persons to whom delivery of such
securities shall be made.
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4.4.2. Payment of Portfolio Monies. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer therefor
(or an agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the operation
of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Agreement, legal fees, accounting fees, and other
operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other proper trust purpose, but only upon receipt of,
in addition to Proper Instructions, a copy of a Certified
Resolution specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom such payment is to be
made.
4.4.3. Market Conditions. Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained for
the account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and procedures in the
country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
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SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Custodian (other than bearer securities)
shall be registered in the name of the applicable Portfolio or in the name of
the Custodian or in the name of any Foreign Sub-Custodian or in the name of any
nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of a Portfolio under the terms of this
Agreement unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
SECTION 4.6. BANK ACCOUNTS. A bank account or bank accounts opened and
maintained outside the United States on behalf of a Portfolio with a Foreign
Sub-Custodian shall be subject only to draft or order by the Custodian or such
Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to hold
cash received by or from or for the account of the Portfolio.
SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable
endeavors to collect all income and other payments in due course with respect to
the Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio. In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.
SECTION 4.8. PROXIES. The Custodian will generally with respect to the
foreign securities held under this Section 4 use its reasonable endeavors to
facilitate the exercise of voting and other shareholder proxy rights, subject
always to the laws, regulations and practical constraints that may exist in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power,
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and both (i) and (ii) occur at least three (3) business days prior to the date
on which such right or power is to be exercised.
SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN
SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs as a
Foreign Sub-Custodian shall, to the extent possible, require the Foreign
Sub-Custodian to exercise reasonable care in the performance of its duties and,
to the extent possible, to indemnify, and hold harmless, the Custodian from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the Foreign Sub-Custodian's performance of such obligations. At
the Fund's election, the Portfolios shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a Foreign
Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolios have not been made
whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11. TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of the Portfolios by the tax law of the
United States or of any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations imposed on
the Fund with respect to the Portfolios or the Custodian as custodian of the
Portfolios by the tax law of countries other than those mentioned in the above
sentence, including responsibility for withholding and other taxes, assessments
or other governmental charges, certifications and governmental reporting. The
sole responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of countries for which the Fund has provided such
information.
SECTION 4.12. CONFLICT. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of Section 3
hereof, in the event of any conflict between the provisions of Sections 3 and 4
hereof, the provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares thereof issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund on
behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Fund's Declaration of Trust and any applicable votes of the
Board of Trustees pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or
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through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares, the Custodian shall
honor checks drawn on the Custodian by a holder of Shares, which checks have
been furnished by the Fund to the holder of Shares, when presented to the
Custodian in accordance with such procedures and controls as are mutually agreed
upon from time to time between the Fund and the Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees accompanied
by a detailed description of procedures approved by the Board of Trustees,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Trustees and
the Custodian are satisfied that such procedures afford adequate safeguards for
the Portfolios' assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three - party
agreement which requires a segregated asset account in accordance with Section
2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Trustees.
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SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a Certified Resolution as conclusive
evidence (a) of the authority of any person to act in accordance with such
resolution or (b) of any determination or of any action by the Board of Trustees
pursuant to the Fund's Declaration of Trust as described in such resolution, and
such resolution may be considered as in full force and effect until receipt by
the Custodian of written notice to the contrary.
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of each Portfolio and/or compute the net asset value per Share of the
outstanding Shares or, if directed in writing to do so by the Fund on behalf of
the Portfolio, shall itself keep such books of account and/or compute such net
asset value per Share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Prospectus and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per Share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Agreement in
such manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the
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preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to
the SEC and with respect to any other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or maintained
in a U.S. Securities System or a Foreign Securities System (collectively
referred to herein as the "Securities Systems"), relating to the services
provided by the Custodian under this Agreement; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall be
without liability to the Fund and the Portfolios for any loss, liability, claim
or expense resulting from or caused by anything which is (A) part of Country
Risk (as defined in Section 3 hereof), including without limitation
nationalization, expropriation, currency restrictions, or acts of war,
revolution, riots or terrorism, or (B) part of the "prevailing country risk" of
the Portfolios, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May
12, 1997) or as such term or other similar terms are
21
<PAGE>
now or in the future interpreted by the SEC or by the staff of the Division of
Investment Management thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or the Investment Advisor in their instructions to the Custodian
provided such instructions have been in accordance with this Agreement; (iii)
the insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge of registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
any consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) changes to any existing, or any provision of any
future, law or regulation or order of the United States of America, or any state
thereof, or any other country, or political subdivision thereof or of any court
of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
22
<PAGE>
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than sixty (60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not with respect to a Portfolio act under
Section 2.8 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the 1940 Act and that the Custodian shall not with respect to a
Portfolio act under Section 2.9 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Trustees has approved the initial use of the Direct Paper System by such
Portfolio; provided further, however, that the Fund shall not amend or terminate
this Agreement in contravention of any applicable federal or state regulations,
or any provision of the Fund's Declaration of Trust, and further provided, that
the Fund on behalf of one or more of the Portfolios may at any time by action of
its Board of Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or (ii)
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed
by the Board of Trustees, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of each applicable Portfolio then held by it
hereunder and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
23
<PAGE>
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement on behalf of each
applicable Portfolio, and to transfer to an account of such successor custodian
all of the securities of each such Portfolio held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Fund's Declaration of
Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to those set forth on Schedule C with respect to which it desires to
have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
24
<PAGE>
SECTION 20. PRIOR AGREEMENTS
This Agreement supersedes and terminates, as of the date hereof, all
prior Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES.
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: EVERGREEN EQUITY TRUST
c/o First Union Corporation - Legal Division
200 Berkeley Street
Boston, Massachusetts 02116-5034
Attention: Terrence J. Cullen, Esq.
Telephone: 617-210-3200
Telecopy: 617-210-3468
To the Custodian: STATE STREET BANK AND TRUST COMPANY
One Heritage Drive, 3rd Floor South
North Quincy, Massachusetts 02171
Attention: Ronald F. Mauriello
Telephone: 617-985-1891
Telecopy: 617-537-5203
Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the
next time after delivery when normal business hours commence and in the case of
cable, telex or telecopy on the business day after the receipt thereof. Evidence
that the notice was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or
25
<PAGE>
other similar process. The parties hereto all/each agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 23. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ ] The Custodian is not authorized to release the
Fund's name, address, and share positions.
26
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of September 18, 1997.
EVERGREEN EQUITY TRUST FUND SIGNATURE ATTESTED TO BY:
By: /s/John J. Pileggi By: /s/George O. Martinez
Name: John J. Pileggi Name: George O. Martinez
Title: President Title: Secretary
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: /s/Ronald E. Logue By: /s/Glenn Ciotti
Name: Ronald E. Logue Name: Glenn Ciotti
Title: Executive Vice President Title: VP and Assoc. Counsel
27
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der oesterreichischen --
Sparkasen AG
Bahrain The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale Bank --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. --
1992
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
People's Republic The Hongkong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
Croatia Privredana banka Zagreb d.d --
Cyprus Barclays Bank PLC --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Ltd. --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A Bank of Greece
Hong Kong Standard Chartered Bank --
1992
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
Hungary Citibank Budapest Rt. --
India Deutsche Bank AG; --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
<PAGE>
<TABLE>
<CAPTION>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
<S> <C> <C>
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Trust and Merchant Bank --
Japan The Daiwa Bank, Limited; Japan Securities Depository
The Fuji Bank, Limited Center;
Jordan The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking --
Corporation Limited
Latvia Hansabank --
Lebanon The British Bank of the Middle East Custodian and Clearing Center of Financial
(as delegate of the Hongkong and
Instruments for Lebanon (MIDCLEAR) S.A.L.;
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
</TABLE>
1992
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa -
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank Poland S.A. --
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
Portugal Banco Comercial Portugues --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, Zurich --
via Credit Suisse First Boston
Limited, Moscow
Singapore The Development Bank --
of Singapore Ltd.
Slovak Republic Ceskoslovenska Obchodna --
Banka A.S.
Slovenia Banka Creditanstalt d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Barclays Bank of Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland Union Bank of Switzerland --
1992
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad & Tobago Republic Bank Ltd. --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
United Kingdom State Street Bank and Trust --
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)
Cedel (Cedel Bank, societe anonyme)
INTERSETTLE (for EASDAQ Securities)
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory
Depositories
Argentina -Caja de Valores S.A.;
-CRYL
Australia -Austraclear Limited;
-Reserve Bank Information and
Transfer System
Austria -Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots et
de Virements de Titres S.A.;
-Banque Nationale de Belgique
Brazil - Camara de Liquidacao de Sao Paulo, (Calispa);
-Bolsa de Valores de Rio de Janeiro
- All SSB clients presently use Calispa
-Central de Custodia e de Liquidacao Financeira
de Titulos
-Banco Central do Brasil,
Systema Especial de Liquidacao e
Custodia
Bulgaria - Central Depository AD
Canada -The Canadian Depository
for Securities Limited; West Canada
1992
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Depository Trust Company
[depositories linked]
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
People's Republic -Shanghai Securities Central Clearing and
of China Registration Corporation;
-Shenzhen Securities Central Clearing
Co., Ltd.
Croatia Ministry of Finance
Czech Republic --Stredisko cennych papiru(degree);
-Czech National Bank
Denmark -Vaerdipapircentralen - The Danish
Securities Center
Egypt -Misr Company for Clearing, Settlement,
and Central Depository
Estonia - Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities
Depository
France -Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres;
-Banque de France,
Saturne System
Germany -The Deutscher Kassenverein AG
Greece -The Central Securities Depository
1992
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
(Apothetirion Titlon A.E.);
Hong Kong -The Central Clearing and
Settlement System;
-The Central Money Markets Unit
Hungary -The Central Depository and Clearing
House (Budapest) Ltd.
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
India The National Securities Depository Limited
Indonesia -Bank of Indonesia
Ireland -The Central Bank of Ireland,
The Gilt Settlement Office
Israel -The Clearing House of the
Tel Aviv Stock Exchange;
-Bank of Israel
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Japan -Bank of Japan Net System
Republic of Korea -Korea Securities Depository Corporation
Latvia - The Latvian Central Depository
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Lebanon -The Central Bank of Lebanon
Lithuania - The Central Securities Depository of Lithuania
Malaysia -Malaysian Central Depository Sdn.
Bhd.;
-Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
Systems
Mauritius -The Central Depository & Settlement
Co. Ltd.
Mexico -S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores);
The Netherlands -Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. ("NECIGEF");
New Zealand -New Zealand Central Securities
Depository Limited
Norway -Verdipapirsentralen - The Norwegian
Registry of Securities
Oman -Muscat Securities Market
Peru -Caja de Valores y Liquidaciones
(CAVALI, S.A.)
Philippines -The Philippines Central Depository Inc.
1992
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
-The Book-Entry-System of Bangko
Sentral ng Pilipinas;
-The Registry of Scripless Securities of the
Bureau of the Treasury
Poland -The National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych);
-National Bank of Poland
Portugal -Central de Valores Mobiliarios
Romania -National Securities Clearing, Settlement and
Depository Co.;
-Bucharest Stock Exchange;
-National Bank of Romania
Singapore -The Central Depository (Pvt.)
Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko Cennych Papierov;
-National Bank of Slovakia
Slovenia - Klirinsko Depotna Bruzba
South Africa -The Central Depository Limited
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Spain -Servicio de Compensacion y
Liquidacion de Valores, S.A.;
-Banco de Espana,
Anotaciones en Cuenta
Sri Lanka -Central Depository System
(Pvt) Limited
Sweden -Vardepapperscentralen VPC AB -
The Swedish Central Securities Depository
Switzerland -Schweizerische Effekten - Giro AG;
Taiwan - R.O.C. -The Taiwan Securities Central
Depository Company, Ltd.
Thailand -Thailand Securities Depository
Company Limited
Tunisia -STICODEVAM;
-Central Bank of Tunisia;
-Tunisian Treasury
Turkey -Takas ve Saklama Bankasi A.S.;
-Central Bank of Turkey
United Kingdom -The Bank of England,
1992
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
The Central Gilts Office;
The Central Moneymarkets Office
Uruguay -Central Bank of Uruguay
Zambia -Lusaka Central Depository
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE C
Pursuant to the custodian agreement between Evergreen Equity Trust (the
"Fund") and State Street Bank and Trust Company dated September 18,
1997 (the "Agreement"), as of January 12, 1998, the Fund had made the
following Portfolios (as such term is defined in the Agreement) subject
to the Agreement:
Evergreen Aggressive Growth Fund Evergreen Fund
Evergreen Micro Cap Fund Evergreen Omega Fund
Evergreen Small Company Growth Fund Evergreen
Strategic Growth Fund Evergreen American Retirement
Fund Evergreen Foundation Fund Evergreen Tax
Strategic Foundation Fund Evergreen Balanced Fund
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 Evergreen Blue Chip
Fund
<PAGE>
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement between EVERGREEN EQUITY
TRUST (the "Customer") and State Street Bank and Trust Company ("State
Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of
certain assets of the Customer pursuant to a certain Custodian
Agreement (the "Custodian Agreement") dated as of September 18, 1997;
WHEREAS, State Street has developed and utilizes proprietary
accounting and other systems, including State Street's proprietary
Multicurrency HORIZONSM Accounting System, in its role as custodian of
the Customer, and maintains certain Customer-related data ("Customer
Data") in databases under the control and ownership of State Street
(the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain
Data Access Services solely for the benefit of the Customer, and
intends to provide additional services, consistent with the terms and
conditions of this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable
consideration, the parties agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. System. Subject to the terms and conditions of this
Addendum, State Street hereby agrees to provide the Customer with
access to State Street's Multicurrency HORIZONSM Accounting System and
the other information systems (collectively, the "System") as described
in Attachment A, on a remote basis for the purpose of obtaining reports
and information, solely on computer hardware, system software and
telecommunication links as listed in Attachment B (the "Designated
Configuration") of the Customer, or certain third parties approved by
State Street that serve as investment advisors or investment managers
of the Customer (the "Investment Advisor"), and solely with respect to
the Customer or on any designated substitute or back-up equipment
configuration with State Street's written consent, such consent not to
be unreasonably withheld.
b. Data Access Services. State Street agrees to make available
to the Customer the Data Access Services subject to the terms and
conditions of this Addendum and data access operating standards and
procedures as may be issued by State Street from time to time. The
ability of the Customer to originate electronic instructions to State
Street on behalf of the Customer in order to (i) effect the transfer or
movement of cash or securities held under custody by State Street or
(ii) transmit accounting or other information (such transactions are
referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and
analysis, shall be deemed to be Data Access Services for purposes of
this Addendum.
c. Additional Services. State Street may from time to time
agree to make available to the Customer additional Systems that are not
described in the attachments to this Addendum. In the absence of any
other written agreement concerning such additional systems, the term
"System" shall include, and this Addendum shall govern, the Customer's
access to and use of any additional System made available by State
Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection
with the Data Access Services provided under this Addendum, the
Customer will have access, through the Data Access Services, to
Customer Data and to functions of State Street's proprietary systems;
provided, however that in no event will the Customer have direct access
to any third party systems- level software that retrieves data for,
stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. Designated Equipment; Designated Location. The System and
the Data Access Services shall be used and accessed solely on and
through the Designated Configuration at the offices of the Customer or
the Investment Advisor located in Boston, Massachusetts ("Designated
Location").
b. Designated Configuration; Trained Personnel. State Street
shall be responsible for supplying, installing and maintaining the
Designated Configuration at the Designated Location. State Street and
the Customer agree that each will engage or retain the services of
trained personnel to enable both parties to perform their respective
obligations under this Addendum. State Street agrees to use
commercially reasonable efforts to maintain the System so that it
remains serviceable, provided, however, that State Street does not
guarantee or assure uninterrupted remote access use of the System.
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c. Scope of Use. The Customer will use the System and the Data
Access Services only for the processing of securities transactions, the
keeping of books of account for the Customer and accessing data for
purposes of reporting and analysis. The Customer shall not, and shall
cause its employees and agents not to (i) permit any third party to use
the System or the Data Access Services, (ii) sell, rent, license or
otherwise use the System or the Data Access Services in the operation
of a service bureau or for any purpose other than as expressly
authorized under this Addendum, (iii) use the System or the Data Access
Services for any fund, trust or other investment vehicle without the
prior written consent of State Street, (iv) allow access to the System
or the Data Access Services through terminals or any other computer or
telecommunications facilities located outside the Designated Locations,
(v) allow or cause any information (other than portfolio holdings,
valuations of portfolio holdings, and other information reasonably
necessary for the management or distribution of the assets of the
Customer) transmitted from State Street's databases, including data
from third party sources, available through use of the System or the
Data Access Services to be redistributed or retransmitted to another
computer, terminal or other device for other than use for or on behalf
of the Customer or (vi) modify the System in any way, including without
limitation, developing any software for or attaching any devices or
computer programs to any equipment, system, software or database which
forms a part of or is resident on the Designated Configuration.
d. Other Locations. Except in the event of an emergency or of
a planned System shutdown, the Customer's access to services performed
by the System or to Data Access Services at the Designated Location may
be transferred to a different location only upon the prior written
consent of State Street. In the event of an emergency or System
shutdown, the Customer may use any back-up site included in the
Designated Configuration or any other back-up site agreed to by State
Street, which agreement will not be unreasonably withheld. The Customer
may secure from State Street the right to access the System or the Data
Access Services through computer and telecommunications facilities or
devices complying with the Designated Configuration at additional
locations only upon the prior written consent of State Street and on
terms to be mutually agreed upon by the parties.
e. Title. Title and all ownership and proprietary rights to
the System, including any enhancements or modifications thereto,
whether or not made by State Street, are and shall remain with State
Street.
f. No Modification. Without the prior written consent of State
Street, the Customer shall not modify, enhance or otherwise create
derivative works based upon the System, nor shall the Customer reverse
engineer, decompile or otherwise attempt to secure the source code for
all or any part of the System.
g. Security Procedures. The Customer shall comply with data
access operating standards and procedures and with user identification
or other password control requirements and other security procedures as
may be issued from time to time by State Street for use of the System
on a remote basis and to access the Data Access Services. The Customer
shall have access only to the Customer Data and authorized transactions
agreed upon from time to time by State Street and, upon notice from
State Street, the Customer shall discontinue remote use of the System
and access to Data Access Services for any security reasons cited by
State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified
by the Customer) after such discontinuance, assume responsibility to
provide accounting services under the terms of the Custodian Agreement.
h. Inspections. State Street shall have the right to inspect
the use of the System and the Data Access Services by the Customer and
the Investment Advisor to ensure compliance with this Addendum. The
on-site inspections shall be upon prior written notice to the Customer
and the Investment Advisor and at reasonably convenient times and
frequencies so as not to result in an unreasonable disruption of the
Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. Proprietary Information. The Customer acknowledges and
State Street represents that the System and the databases, computer
programs, screen formats, report formats, interactive design
techniques, documentation and other information made available to the
Customer by State Street as part of the Data Access Services and
through the use of the System constitute copyrighted, trade secret, or
other proprietary information of substantial value to State Street. Any
and all such information provided by State Street to the Customer shall
be deemed proprietary and confidential information of State Street
(hereinafter "Proprietary Information"). The Customer agrees that it
will hold such Proprietary Information in the strictest confidence and
secure and protect it in a manner consistent with its own procedures
for the protection of its own confidential information and to take
appropriate action by instruction or agreement with its employees who
are permitted access to the Proprietary Information to satisfy its
obligations hereunder. The Customer further acknowledges that State
Street shall not be required to provide the Investment Advisor with
access to the System unless it has first received from the Investment
Advisor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C to this Addendum. The Customer
shall use all commercially reasonable efforts to assist State Street in
identifying and preventing any unauthorized use, copying or disclosure
of the Proprietary Information or any portions thereof or any of the
logic, formats or designs contained therein.
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b. Cooperation. Without limitation of the foregoing, the
Customer shall advise State Street immediately in the event the
Customer learns or has reason to believe that any person to whom the
Customer has given access to the Proprietary Information, or any
portion thereof, has violated or intends to violate the terms of this
Addendum, and the Customer will, at its expense, co-operate with State
Street in seeking injunctive or other equitable relief in the name of
the Customer or State Street against any such person.
c. Injunctive ReliefThe Customer acknowledges that the
disclosure of any Proprietary Information, or of any information which
at law or equity ought to remain confidential, will immediately give
rise to continuing irreparable injury to State Street inadequately
compensable in damages at law. In addition, State Street shall be
entitled to obtain immediate injunctive relief against the breach or
threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. Survival.The provisions of this Section 4 shall survive the
termination of this Addendum.
5. LIMITATION ON LIABILITY
a. Limitation on Amount and Time for Bringing Action. The
Customer agrees that any liability of State Street to the Customer or
any third party arising out of State Street's provision of Data Access
Services or the System under this Addendum shall be limited to the
amount paid by the Customer for the preceding 24 months for such
services. In no event shall State Street be liable to the Customer or
any other party for any special, indirect, punitive or consequential
damages even if advised of the possibility of such damages. No action,
regardless of form, arising out of this Addendum may be brought by the
Customer more than two years after the Customer has knowledge that the
cause of action has arisen.
b. Limited Warranties. NO OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
ARE MADE BY STATE STREET.
c. Third-Party Data. Organizations from which State Street may
obtain certain data included in the System or the Data Access Services
are solely responsible for the contents of such data, and State Street
shall have no liability for claims arising out of the contents of such
third-party data, including, but not limited to, the accuracy thereof.
d. Regulatory Requirements. As between State Street and the
Customer, the Customer shall be solely responsible for the accuracy of
any accounting statements or reports produced using the Data Access
Services and the System and the conformity thereof with any
requirements of law.
e. Force Majeure. Neither party shall be liable for any costs
or damages due to delay or nonperformance under this Addendum arising
out of any cause or event beyond such party's control, including
without limitation, cessation of services hereunder or any damages
resulting therefrom to the other party, or the Customer as a result of
work stoppage, power or other mechanical failure, computer virus,
natural disaster, governmental action, or communication disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from
any loss, damage or expense including reasonable attorney's fees, (a
"loss") suffered by State Street arising from (i) the negligence or
willful misconduct in the use by the Customer of the Data Access
Services or the System, including any loss incurred by State Street
resulting from a security breach at the Designated Location or
committed by the Customer's employees or agents or the Investment
Advisor and (ii) any loss resulting from incorrect Client Originated
Electronic Financial Instructions. State Street shall be entitled to
rely on the validity and authenticity of Client Originated Electronic
Financial Instructions without undertaking any further inquiry as long
as such instruction is undertaken in conformity with security
procedures established by State Street from time to time.
7. FEES
Fees and charges for the use of the System and the Data Access Services
and related payment terms shall be as set forth in the Custody Fee
Schedule in effect from time to time between the parties (the "Fee
Schedule"). Any tariffs, duties or taxes imposed or levied by any
government or governmental agency by reason of the transactions
contemplated by this Addendum, including, without limitation, federal,
state and local taxes, use, value added and personal property taxes
(other than income, franchise or similar taxes which may be imposed or
assessed against State Street) shall be borne by the Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported
by proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. Training. State Street agrees to provide training, at a
designated State Street training facility or at the Designated
Location, to the Customer's personnel in connection with the use of the
System on the Designated Configuration.
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The Customer agrees that it will set aside, during regular business
hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services,
designated by the Customer, to receive the training offered by State
Street pursuant to this Addendum.
b. Installation and Conversion. State Street shall be
responsible for the technical installation and conversion
("Installation and Conversion") of the Designated Configuration. The
Customer shall have the following responsibilities in connection with
Installation and Conversion of the System:
(i) The Customer shall be solely responsible for
the timely acquisition and maintenance of
the hardware and software that attach to the
Designated Configuration in order to use the
Data Access Services at the Designated
Location.
(ii) State Street and the Customer each agree
that they will assign qualified personnel to
actively participate during the Installation
and Conversion phase of the System
implementation to enable both parties to
perform their respective obligations under
this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to
provide the support services set out in Attachment D to this Addendum.
10. TERM OF ADDENDUM
a. Term of Addendum. This Addendum shall become effective on
the date of its execution by State Street and shall remain in full
force and effect until terminated as herein provided.
b. Termination of Addendum. Either party may terminate this
Addendum (i) for any reason by giving the other party at least
one-hundred and eighty days' prior written notice in the case of notice
of termination by State Street to the Customer or thirty days' notice
in the case of notice from the Customer to State Street of termination;
or (ii) immediately for failure of the other party to comply with any
material term and condition of the Addendum by giving the other party
written notice of termination. In the event the Customer shall cease
doing business, shall become subject to proceedings under the
bankruptcy laws (other than a petition for reorganization or similar
proceeding) or shall be adjudicated bankrupt, this Addendum and the
rights granted hereunder shall, at the option of State Street,
immediately terminate with notice to the Customer. This Addendum shall
in any event terminate as to any Customer within 90 days after the
termination of the Custodian Agreement applicable to such Customer.
c. Termination of the Right to Use. Upon termination of this
Addendum for any reason, any right to use the System and access to the
Data Access Services shall terminate and the Customer shall immediately
cease use of the System and the Data Access Services. Immediately upon
termination of this Addendum for any reason, the Customer shall return
to State Street all copies of documentation and other Proprietary
Information in its possession; provided, however, that in the event
that either party terminates this Addendum or the Custodian Agreement
for any reason other than the Customer's breach, State Street shall
provide the Data Access Services for a period of time and at a price to
be agreed upon by the parties.
11. MISCELLANEOUS
a. Assignment; Successors. This Addendum and the rights and
obligations of the Customer and State Street hereunder shall not be
assigned by either party without the prior written consent of the other
party, except that State Street may assign this Addendum to a successor
of all or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with State Street.
b. Year 2000. State Street will take all steps necessary to
ensure that its products (and those of its third-party suppliers)
reflect the available state of the art technology to offer products
that are Year 2000 compliant, including, but not limited to, century
recognition of dates, calculations that correctly compute same century
and multi century formulas and date values, and interface values that
reflect the date issues arising between now and the next one-hundred
years. If any changes are required, State Street will make the changes
to its products at no cost to Customer and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
c. Survival. All provisions regarding indemnification,
warranty, liability and limits thereon, and confidentiality and/or
protection of proprietary rights and trade secrets shall survive the
termination of this Addendum.
d. Entire Agreement. This Addendum and the attachments hereto
constitute the entire understanding of the parties hereto with respect
to the Data Access Services and the use of the System and supersedes
any and all prior or contemporaneous representations or agreements,
whether oral or written, between the parties as such may relate to the
Data
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Access Services or the System, and cannot be modified or altered except
in a writing duly executed by the parties. This Addendum is not
intended to supersede or modify the duties and liabilities of the
parties hereto under the Custodian Agreement or any other agreement
between the parties hereto except to the extent that any such agreement
specifically refers to the Data Access Services or the System. No
single waiver of any right hereunder shall be deemed to be a continuing
waiver.
e. Severability. If any provision or provisions of this
Addendum shall be held to be invalid, unlawful, or unenforceable, the
validity, legality, and enforceability of the remaining provisions
shall not in any way be affected or impaired.
f. Governing Law. This Addendum shall be interpreted and
construed in accordance with the internal laws of The Commonwealth of
Massachusetts without regard to the conflict of laws provisions
thereof.
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ATTACHMENT A
Multicurrency HORIZONSM Accounting System
System Product Description
I. The Multicurrency HORIZONSM Accounting System is designed to provide lot
level portfolio and general ledger accounting for SEC and ERISA type
requirements and includes the following services: 1) recording of general
ledger entries; 2) calculation of daily income and expense; 3)
reconciliation of daily activity with the trial balance, and 4) appropriate
automated feeding mechanisms to (i) domestic and international settlement
systems, (ii) daily, weekly and monthly evaluation services, (iii)
portfolio performance and analytic services, (iv) customer's internal
computing systems and (v) various State Street provided information
services products.
II. GlobalQuestR is designed to provide customer access to the following
information maintained on The Multicurrency HORIZONSM Accounting System: 1)
cash transactions and balances; 2) purchases and sales; 3) income
receivables; 4) tax refund receivables; 5) daily priced positions; 6) open
trades; 7) settlement status; 8) foreign exchange transactions; 9) trade
history, and 10) daily, weekly and monthly evaluation services.
III. SaFiReSM. SaFiReSM is designed to provide the customer with the ability to
prepare its own financial reports by permitting the customer to access
customer information maintained on the Multicurrency HORIZONR Accounting
System, to organize such information in a flexible reporting format and to
have such reports printed on the customer's desktop or by its printing
provider.
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ATTACHMENT B
Designated Configuration
<PAGE>
ATTACHMENT C
Undertaking
The undersigned understands that in the course of its
employment as Investment Advisor to EVERGREEN EQUITY TRUST (the
"Customer") it will have access to State Street Bank and Trust
Company's ("State Street") Multicurrency HORIZONSM Accounting System
and other information systems (collectively, the "System").
The undersigned acknowledges that the System and the
databases, computer programs, screen formats, report formats,
interactive design techniques, documentation and other information made
available to the undersigned by State Street as part of the Data Access
Services provided to the Customer and through the use of the System
constitute copyrighted, trade secret, or other proprietary information
of substantial value to State Street. Any and all such information
provided by State Street to the Undersigned shall be deemed proprietary
and confidential information of State Street (hereinafter "Proprietary
Information"). The undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a
manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction
or agreement with its employees who are permitted access to the
Proprietary Information to satisfy its obligations hereunder.
The undersigned will not attempt to intercept data, gain
access to data in transmission, or attempt entry into any system or
files for which it is not authorized. It will not intentionally
adversely affect the integrity of the System through the introduction
of unauthorized code or data, or through unauthorized deletion.
Upon notice by State Street for any reason, any right to use
the System and access to the Data Access Services shall terminate and
the undersigned shall immediately cease use of the System and the Data
Access Services. Immediately upon notice by State Street for any
reason, the undersigned shall return to State Street all copies of
documentation and other Proprietary Information in its possession.
First Union National Bank
By: _________________________
Title: _________________________
Date: _________________________
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ATTACHMENT C-1
Undertaking
The undersigned understands that in the course of its
employment as Independent Auditor to EVERGREEN EQUITY TRUST (the
"Customer") it will have access to State Street Bank and Trust
Company's ("State Street") Multicurrency HORIZON Accounting System and
other information systems (collectively, the "System").
The undersigned acknowledges that the System and the
databases, computer programs, screen formats, report formats,
interactive design techniques, documentation, and other information
made available to the Undersigned by State Street as part of the Data
Access Services provided to the Customer and through the use of the
System constitute copyrighted, trade secret, or other proprietary
information of substantial value to State Street. Any and all such
information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold
such Proprietary Information in confidence and secure and protect it in
a manner consistent with its own procedures for the protection of its
own confidential information and to take appropriate action by
instruction or agreement with its employees who are permitted access to
the Proprietary Information to satisfy its obligations hereunder.
The Undersigned will not attempt to intercept data, gain
access to data in transmission, or attempt entry into any system or
files for which it is not authorized. It will not intentionally
adversely affect the integrity of the System through the introduction
of unauthorized code or data, or through unauthorized deletion.
Upon notice by State Street for any reason, any right to use
the System and access to the Data Access Services shall terminate and
the Undersigned shall immediately cease use of the System and the Data
Access Services. Immediately upon notice by State Street for any
reason, the Undersigned shall return to State Street all copies of
documentation and other Proprietary Information in its possession.
*[Name of Independent Auditor]
By:
Title:
Date:
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ATTACHMENT D
Support
During the term of this Addendum, State Street agrees to
provide the following on-going support services:
a. Telephone Support. The Customer Designated Persons may
contact State Street's Multicurrency HORIZONSM Help Desk and Customer
Assistance Center between the hours of 8 a.m. and 6 p.m. (Eastern time)
on all business days for the purpose of obtaining answers to questions
about the use of the System, or to report apparent problems with the
System. From time to time, the Customer shall provide to State Street a
list of persons, not to exceed five in number, who shall be permitted
to contact State Street for assistance (such persons being referred to
as "the Customer Designated Persons").
b. Technical Support. State Street will provide technical
support to assist the Customer in using the System and the Data Access
Services. The total amount of technical support provided by State
Street shall not exceed 10 resource days per year. State Street shall
provide such additional technical support as is expressly set forth in
the fee schedule in effect from time to time between the parties (the
"Fee Schedule"). Technical support, including during installation and
testing, is subject to the fees and other terms set forth in the Fee
Schedule.
c. Maintenance Support. State Street shall use commercially
reasonable efforts to correct system functions that do not work
according to the System Product Description as set forth on Attachment
A in priority order in the next scheduled delivery release or otherwise
as soon as is practicable.
d. System Enhancements. State Street will provide to the
Customer any enhancements to the System developed by State Street and
made a part of the System; provided that, sixty (60) days prior to
installing any such enhancement, State Street shall notify the Customer
and shall offer the Customer reasonable training on the enhancement.
Charges for system enhancements shall be as provided in the Fee
Schedule. State Street retains the right to charge for related systems
or products that may be developed and separately made available for use
other than through the System.
e. Custom Modifications. In the event the Customer desires
custom modifications in connection with its use of the System, the
Customer shall make a written request to State Street providing
specifications for the desired modification. Any custom modifications
may be undertaken by State Street in its sole discretion in accordance
with the Fee Schedule.
f. Limitation on Support. State Street shall have no
obligation to support the Customer's use of the System: (i) for use on
any computer equipment or telecommunication facilities which does not
conform to the Designated Configuration or (ii) in the event the
Customer has modified the System in breach of this Addendum.
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ADMINISTRATIVE SERVICES AGREEMENT
EVERGREEN EQUITY TRUST
This Administrative Services Agreement is made as of this 18th day of
September, 1997 between Evergreen Equity Trust, a Delaware business trust
(herein called the "Trust"), and Evergreen Investment Services, Inc., a Delaware
corporation (herein called "EIS").
W I T N E S S E T H:
WHEREAS, the Trust is a Delaware business trust consisting of one or
more portfolios which operates as an open-end management investment company and
is so registered under the Investment Company Act of 1940; and
WHEREAS, the Trust desires to retain EIS as its Administrator to
provide it with administrative services, and EIS is willing to render such
services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR. The Trust hereby appoints EIS as
administrator of the Trust and each of its portfolios listed on SCHEDULE A
attached hereto on the terms and conditions set forth in this Agreement; and EIS
hereby accepts such appointment and agrees to perform the services and duties
set forth in Section 2 of this Agreement in consideration of the compensation
provided for in Section 4 hereof.
2. SERVICES AND DUTIES. As Administrator, and subject to the
supervision and control of the Trustees of the Trust, EIS will hereafter provide
facilities, equipment and personnel to carry out the following administrative
services for operation of the business and affairs of the Trust and each of its
portfolios:
(a) prepare, file and maintain the Trust's governing documents, including the
Declaration of Trust (which has previously been prepared and filed), the
By-laws, minutes of meetings of Trustees and shareholders, and proxy
statements for meetings of shareholders;
(b) prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements for
the Trust and the Trust's shares and all amendments thereto, reports to
regulatory authorities and shareholders, prospectuses, proxy statements,
and such other documents as may be necessary or convenient to enable the
Trust to make a continuous offering of its shares;
<PAGE>
(c) prepare, negotiate and administer contracts on behalf of the Trust with,
among others, the Trust's distributor, custodian and transfer agent;
(d) supervise the Trust's fund accounting agent in the maintenance of the
Trust's general ledger and in the preparation of the Trust's financial
statements, including oversight of expense accruals and payments and the
determination of the net asset value of the Trust's assets and of the
Trust's shares, and of the declaration and payment of dividends and other
distributions to shareholders;
(e) calculate performance data of the Trust for dissemination to information
services covering the investment company industry;
(f) prepare and file the Trust's tax returns;
(g) examine and review the operations of the Trust's custodian and transfer
agent;
(h) coordinate the layout and printing of publicly disseminated prospectuses
and reports;
(i) prepare various shareholder reports;
(j) assist with the design, development and operation of new portfolios of the
Trust;
(k) coordinate shareholder meetings;
(l) provide general compliance services; and
(m) advise the Trust and its Trustees on matters concerning the Trust and its
affairs.
The foregoing, along with any additional services that EIS shall agree
in writing to perform for the Trust hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any duties,
functions, or services to be performed for the Trust by the Trust's investment
adviser, distributor, custodian or transfer agent pursuant to their agreements
with the Trust.
3. EXPENSES. EIS shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide the Administrative Services to the Trust. The Trust shall
be responsible for all other expenses incurred by EIS on behalf of the Trust,
including without limitation postage and courier expenses, printing expenses,
registration fees, filing fees, fees of outside counsel and independent
auditors, insurance premiums, fees payable to Trustees who are not EIS
employees, and trade association dues.
4. COMPENSATION. For the Administrative Services provided, the Trust hereby
<PAGE>
agrees to pay and EIS hereby agrees to accept as full compensation for its
services rendered hereunder an administrative fee, calculated daily and payable
monthly, at an annual rate determined in accordance with the table below.
Aggregate Daily Net Assets of Funds
Administered by EIS for Which Any
Affiliate of First Union National Bank
Administrative Fee Serves as Investment Adviser
------------------ ----------------------------
.050% on the first $7 billion
.035% on the next $3 billion
.030% on the next $5 billion
.020% on the next $10 billion
.015% on the next $5 billion
.010% on assets in excess of $30 billion
Each portfolio of the Trust shall pay a portion of the administrative fee equal
to the rate determined above times that portfolio's average annual daily net
assets.
5. RESPONSIBILITY OF ADMINISTRATOR. EIS shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. EIS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Any person, even though also an officer,
director, partner, employee or agent of EIS, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with the duties of EIS hereunder) to be
rendering such services to or acting solely for the Trust and not as an officer,
director, partner, employee or agent or one under the control or direction of
EIS even though paid by EIS.
6. DURATION AND TERMINATION.
(a) This Agreement shall continue in effect from year to year
thereafter, provided it is approved, at least annually, by a
vote of a majority of Trustees of the Trust including a
majority of the disinterested Trustees.
<PAGE>
(b) This Agreement may be terminated at any time, without payment
of any penalty, on sixty (60) day's prior written notice by a
vote of a majority of the Trust's Trustees or by EIS.
7. AMENDMENT. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. NOTICES. Notices of any kind to be given to the Trust hereunder by
EIS shall be in writing and shall be duly given if delivered to the Trust and to
its investment adviser at the following address: First Union National Bank, One
First Union Center, Charlotte, North Carolina 28288. Notices of any kind to be
given to EIS hereunder by the Trust shall be in writing and shall be duly given
if delivered to EIS at 200 Berkeley Street, Boston, Massachusetts 02116.
Attention: Chief Administrative Officer.
9. LIMITATION OF LIABILITY. EIS is hereby expressly put on notice of
the limitation of liability as set forth in the Declaration of Trust and agrees
that the obligations pursuant to this Agreement of a particular portfolio and of
the Trust with respect to that particular portfolio be limited solely to the
assets of that particular portfolio, and EIS shall not seek satisfaction of any
such obligation from the assets of any other portfolio, the shareholders of any
portfolio, the Trustees, officers, employees or agents of the Trust, or any of
them.
10. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section 5
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by
Delaware law; provided, however, that nothing herein shall be construed in a
manner inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Administrative
Services Agreement to be executed by their officers designated below as of the
day and year first above written.
EVERGREEN EQUITY TRUST
ATTEST: /s/Carol Churns By: /s/John J. Pileggi
------------------------- ----------------------
Name: John J. Pileggi
Title: President
<PAGE>
EVERGREEN INVESTMENT SERVICES, INC.
ATTEST:_______________________ By: /s/Gordon Forrester
-----------------------------
Name: Gordon Forrester
Title: Chief Administrative Officer
<PAGE>
SCHEDULE A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Aggressive Growth Fund
Growth and Income Funds
Evergreen Value Fund
Evergreen Utility Fund
<PAGE>
MASTER TRANSFER AND RECORDKEEPING AGREEMENT
AGREEMENT made as of the 18th day of September, 1997 by and between
each of the parties listed on Exhibit A which is attached hereto and made a part
hereof (each a "Fund" or "Funds"), each for itself and not jointly, each having
its principal place of business at 200 Berkeley Street, Boston, Massachusetts
02116, and Evergreen Service Company ("ESC"), having its principal place of
business at 200 Berkeley Street, Boston, Massachusetts
02116.
W I T N E S S E T H T H A T
WHEREAS, each Fund desires ESC to perform certain services for the Fund,
and ESC is willing to perform such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
each party, for itself and not jointly, agrees as follows:
1. ADDITIONAL PARTIES - Any other registered investment company for which
Keystone Investment Management Company (KIMCO), Evergreen Asset Management Corp.
("Evergreen Asset"), The Capital Management Group of First Union National Bank
of North Carolina ("CMG") or one of its affiliates serves as investment adviser,
trustee or manager may become a Fund party to this Agreement, for itself and not
jointly, by giving written notice to ESC that it has elected to become a Fund
party hereto, to which election ESC has given its written consent.
2. SERVICES - ESC shall perform for each Fund the services set forth on
Exhibit B which is attached hereto and made a part hereof. ESC shall also
perform for each Fund, without additional charge, any services which it
customarily performs in the ordinary course of business without additional
charge for the investment companies for which ESC acts as transfer agent,
dividend disbursing agent, or shareholder servicing and recordkeeping agent.
ESC shall perform such other services in addition to those set forth on
Exhibit B hereto as a Fund shall request in writing. Any of the services to be
performed hereunder, and the manner in which such services are to be performed,
shall be changed only pursuant to a written agreement signed by the parties
hereto.
ESC will undertake no activity which, in its judgment, will adversely
effect the performance of its obligations to a Fund under this Agreement.
3. FEES - Each Fund shall pay ESC for the services to be performed pursuant
to this Agreement in accordance with and in the manner set forth with respect to
such Fund on Exhibit C attached hereto and made a part hereof.
4. EFFECTIVE DATE - This Agreement shall become effective as of the date
set forth above and shall become effective as to each Fund which gives written
notice to ESC pursuant to Paragraph 1 hereof that it elects to become a party
hereto as of the date of such notice.
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<PAGE>
5. TERM - This Agreement shall be in effect until terminated in accordance
with Section 17 hereof.
6. USE OF ESC'S NAME - The Funds will not use ESC's name in any sales
literature or other material in a manner not approved by ESC in writing before
such use, unless a similar use was previously approved. Notwithstanding the
foregoing, ESC hereby consents to all uses of ESC's name which merely refer in
accurate terms to ESC's appointments hereunder or which are required by the
Securities and Exchange Commission or a state securities commission, and
provided, further, that in no case will such approval be unreasonably withheld
or delayed.
7. STANDARD OF CARE - ESC shall at all times use its best efforts and act
in good faith and in a non-negligent manner in performing all services pursuant
to this Agreement.
8. UNCONTROLLABLE EVENTS - ESC shall not be liable for damage, loss of
data, delays or errors occurring by reason of circumstances beyond its control,
including, but not limited to, acts of civil or military authority, national
emergencies, fire, flood or catastrophe, acts of God, insurrection, war, riots,
or failure of transportation, communication or power supply. However, ESC shall
keep in a separate and safe place additional copies of all records required to
be maintained pursuant to this Agreement or additional tapes or discs necessary
to reproduce all such records. Furthermore, at all times during this Agreement,
ESC shall maintain an arrangement whereby ESC will have a backup computer
facility available for its use in providing the services required hereunder in
the event circumstances beyond ESC's control result in ESC not being able to
process the necessary work at its principal computer facility. ESC shall, from
time to time, upon request from any Fund provide written evidence and details of
its arrangement for obtaining the use of such a backup computer facility. ESC
shall use reasonable care to minimize the likelihood of all damage, loss of
data, delays and errors resulting from an uncontrollable event. Should such
damage, loss of data, delays or errors occur, ESC shall use its best efforts to
mitigate the effects of such occurrence. Representatives of each Fund shall be
entitled to inspect the ESC premises and operating capabilities within
reasonable business hours and upon reasonable notice to ESC.
9. INDEMNIFICATION - Each Fund shall indemnify and hold ESC, its employees
and agents harmless against any losses, claims, damages, judgments, liabilities
or expenses (including reasonable counsel fees and expenses) resulting from (1)
transactions which occurred prior to the date ESC began serving as Transfer
Agent to the Fund; (2) action taken or permitted by ESC in good faith with due
care and without negligence in reliance upon instructions received from such
Fund in accordance with Section 10 hereof or with respect to a Fund upon the
opinion of counsel for the Fund, as to anything arising in connection with its
performance under this Agreement; or (3) any act done or suffered by ESC with
respect to a Fund in good faith with due care and without negligence in
connection with its performance under this Agreement in reliance upon any
instruction, order, stock certificate or other instrument
-2-
<PAGE>
reasonably believed by it to be genuine and to bear the genuine signature of any
person or persons authorized to sign, countersign, or execute same, and which
complies with all applicable requirements of the Fund's current prospectus(es)
and statement of additional information, this Agreement and instructions and
other governing documents provided to ESC by the Fund. For purposes of this
indemnification, it is specifically agreed that if any instruction received by
ESC in accordance with Section 10 hereof differs from the requirements set forth
in the Fund's current prospectus(es) or statement of additional information
then, with regard to that difference, the instruction, order, stock certificate
or other instrument relied upon by ESC, ESC need only comply with such
instruction (and not the current prospectus(es) or statement of additional
information).
In the event that ESC requests any Fund to indemnify or hold it harmless
hereunder, ESC shall use its best efforts to inform the Fund of the relevant
facts concerning the matter in question. ESC shall use reasonable care to
identify and promptly notify a Fund concerning any matter which ESC believes may
result in a claim for indemnification against such Fund, and shall notify the
Fund within seven days of notice to ESC of the filing of any suit or other legal
action or the institution by a government agency of any administrative action or
investigation against ESC which involves its duties under this Agreement. Each
Fund shall have the election of defending ESC against any claim with respect to
such Fund which may be the subject of indemnification or holding it harmless
hereunder. In the event a Fund so elects, it will so notify ESC. Thereupon the
Fund shall take over defense of the claim, and, if so requested by a Fund, ESC
shall incur no further legal or other expenses related thereto for which it
shall be entitled to indemnity or holding harmless hereunder; provided, however,
that nothing herein shall prevent ESC from retaining counsel to defend any claim
at ESC's own expense.
Except with the prior written consent of a Fund, ESC shall in no event
confess any claim or make any compromise in any matter in which such Fund will
be asked to indemnify or hold ESC harmless hereunder. ESC shall be without
liability to a Fund with respect to anything done or omitted to be done in
accordance with the terms of this Agreement or instructions properly received
pursuant hereto if done in good faith and without negligence or willful or
wanton misconduct. In no event shall ESC be liable for consequential damages,
lost profits, or other special damages, even if ESC has been informed of the
possibility of such damage or loss by the Fund or by third parties.
Notwithstanding the foregoing, ESC shall be liable to each Fund for any
damage or losses suffered by such Fund as a result of a delay or negligence on
the part of ESC in processing a purchase or liquidation transaction or in making
payment to a shareholder of such Fund; it being agreed that, without in any way
limiting ESC's liability for other transactions hereunder, that such damages
shall not be deemed to be consequential or special.
10. INSTRUCTIONS - ESC shall comply with all instructions issued by a Fund
in the form prescribed below which are permitted or required under Exhibit B
attached hereto. Whenever
-3-
<PAGE>
ESC takes action hereunder pursuant to instructions from a Fund, ESC shall be
entitled to rely upon such instructions only when such instructions are signed
by the President or Treasurer of the Fund or by an individual designated in
writing by the President or Treasurer as a person authorized to give
instructions hereunder. A Fund may waive the requirement that all instructions
be in writing, if such waiver defines the occurrences not requiring written
instruction, indicates the persons authorized to give such non-written
instructions, and is signed by one of the persons pursuant to the immediately
preceding sentence of this Section 10. In the event ESC obtains a Fund's written
waiver, it may rely on non-written instructions received pursuant thereto.
11. CONFIDENTIALITY - ESC agrees to treat as confidential all records and
other information relative to a Fund and the Fund's shareholders. ESC, on behalf
of itself and its employees, agrees to keep confidential all such information,
except, after prior notification to and approval by a Fund (which approval shall
not be unreasonably withheld and may not be withheld where ESC may be exposed to
civil or criminal contempt proceedings) when requested to divulge such
information by duly constituted authorities or when requested by a shareholder
of a Fund seeking information about his own or an appropriately related account.
12. REPORTS - ESC will furnish to each Fund and to properly authorized
auditors, examiners, investment companies, dealers, salesmen, insurance
companies, transfer agents, registrars, investors, and others designated by each
Fund in writing, such reports at such times as are prescribed for each service
in Exhibit B.
13. RIGHT OF OWNERSHIP - ESC agrees that all records and other data
received, computed, developed, used and/or stored pursuant to this Agreement are
the exclusive property of each respective Fund and that all such records and
other data will be furnished without additional charge to a Fund in available
machine readable data form immediately upon termination of this Agreement with
respect to such Fund for any reason whatsoever. Furthermore, upon a Fund's
request at any time or times while this Agreement is in effect, ESC shall
deliver to such Fund, at the Fund's expense, any or all of the data and records
held by ESC pursuant to this Agreement, in the form as requested by the Fund. On
the effective date of termination of this Agreement with respect to a Fund or,
if later, on the date a Fund ceases to use ESC's services, ESC will promptly
return to the Fund any and all records and other data belonging to the Fund free
of any claim or retention of rights by ESC.
14. REDEMPTION OF SHARES - The parties hereto agree that ESC shall process
liquidations, redemptions or repurchases of shares of each Fund, as the agent
for such Fund, in the manner described in the then current prospectus(es) and
statement of additional information for the Fund. Notwithstanding the foregoing,
ESC shall be liable for any losses, damages, claims or expenses resulting from
ESC's failure to obtain the appropriate signature guarantee with regard to any
redemption or transfer processed by ESC even if the current prospectus(es) or
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<PAGE>
statement of additional information authorizes ESC to waive the requirement of a
signature guarantee unless ESC is authorized in writing by an appropriate party
to waive such a requirement.
15. SUBCONTRACTING - Each Fund may require that ESC, or ESC may, with the
prior written consent of such Fund, subcontract with one or more of its
affiliated or other persons to perform all or part of its obligations hereunder,
provided, however, that, notwithstanding any such subcontract, ESC shall be
fully responsible to each Fund hereunder.
16. ASSIGNMENT - This Agreement and the rights and duties hereunder shall
not be assignable by ESC or any of the Fund parties hereto except by the
specific written consent of the other party.
17. TERMINATION - This Agreement may be terminated with respect to a Fund
on such date on which ESC has given such Fund not less than 180 days prior
written notice or on which such Fund has given ESC not less than 90 days prior
written notice. Upon such termination, ESC will use its best efforts to
cooperate and assist in accomplishing a timely, efficient and accurate
conversion to the person or firm which will provide the services described
hereunder. This Agreement may be terminated by any Fund without the payment of
any penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination; provided, however, that for the
purpose of this Section 17 any amount due under Section 3 of this Agreement
which is undisputed is not considered a penalty, forfeiture, compulsory buyout
amount or performance of any other obligation which could deter termination.
This Agreement may be terminated with respect to a Fund after written
notice to ESC by the Fund if there is a material breach or violation of this
Agreement or if ESC fails to perform any of its obligations under this Agreement
and the failure continues for more than 30 days after the Fund gives notice of
the failure to ESC or bankruptcy or insolvency proceedings of any nature are
instituted by or against ESC.
18. INSURANCE - ESC shall maintain throughout the term of this Agreement a
fidelity bond(s) in an amount in excess of the minimum amount required to be
obtained by the Funds which are parties hereto pursuant to Rule 17g-1 under the
Investment Company Act of 1940 (the "1940 Act") covering the acts of its
officers, employees or agents in performing any and all of the services required
to be performed hereunder. ESC agrees to promptly notify each Fund in writing of
any material amendment or cancellation of such bond(s). ESC shall at such times
as the Fund may request, but at least once each year, notify each Fund of any
claims made pursuant to such bond(s).
19. AMENDMENT - This Agreement may be amended at any time by an instrument
in writing executed by both ESC and any Fund which is a party hereto, or each of
their respective
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<PAGE>
successors, provided that any such amendment will conform to the requirements
set forth in the 1940 Act and the rules and regulations thereunder.
20. NOTICE - Any notice shall be sufficiently given when sent by registered
or certified mail to any party at the address of such party set forth above or
at such other address as such party may from time to time specify in writing to
the other party.
21. SECTION HEADINGS - Section headings are included for convenience only
and are not to be used to construe or interpret this Agreement.
22. INTERPRETIVE PROVISIONS - In connection with the operation of this
Agreement, ESC and one or more of the Funds may agree with respect to such Funds
and ESC from time to time on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their combined opinion be consistent
with the general tenor of this Agreement. Furthermore, ESC and such Fund(s) may
agree to add to, delete from or change the services set forth with respect to
such Fund(s) in Exhibit B of the Agreement. Each such interpretive or additional
provision, and each addition, deletion or change is to be signed by all parties
affected and annexed hereto, and no such provision, addition, deletion or change
shall contravene any applicable federal or state law or regulation and no such
provision, addition, deletion or change shall be deemed to be an amendment of
any provision of this Agreement with the exception of Exhibit B hereto.
23. GOVERNING LAW - This Agreement shall be governed by and its provisions
shall be construed in accordance with the laws of The Commonwealth of
Massachusetts.
24. DELAWARE BUSINESS TRUST - Each of the Funds listed on Exhibit A
attached hereto is a series of a Delaware business trust established under a
Declaration of Trust. The obligations of such Funds are not personally binding
upon, nor shall recourse be had against the private property of, any of the
Trustees, shareholders, officers, employees or agents of the Funds, but only the
property of such Funds shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
EVERGREEN SERVICE COMPANY
By: /s/Edward J. Falvey
---------------------------------
Edward J. Falvey
President
Evergreen Select Fixed Income Trust
Evergreen Select Limited Duration Fund
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<PAGE>
Evergreen Select Fixed Income Fund
Evergreen Select Income Plus Fund
Evergreen Select Intermediate Tax Exempt Bond Fund
Evergreen Select Core Bond Fund
Evergreen Select Intermediate Bond Fund
Evergreen Select Equity Trust Evergreen Select Strategic Value Fund Evergreen
Select Large Cap Blend Fund Evergreen Select Social Principles Fund
Evergreen Select Equity Income Fund Evergreen Select Small Company
Value Fund Evergreen Select Common Stock Fund Evergreen Select
Balanced Fund Evergreen Select Diversified Value Fund
Evergreen Select Money Market Trust
Evergreen Select 100% Treasury Money Market Fund
Evergreen Equity Trust
Evergreen Balanced Fund
Evergreen Small Company Growth Fund
Evergreen Fixed Income Trust
Evergreen Diversified Bond Fund
Evergreen Intermediate Term Bond Fund
Evergreen Municipal Trust
Evergreen Connecticut Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Tax Free Fund
By: /s/John J. Pileggi
----------------------------
John J. Pileggi
President
-7-
<PAGE>
EXHIBIT A
Evergreen Select Fixed Income Trust Evergreen Select Limited Duration Fund
Evergreen Select Fixed Income Fund Evergreen Select Income Plus Fund
Evergreen Select Intermediate Tax Exempt Bond Fund Evergreen Select
Core Bond Fund Evergreen Select Intermediate Bond Fund
EvergreenSelect Equity Trust
Evergreen Select Strategic Value Fund Evergreen Select Large Cap Blend
Fund Evergreen Select Social Principles Fund Evergreen Select Equity
Income Fund Evergreen Select Small Company Value Fund Evergreen Select
Common Stock Fund Evergreen Select Balanced Fund Evergreen Select
Diversified Value Fund
Evergreen Select Money Market Trust
Evergreen Select 100% Treasury Money Market Fund
Evergreen Equity Trust
Evergreen Balanced Fund
Evergreen Small Company Growth Fund
Evergreen Fixed Income Trust
Evergreen Diversified Bond Fund
Evergreen Intermediate Term Bond Fund
Evergreen Municipal Trust
Evergreen Connecticut Municipal Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Tax Free Fund
A-1
-8-
<PAGE>
EXHIBIT B
The services provided for in this Agreement shall be performed by ESC, or
any agent appointed by ESC pursuant to Section 15 of this Agreement, under the
name of Evergreen Service Company (ESC) and this name or any similar name or
logo will not be used by ESC or its agents for any purposes other than those
related to this Agreement or to any other agreement which ESC may enter into
with any of the Fund (s) or with companies affiliated with the Fund(s).
The offices of ESC shall be open to perform the services pursuant to this
Agreement on all days when the Fund is open to transact business.
ESC will perform all services normally provided to investment companies
such as the Fund(s), and the quality of such services shall be equal to or
better than that provided to the other investment companies serviced by ESC.
With respect to each Fund, by way of illustration, but not limitation, these
services will include:
1. Establishing, maintaining, safeguarding and reporting on shareholder
account information and account histories, (including registration, name and
address recorded in generally accepted form, dealer, representative, branch, and
territory information, mailing address, distribution address, various codes and
specific information relating to (if applicable); withdrawal plans, letters of
intent, systematic investing, insured redemptions plans, account groupings for
rights of accumulation discount processing, and for account group reporting for
plan accounts and other accounts grouped for master sub-account reporting.)
2. Recording and controlling shares outstanding in certificate ("issued")
and non-certificate ("unissued") form.
3. Maintaining a record for each certificate issued to include certificate
number, account number, issued date, number of shares, canceled date or stop
date, where appropriate.
4. Reconciling the number of outstanding shares of each Fund on a daily
basis with the Fund and the Fund's custodian, promptly correcting any
differences noted.
5. Establishing and maintaining a trade file on behalf of each Fund based
on trade information furnished to the transfer agent by the Fund or its
distributors.
6. Accepting and processing direct cash investments however received and
investing such investments promptly in shareholder accounts.
7. Passing upon the adequacy of documents properly endorsed and guaranteed
submitted by or on behalf of a shareholder to transfer ownership or redeem
shares.
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<PAGE>
8. Transferring ownership of shares upon the books of each Fund.
9. Redeeming shares and preparing and mailing redemption checks or wire
proceeds as instructed.
10. Preparing and promptly mailing account statements to the shareholder or
such other authorized address and, when appropriate, as instructed by a Fund, to
the dealer or dealer branch, whenever transaction activity effecting share
balances are posted to a Fund account that is of the type that should receive
such statement.
11. Checking surrendered certificates for stop transfer instructions.
12. Canceling certificates surrendered.
13. Issuing certificates as replacements for those canceled, or as an
original issue of additional shares or upon the reduction of an equal number of
unissued shares.
14. Maintaining and updating a stop transfer file, promptly placing stop
transfer codes upon notification of possible loss, destruction or disappearance
of a certificate. Upon receipt of proper documentation obtaining necessary
insurance forms and issuing replacement certificates.
15. Balancing outstanding shares of record with the custodian prior to each
distribution and calculating and paying or reinvesting distributions to
shareholders of record and to open trade receivables and free stock.
16. Processing exchanges of shares of one Fund or Portfolio for another,
calculating proper sales charges and collecting fees as required.
17. Processing withdrawal plan liquidations according to plan instructions.
18. Reporting to each Fund and its custodian daily the capital stock
activities and dollar amounts of transactions.
19. Promptly answering inquiries from shareholders, dealers, Fund
personnel, and others as requested in accordance with the terms of this
Agreement as to account matters, referring policy or investment matters to the
Fund.
20. Mailing reports and special mailings, as directed by a Fund, to all
shareholders or selected holders or dealers.
21. Providing services with regard to the annual or special meetings of a
Fund, including preparation and timely mailing of proxy material to shareholders
of record and others as
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<PAGE>
directed by the Fund, and receiving, examining and recording all properly
executed proxies and performing such follow-up as required by the Fund.
22. Providing periodic listings and tallies of shareholder votes and
certifying the final tally.
23. Providing an inspector of elections at the annual or any special
meetings of a Fund.
24. Maintaining tax information for each account, deducting amounts where
required and furnishing to a Fund, its shareholders, dealers and, when
appropriate, regulatory bodies, the necessary tax information, all in compliance
with the various applicable laws.
25. Maintaining records of account and distribution information for checks
and confirmations returned as undeliverable by the Post Office.
26. Maintaining records and reporting sales information for Blue Sky
reporting purposes.
27. Calculating and processing Fund mergers or stock dividends, as directed
by a Fund.
28. Maintaining all Fund records as outlined in the record and tape
retention schedule delivered by a Fund.
29. Reconciling all investment, distribution and redemption accounts.
30. Providing for the replacement of uncashed distribution or redemption
checks.
31. Maintaining and safeguarding an inventory of unissued blank stock
certificates, checks and other Fund records.
32. Making available to a Fund and its distributors at their locations
devices which will provide immediate electronic access to computerized records
maintained for a Fund.
33. Providing space and such technical expertise as may be required to
enable a Fund and its properly authorized auditors, examiners and others
designated by the Fund in writing to properly understand and examine all books,
records, computer files, microfilm and other items maintained pursuant to this
Agreement, and to assist as required in such examination.
34. Assigning a single account number to each shareholder regardless of the
number of Funds or Portfolios owned for which Keystone Investment Management
Company, Evergreen Asset Management Corp., The Capital Management Group of First
Union National Bank of North Carolina or one of its affiliates is the trustee,
investment adviser or manager (except as instructed otherwise.)
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<PAGE>
35. Mailing prospectuses to existing accounts on receipt of the first
direct investment transaction after a new prospectus has been issued by a Fund.
36. Mailing cash election notices when required prior to capital gains
distributions.
37. Maintaining information, performing the necessary research and
producing reports required to comply with all applicable state escheat or
abandoned property laws.
With respect to each Fund, the Transfer Agent will produce reports as requested
by a Fund including, but not limited to, the following:
Shareholder Account Confirmation As required
Redemption Checks When redemption is made
Certificates When requested
Withdrawal plan payment checks On payment cycle
Distribution checks As required
Name and address labels
(per account registration) As requested
Proxy When required
1099 Annually
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
Daily and (monthly) share proof Daily
Daily master control Daily
Blue Sky exception Daily
Blue Sky master list Monthly and whenever a new
permit is issued by a state
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<PAGE>
Blue Sky sales report Cycle as designated in
advance by distributor
Check register Daily
Account information reports When requested
(Monthly) Cumulative Monthly
transaction
New account list Monthly
Shareholder master list When requested
Sales by State Monthly
Activities statistics Monthly
Distribution journals As required
Proxy tallies and vote listings When requested
Withdrawal plan account check Monthly
reconciliation
Dividend account check As required
reconciliation
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EXHIBIT C
Transfer Agent Fee Schedule
Charges to Funds
Group 1 - Retail Monthly Dividend Funds
Per open account per year $26.50
Per closed account per year 9.00
Per new account 10.00
Group 2 - Retail Quarterly Dividend Funds
Per open account per year $25.50
Per closed account per year 9.00
Per new account 10.00
Group 3 - Semi-Annual and Annual Dividend Funds
Per open account per year $24.50
Per closed account per year 9.00
Per new account 10.00
Group 4 - Retail Money Market Funds
Per open account per year $26.50
Per closed account per year 9.00
Per new account 10.00
Group 5 - Institutional Monthly Dividend Funds
Per open account per year $
Per closed account per year
Per new account
Group 6 - Institutional Quarterly Dividend Funds
Per open account per year $
Per closed account per year
Per new account
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<PAGE>
Group 7 - Semi-Annual and Annual Institutional Funds
Per open account per year $
Per closed account per year
Per new account
Group 7 - Institutional Money Market Funds
Per open account per year $
Per closed account per year
Per new account
Charges to Shareholders
Group 5 - ERISA **
Per IRA participant per year $10.00 with a maximum of $20.00
Per Keogh participant per year $10.00 with a maximum of $20.00
Per TSA per year $10.00 with a maximum of $20.00
**These fees are not borne by the Funds, but are direct shareholder charges.
Funds that have "seed" capital only will not be charged until the Fund has
public shareholders.
This Fee Schedule is exclusive of out-of-pocket reimbursable expenses and fee
reductions relating to average collected balance credits.
Out-of-pocket expenses include but are not limited to the following:
Stationery and supplies
Checks
Express Delivery
Postage
Printing of forms
Telephone
Photocopies and Microfilm
<PAGE>
DISTRIBUTION PLAN OF CLASS A SHARES
THE EVERGREEN EQUITY TRUST
SECTION 1. The Evergreen Equity Trust (the "Trust") individually and/or
on behalf of its series (each a "Fund") referred to in Exhibit A to this Rule
12b-1 Plan of Distribution (the "Plan") may act as the distributor of securities
which are issued in respect of the Fund's Class A shares ("Shares"), pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act") according
to the terms of this Plan.
SECTION 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of 0.75% of the average daily net asset value of Class A shares
("Shares") of the Fund. Such amounts may be expended to finance activity which
is principally intended to result in the sale of Shares including, without
limitation, expenditures consisting of payments to a principal underwriter of
the Fund ("Principal Underwriter") or others in order (i) to make payments to
the Principal Underwriter or others of sales commissions, other fees or other
compensation for services provided or to be provided, to enable payments to be
made by the Principal Underwriter or others for any activity primarily intended
to result in the sale of Shares, to pay interest expenses associated with
payments in connection with the sale of Shares and to pay any expenses of
financing permitted by this clause (i); (ii) to enable the Principal Underwriter
or others to receive, pay or to have paid to others who have sold Shares, or who
provide services to holders of Shares, a service fee, maintenance or other fee
in respect of such services, at such intervals as the Principal Underwriter or
such others may determine, in respect of Shares previously sold and remaining
outstanding during the period in respect of which such fee is or has been paid;
and/or (iii) to compensate the Principal Underwriter or others for efforts
(including without limitation any financing of payments under (i) and (ii) for
the sale of shares) in respect of sales of Shares since inception of the Plan or
any predecessor plan. Appropriate adjustments shall be made to the payments made
pursuant to this Section 2 to the extent necessary to ensure that no payment is
made by the Trust on behalf of any Fund with respect to the Class in excess of
the applicable limit imposed on asset based, front end and deferred sales
charges under subsection (d) of Rule 2830 of the Business Conduct Rules of the
National Association of Securities Dealers Regulation, Inc. (The "NASDR"). In
addition, to the extent any amounts paid hereunder fall within the definition of
an "asset based sales charge" under said NASDR Rule such payments shall be
limited to 0.75 of 1% of the aggregate net asset value of the Shares on an
annual basis and, to the extent that any such payments are made in respect of
"shareholder services" as that term is defined in the NASDR Rule, such payments
shall be limited to .25 of 1% of the aggregate net asset value of the Shares on
an annual basis and shall only be made in respect of shareholder services
rendered during the period in which such amounts are accrued.
SECTION 3. This Plan shall not take effect until it has been approved
together with any related agreements by votes of a majority of both (a) the
Board of Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or any
agreements of the Fund or any other person related to this Plan ("Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
SECTION 4. Unless sooner terminated pursuant to Section 6, this Plan shall
continue in
<PAGE>
effect for a period of one year from the date it takes effect and thereafter
shall continue in effect so long as such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in Section 3.
SECTION 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of each Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees and the Board
shall review at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
SECTION 6. This Plan may be terminated at any time with respect to any
Fund by vote of a majority of the Rule 12b-1 Trustees or by vote of a majority
of such Fund's outstanding Shares.
SECTION 7. Any agreement of the Fund related to this Plan shall be in
writing and shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of such Fund's
outstanding Shares on not more than sixty days written notice
to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
SECTION 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of each Fund's outstanding Shares, and no material amendment to this Plan
shall be made unless approved in the manner provided for in Section 3 hereof.
Effective Date: October 1, 1997
F:\RNH\SALEM23\EVEQA.PLN:2/6/98
<PAGE>
EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Aggressive Growth Fund
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2)*
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
Specialty Growth and Balanced Funds
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund
Growth and Income Funds 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 Keystone Growth and Income Fund
(S-1)*
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
* Class A Shares and Class C Shares authorized but not issued
<PAGE>
DISTRIBUTION PLAN FOR CLASS B-1 SHARES
EVERGREEN EQUITY TRUST
Section 1. The Evergreen Equity Trust (the "Trust"), individually
and/or on behalf of its series, (each a "Fund"), referred to in Exhibit A to
this 12b-1 Plan of Distribution (the "Plan"), may act as the distributor of
certain securities of which it is the issuer pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") according to the terms of this
Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at an
annual rate of up to 1.00% of the average daily net asset value of the Fund
attributable to the Fund's Class B-1 shares (the "Shares"). Such amounts may be
expended to finance any activity that is principally intended to result in the
sale of Shares, including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund or others as sales commissions
or other compensation for services provided or to be provided ("Distribution
Fees") or as reimbursement for expenses that are incurred or accrued at any time
during which this Plan or any predecessor plan is in effect, together with
interest on any such amounts, at rates approved by the Rule 12b-1 Trustees (as
defined below) in the manner referred to below, all whether or not this Plan or
any predecessor plan has been otherwise terminated, if such payment of such
expenditures is for services theretofore provided or for reimbursement of
expenses theretofore incurred or accrued prior to termination of this Plan or
any predecessor plan in other respects and if such payment is or has been so
approved by such Rule 12b-1 Trustees, or agreed to on behalf of the Fund with
such approval, all subject to such specific implementation as such 12b-1
Trustees may approve; provided that, at the time any such payment is made,
whether or not this Plan or any predecessor plan has been otherwise terminated,
the making of such payment will not cause the limitation upon such payments set
forth in the preceding sentence to be exceeded. Without limiting the generality
of the foregoing, the Trust on behalf of each Fund may pay to, or on the order
of, any person who has served from time to time as principal underwriter (a
"Principal Underwriter") amounts for distribution services pursuant to a
principal underwriting agreement or otherwise. No principal underwriting
agreement or other agreement shall be an agreement related to this Plan, as
referred to in Rule 12b-1 of the Securities and Exchange Commission, unless it
specifically states that it is such a related agreement. Any such principal
underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-1 Shares and/or
other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
-1-
<PAGE>
such B-Class-of-Shares of the Fund and may, but need not, also provide: (i) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taking into account in determining its
Allocable Portion; (ii) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below); (iii)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the 1940 Act, the Rules promulgated thereunder by the Securities and
Exchange Commission and the Business Conduct Rules of the National Association
of Securities Dealers, Inc., in each case enacted or promulgated after June
1995, or in connection with a "Complete Termination" (as hereinafter defined);
(iv) that the Trust on behalf of any Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (v) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate the Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (vi) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Trust on behalf of any Fund shall pay
to the assignee such portion of the Principal Underwriter's Allocable Portion of
the Distribution Fees and CDSCs so assigned. For purposes of such principal
underwriting agreement, the term Allocable Portion of Distribution Fees as
applied to any Principal Underwriter may mean the portion of the Distribution
Fee allocable to Distributor Shares in accordance with the "Allocation Schedule"
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term Allocable Portion of
CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs
allocable to Distributor Shares in accordance with the Allocation Schedule
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term "Complete
Termination" may mean a termination of this Plan involving the cessation of
payments of the Distribution Fees thereunder, the cessation of payments of
distribution fees pursuant to every other Rule 12b-1 plan of the
-2-
<PAGE>
Fund for every existing or future B-Class-of-Shares and the cessation of the
offering by the Fund of existing or future B-Class-of-Shares, which conditions
shall be deemed to be satisfied when they are first complied with and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-1 Shares which are Distributor Shares pursuant to the
Allocation Schedule shall have been redeemed or converted or (ii) a specified
date, after either of which times such conditions need no longer be complied
with. For purposes of such principal underwriting agreement, the term
"B-Class-of-Shares" may mean each of the B-1 Class of Shares of a Fund, the B-2
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as "Shares" under such Allocation Schedule or
which has economic characteristics substantially similar to those of the B-1 or
B-2 Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of the shares of such
classes. The parties may agree that the existing C Class of Shares of the Fund
does not have substantially similar economic characteristics to the B-1 or B-2
Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of such shares. For
purposes of clarity the parties to such principal underwriting agreement may
state that they intend that a new installment load class of shares which may be
authorized by amendments to Rule 6(c)-10 under the 1940 Act will not be
considered to be a B-Class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing C Class of
Shares of the Fund taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of such shares. For
purposes of such principal underwriting agreement, "Allocation Schedule" may
mean a schedule which shall be approved by Trustees (as defined below) in
connection with their required approval of such principal underwriting agreement
as assigning to each principal Underwriter of Shares the portion of the total
Distribution Fees payable by the Trust on behalf of each Fund under such
principal underwriting agreement which has been earned by such Principal
Underwriter to the extent necessary so that the continued payments thereof if
such Principal Underwriter ceases to serve in that capacity does not penalize
the Fund by requiring the Trust on behalf of such Fund to pay for services that
have not been earned.
Section 3. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements, by
votes of both (a) a majority of the Board of Trustees of the Trust and (b) a
majority of those Trustees of the Trust who are not "interested persons" of the
Trust (as said term is defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of this Plan or any agreements of
the Fund or any other person related to this Plan (the "Rule 12b-1 Trustees"),
cast in person at a meeting called for the purpose of voting on this Plan or
such agreements.
-3-
<PAGE>
Section 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long a such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of any Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees, and the Board
shall review, at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
Section 6. This Plan may be terminated as to any Fund, in whole or in
part, at any time by vote of a majority of the Rule 12b-1 Trustees or by vote of
a majority of the outstanding Shares of such Fund, with the effects provided for
in Section 2, as applicable.
Section 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of
a majority of the outstanding Shares of the Fund on not more than sixty days
written notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event of
its assignment.
Section 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined by the 1940
Act) of the outstanding Shares of each Fund, and no material amendment to this
Plan shall be made unless approved in the manner provided for in Section 3
hereof.
Effective Date: October 1, 1997
-4-
<PAGE>
EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Growth and Income Funds
Evergreen Fund for Total Return
-5-
<PAGE>
DISTRIBUTION PLAN FOR CLASS B-2 SHARES
EVERGREEN EQUITY TRUST
Section 1. The Evergreen Equity Trust (the "Trust"), individually
and/or on behalf of its series (each a "Fund"), referred to in Exhibit A to this
12b-1 Plan of Distribution (the "Plan"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act") according to the terms of this Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of up to 1.00% of the average daily net asset value of the Fund
attributable to the Fund's Class B-2 shares (the "Shares"). Such amounts may be
expended to finance any activity that is principally intended to result in the
sale of Shares, including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund or others as sales commissions
or other compensation for services provided or to be provided ("Distribution
Fees") or as reimbursement for expenses that are incurred or accrued at any time
during which this Plan or any predecessor plan is in effect, together with
interest on any such amounts, at rates approved by the Rule 12b-1 Trustees (as
defined below) in the manner referred to below, all whether or not this Plan or
any predecessor plan has been otherwise terminated, if such payment of such
expenditures is for services theretofore provided or for reimbursement of
expenses theretofore incurred or accrued prior to termination of this Plan or
any predecessor plan in other respects and if such payment is or has been so
approved by such Rule 12b-1 Trustees, or agreed to on behalf of the Fund with
such approval, all subject to such specific implementation as such 12b-1
Trustees may approve; provided that, at the time any such payment is made,
whether or not this Plan or any predecessor plan has been otherwise terminated,
the making of such payment will not cause the limitation upon such payments set
forth in the preceding sentence to be exceeded. Without limiting the generality
of the foregoing, the Trust on behalf of each Fund may pay to, or on the order
of, any person who has served from time to time as principal underwriter (a
"Principal Underwriter") amounts for distribution services pursuant to a
principal underwriting agreement or otherwise. No principal underwriting
agreement or other agreement shall be an agreement related to this Plan, as
referred to in Rule 12b-1 of the Securities and Exchange Commission, unless it
specifically states that it is such a related agreement. Any such principal
underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-2 Shares and/or
other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (i) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taking into account in determining its
Allocable Portion; (ii) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than
-1-
<PAGE>
its right to its Allocable Portion of the Distribution Fees and CDSCs (as
defined below); (iii) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall not be changed
or terminated except to the extent required by any change in applicable law,
including without limitation, the 1940 Act, the Rules promulgated thereunder by
the Securities and Exchange Commission and the Business Conduct Rules of the
National Association of Securities Dealers, Inc., in each case enacted or
promulgated after June 1995, or in connection with a "Complete Termination" (as
hereinafter defined); (iv) that the Trust on behalf of any Fund will not waive
or change any contingent deferred sales charge ("CDSC") in respect of the
Distributor's Allocable Portion thereof, except as provided in the Fund's
prospectus or statement of additional information without the consent of the
Principal Underwriter or any assignee of such Principal Underwriter's rights to
its Allocable Portion; (v) that the termination of the Principal Underwriter,
the principal underwriting agreement or this Plan will not terminate the
Principal Underwriter's rights to its Allocable Portion of the CDSCs; and (vi)
that any Principal Underwriter may assign its rights to its Allocable Portion of
the Distribution Fees and CDSCs (but not such Principal Underwriter's
obligations to the Fund under its principal underwriting agreement) to raise
funds to make expenditures described in Section 2 above and in connection
therewith, and upon receipt of notice of such assignment, the Trust on behalf of
any Fund shall pay to the assignee such portion of the Principal Underwriter's
Allocable Portion of the Distribution Fees and CDSCs so assigned. For purposes
of such principal underwriting agreement, the term Allocable Portion of
Distribution Fees as applied to any Principal Underwriter may mean the portion
of the Distribution Fee allocable to Distributor Shares in accordance with the
"Allocation Schedule" attached to such Principal Underwriter's principal
underwriting agreement. For purposes of such principal underwriting agreement,
the term Allocable Portion of CDSCs as applied to any Principal Underwriter may
mean the portion of the CDSCs allocable to Distributor Shares in accordance with
the Allocation Schedule attached to such Principal Underwriter's principal
underwriting agreement. For purposes of such principal underwriting agreement,
the term "Complete Termination" may mean a termination of this Plan involving
the cessation of payments of the Distribution Fees thereunder, the cessation of
payments of distribution fees pursuant to every other Rule 12b-1 plan of the
Fund for every existing or future B-Class-of-Shares and the cessation of the
offering by the Fund of existing or future B-Class-of-Shares, which conditions
shall be deemed to be satisfied when they are first complied with and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-2 Shares which are Distributor Shares pursuant to the
Allocation Schedule shall have been redeemed or converted or (ii) a specified
date, after either of which times such conditions need no longer be complied
with. For purposes of such principal underwriting agreement, the term
"B-Class-of- Shares" may mean each of the B-1 Class of Shares of a Fund, the B-2
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as "Shares" under such Allocation Schedule or
which has economic characteristics substantially similar to those of the B-1 or
B-2 Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of the shares of such
classes. The parties may agree that the existing C Class of Shares of the Fund
does not have substantially similar economic characteristics to the B-1 or B-2
Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of such shares. For
purposes of clarity the
-2-
<PAGE>
parties to such principal underwriting agreement may state that they intend that
a new installment load class of shares which may be authorized by amendments to
Rule 6(c)-10 under the 1940 Act will not be considered to be a B-Class-of-Shares
if it has economic characteristics substantially similar to the economic
characteristics of the existing C Class of Shares of the Fund taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares. For purposes of such principal
underwriting agreement, "Allocation Schedule" may mean a schedule which shall be
approved by Trustees (as defined below) in connection with their required
approval of such principal underwriting agreement as assigning to each Principal
Underwriter of Shares the portion of the total Distribution Fees payable by the
Trust on behalf of each Fund under such principal underwriting agreement which
has been earned by such Principal Underwriter to the extent necessary so that
the continued payments thereof if such Principal Underwriter ceases to serve in
that capacity does not penalize the Fund by requiring the Trust on behalf of
such Fund to pay for services that have not been earned.
Section 3. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements, by
votes of both (a) a majority of the Board of Trustees (the "Trustees") of the
Trust and (b) a majority of those Trustees of the Trust who are not "interested
persons" of the Trust (as said term is defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or any
agreements of the Fund or any other person related to this Plan (the "Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
Section 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long a such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of any Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees, and the Board
shall review, at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
Section 6. This Plan may be terminated as to any Fund, in whole or in
part, at any time by vote of a majority of the Rule 12b-1 Trustees or by vote of
a majority of the outstanding Share of such Fund, with the effects provided for
in Section 2, as applicable.
Section 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without payment of
any penalty,
-3-
<PAGE>
by vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of
the outstanding Shares of the Fund on not more than sixty days written notice to
any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event of
its assignment.
Section 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of the outstanding Shares of each Fund, and no material amendment to this
Plan shall be made unless approved in the manner provided for in Section 3
hereof.
Effective Date: October 1, 1997
-4-
<PAGE>
EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Growth and Income Funds
Evergreen Fund for Total Return
-5-
<PAGE>
DISTRIBUTION PLAN OF CLASS B SHARES
EVERGREEN EQUITY TRUST
Section 1. The Evergreen Equity Trust (the "Trust"), individually and/or on
behalf of its series (each a "Fund") referred to in Exhibit A to this 12b-1
Distribution Plan (the "Plan") may act as the distributor of certain securities
of which it is the issuer, pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act") according to the terms of this Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at an
annual rate of 1.00% of the average daily net asset value of its Class B shares
("Shares") to finance any activity which is principally intended to result in
the sale of Shares including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund ("Principal Underwriter") or
others in order: (i) to enable payments to be made by the Principal Underwriter
or others for any activity primarily intended to result in the sale of Shares,
including, without limitation,
(a) compensation to public relations consultants or other persons assisting in,
or providing services in connection with, the distribution of Shares, (b)
advertising, (c) printing and mailing of prospectuses and reports for
distribution to persons other than existing shareholders, (d) preparation and
distribution of advertising material and sales literature, (e) commission
payments, and principal and interest expenses associated with the financing of
commission payments, made by the Principal Underwriter in connection with the
sale of Shares and (f) conducting public relations efforts such as seminars;
(ii) to enable the Principal Underwriter or others to receive, pay or to have
paid to others who have sold Shares, or who provide services to holders of
Shares, a maintenance or other fee in respect of services provided to holders of
Shares, at such intervals as the Principal Underwriter or such others may
determine, in respect of Shares previously sold and remaining outstanding during
the period in respect of which such fee is or has been paid; and/or (iii) to
compensate the Principal Underwriter or such others for their efforts in respect
of sales of Shares since inception of the Plan or any predecessor plan.
Appropriate adjustments shall be made to the payments made pursuant to this
Section 2 to the extent necessary to ensure that no payment is made on behalf of
any Fund with respect to Class B Shares in excess of any limit imposed on asset
based, front end and deferred sales charges under any rule or regulations
adopted by the National Association of Securities Dealers, Inc. (the "NASD
Rules"). In addition, to the extent any amounts paid hereunder fall within the
definition of an "asset based sales charge" under said NASD Rules such payments
shall be limited to .75 of 1% of the aggregate net asset value of the Shares on
an annual basis and, to the extent that any such payments are made in respect of
"shareholder services" as that term is defined in the NASD Rules, such payments
shall be limited to .25 of 1% of the aggregate net asset value of the Shares on
-1-
<PAGE>
an annual basis and shall only be made in respect of shareholder services
rendered during the period in which such amounts are accrued.
Section 3. This Plan shall not take effect with respect to any Fund until
it has been approved by votes of a majority of (a) the Trustees of the Trust,
and (b) those Trustees of the Trust who are not "interested persons" (as defined
in the 1940 Act) and who have no direct or indirect financial interest
in the operation of this Plan or any agreements of the Trust related hereto or
any other person related to this Plan ("Disinterested Trustees"), cast in person
at a meeting called for the purpose of voting on this Plan. In addition, any
agreement related to this Plan and entered into by the Trust on behalf of the
Fund in connection therewith shall not take effect until it has been approved by
votes of a majority of (a) the Board of Trustees of the Trust, and (c) the
Disinterested Trustees of the Trust.
Section 4. Unless sooner terminated pursuant to Section 6, this Plan shall
continue in effect for a period of one year from the date it takes effect and
thereafter shall continue in effect for additional periods that shall not exceed
one year so long as such continuance is specifically approved by votes of a
majority of both (a) the Board of Trustees of the Trust and (b) the
Disinterested Trustees of the Trust, cast in person at a meeting called for the
purpose of voting on this Plan, provided that payments for services theretofore
provided or for reimbursement of expenses theretofore incurred or accrued prior
to termination of this Plan in accordance with Section 2 may be continued by the
Fund to the extent provided for in Section 6, below, as applicable.
Section 5. Any person authorized to direct the disposition of monies paid
or payable pursuant to this Plan or any related agreement shall provide to the
Trust's Board and the Board shall review at least quarterly a written report of
the amounts so expended and the purposes for which such expenditures were made.
Section 6. Payments with respect to services provided by the Principal
Underwriter or others pursuant to Section 2, above, shall be authorized
hereunder, whether or not this Plan has been otherwise terminated, if such
payments are for services theretofore provided or for reimbursement of expenses
theretofore incurred or accrued prior to termination of this Plan in other
respects and if such payment is or has been so approved by the Board, including
the Disinterested Trustees, or agreed to on behalf of the Fund with such
approval, all subject to such specific implementation as the Board, including
the Disinterested Trustees, may approve; provided that, at the time any such
payment is made, whether or not this Plan has been otherwise terminated, the
making of such payment will not cause the limitation upon such payments set
forth in Section 2 to be exceeded. Without limiting the generality of the
foregoing, the Trust on behalf of any Fund may pay to, or on the order of, any
person who has
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served from time to time as Principal Underwriter amounts for distribution
services pursuant to a principal underwriting agreement or otherwise. Any such
principal underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B Shares and/or other
specified classes of shares of any Fund (together the "B-Class-of-Shares"), a
fee which may be designated a Distribution Fee and may be paid at a rate per
annum up to .75 % of the average daily net asset value of such B-Class-of-Shares
of the Fund and may, but need not, also provide: (i) that a Principal
Underwriter will be deemed to have fully earned its "Allocable Portion" of the
Distribution Fee upon the sale of the Commission Shares (as defined in the
Allocation Schedule) taken into account in determining its Allocable Portion;
(ii) that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fee shall be absolute and unconditional and shall
not be subject to dispute, offset, counterclaim or any defense whatsoever (it
being understood that such provision is not a waiver of the Fund's right to
pursue such Principal Underwriter and enforce such claims against the assets of
such Principal Underwriter other than its right to its Allocable Portion of the
Distribution Fee and CDSCs (as defined below); (iii) that the Fund's obligation
to pay such Principal Underwriter its Allocable Portion of the Distribution Fee
shall not be changed or terminated except to the extent required by any change
in applicable law, including without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules of the National Association of Securities Dealers, Inc.,
in each case enacted or promulgated after May 5, 1997, or in connection with a
"Complete Termination" (as hereinafter defined); (iv) that the Trust on behalf
of any Fund will not waive or change any contingent deferred sales charge
("CDSC") in respect of the Distributor's Allocable Portion thereof, except as
provided in the Fund's prospectus or statement of additional information without
the consent of the Principal Underwriter or any assignee of such Principal
Underwriter's rights to its Allocable Portion; (v) that the termination of the
Principal Underwriter, the principal underwriting agreement or this Plan will
not terminate such Principal Underwriter's rights to its Allocable Portion of
the CDSCs; and (vi) that any Principal Underwriter may assign its rights to its
Allocable Portion of the Distribution Fee and CDSCs (but not such Principal
Underwriter's obligations to the Fund under its principal underwriting
agreement) to raise funds to make expenditures described in Section 2 above and
in connection therewith, and upon receipt of notice of such assignment, the
Trust on behalf of any Fund shall pay to the assignee such portion of the
Principal Underwriter's Allocable Portion of the Distribution Fee and CDSCs so
assigned. For purposes of such principal underwriting agreement, the term
Allocable Portion of Distribution Fee as applied to any Principal Underwriter
may mean the portion of the Distribution Fee allocable to Distributor Shares in
accordance with the "Allocation Schedule" attached to such Principal
Underwriter's principal underwriting agreement. For purposes of such principal
underwriting agreement, the term Allocable Portion of CDSCs as applied to any
Principal Underwriter may mean the portion of the CDSCs
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<PAGE>
allocable to Distributor Shares in accordance with the Allocation Schedule
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term "Complete
Termination" may mean a termination of this Plan involving the cessation of
payments of the Distribution Fee thereunder, the cessation of payments of
distribution fees pursuant to every other Rule 12b-1 plan of the Fund for every
existing or future B-Class-of-Shares and the cessation of the offering by the
Fund of existing or future B-Class-of-Shares, which conditions shall be deemed
to be satisfied when they are first complied with and so long thereafter as they
are complied with prior to the earlier of (i) the date upon which all of the B
Shares which are Distributor Shares pursuant to the Allocation Schedule shall
have been redeemed or converted or (ii) a specified date, after either of which
times such conditions need no longer be complied with. For purposes of such
principal underwriting agreement, the term "B-Class-of-Shares" may mean the B
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as "Shares" under such Allocation Schedule or
which has economic characteristics substantially similar to those of the B Class
of Shares taking into account the total sales charge, CDSC or other similar
charges borne directly or indirectly by the holder of the shares of such
classes.
The parties may agree that the existing C Class of Shares of the Fund does
not have substantially similar economic characteristics to the B Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of such shares. For purposes of
clarity the parties to such principal underwriting agreement may state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Trustees (as defined below) in connection with their
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fee
payable by the Trust on behalf of each Fund under such principal underwriting
agreement which has been earned by such Principal Underwriter to the extent
necessary so that the continued payments thereof if such Principal Underwriter
ceases
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to serve in that capacity does not penalize the Fund by requiring the Trust on
behalf of such Fund to pay for services that have not been earned.
Section 7. This Plan may be terminated at any time with respect to any Fund
by vote of a majority of the Disinterested Trustees, or by vote of a majority of
the Shares of such Fund, provided that payments for services theretofore
provided or for reimbursement of expenses theretofore incurred or accrued prior
to termination of this Plan in accordance with Section 2 may be continued by the
Fund to the extent provided for in Section 6, above, as applicable.
Section 8. Any agreement of the Trust, with respect to any Fund, related to
this Plan shall be in writing and shall provide:
A. That such agreement may be terminated with respect to any Fund at any
time without payment of any penalty, by vote of a majority of the Disinterested
Trustees or by a vote of a majority of the outstanding Shares of such Fund on
not more than sixty days written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 9. This Plan may not be amended to increase materially the amount
of distribution expenses provided for in Section 2 with respect to a Fund unless
such amendment is approved by a vote of at least a majority (as defined in the
1940 Act) of the outstanding Shares of such Fund, and no material amendment to
this Plan shall be made unless approved by votes of a majority of (a) the Board
of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust, cast
in person at a meeting called for the purpose of voting on such amendment.
Effective Date: October 1, 1997
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EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Aggressive Growth Fund
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2)
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
Specialty Growth and Balanced Funds
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund
Growth and Income Funds 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 Keystone Growth and Income Fund
(S-1)
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
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<PAGE>
DISTRIBUTION PLAN OF CLASS C SHARES
EVERGREEN EQUITY TRUST
SECTION 1. The Evergreen Equity Trust (the "Trust") individually and/or
on behalf of its series (the "Fund") referred to in Exhibit A to this Rule 12b-1
Plan of Distribution (the "Plan") may act as the distributor of securities which
are issued in respect of the Fund's Class C shares ("Shares"), pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the
terms of this Plan.
SECTION 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of 1.00% of the average daily net asset value of the Shares. Such
amounts may be expended to finance activity which is principally intended to
result in the sale of Shares including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal
Underwriter") or others in order (i) to make payments to the Principal
Underwriter or others of sales commissions, other fees or other compensation for
services provided or to be provided, to enable payments to be made by the
Principal Underwriter or others for any activity primarily intended to result in
the sale of Shares, to pay interest expenses associated with payments in
connection with the sale of Shares and to pay any expenses of financing
permitted by this clause (i); (ii) to enable the Principal Underwriter or others
to receive, pay or to have paid to others who have sold Shares, or who provide
services to holders of Shares, a service fee, maintenance or other fee in
respect of such services, at such intervals as the Principal Underwriter or such
others may determine, in respect of Shares previously sold and remaining
outstanding during the period in respect of which such fee is or has been paid;
and/or (iii) to compensate the Principal Underwriter or others for efforts
(including without limitation any financing of payments under (i) and (ii) for
the sale of shares) in respect of sales of Shares since inception of the Plan or
any predecessor plan. Appropriate adjustments shall be made to the payments made
pursuant to this Section 2 to the extent necessary to ensure that no payment is
made by the Trust on behalf of any Fund with respect to the Class in excess of
the applicable limit imposed on asset based, front end and deferred sales
charges under subsection (d) of Rule 2830 of the Business Conduct Rules of the
National Association of Securities Dealers Regulation, Inc. (The "NASDR"). In
addition, to the extent any amounts paid hereunder fall within the definition of
an "asset based sales charge" under said NASDR Rule, such payments shall be
limited to 0.75 of 1% of the aggregate net asset value of the Shares on an
annual basis and, to the extent that any such payments are made in respect of
"shareholder services" as that term is defined in the NASDR Rule, such payments
shall be limited to .25 of 1% of the aggregate net asset value of the Shares on
an annual basis and shall only be made in respect of shareholder services
rendered during the period in which such amounts are accrued.
SECTION 3. This Plan shall not take effect until it has been approved
together with any related agreements by votes of a majority of both (a) the
Board of Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as said term is defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of this Plan
or any agreements of the Fund or any other person related to this Plan (the
"Rule 12b-1
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<PAGE>
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
SECTION 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof.
SECTION 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of each Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees and the Board
shall review at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
SECTION 6. This Plan may be terminated with respect to any Fund at any
time by vote of a majority of the Rule 12b-1 Trustees or by vote of a majority
of such Fund's outstanding Shares.
SECTION 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of such Fund's
outstanding Shares on not more than sixty days written notice
to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
SECTION 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of each Fund's outstanding Shares, and no material amendment to this Plan
shall be made unless approved in the manner provided for in Section 3 hereof.
Effective Date: October 1, 1997
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EXHIBIT A
EVERGREEN EQUITY TRUST
Domestic Equity Funds
Evergreen Aggressive Growth Fund
Evergreen Fund
Evergreen Micro Cap Fund
Evergreen Omega Fund
Evergreen Small Company Growth Fund
Keystone Strategic Growth Fund (K-2)*
(To be redesignated Evergreen Strategic Growth Fund January 12, 1998)
Specialty Growth and Balanced Funds
Evergreen American Retirement Fund
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund
Growth and Income Funds 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 Keystone Growth and Income Fund
(S-1)*
(To be redesignated Evergreen Blue Chip Fund January 12, 1998)
* Class A Shares and Class C Shares authorized but not issued
<PAGE>
