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PROSPECTUS
April 15, 1999
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Evergreen Domestic Growth Funds [EVERGREEN FUNDS LOGO APPEARS HERE]
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Evergreen Masters Fund
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Masters Fund (the "Fund") seeks long-term capital
appreciation.
This prospectus provides information regarding the Class A, Class B and
Class C shares offered by the Fund. The Fund is a diversified series of an
open-end, management investment company. This prospectus sets forth concise
information about the Fund that a prospective investor should know before
investing. The address of the Fund is 200 Berkeley Street, Boston,
Massachusetts 02116.
A Statement of Additional Information ("SAI") for the Fund dated February
1, 1998, as amended on August 3, 1998, September 1, 1998 and January 4, 1999
has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated by reference herein. The SAI provides information regarding
certain matters discussed in this prospectus and other matters which may be of
interest to investors, and may be obtained without charge by calling the Fund
at (800) 343-2898. There can be no assurance that the investment objective of
the Fund will be achieved. Investors are advised to read this prospectus
carefully.
An investment in the Fund is not a deposit or obligation of any bank, is
not endorsed or guaranteed by any bank, and is not insured or otherwise
protected by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency. An investment in
the Fund involves risk, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSE INFORMATION....................... 3
FINANCIAL HIGHLIGHTS...................... 3
DESCRIPTION OF THE FUND................... 3
Investment Objective and Policies...... 3
Investment Practices and Restrictions.. 5
ORGANIZATION AND SERVICE PROVIDERS........ 9
Organization........................... 9
Service Providers...................... 9
Distribution Plans and Agreements...... 11
PURCHASE AND REDEMPTION OF SHARES......... 12
How to Buy Shares...................... 12
How to Redeem Shares................... 16
Exchange Privilege..................... 17
Shareholder Services................... 18
Banking Laws........................... 19
OTHER INFORMATION......................... 19
Dividends, Distributions and Taxes..... 19
General Information.................... 20
</TABLE>
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EXPENSE INFORMATION
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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
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on
Purchases (as a % of offering
price) 4.75% None None
Maximum Contingent Deferred Sales
Charge (as a % of original
purchase price or redemption
proceeds, whichever is lower) None(1) 5.00%(2) 1.00%(2)
</TABLE>
Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's estimated annual operating expenses for the
fiscal period ending September 30, 1999. The examples show what you would pay
if you invested $1,000 over the periods indicated. The examples assume that
you reinvest all of your dividends and that the Fund's average annual return
will be 5%. The examples are for illustration purposes only and should not be
considered a representation of past or future expenses or annual return. The
Fund's actual expenses and returns will vary. For a more complete description
of the various costs and expenses borne by the Fund see "Organization and
Service Providers."
<TABLE>
<CAPTION>
Annual Operating Expenses
- -------------------------
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Management Fees 0.95% 0.95% 0.95%
12b-1 Fees(3) 0.25% 1.00% 1.00%
Other Expenses 0.38% 0.38% 0.38%
---- ---- ----
Total 1.58% 2.33% 2.33%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Example
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Assuming Redemption at Assuming No
End of Period Redemption
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Class A Class B Class C Class B Class C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
After 1 Year $63 $ 74 $34 $24 $24
After 3 Years $95 $103 $73 $73 $73
</TABLE>
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(1) Investments of $1 million or more are not subject to a front-end sales
charge, but may be subject to a contingent deferred sales charge upon
redemption within one year after the month of purchase.
(2) The deferred sales charge on Class B shares declines from 5% to 1% on
amounts redeemed within six years after the month of purchase. The
deferred sales charge on Class C shares is 1% on amounts redeemed within
one year after the month of purchase. No sales charge is imposed on
redemptions made thereafter. See "Purchase and Redemption of Shares" for
more information.
(3) Class A shares of the Fund can pay up to 0.75% of average daily net assets
as a 12b-1 fee. For the foreseeable future, the Class A 12b-1 fees will be
limited to 0.25% of average daily net assets. Long-term shareholders may
pay more than the economic equivalent front-end sales charges permitted by
the National Association of Securities Dealers, Inc.
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FINANCIAL HIGHLIGHTS
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As of the date of this prospectus, the Fund had not commenced operations.
Therefore, no financial highlights are currently available.
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DESCRIPTION OF THE FUND
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is nonfundamental; as a result, the Fund
may change its objective without a shareholder vote. The Fund has also adopted
certain fundamental investment policies which are mainly designed to limit the
Fund's exposure to risk. The Fund's fundamental policies cannot be changed
without a shareholder vote. See the SAI for more information regarding the
Fund's fundamental investment policies or other related investment policies.
There can be no assurance that the Fund's investment objective will be
achieved.
The Fund's investment objective is to seek long-term capital appreciation
by investing at least 65% of its assets in equity securities. The Fund's
investment program is based on the Manager of Managers Strategy of
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First Union National Bank's ("FUNB") Evergreen Investment Management group
("EIM"). EIM allocates the Fund's portfolio assets on an approximately equal
basis among a number of investment management organizations ("Managers") --
currently four in number -- each of which employs a different investment
style.
In EIM's opinion, the Manager of Managers strategy may provide advantages
over the use of a single manager because of the following primary factors:
(i) Most equity investment management firms consistently employ a
distinct investment "style" which causes them to emphasize stocks with
particular characteristics;
(ii) because of changing investor preferences, any given investment
style will move into and out of market favor and will result in better
investment performance under certain market conditions but less
successful performance under other conditions; and
(iii) consequently, by allocating the Fund's portfolio on an
approximately equal basis among Managers employing different styles, the
impact of any one such style on investment performance will be diluted,
and the investment performance of the total portfolio will be more
consistent and less volatile over the long term than if a single style
were employed throughout the entire period.
EIM, based on the foregoing principles and on its analysis and evaluation
of information regarding the personnel and investment styles and performance
of numerous professional investment management firms, has selected for
appointment by the Fund a group of Managers representing a blending of
different investment styles which, in its opinion, is appropriate to the
Fund's investment objective.
EIM has ultimate responsibility for the investment performance of the
Fund. EIM continuously monitors the performance and investment styles of the
Fund's portfolio Managers and from time to time may recommend changes of
Managers based on factors such as changes in a Manager's investment style or a
departure by a Manager from the investment style for which it had been
selected, a deterioration in a Manager's performance relative to that of other
investment management firms practicing a similar style, or adverse changes in
its ownership or personnel.
The Fund's current Managers are:
Evergreen Asset Management Corp. ("Evergreen Asset")
MFS Institutional Advisors, Inc. ("MFS")
OppenheimerFunds, Inc. ("Oppenheimer")
Putnam Investment Management, Inc. ("Putnam")
The investment styles described below will be those applied by each of
the Managers to the segment of the Fund's portfolio for which that Manager is
responsible.
Evergreen Asset's segment of the portfolio will primarily be invested, in
accordance with its value oriented strategy, in equity securities of U.S. and
foreign companies with market capitalizations between approximately $500
million and $5 billion. In accordance with the value style of investing
Evergreen Asset invests in companies it believes the market has temporarily
undervalued in relation to such factors as the company's assets, cash flow and
earnings potential.
MFS manages its segment of the portfolio by primarily investing, in
accordance with its growth oriented investment strategy, in equity securities
of companies with market capitalizations between approximately $500 million
and $5 billion. Such companies generally would be expected to show earnings
growth over time that is well above the growth rate of the overall economy and
the rate of inflation, and would have the products, management and market
opportunities which are usually necessary to continue sustained growth. MFS
may invest up to 25% (and generally expects to invest between 0% and 10%) of
its segment of the Fund's assets in foreign securities (not including American
Depositary Receipts), including foreign growth securities, which are not
traded on a U.S. exchange.
Oppenheimer manages its segment of the portfolio in accordance with a
blended growth and value investment strategy. Investments are primarily in
equity securities of those companies with market capitalizations over $5
billion; however, Oppenheimer may, when it deems advisable, invest in the
equity securities of mid-cap and small-cap companies. In purchasing portfolio
securities, Oppenheimer may invest without limit in foreign
4
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securities and may, to a limited degree, invest in non-convertible debt
securities and preferred stocks which have the potential for capital
appreciation.
Putnam's segment of the portfolio will primarily be invested, in
accordance with its growth oriented investment strategy, in equity securities
of U.S. and foreign issuers with market capitalizations of $2 billion or more.
Putnam may also purchase non-convertible debt securities which offer the
opportunity for capital appreciation.
In the evaluation of a company, more consideration is given to growth
potential than to dividend income. Putnam believes that evaluating a company's
probable future earnings, dividends, financial strength, working assets and
competitive position will prove more profitable in the long run than simply
seeking current dividend income.
Equity securities include common stocks, preferred stocks, bonds,
warrants or rights that are convertible into stocks, and depositary receipts
for those securities. Investments may also be made to a limited degree in non-
convertible debt securities and preferred stocks which offer an opportunity
for capital appreciation.
Each Manager may also invest, for temporary defensive purposes, up to
100% of the assets allocated to its segment in short-term obligations. Such
obligations may include U.S. government securities, master demand notes,
commercial paper and notes, bank deposits and other financial obligations.
In addition to the investment policies detailed above, the Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions."
INVESTMENT PRACTICES AND RESTRICTIONS
Repurchase Agreements. The Fund may invest in repurchase agreements. A
repurchase agreement is an agreement by which the Fund purchases a security
(usually U.S. government securities) for cash and obtains a simultaneous
commitment from the seller (usually a bank or broker-dealer) to repurchase the
security at an agreed-upon price and specified future date. The repurchase
price reflects an agreed-upon interest rate for the time period of the
agreement. The Fund's risk is the inability of the seller to pay the agreed-
upon price on the delivery date. However, this risk is tempered by the ability
of the Fund to sell the security in the open market in the case of a default.
In such a case, the Fund may incur costs in disposing of the security which
would increase Fund expenses. The Fund's Managers will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by the Fund to sell
a security and repurchase it at a specified time and price. The Fund could
lose money if the market values of the securities it sold decline below their
repurchase prices. Reverse repurchase agreements may be considered a form of
borrowing, and, therefore, a form of leverage. Leverage may magnify gains or
losses of the Fund.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. The Fund
may enter into transactions whereby it commits to buying a security, but does
not pay for or take delivery of the security until some specified date in the
future. The value of these securities is subject to market fluctuation during
this period and no income accrues to the Fund until settlement. At the time of
settlement, a when-issued security may be valued at less than its purchase
price. When entering into these transactions, the Fund relies on the other
party to consummate the transaction; if the other party fails to do so, the
Fund may be disadvantaged. The Fund does not intend to purchase when-issued
securities for speculative purposes, but only in furtherance of its investment
objective.
Securities Lending. To generate income and offset expenses, the Fund may lend
securities to broker-dealers and other financial institutions. Loans of
securities by the Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any
income accruing on the security. Also, the Fund may invest any collateral it
receives in additional securities. Gains or losses in the market value of a
lent security will affect the Fund and its shareholders. When the Fund lends
its securities, it runs the risk that it could not retrieve the securities on
a timely basis, possibly losing the opportunity to sell the securities at a
desirable price. Also, if the borrower files for bankruptcy or becomes
insolvent, the Fund's ability to dispose of the securities may be delayed.
5
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Investing in Securities of Other Investment Companies. The Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, the Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that
the Fund currently bears concerning its own operations and may result in some
duplication of fees.
Borrowing. The Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. The Fund may also borrow an additional 5%
of its total assets from banks and others. The Fund may only borrow as a
temporary measure for extraordinary or emergency purposes such as the
redemption of Fund shares. The Fund may not purchase additional securities
when borrowings exceed 5% of total assets.
The purchase of securities while borrowings are outstanding will have the
effect of leveraging the Fund. Such leveraging or borrowing increases the
Fund's exposure to capital risk and borrowed funds are subject to interest
costs which will reduce net income.
Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purpose of the foregoing 15% limit. The inability of the Fund to
dispose of illiquid investments readily or at a reasonable price could impair
its ability to raise cash for redemptions or other purposes.
Restricted Securities. The Fund may invest in restricted securities, including
securities eligible for resale pursuant to Rule 144A under the Securities Act
of 1933 (the "1933 Act"). Generally, Rule 144A establishes a safe harbor from
the registration requirements of the 1933 Act for resale by large
institutional investors of securities not publicly traded in the U.S. The
Fund's Managers determine the liquidity of Rule 144A securities according to
the guidelines and procedures adopted by Evergreen Equity Trust's Board of
Trustees. The Board of Trustees monitors the Managers' application of those
guidelines and procedures. Securities eligible for resale pursuant to Rule
144A, which the Fund's Managers have determined to be liquid or readily
marketable, are not subject to the 15% limit on illiquid securities.
Options and Futures. The Fund may engage in options and futures transactions.
Options and futures transactions are intended to enable the Fund to manage
market, interest rate or exchange rate risk. The Fund does not use these
transactions for speculation or leverage.
The Fund may attempt to hedge all or a portion of its portfolio through
the purchase of both put and call options on its portfolio securities and
listed put options on financial futures contracts for portfolio securities.
The Fund may also purchase call options on financial futures contracts. The
Fund may write covered call options on its portfolio securities to attempt to
increase its current income. The Fund will maintain its position in
securities, option rights, and segregated cash subject to puts and calls until
the options are exercised, closed, or have expired. An option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series.
The Fund may write (i.e., sell) covered call and put options. By writing
a call option, the Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, the Fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price if the option is exercised. The Fund also may write straddles
(combinations of covered puts and calls on the same underlying security). The
Fund may only write "covered" options. This means that so long as the Fund is
obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, the Fund might own substantially similar U.S. Treasury bills.
The Fund will be considered "covered" with respect to a put option it writes
if, so long as it is obligated as the writer of the put option, it deposits
and maintains with its custodian in a segregated account liquid assets having
a value equal to or greater than the exercise price of the option.
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.
6
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A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities
of the U.S. government. If the Fund enters into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. The Fund
would agree to purchase securities in the future at a predetermined price
(i.e., "go long") to hedge against a decline in market interest rates.
The Fund may also enter into currency and other financial futures
contracts and write options on such contracts. The Fund intends to enter into
such contracts and related options for hedging purposes. The Fund will enter
into futures on securities, currencies, or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy
or sell securities or currencies during a designated month at whatever price
exists at that time. A futures contract on a securities index does not involve
the actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Fund does not make
payment or deliver securities upon entering into a futures contract. Instead,
it puts down a margin deposit, which is adjusted to reflect changes in the
value of the contract and which remains in effect until the contract is
terminated.
The Fund may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by the Fund, the profit on the
contract will tend to rise when the value of the underlying securities or
currencies declines and to fall when the value of such securities or
currencies increases. Thus, the Fund sells futures contracts in order to
offset a possible decline in the value of its securities or currencies. If a
futures contract is purchased by the Fund, the value of the contract will tend
to rise when the value of the underlying securities or currencies increases
and to fall when the value of such securities or currencies declines.
The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for
the purpose of closing out its options positions. The Fund's ability to enter
into closing transactions depends on the development and maintenance of a
liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. As a result,
there can be no assurance that the Fund will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Fund is not able to enter into an offsetting transaction, the
Fund will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case it
would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Fund to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Fund's use of them can result in poorer performance (i.e., the Fund's return
may be reduced). The Fund's attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Fund uses financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk
that the prices of the securities subject to the financial futures contracts
and options on financial futures contracts may not correlate perfectly with
the prices of the securities in the Fund's portfolio. This may cause the
financial futures contracts and any related options to react to market changes
differently than the portfolio securities. In addition, the Fund's Managers
could be incorrect in their expectations and forecasts about the direction or
extent of market factors, such as interest rates, securities price movements,
and other economic factors. Even if the Fund's Managers correctly predict
interest rate movements, a hedge could be unsuccessful if changes in the value
of the Fund's futures position did not correspond to changes in the value of
its investments. In these events, the Fund may lose money on the financial
futures contracts or the options on financial futures contracts. It is not
certain that a secondary market for positions in financial futures contracts
or for options on financial futures contracts will exist at all times.
Although the Fund's Managers will consider liquidity before entering into
financial futures contracts or options on financial futures contracts, there
is no assurance that a liquid secondary market on an exchange will exist for
any particular financial futures contract or option on a financial futures
contract at any particular time. The Fund's ability to establish and close out
financial futures contracts and options on financial futures contract
positions depends on this secondary market. If the Fund is unable to close out
its position due to disruptions in the market or lack of liquidity, the Fund
may lose money on the futures contract or option, and the losses to the Fund
could be significant.
7
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Derivatives. Derivatives are financial contracts, such as those described
above, whose value is based on an underlying asset, such as a stock or a bond,
or an underlying economic factor, such as an index or an interest rate.
The Fund may invest in derivatives only if the expected risks and rewards
are consistent with its objectives and policies.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains or losses in the value of the derivative. Derivatives
can also cause the Fund to lose money if the Fund fails to correctly predict
the direction in which the underlying asset or economic factor will move.
Investment in Small and Mid-Sized Companies. Investments in securities of
little-known, relatively small or mid-sized and special situation companies
may tend to be speculative and volatile. A lack of management depth in such
companies could increase the risks associated with the loss of key personnel.
Also, the material and financial resources of such companies may be limited,
with the consequence that funds or external financing necessary for growth may
be unavailable. Such companies may also be involved in the development or
marketing of new products or services for which there are no established
markets. If projected markets do not materialize or only regional markets
develop, such companies may be adversely affected or may be subject to the
consequences of local events. Moreover, such companies may be insignificant
factors in their industries and may become subject to intense competition from
larger companies. Securities of companies in which the Fund may invest will
frequently be traded only in the over-the-counter market or on regional stock
exchanges and will often be closely held. Securities of this type may have
limited liquidity and may be subject to wide price fluctuations. As a result
of the risk factors described above, to the extent the Fund invests in small
and mid-sized companies, the net asset value of the Fund's shares can be
expected to vary significantly.
Foreign Investments. Foreign securities may involve additional risks.
Specifically, they may be affected by the strength of foreign currencies
relative to the U.S. dollar, or by political or economic developments in
foreign countries. Accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. There may be less
publicly available information about a foreign company than about a U.S.
company. Foreign markets may be less liquid or more volatile than U.S. markets
and may offer less protection to investors. It may also be more difficult to
enforce contractual obligations abroad than would be the case in the U.S.
because of differences in the legal systems. Foreign securities may be subject
to foreign taxes, which may reduce yield, and may be less marketable than
comparable U.S. securities. All these factors are considered by the Fund's
Managers before making any of these types of investments.
Foreign Currency Transactions. As discussed above, the Fund may invest in
securities of foreign issuers. When the Fund invests in foreign securities,
they usually will be denominated in foreign currencies, and the Fund
temporarily may hold funds in foreign currencies. Thus, the value of the
Fund's shares will be affected by changes in exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell.
The Fund intends to use these contracts to hedge the U.S. dollar value of a
security it already owns, particularly if the Fund expects a decrease in the
value of the currency in which the foreign security is denominated. Although
the Fund will attempt to benefit from using forward contracts, the success of
its hedging strategy will depend on the Managers' ability to predict
accurately the future exchange rates between foreign currencies and the U.S.
dollar. The value of the Fund's investments denominated in foreign currencies
will depend on the relative strength of those currencies and the U.S. dollar,
and the Fund may be affected favorably or unfavorably by changes in the
exchange rates or exchange control regulations between foreign currencies and
the U.S. dollar. Changes in foreign currency exchange rates also may affect
the value of dividends and interest earned, gains and losses realized on the
sale of securities and net investment income and gains, if any, to be
distributed to shareholders by the Fund. The Fund does not intend to enter
into foreign currency transactions for speculation or leverage.
8
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Special Risk Considerations Regarding the Multi-Manager Strategy. EIM oversees
the portfolio management services provided to the Fund by each of the four
Managers. EIM does not, however, determine what investments will be purchased
or sold for any segment of the portfolio. Because each Manager will be
managing its segment of the portfolio independently from the other Managers,
the same security may be held in two different segments of the portfolio, or
may be acquired for one segment of the portfolio at a time when the Manager of
another segment deems it appropriate to dispose of the security from that
other segment. Similarly, under some market conditions, one or more of the
Managers may believe that temporary, defensive investments in short-term
instruments or cash are appropriate when another Manager or Managers believe
continued exposure to the equity markets is appropriate for their segments of
the portfolio. Because each Manager directs the trading for its own segment of
the portfolio, and does not aggregate its transactions with those of the other
Managers, the Fund may incur higher brokerage costs than would be the case if
a single investment advisor or Manager were managing the entire portfolio.
Also, because each segment of the portfolio will perform differently from the
other segments depending upon the investments it holds and changing market
conditions, one segment may be larger or smaller at various times than other
segments. Net cash inflows or outflows resulting from sales and redemptions of
the Fund's shares will, however, continue to be allocated on an equal basis
among the four segments of the portfolio without regard to the relative size
of the segments. EIM will not reallocate assets among the segments to reduce
these differences in size until the assets allocated to one Manager either
exceeds 35% or is less than 15% of the Fund's average daily net assets for a
period of three consecutive months. In such event EIM may, but is not
obligated to, reallocate assets among Managers to provide for a more equal
distribution of the Fund's assets.
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ORGANIZATION AND SERVICE PROVIDERS
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ORGANIZATION
Fund Structure. The Fund is an investment pool, which invests shareholders'
money toward a specified goal. The Fund is a diversified series of an open-
end, management investment company called Evergreen Equity Trust (the
"Trust"). The Trust is a Delaware business trust organized on September 18,
1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Fund's activities, reviewing,
among other things, the Fund's performance and its contractual arrangements
with various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, shares will be fully paid and
nonassessable. Shares of the Fund are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Fund does not hold annual shareholder meetings; the Fund may,
however, hold special meetings for such purposes as electing or removing
Trustees, changing fundamental policies and approving investment advisory
agreements or 12b-1 plans. In addition, the Fund is prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect Trustees.
SERVICE PROVIDERS
Investment Advisor. The investment advisor of the Fund is the EIM group of
FUNB which is a wholly-owned subsidiary of First Union Corporation ("First
Union"). First Union is located at 301 South College Street and FUNB is
located at 201 South College Street, Charlotte, North Carolina 28288-0630.
First Union and its subsidiaries provide a broad range of financial services
to individuals and businesses throughout the United States.
Pursuant to its Investment Advisory and Management Agreement (the
"Advisory Agreement") EIM oversees the administration of all aspects of the
business and affairs of the Fund and selects, contracts with and
9
<PAGE>
compensates Managers to manage the assets of the Fund's portfolio. EIM
monitors the Managers for compliance with the investment objectives and
policies of the Fund, reviews the performance of the Managers, and
periodically reports to the Trust. EIM has the right under the Advisory
Agreement to directly manage any or all of the Fund's assets.
EIM is entitled to receive from the Fund an annual fee equal to 0.95% of
average daily net assets of the Fund.
The Trust and FUNB have filed an exemptive application with, and expect
in the near future to receive an order from, the Securities and Exchange
Commission ("SEC") that will permit EIM, subject to certain conditions, and
without the approval of shareholders to: (a) employ a new unaffiliated Manager
or Managers for the Fund pursuant to the terms of a new portfolio management
agreement, in each case either as a replacement for an existing Manager or as
an additional Manager; (b) change the terms of any portfolio management
agreement; and (c) continue the employment of an existing Manager on the same
advisory contract terms where a contract has been assigned because of a change
in control of the Manager. In such circumstances, shareholders would receive
notice of such action, including the information concerning the Manager that
normally is provided in a proxy statement. The exemptive order also will
permit disclosure of fees paid to unaffiliated Managers on an aggregate basis
only.
Shareholders have the right to terminate arrangements with a Manager by
vote of a majority of the outstanding shares of the Fund. In addition,
shareholders have the right to approve, in accordance with current SEC
interpretations, any new portfolio management agreements with affiliated
Managers.
Manager Oversight. EIM has appointed a committee of investment personnel which
is primarily responsible for overseeing the Managers of the Fund. The
investment advisor has ultimate responsibility for the investment performance
of the Fund.
Managers. Subject to the supervision of CMG, each Manager manages a segment of
the Fund's portfolio in accordance with the Fund's investment objective and
policies, makes investment decisions for the segment, and places orders to
purchase and sell securities for the segment. The Fund pays no direct fees to
any of the Managers.
Set forth below is a brief description of the Fund's Managers.
Evergreen Asset, 2500 Westchester Avenue, Purchase, New York 10577, is a
wholly-owned subsidiary of First Union. Evergreen Asset, with its
predecessors, has served as investment advisor to the Evergreen mutual funds
since 1971.
MFS, 500 Boylston Street, Boston, Massachusetts 02116, together with its
parent company, is America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924
and the founding of the first mutual fund in the United States. MFS is a
subsidiary of Massachusetts Financial Services Company, which is a subsidiary
of SunLife of Canada (U.S.) Financial Services Holdings, Inc., which in turn
is an indirect wholly-owned subsidiary of SunLife Assurance Company of Canada.
As of July 31, 1998, MFS managed more than $87 billion on behalf of over 3.3
million investor accounts.
Oppenheimer, Two World Trade Center, New York, New York 10048, has
operated as an investment advisor since 1959. As of August 31, 1998,
Oppenheimer and its subsidiaries managed investment companies with assets of
more than $85 billion and with more than 4 million shareholder accounts.
Oppenheimer is owned by Oppenheimer Acquisition Corp., a holding company that
is owned in part by senior officers of Oppenheimer and controlled by
Massachusetts Mutual Life Insurance Company.
Putnam, One Post Office Square, Boston, Massachusetts 02109, has been
managing mutual funds since 1937. As of June 30, 1998, Putnam and its
affiliates managed more than $278 billion of assets. Putnam is a subsidiary of
Putnam Investments, Inc., which is owned by Marsh & McLennan Companies, Inc.,
a publicly-owned holding company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit consulting and
investment management.
10
<PAGE>
Evergreen Asset has entered into a sub-advisory agreement with Lieber &
Company, an indirect wholly-owned subsidiary of First Union, which provides
that Lieber & Company's research department and staff will furnish Evergreen
Asset with information, investment recommendations, advice and assistance, and
will generally be available for consultation on the portfolio of the Fund.
Lieber & Company will be reimbursed by Evergreen Asset in connection with the
rendering of services on the basis of the direct and indirect costs of
performing such services. There is no additional charge to the Fund for the
services provided by Lieber & Company. The address of Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577.
EIM pays the Managers of the Fund sub-advisory fees equal in the
aggregate up to .50% of the Fund's average daily net assets. Evergreen Asset,
an affiliate of EIM, receives a sub-advisory fee equal to .50% of the first
$500 million of the Fund's average daily net assets managed by Evergreen
Asset, .40% of the next $500 million of such net assets, and .35% of such net
assets in excess of $1 billion.
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.
The Fund pays ESC a fee of $10.00 when a new account is established, plus
annual fees as follows:
<TABLE>
<CAPTION>
Annual Fee Per Annual Fee Per
Fund Type Open Account Closed Account
--------- -------------- --------------
<S> <C> <C>
Monthly Dividend Funds $22.75 $9.00
Quarterly Dividend Funds $21.75 $9.00
Semiannual Dividend Funds $20.75 $9.00
Annual Dividend Funds $20.75 $9.00
Money Market Funds $22.75 $9.00
</TABLE>
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, acts as the Fund's custodian.
Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of
The BISYS Group, Inc., located at 125 West 55th Street, New York, New York
10019, is the principal underwriter of the Fund.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to the Fund. As administrator, and subject to the supervision
and control of the Trust's Board of Trustees, EIS provides the Fund with
facilities, equipment and personnel. For its services as administrator, EIS is
entitled to receive a fee based on the aggregate average daily net assets of
the Fund at a rate based on the total assets of all mutual funds administered
by EIS for which any affiliate of FUNB serves as investment advisor. The
administration fee is calculated in accordance with the following schedule.
<TABLE>
<CAPTION>
Administration Fee
------------------
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
</TABLE>
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 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%
11
<PAGE>
Of the amount that each class may pay under its respective Plan, up to
0.25% may constitute a service fee to be used to compensate organizations,
which may include the Fund's investment advisor or its affiliates, for
personal services rendered to shareholders and/or the maintenance of
shareholder accounts. The Fund may not pay any distribution or services fee
during any fiscal period in excess of the amounts set forth above. Amounts
paid under the Plans are used to compensate the Fund's distributor pursuant to
the Distribution Agreements entered into by the Fund.
The Plans are in compliance with the Conduct Rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a
class of shares to an annual rate of 0.75% and 0.25%, respectively, of the
average aggregate annual net assets attributable to that class. The rules also
limit the aggregate of all front-end, deferred and asset-based sales charges
imposed with respect to a class of shares by a mutual fund that also charges a
service fee to 6.25% of cumulative gross sales of shares of that class, plus
interest on the unpaid amount at the prime rate plus 1% per annum.
Distribution Agreements. The Fund has also entered into distribution
agreements (each a "Distribution Agreement" or collectively the "Distribution
Agreements") with EDI. Pursuant to the Distribution Agreements, the Fund will
compensate EDI for its services as distributor based upon the maximum annual
rate as a percentage of the Fund's average daily net assets attributable to
the class, as follows:
Class A Shares 0.25%
Class B shares 1.00%
Class C shares 1.00%
The Distribution Agreements provide that EDI will use the distribution
fee received from the Fund for payments (1) to compensate broker-dealers or
other persons for distributing shares of the Fund, including interest and
principal payments made in respect of amounts paid to broker-dealers or other
persons that have been financed (EDI may assign its rights to receive
compensation under the Distribution Agreements to secure such financings), (2)
to otherwise promote the sale of shares of the Fund, and (3) to compensate
broker-dealers, depository institutions and other financial intermediaries for
providing administrative, accounting and other services with respect to the
Fund's shareholders. FUNB or its affiliates may finance the payments made by
EDI to compensate broker-dealers or other persons for distributing shares of
the Fund.
In the event the Fund acquires the assets of other mutual funds,
compensation paid to EDI under the Distribution Agreements may be paid by EDI
to the distributors of the acquired funds or their predecessors.
Since EDI's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EDI, the amount of compensation
received by EDI under the Distribution Agreements during any year may be more
or less than its actual expenses and may result in a profit to EDI.
Distribution expenses incurred by EDI in one fiscal year that exceed the level
of compensation paid to EDI for that year may be paid from distribution fees
received from the Fund in subsequent fiscal years.
- -------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
You may purchase shares of the Fund through broker-dealers, banks or
other financial intermediaries, or directly through EDI. In addition, you may
purchase shares of the Fund by mailing to the Fund, c/o ESC, P.O. Box 2121,
Boston, Massachusetts 02106-2121, a completed application and a check payable
to the Fund. You may also telephone 1-800-343-2898 to obtain the number of an
account to which you can wire or electronically transfer funds and then send
in a completed application. The minimum initial investment is $1,000, which
may be waived in certain situations. Subsequent investments in any amount may
be made by check, by wiring federal funds, by direct deposit or by an
electronic funds transfer.
12
<PAGE>
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>
As a % of the Net As a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
- ------------------ ----------------- -------------- --------------------------
<S> <C> <C> <C>
Less than $50,000....... 4.99% 4.75% 4.25%
$50,000--$99,999........ 4.71% 4.50% 4.25%
$100,000--$249,999...... 3.90% 3.75% 3.25%
$250,000--$499,999...... 2.56% 2.50% 2.00%
$500,000--$999,999...... 2.04% 2.00% 1.75%
$1,000,000 or more...... None None 1.00% of the amount invested
up to $2,999,999; .50% of the amount
invested over $2,999,999, up to $4,999,999;
and .25% of the excess over $4,999,999
</TABLE>
No front-end sales charges are imposed on Class A shares purchased by (a)
institutional investors, which may include bank trust departments and
registered investment advisors; (b) investment advisors, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory
or other fee; (c) clients of investment advisors or financial planners who
place trades for their own accounts if the accounts are linked to the master
account of such investment advisors or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with the Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and
retired employees of FUNB and its affiliates, EDI and any broker-dealer with
whom EDI has entered into an agreement to sell shares of the Fund, and members
of the immediate families of such employees; (g) upon the initial purchase of
an Evergreen fund by investors reinvesting the proceeds from a redemption
within the preceding 30 days of shares of other mutual funds, provided such
shares were initially purchased with a front-end sales charge or subject to a
CDSC; and (h) all qualified plan customers holding Evergreen Class Y shares in
connection with a rollover into an individual retirement account. Certain
broker-dealers or other financial institutions may impose a fee on
transactions in shares of the Fund.
Class A shares may also be purchased at net asset value for a limited
time. Class A shares may be purchased at net asset value from January 4, 1999
to March 5, 1999, or when the Fund's total assets reach $100 million,
whichever is sooner. A CDSC of 1.00% will be imposed if the shares are
redeemed within two years of their purchase. Exchanges into other Evergreen
funds are prohibited for a period of six months following the initial
purchase. Any shares exchanged after the six-month period which are redeemed
within two years from the initial purchase will be subject to a CDSC of 1.00%.
Redemptions received in connection with a Systematic Withdrawal Plan will not
incur a CDSC. See "Shareholder Services--Systematic Withdrawal Plan" for
further information. See "How to Buy Shares--Contingent Deferred Sales Charge"
for more information on waivers. In connection with sales made, EDI will pay
broker-dealers at the rate of 3.00% of the net asset value of the shares
purchased.
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.
13
<PAGE>
Certain employer-sponsored retirement or savings plans, including
eligible 401(k) plans, may purchase Class A shares at net asset value provided
that such plans meet certain required minimum number of eligible employees or
required amount of assets. Additional information concerning the waiver of
sales charges is set forth in the SAI.
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 Imposed
- ------------------------- -------
<S> <C>
Month of purchase and the first twelve-month period following the month
of purchase........................................................... 5.00%
Second twelve-month period following the month of purchase............. 4.00%
Third twelve-month period following the month of purchase.............. 3.00%
Fourth twelve-month period following the month of purchase............. 3.00%
Fifth twelve-month period following the month of purchase.............. 2.00%
Sixth twelve-month period following the month of purchase.............. 1.00%
No CDSC is imposed on amounts redeemed thereafter.
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to
EDI. In the event 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. 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
14
<PAGE>
for the exemption from front-end sales charges described under "Class A
Shares -- Front-End Sales Charge Alternative" above. Broker-dealers and other
financial intermediaries whose clients have purchased Class C shares may
receive a service fee equal to 0.75% of the average daily net asset value of
such shares on an annual basis held by their clients more than one year from
the date of purchase. Service fees will commence immediately with respect to
shares eligible for exemption from the CDSC normally applicable to Class C
shares.
Contingent Deferred Sales Charge. Certain shares with respect to which the
Fund did not pay a commission on issuance, including shares obtained from
dividend or distribution reinvestment, are not subject to a CDSC. Any CDSC
imposed upon the redemption of Class A, Class B or Class C shares is a
percentage of the lesser of (1) the net asset value of the shares redeemed or
(2) the net asset value at the time of purchase of such shares.
No CDSC is imposed on a redemption of shares of the Fund in the event of:
(1) death or disability of the shareholder; (2) a lump-sum distribution from a
401(k) plan or other benefit plan qualified under the Employee Retirement
Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA
plans if the shareholder is at least 59 1/2 years old; (4) involuntary
redemptions of accounts having an aggregate net asset value of less than
$1,000; (5) automatic withdrawals under the Systematic Withdrawal Plan of up
to 1.00% per month of the shareholder's initial account balance; (6)
withdrawals consisting of loan proceeds to a retirement plan participant; (7)
financial hardship withdrawals made by a retirement plan participant; or (8)
withdrawals consisting of returns of excess contributions or excess deferral
amounts made to a retirement plan participant.
The Fund may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or CDSC to certain Directors, Trustees,
officers and employees of the Fund, FUNB, Evergreen Investment Management
Company ("EIMC"), Meridian Investment Company ("Meridian"), Evergreen Asset,
First International Advisors, Ltd. ("First International"), EDI and certain of
their affiliates, and to members of the immediate families of such persons, to
registered representatives of firms with dealer agreements with EDI, and to a
bank or trust company acting as a trustee for a single account.
How the Fund Values Its Shares. The net asset value of each class of shares of
the Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that class by the number of outstanding shares of that
class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. eastern time).
The securities in the Fund are valued at their current market values
determined on the basis of market quotations or, if such quotations are not
readily available, such other methods as the Trustees believe would accurately
reflect fair value.
General. The decision as to which class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares,
which incur lower ongoing distribution and/or shareholder service fees, after
seven years. If you are unsure of the time period of your investment, you
might consider Class C shares since there are no initial sales charges and,
although there is no conversion feature, the CDSC only applies to redemptions
made during the first year after the month of purchase. Consult your financial
intermediary for further information. The compensation received by broker-
dealers and agents may differ depending on whether they sell Class A, Class B
or Class C shares. There is no size limit on purchases of Class A shares.
In addition to the discount or commission paid to broker-dealers, EDI may
from time to time pay to broker-dealers additional cash incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of
the Fund and/or other Evergreen funds. EDI may also limit the availability of
such incentives to certain specified dealers. EDI from time to time sponsors
promotions involving First Union Brokerage Services, Inc., an affiliate of the
Fund's investment advisor, and select broker-dealers, pursuant to which
incentives are paid, including gift certificates and payments in amounts up to
1% of the dollar amount of shares of the Fund sold. Awards may also be made
based on the opening of a minimum number of accounts. Such promotions are not
being made available to all broker-dealers. Certain broker-dealers may also
receive payments from EDI or the Fund's investment advisor over and above the
usual trail commissions or shareholder servicing payments applicable to a
given class of shares.
15
<PAGE>
Additional Purchase Information. As a condition of this offering, if a
purchase is canceled due to nonpayment or because an investor's check does not
clear, the investor will be responsible for any loss the Fund or its
investment advisor incurs. If such investor is an existing shareholder, the
Fund may redeem shares from an investor's account to reimburse the Fund or its
investment advisor for any loss. In addition, such investor may be prohibited
or restricted from making further purchases in any of the Evergreen funds. The
Fund will not accept third party checks other than those payable directly to a
shareholder whose account has been in existence at least 30 days.
HOW TO REDEEM SHARES
You may "redeem" (i.e., sell) your shares in the Fund to the Fund for
cash at their net redemption value on any day the Exchange is open, either
directly by writing to the Fund, c/o ESC, or through your financial
intermediary. The amount you will receive is the net asset value adjusted for
fractions of a cent (less any applicable CDSC) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, the Fund
will not send proceeds until it is reasonably satisfied that the check has
been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Through Your Financial Intermediary. The Fund must receive
instructions from your financial intermediary before 4:00 p.m. (eastern time)
for you to receive that day's net asset value (less any applicable CDSC). Your
financial intermediary is responsible for furnishing all necessary
documentation to the Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m. (eastern time).
Redeeming Shares Directly by Mail or Telephone. You may redeem by mail by
sending a signed letter of instruction or stock power form to the Fund, c/o
ESC (the registrar, transfer agent and dividend-disbursing agent for the
Fund). Stock power forms are available from your financial intermediary, ESC,
and many commercial banks. Additional documentation is required for the sale
of shares by corporations, financial intermediaries, fiduciaries and surviving
joint owners. Signature guarantees are required for all redemption requests
for shares with a value of more than $50,000. Currently, the requirement for a
signature guarantee has been waived on redemptions of $50,000 or less when the
account address of record has been the same for a minimum period of 30 days.
The Fund and ESC reserve the right to withdraw this waiver at any time. A
signature guarantee must be provided by a bank or trust company (not a Notary
Public), a member firm of a domestic stock exchange or by other financial
institutions whose guarantees are acceptable under the Securities Exchange Act
of 1934 and ESC's policies.
Shareholders may redeem amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
prospectus between the hours of 8:00 a.m. and 6:00 p.m. (eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
ESC's offices are closed). The Exchange is closed on New Years Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. 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
16
<PAGE>
telephone are allowed only if the address and bank account of record have been
the same for a minimum period of 30 days. The Fund reserves the right at any
time to terminate, suspend, or change the terms of any redemption method
described in this prospectus, except redemption by mail, and to impose fees.
Except as otherwise noted, the Fund, ESC, and EDI will not assume
responsibility for the authenticity of any instructions received by any of
them from a shareholder in writing, over the Evergreen Express Line (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Fund, ESC, and EDI will not be liable when following instructions
received over the Evergreen Express Line or by telephone that ESC reasonably
believes are genuine.
Evergreen Express Line. The Evergreen Express Line offers you specific fund
account information and price and yield quotations as well as the ability to
do account transactions, including investments, exchanges and redemptions. You
may access the Evergreen Express Line by dialing toll free 1-800-346-3858 on
any touch-tone telephone, 24 hours a day, seven days a week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Fund may temporarily suspend the right to redeem its shares
when: (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists
and the Fund cannot dispose of its investments or fairly determine their
value; or (4) the SEC so orders. The Fund reserves the right to close an
account that through redemption has fallen below $1,000 and has remained so
for 30 days. Shareholders will receive 60 days' written notice to increase the
account value to at least $1,000 before the account is closed. The Fund has
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Fund is obligated to redeem shares solely in cash, up to the lesser of
$250,000 or 1% of the Fund's total net assets, during any 90 day period for
any one shareholder.
EXCHANGE PRIVILEGE
How to Exchange Shares. You may exchange some or all of your shares for shares
of the same class in other Evergreen funds through your financial
intermediary, by calling or writing to ESC or by using the Evergreen Express
Line as described above. If the shares being tendered for exchange are still
subject to a CDSC or are eligible for conversion in a specified time, such
remaining charge or remaining time will carry over to the shares being
acquired in the exchange transaction. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received. An
exchange which represents an initial investment in another Evergreen fund is
subject to the minimum investment and suitability requirements of each fund.
Each of the Evergreen funds has different investment objectives and
policies. For more information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at
any time by the Fund upon 60 days' notice to shareholders and is only
available in states in which shares of the fund being acquired may lawfully be
sold.
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.
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Exchanges By Telephone and Mail. Exchange requests received by the Fund after
4:00 p.m. (eastern time) will be processed using the net asset value
determined at the close of the next business day. During periods of drastic
economic or market changes, shareholders may experience difficulty in
effecting telephone exchanges. You should follow the procedures outlined below
for exchanges by mail if you are unable to reach ESC by telephone. If you wish
to use the telephone exchange service you should indicate this on the
application. As noted above, the Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares
communicated by telephone are genuine. A telephone exchange may be refused by
the Fund or ESC if it is believed advisable to do so. Procedures for
exchanging Fund shares by telephone may be modified or terminated at any time.
Written requests for exchanges should follow the same procedures outlined for
written redemption requests in the section entitled "How to Redeem Shares;"
however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. For more information
about these services or your account, contact your financial intermediary, ESC
or call the toll-free number on the front page of this prospectus. Some
services are described in more detail in the application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of the Fund with no minimum
initial investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the
Systematic Withdrawal Plan by filling out the appropriate part of the
application. Under this Plan, you may receive (or designate a third party to
receive) a monthly or quarterly fixed-withdrawal payment in a stated amount of
at least $75 and as much as 1.0% per month or 3.0% per quarter of the total
net asset value of the Fund shares in your account when the Plan was opened.
Fund shares will be redeemed as necessary to meet withdrawal payments. All
participants must elect to have their dividends and capital gains
distributions reinvested automatically.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified employee benefit and savings plans may make shares of the Fund
and other Evergreen funds available to their participants. Investments made by
such employee benefit plans may be exempt from front-end sales charges if they
meet the criteria set forth under "Class A Shares -- Front-End Sales Charge
Alternative." Evergreen Asset, EIMC, Meridian, First International or FUNB may
provide compensation to organizations providing administrative and
recordkeeping services to plans which make shares of the Evergreen funds
available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends
and distributions are automatically reinvested in full and fractional shares
of the Fund at the net asset value per share at the close of business on the
record date, unless otherwise requested by a shareholder in writing. If the
transfer agent does not receive a written request for subsequent dividends
and/or distributions to be paid in cash at least three full business days
prior to a given record date, the dividends and/or distributions to be paid to
a shareholder will be reinvested.
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen fund. This results
in more shares being purchased when the selected fund's net asset value is
relatively low and fewer shares being purchased when the fund's net asset
value is relatively high and may result in a lower average cost per share than
a less systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in a fund. You should designate on the 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.
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You may select this service on your application and indicate the Evergreen
fund(s) into which distributions are to be invested.
Tax Sheltered Retirement Plans. The Fund has various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Medical
Savings Accounts; Pension and Target Benefit and Money Purchase Plans. For
details, including fees and application forms, call toll free 1-800-247-4075
or write to ESC.
BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Fund. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment advisor, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase
of shares of such an investment company upon the order of its customer. FUNB
and its affiliates are subject to and in compliance with the aforementioned
laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB or its affiliates being
prevented from continuing to perform the services required under the
investment advisory contract or from acting as agent in connection with the
purchase of shares of the Fund by its customers. If FUNB or its affiliates
were prevented from continuing to provide the services called for under the
investment advisory agreement, it is expected that the Trustees would
identify, and call upon the Fund's shareholders to approve, a new investment
advisor. If this were to occur, it is not anticipated that the shareholders of
the Fund would suffer any adverse financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to distribute its investment company taxable income
annually and net capital realized gains at least annually. Shareholders
receive Fund distributions in the form of additional shares of that class of
shares upon which the distribution is based or, at the shareholder's option,
in cash. Shareholders of the Fund who have not opted to receive cash prior to
the payable date for any dividend from net investment income or the record
date for any capital gains distribution will have the number of such shares
determined on the basis of the Fund's net asset value per share computed at
the end of that day after adjustment for the distribution. Net asset value is
used in computing the number of shares in both capital gains and income
distribution investments.
Because Class A shares bear most of the costs of distribution of such
shares through payment of a front-end sales charge, while Class B, when
applicable, and Class C shares bear such expenses through a higher annual
distribution fee, expenses attributable to Class B shares and Class C shares
will generally be higher than those of Class A shares, and income
distributions paid by the Fund with respect to Class A shares will generally
be greater than those paid with respect to Class B and Class C shares.
Account statements and/or checks, as appropriate, will be mailed within
seven days after the Fund pays a distribution. Unless the Fund receives
instructions to the contrary before the record or payable date, as the case
may be, it will assume that a shareholder wishes to receive that distribution
and future capital gains and income distributions in shares. Instructions
continue in effect until changed in writing.
The Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). While so qualified, it
is expected that the Fund will not be required to pay any federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment
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companies, such as the Fund, to the extent they do not meet certain
distribution requirements by the end of each calendar year. The Fund
anticipates meeting such distribution requirements.
Any taxable dividend declared in October, November or December to
shareholders of record in such a month and paid by the following January 31
will be includable in the taxable income of shareholders as if paid on
December 31 of the year in which the dividend was declared.
The Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
U.S. may reduce or eliminate such taxes. Shareholders of the Fund who are
subject to U.S. federal income tax may be entitled, subject to certain rules
and limitations, to claim a federal income tax credit or deduction for foreign
income taxes paid by the Fund. See the SAI for additional details. The Fund's
transactions in options, futures and forward contracts may be subject to
special tax rules. These rules can affect the amount, timing and
characteristics of distributions to shareholders.
The Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any)
and redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the application, or on
a separate form supplied by the Fund's transfer agent, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from
backup withholding.
A shareholder who acquires Class A shares of the Fund and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of
shares of the Fund.
The Fund intends to distribute its net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital
gains. The Fund will designate capital gains distributions as such by a
written notice mailed to each shareholder no later than 60 days after the
close of the Fund's taxable year. If a shareholder receives a capital gain
dividend and holds his shares for six months or less, then any allowable loss
on disposition of such shares will be treated as a long-term capital loss to
the extent of such capital gain dividend.
The foregoing discussion of federal income tax consequences is based on
tax laws and regulations in effect on the date of this prospectus and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the SAI. In addition,
you should consult your own tax advisor as to the tax consequences of
investments in the Fund, including the application of state and local taxes
which may be different from the federal income tax consequences described
above.
GENERAL INFORMATION
Portfolio Turnover and Brokerage. The estimated annual portfolio turnover rate
for the Fund is not expected to exceed 100%. A portfolio turnover rate of 100%
would occur if all of the Fund's portfolio securities were replaced in one
year. The portfolio turnover rate experienced by the Fund directly affects the
transaction costs relating to the purchase and sale of securities which the
Fund bears directly. A high rate of portfolio turnover will increase such
costs. It is contemplated that Lieber & Company, an affiliate of Evergreen
Asset and a member of the New York and American Stock Exchanges will, with
respect to assets of the Fund managed by Evergreen Asset and to the extent
practicable, effect substantially all of the portfolio transactions for
Evergreen Asset's portion of the Fund effected on those exchanges. In
addition, broker-dealers affiliated with MFS, Oppenheimer and Putnam may be
utilized by these Managers to effect portfolio transactions for the Fund. See
the SAI for further information regarding the practices of the Fund affecting
portfolio turnover and brokerage allocation practices.
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, the Fund may consider sales of its shares as a factor in the
selection of broker-dealers to enter into portfolio transactions with the
Fund.
Other Classes of Shares. The Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this prospectus and are only
available to (1) persons who at or prior to December 31, 1994 owned shares in
a mutual fund advised by Evergreen Asset, (2) certain institutional investors
and (3) investment advisory clients of FUNB, Evergreen Asset,
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EIMC, Meridian, First International or their affiliates. The dividends payable
with respect to Class A, Class B and Class C shares will be less than those
payable with respect to Class Y shares due to the distribution and shareholder
servicing-related expenses borne by Class A, Class B and Class C shares and
the fact that such expenses are not borne by Class Y shares. Investors should
telephone (800) 343-2898 to obtain more information on other classes of
shares.
Performance Information. From time to time, the Fund may quote its "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B, Class C and Class Y shares. The Fund's total return for
each such period is computed by finding, through the use of a formula
prescribed by the SEC, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of
the investment at the end of the period. For purposes of computing total
return, dividends and capital gains distributions paid on shares of the Fund
are assumed to have been reinvested when paid and the maximum sales charges
applicable to purchases of the Fund's shares are assumed to have been paid.
Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC
for all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment
income reported in the Fund's financial statements. To calculate yield, the
Fund takes the interest and dividend income it earned from its portfolio of
investments (as defined by the SEC formula) for a 30-day period (net of
expenses), divides it by the average number of shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on
the Fund's share price at the end of the 30-day period. This yield does not
reflect gains or losses from selling securities.
Performance data may be included in any advertisement or sales literature
of the Fund. These advertisements may quote performance rankings or ratings of
the Fund by financial publications or independent organizations such as Lipper
Analytical Services, Inc. and Morningstar, Inc. or may compare the Fund's
performance to various indices. The Fund may also advertise in items of sales
literature an "actual distribution rate" which is computed by dividing the
total ordinary income distributed (which may include the excess of short-term
capital gains over losses) to shareholders for the latest 12-month period by
the maximum public offering price per share on the last day of the period.
Investors should be aware that past performance may not be indicative of
future results.
In marketing the Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering
investment alternatives. The information provided to investors may also
include discussions of other Evergreen funds, products, and services, which
may include: retirement investing; brokerage products and services; the
effects of periodic investment plans and dollar cost averaging; saving for
college; and charitable giving. In addition, the information provided to
investors may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques. EDI may also reprint, and
use as advertising and sales literature, articles from Evergreen Events, a
quarterly magazine provided free of charge to Evergreen fund shareholders.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Fund's investment advisor and the
Fund's other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Fund's investment advisor is taking
steps to address the Year 2000 Problem with respect to the computer systems
that it uses and to obtain assurances that comparable steps are being taken by
the Fund's other major service providers. At this time, however, there can be
no assurance that these steps will be sufficient to avoid any adverse impact
on the Fund.
Additional Information. This prospectus and the SAI, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Trust with the SEC under the 1933
Act. Copies of the Registration Statement may be obtained at a reasonable
charge from the SEC or may be examined, without charge, at the offices of the
SEC in Washington, D.C.
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Notes
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Investment Advisor
Evergreen Investment Management group of First Union National Bank, 201 South
College Street, Charlotte, North Carolina 28288
Managers
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
MFS Institutional Advisors, Inc., 500 Boylston Street, Boston, Massachusetts
02116
OppenheimerFunds, Inc., Two World Trade Center, New York, New York 10048
Putnam Investment Management, Inc., One Post Office Square, Boston,
Massachusetts 02109
Custodian
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
Transfer Agent
Evergreen Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121
Legal Counsel
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
Independent Auditors
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
Distributor
Evergreen Distributor, Inc. 90 Park Avenue, New York, New York 10016
83975 546806 RV1
<PAGE>
SUPPLEMENT TO THE CLASS Y PROSPECTUS OF
EVERGREEN MASTERS FUND
The following replaces the existing text in the section entitled "Service
Providers" after the heading "Manager Oversight":
Manager Oversight. EIM has appointed a committee of investment personnel
which is primarily responsible for overseeing the Managers of the Fund. The
investment advisor has ultimate responsibility for the investment performance of
the Fund.
April 15, 1999
