EVERGREEN EQUITY TRUST /DE/, 485BPOS, 2000-05-18

EVERGREEN EQUITY TRUST /DE/
485BPOS, 2000-05-18

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1933 Act Registration No. 333-34568

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-14AE

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

[ ] Pre-Effective [X] Post-Effective
Amendment No. Amendment No. 1

EVERGREEN EQUITY TRUST
(Evergreen Income and Growth Fund)
[Exact Name of Registrant as Specified in Charter)

Area Code and Telephone Number: (617) 210-3200

200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------
(Address of Principal Executive Offices)

Beth K. Werths, Esq.
200 Berkeley Street
Boston, Massachusetts 02116
-----------------------------------------
(Name and Address of Agent for Service)

Copies of All Correspondence to:
Robert N. Hickey, Esq.
Sullivan & Worcester LLP 1025 Connecticut Avenue,
N.W.
Washington, D.C. 20036

It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
<PAGE>

[LOGO OF EVERGREEN FUNDS]

EVERGREEN EQUITY INCOME FUND
200 Berkeley Street
Boston, MA 02116
May 26, 2000

Dear Shareholder,

As a shareholder of Evergreen Equity Income Fund ("Equity Income Fund"), you
are invited to vote on a proposal to merge Equity Income Fund into Evergreen
Income and Growth Fund ("Income and Growth Fund"), another mutual fund within
the Evergreen Family of Funds. The Board of Trustees of Evergreen Equity Trust
has approved the merger and recommends that you vote FOR this proposal.

If approved by shareholders, this is how the merger will work:

. Your Fund will transfer its assets and liabilities to Income and Growth
Fund.

. Income and Growth Fund will issue new shares that will be distributed to
you in an amount equal to the value of your Equity Income Fund shares.
You will receive Class A, Class B, Class C or Class Y shares of Income
and Growth Fund, depending on the class of shares of Equity Income Fund
you currently hold. Although the number of shares you hold may change,
the total value of your investment will not change as a result of the
merger.

. You will not incur any sales loads or similar transaction charges as a
result of the merger.

Immediately following the merger, Income and Growth Fund will change its name
to "Evergreen Equity Income Fund."

The merger is intended to be tax free for federal income tax purposes.
Details about Income and Growth Fund's investment objective, portfolio
management team, performance, etc. along with additional information about the
proposed merger, are contained in the attached prospectus/proxy statement.
Please take the time to familiarize yourself with this information. Votes on
the proposal will be cast at a special meeting of Equity Income Fund's
shareholders to be held on July 14, 2000. Although you are welcome to attend
the meeting in person, you do not need to do so in order to vote your shares.
If you do not expect to attend the meeting, please complete, date, sign and
return the enclosed proxy card in the enclosed postage paid envelope, or vote
via one of the other methods mentioned below. Instructions on how to vote are
included at the end of the prospectus/proxy statement.

If you have any questions about the proposal or the proxy card, please call
Shareholder Communications Corporation, our proxy solicitor, at 800-645-8640.
You may record your vote by telephone, FAX your completed and signed proxy card
(both front and back sides) or vote on the Internet by following the voting
instructions as outlined on your proxy card. If the Fund does not receive a
sufficient number of votes in favor of the merger, you may receive a telephone
call from Shareholder Communications Corporation requesting your vote. The
expenses of the merger, including the costs of soliciting proxies, will be paid
by First Union National Bank.

Thank you for taking this matter seriously and participating in this
important process.

Sincerely,

/s/ William M. Ennis

William M. Ennis
President
Evergreen Funds
<PAGE>

EVERGREEN EQUITY INCOME FUND
200 Berkeley Street
Boston, Massachusetts 02116

----------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

----------------

TO BE HELD ON JULY 14, 2000

Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of Evergreen Equity Income Fund ("Equity Income Fund"), a series
of Evergreen Equity Trust, will be held at the offices of the Evergreen Funds,
26th Floor, 200 Berkeley Street, Boston, Massachusetts 02116 on July 14, 2000,
at 2:00 p.m. for the following purposes:

1. To consider and act upon the Agreement and Plan of Reorganization (the
"Plan") dated as of April 30, 2000, providing for the acquisition of all
the assets of Equity Income Fund by Evergreen Income and Growth Fund
("Income and Growth Fund"), a series of Evergreen Equity Trust, in exchange
for shares of Income and Growth Fund and the assumption by Income and
Growth Fund of the identified liabilities of Equity Income Fund. The Plan
also provides for distribution of these shares of Income and Growth Fund to
shareholders of Equity Income Fund in liquidation and subsequent
termination of Equity Income Fund. A vote in favor of the Plan is a vote in
favor of the liquidation and dissolution of Equity Income Fund.

2. To transact any other business which may properly come before the
Meeting or any adjournment or adjournments thereof.

On behalf of Equity Income Fund, the Trustees of Evergreen Equity Trust have
fixed the close of business on April 28, 2000 as the record date for the
determination of shareholders of the Fund entitled to notice of and to vote at
the Meeting or any adjournment thereof.

IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND IN PERSON ARE URGED TO SIGN WITHOUT DELAY AND RETURN THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT
THEIR SHARES MAY BE REPRESENTED AT THE MEETING. YOUR PROMPT ATTENTION TO THE
ENCLOSED PROXY WILL HELP TO AVOID THE EXPENSE OF FURTHER SOLICITATION.

By order of the Board of Trustees

William M. Ennis
President

May 26, 2000
<PAGE>

INFORMATION RELATING TO THE PROPOSED MERGER

EVERGREEN EQUITY INCOME FUND

into

EVERGREEN INCOME AND GROWTH FUND

This prospectus/proxy statement contains the information you should know
before voting on the proposed merger ("Merger") of your Fund into Evergreen
Income and Growth Fund ("Income and Growth Fund"). If approved, the Merger will
result in your receiving shares of Income and Growth Fund in exchange for your
shares of Evergreen Equity Income Fund ("Equity Income Fund"). The investment
objectives of both Funds are similar. The investment objectives of Equity
Income Fund are to seek primarily current income and secondarily capital
growth. The investment objective of Income and Growth Fund is to seek current
income and capital growth in the value of its shares.

Please read this prospectus/proxy statement carefully and retain it for
future reference. Additional information concerning each Fund and the Merger is
contained in the documents described in the box below, all of which have been
filed with the Securities and Exchange Commission ("SEC").

MORE INFORMATION ABOUT THE FUNDS IS AVAILABLE

See: How to get these documents:

Prospectus for both Funds, dated The Funds make all of these
December 1, 1999, with supplement documents available to you free of
dated February 1, 2000, which charge if you:
accompany this prospectus/proxy . Call 800-645-8640, or
statement. . Write the Funds at 200 Berkeley
Street, Boston, Massachusetts
Statement of additional information 02116.
for both Funds, dated December 1,
1999. You can also obtain any of these
documents for a fee from the SEC if
Annual report for both Funds, dated you:
July 31, 1999.
. Call the SEC at 800-SEC-0330,
Semi-annual report for both Funds,
dated January 31, 2000. Or for free if you:
. Go to the SEC Website
Statement of additional information, (http://www.sec.gov).
dated May 26, 2000, which relates to
this prospectus/proxy statement and To ask questions about this
the Merger. prospectus/proxy statement:
. Call 800-645-8640, or
. Write to the Funds at 200 Berkeley
Street, Boston, Massachusetts
02116.

Information relating to the Funds contained in the Funds' semi-annual report,
annual report, prospectus and statement of additional information, as well as
the statement of additional information relating to this prospectus/proxy
statement, is incorporated by reference into this prospectus/proxy statement.
This means that such information is legally considered to be part of this
document.

The Securities and Exchange Commission has not determined that the information
in this prospectus/proxy statement is accurate or complete, nor has it approved
or disapproved these securities. Anyone who tells you otherwise is committing a
crime.

The shares offered by this prospectus/proxy statement are not deposits of a
bank, and are not insured, endorsed or guaranteed by the FDIC or any government
agency and involve investment risk, including possible loss of your original
investment.

The address of both Funds is 200 Berkeley Street, Boston, Massachusetts 02116
(Telephone: 800-343-2898).

PROSPECTUS/PROXY STATEMENT DATED MAY 26, 2000
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY.................................................................... 3
What are the key features of the Merger?................................. 3
After the Merger, what class of shares of Income and Growth Fund will I
own?.................................................................... 3
How do the Funds' investment objectives, principal investment strategies
and risks compare?...................................................... 4
How do the Funds' sales charges and expenses compare? Will I be able to
buy, sell and exchange shares the same way?............................. 5
How do the Funds' performance records compare?........................... 8
Who will be the Investment Advisor and Portfolio Manager of my Fund after
the Merger? What will the advisory fee be after the Merger?............. 9
What will be the primary federal tax consequences of the Merger?......... 10
RISKS...................................................................... 11

What are the primary risks of investing in each Fund?.................... 11
Are there any other risks of investing in each Fund?..................... 13

MERGER INFORMATION......................................................... 13
Reasons for the Merger................................................... 13
Agreement and Plan of Reorganization..................................... 14
Federal Income Tax Consequences.......................................... 16
Pro Forma Capitalization................................................. 17
Distribution of Shares................................................... 17
Purchase and Redemption Procedures....................................... 19
Exchange Privileges...................................................... 19
Dividend Policy.......................................................... 19
INFORMATION ON SHAREHOLDERS' RIGHTS........................................ 20
Form of Organization..................................................... 20
Capitalization........................................................... 20
Shareholder Liability.................................................... 20
Shareholder Meetings and Voting Rights................................... 20
Liquidation.............................................................. 21
Liability and Indemnification of Trustees................................ 21
VOTING INFORMATION CONCERNING THE MEETING.................................. 21
Shareholder information.................................................. 23
FINANCIAL STATEMENTS AND EXPERTS........................................... 25
LEGAL MATTERS.............................................................. 25
ADDITIONAL INFORMATION..................................................... 25
OTHER BUSINESS............................................................. 25

INSTRUCTIONS FOR EXECUTING PROXY CARDS..................................... 26

OTHER WAYS TO VOTE YOUR PROXY.............................................. 26
EXHIBIT A.................................................................. A-1
EXHIBIT B.................................................................. B-1
</TABLE>

2
<PAGE>

SUMMARY

This section summarizes the primary features and consequences of the Merger.
This summary is qualified in its entirety by reference to the additional
information contained elsewhere in this prospectus/proxy statement, each Fund's
prospectus and statement of additional information and in the Agreement and
Plan of Reorganization.

What are the key features of the Merger?

The Agreement and Plan of Reorganization (the "Plan") sets forth the key
features of the Merger. For a complete description of the Merger, see the Plan,
attached as Exhibit A to this prospectus/proxy statement. The Plan generally
provides for the following:

. the transfer of all of the assets of Equity Income Fund in exchange for
shares of Income and Growth Fund.

. the assumption by Income and Growth Fund of the identified liabilities of
Equity Income Fund. (The identified liabilities consist only of those
liabilities reflected on Equity Income Fund's statement of assets and
liabilities determined immediately preceding the Merger.)

. the liquidation of Equity Income Fund by distributing the shares of Income
and Growth Fund to Equity Income Fund's shareholders.

The Merger is scheduled to take place on or about July 24, 2000. Immediately
following the Merger, Income and Growth Fund will change its name to "Evergreen
Equity Income Fund."

After the Merger, what class of shares of Income and Growth Fund will I
own?

<TABLE>
<CAPTION>
If you own this class of shares of You will get this class of shares of
Equity Income Fund: Income and Growth Fund:
<S> <C>
Class A Class A
Class B Class B
Class C Class C
Class Y Class Y
</TABLE>

The new shares you receive will have the same total value as your Equity
Income Fund shares as of the close of business on the day immediately prior to
the Merger.

The Trustees of Evergreen Equity Trust, including the Trustees who are not
"interested persons" (the "Independent Trustees"), as such term is defined in
the Investment Company Act of 1940 (the "1940 Act"), have concluded that the
Merger would be in the best interest of Equity Income Fund's shareholders, and
that their interest will not be diluted as a result of the Merger. Accordingly,
the Trustees have submitted the Plan for the approval of Equity Income Fund's
shareholders. The Trustees of Evergreen Equity Trust have also approved the
Plan on behalf of Income and Growth Fund.

3
<PAGE>

How do the Funds' investment objectives, principal investment
strategies and risks compare?

The following table highlights the comparison between the Funds with respect
to their investment objectives and principal investment strategies as set forth
in each Fund's prospectus and statement of additional information:

Equity Income Fund Income and Growth Fund
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES To seek primarily To seek current income
current income and and capital growth in
secondarily capital the value of its shares.
growth.
- --------------------------------------------------------------------------------
PRINCIPAL INVESTMENT
STRATEGIES . The portfolio manager . Invests primarily in
attempts to construct common stocks and
a portfolio offering a securities
high income stream and convertible into
low price fluctuation. common stocks across
. Invests at least 65% all market
of its total assets in capitalizations that
common stocks of pay a yield higher
large, established than the average
companies (above $5 yield of companies in
billion in market the S&P 500 Index.
capitalization) with a . May invest up to 25%
history of dividend of its total assets
payments. in investment grade,
. May invest up to 35% fixed-income
of its total assets in securities including
bonds including lower bonds and convertible
quality credit bonds debt securities.
(junk bonds). . May invest up to 50%
. May invest up to 50% of its total assets
of its total assets in in foreign
foreign securities. securities.
. Invests generally in . Invests in both value
stocks believed to be and growth
undervalued and which securities. "Value"
exhibit positive securities are
trends in operations securities that the
and earnings Fund's portfolio
expectations. managers believe are
undervalued. "Growth"
securities are
securities of
companies which the
Fund's portfolio
managers believe have
anticipated earnings
ranging from steady
to accelerated
growth.
- --------------------------------------------------------------------------------
Each Fund may invest up to 100% of its assets in high quality money market
instruments in response to adverse economic, political or market conditions.
This strategy is inconsistent with the Funds' principal investment strategies
and investment goals, and if employed could result in lower returns and loss of
market opportunity.

The Funds have other investment policies, practices and restrictions which,
together with their related risks, are also set forth in each Fund's prospectus
and statement of additional information.

A portion of the securities held by Equity Income Fund may be disposed of in
connection with the Merger and this could result in additional portfolio
transaction costs to the Funds and capital gains to shareholders.

A principal risk of investing in each of the Funds is stock market risk (when
economic growth slows, or interest or inflation rates increase, equity
securities held by the Funds tend to decline in value and may cause a decrease
in dividends paid). Both Funds are also subject to market capitalization risk
(investments primarily

4
<PAGE>

in one category may decline in value if that category falls out of favor). Both
Funds are subject to investment style risk (certain styles such as growth or
value also may fall out of favor causing securities held by the Funds to
decline). Both Funds are also subject to interest rate risk (when interest
rates rise, the value of debt securities held by the Funds tends to decline).
Both Funds are subject to credit risk (the issuers of the securities in which
the Funds invest will be unable to repay principal and pay interest on the
securities held by a Fund either at all or on time). Because Equity Income Fund
can invest in below investment grade securities, it is subject to increased
credit risk. Both Funds are also subject to foreign investment risk (political
turmoil, economic instability and currency exchange fluctuations could
adversely affect the value of foreign securities held by the Funds). For a
detailed comparison of the Funds' risks, see the section entitled "Risks"
below.

How do the Funds' sales charges and expenses compare? Will I be able to
buy, sell and exchange shares the same way?

The sales charges for the comparable classes of both Funds are the same. Both
Funds offer four classes of shares. You will not pay a sales charge in
connection with the Merger. The procedures for buying, selling and exchanging
shares of the Funds are identical. For more information, see "Purchase and
Redemption Procedures" and "Exchange Privileges" below.

The following tables allow you to compare the sales charges and expenses of
the two Funds. The table entitled "Income and Growth Fund Pro Forma" also shows
you what the sales charges and expenses are estimated to be assuming the Merger
takes place.

Shareholder Fees (fees paid directly from your investment)

- --------------------------------------------------------------------------------
Equity Income Fund
- --------------------------------------------------------------------------------

Shareholder Class A Class B Class C Class Y
Transaction
Expenses

Maximum sales charge
imposed on purchases
(as a % of offering
price) 4.75% None None None

Maximum deferred sales
charge (as a % of
either the redemption
amount or initial
investment whichever
is lower) None* 5.00% 2.00%** None
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Income and Growth Fund
- --------------------------------------------------------------------------------
Shareholder Class A Class B Class C Class Y
Transaction
Expenses

Maximum sales charge
imposed on purchases
(as a % of offering
price) 4.75% None None None

- --------------------------------------------------------------------------------
Income and Growth Fund
Pro Forma

- --------------------------------------------------------------------------------
Shareholder Class A Class B Class C Class Y
Transaction
Expenses

Maximum sales charge
imposed on purchases
(as a % of offering
price) 4.75% None None None

* 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 ("CDSC") of
1.00% upon redemption within one year after the month of purchase.

** Class C Shares purchased prior to February 1, 2000 are subject to the CDSC
schedule in place at that time, which included a CDSC of 1.00%.

5
<PAGE>

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

- --------------------------------------------------------------------------------
Equity Income Fund

(based on expenses for the fiscal year ended
July 31, 1999 which have been restated to
reflect current contractual rates as of
January 3, 2000)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Fund
Management 12b-1 Other Operating
Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
Class A 0.54% 0.25% 0.39% 1.18%
Class B 0.54% 1.00% 0.39% 1.93%
Class C 0.54% 1.00% 0.39% 1.93%
Class Y 0.54% 0.00% 0.39% 0.93%
</TABLE>

- --------------------------------------------------------------------------------
Income and Growth Fund

(based on expenses for the fiscal
year ended July 31, 1999 which have
been restated to reflect current
contractual rates as of January 3,
2000)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Fund
Management 12b-1 Other Operating
Fees Fees Expenses Expenses
<S> <C> <C> <C> <C>
Class A 0.89% 0.25% 0.32% 1.46%
Class B 0.89% 1.00% 0.32% 2.21%
Class C 0.89% 1.00% 0.32% 2.21%
Class Y 0.89% 0.00% 0.32% 1.21%
</TABLE>
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

Income and Growth Fund Pro Forma
(based on what the estimated combined
expenses of Income and Growth Fund
would have been for the 12 months
ended January 31, 2000)*

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Fund
Management 12b-1 Other Operating
Fees Fees Expenses Expenses**
<S> <C> <C> <C> <C>
Class A 0.85% 0.25% 0.33% 1.43%
Class B 0.85% 1.00% 0.33% 2.18%
Class C 0.85% 1.00% 0.33% 2.18%
Class Y 0.85% 0.00% 0.33% 1.18%
</TABLE>
- --------------------------------------------------------------------------------

* The expenses reflect contractual rate changes made on January 3, 2000. At
that time, the advisory fee was reduced in order to offset an increase in the
Fund's administrative services fee.

** From time to time, the Fund's investment advisor may, at its discretion,
reduce or waive its fees or reimburse the Fund for certain of its expenses in
order to reduce expense ratios. The Annual Fund Operating Expenses do not
reflect fee waivers and expense reimbursements. If the Merger takes place,
the Fund's investment advisor has agreed to waive the management fee and/or
reimburse expenses for a period of two years beginning in July 2000 in order
to limit Total Fund Operating Expenses to 1.42% for Class A, 2.17% for Class
B, 2.17% for Class C and 1.17% for Class Y.

6
<PAGE>

The table below shows examples of the total expenses you would pay on a
$10,000 investment over one-, three-, five- and ten-year periods. The example
is intended to help you compare the cost of investing in Equity Income Fund
versus Income and Growth Fund and for Income and Growth Fund pro forma,
assuming the Merger takes place, and is for illustration only. The example
assumes a 5% average annual return, the imposition of the maximum sales charge
(if any) and that you reinvest all of your dividends. Your actual costs may be
higher or lower. For Class C shares of Income and Growth Fund pro forma, the
maximum 2% CDSC has been applied rather than the maximum 1% CDSC which will be
applicable with regard to Class C shares of Equity Income Fund purchased before
February 1, 2000 and exchanged for Class C shares of Income and Growth Fund.

Example of Fund Expenses

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Equity Income Fund
----------------------------------------------------------------------------
Assuming No
Assuming Redemption at End of Period Redemption
----------------------------------------------------------------------------
Class A Class B Class C Class Y Class B Class C
<S> <C> <C> <C> <C> <C> <C>
After 1 year $590 $696 $396 $95 $196 $196
After 3 years $832 $906 $606 $296 $606 $606
After 5 years $1,093 $1,242 $1,042 $515 $1,042 $1,042
After 10 years $1,839 $1,968 $2,254 $1,143 $1,968 $2,254
----------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Income and Growth Fund
----------------------------------------------------------------------------
Assuming No
Assuming Redemption at End of Period Redemption
----------------------------------------------------------------------------
Class A Class B Class C Class Y Class B Class C
<S> <C> <C> <C> <C> <C> <C>
After 1 year $617 $724 $424 $123 $224 $224
After 3 years $915 $991 $691 $384 $691 $691
After 5 years $1,235 $1,385 $1,185 $665 $1,185 $1,185
After 10 years $2,138 $2,266 $2,544 $1,466 $2,266 $2,544
----------------------------------------------------------------------------
</TABLE>

----------------------------------------------------------------------------
Income and Growth Fund Pro Forma
----------------------------------------------------------------------------
Assuming No
Assuming Redemption at End of Period Redemption
----------------------------------------------------------------------------
Class A Class B Class C Class Y Class B Class C
<S> <C> <C> <C> <C> <C> <C>
After 1 year $614 $721 $421 $120 $221 $221
After 3 years $906 $982 $682 $375 $682 $682
After 5 years $1,219 $1,370 $1,170 $649 $1,170 $1,170
After 10 years $2,107 $2,234 $2,513 $1,432 $2,234 $2,513
----------------------------------------------------------------------------
</TABLE>

7
<PAGE>

How do the Funds' performance records compare?

The following charts show how each Fund has performed in the past. Past
performance is not an indication of future results.

Year-by-Year Total Return (%)

The chart below shows the percentage gain or loss for Equity Income Fund's
Class A shares and for Income and Growth Fund's Class Y shares in each of the
past ten calendar years. For each Fund the class shown is the oldest class. The
chart should give you a general idea of the risks of investing in each Fund by
showing how each Fund's return has varied from year-to-year. The expenses of
Equity Income Fund's Class A shares are higher than the expenses of Income and
Growth Fund's Class Y shares due to the difference in Rule 12b-1 fees (Rule
12b-1 fees paid by Class A are 0.25%; Class Y does not pay any 12b-1 fees). If
the performance of Equity Income Fund's Class Y shares were shown on the chart
for the same periods as that for the Fund's Class A shares, performance would
have been higher. This chart includes the effects of Fund expenses, but not
sales charges. Returns would be lower for Equity Income Fund's Class A shares
if sales charges were included. Class Y shares of Income and Growth Fund are
not subject to any sales charges.

Equity Income Fund (Class A) Income and Growth Fund (Class Y)

[GRAPH] [GRAPH]

1990 (2.31)% 1990 (6.30)%
1991 25.19% 1991 22.99%
1992 4.72% 1992 10.03%
1993 12.82% 1993 12.92%
1994 (3.98)% 1994 (6.42)%
1995 29.51% 1995 23.86%
1996 26.99% 1996 12.89%
1997 24.07% 1997 25.58%
1998 13.92% 1998 (0.79)%
1999 (1.16)% 1999 16.37%

Best Quarter: 4th Quarter 1998 +13.53% Best Quarter: 2nd Quarter 1999 +14.50%
Worst Quarter: 3rd Quarter 1998 - 9.55% Worst Quarter: 3rd Quarter 1998 -11.55%

Year to date total return through Year to date total return through
3/31/2000 is +0.46%. 3/31/2000 is -0.80%.

The next table lists each Fund's average annual total return over the past
one, five and ten years and since inception (through 12/31/1999), including
applicable sales charges. This table is intended to provide you with some
indication of the risks of investing in each Fund by comparing its performance
with an index. At the bottom of the table you can compare Equity Income Fund's
performance with the S&P 500 Index ("S&P 500") and the Lehman Brothers
Aggregate Bond Index ("LBABI"), and Income and Growth Fund's performance with
the Wilshire 5000 Index ("Wilshire 5000"). The S&P 500 Index is a market value-
weighted index measuring the performance of 500 U.S. stocks chosen for market
size, liquidity, and industry group representation. The LBABI is an unmanaged
fixed income index covering the U.S. investment grade fixed-rate bond market,
including U.S. government and U.S. government agency securities, corporate
securities, and asset-backed securities. The Wilshire 5000 Index is an
unmanaged market value-weighted index measuring the performance of all U.S.-
headquartered equity securities with readily available price data. An index
does not include transaction costs associated with buying and selling
securities or any mutual fund expenses. It is not possible to invest directly
in an index.

8
<PAGE>

Average Annual Total Return (for the period ended 12/31/1999)

- -------------------------------------------------------------------------------
Equity Income Fund*
- -------------------------------------------------------------------------------
Inception Performance
Date of Since
Class 1 year 5 year 10 year 4/14/1987

Class A 4/14/1987 -5.87% 16.95% 11.75% 11.48%
Class B 2/1/1993 -5.96% 16.95% 11.68% 11.43%
Class C 2/1/1993 -2.67% 17.20% 11.69% 11.44%
Class Y 1/13/1997 -0.90% 18.19% 12.33% 11.95%
S&P 500 21.04% 28.56% 18.21% 16.61%
LBABI -0.82% 7.73% 7.70% 7.85%

- -------------------------------------------------------------------------------
Income and Growth Fund**
- -------------------------------------------------------------------------------
Inception Performance
Date of Since
Class 1 year 5 year 10 year 8/31/1978

Class A 1/3/1995 10.60% 13.81% 9.85% 13.74%
Class B 1/3/1995 10.24% 13.85% 9.98% 13.81%
Class C 1/3/1995 14.24% 14.07% 9.98% 13.80%
Class Y 8/31/1978 16.37% 15.18% 10.51% 14.06%
Wilshire 5000 23.56% 27.06% 17.59% 12.86%

* Historical performance shown for Classes B, C, and Y prior to their
inception is based on the performance of Class A, the original class
offered. These historical returns for Classes B, C and Y have not been
adjusted to reflect the effect of each Class' 12b-1 fees. The 12b-1 fee for
Class A is 0.25%, for Class B is 1.00% and for Class C is 1.00%. Class Y
does not pay a 12b-1 fee. If these fees had been reflected, returns for
Class B and Class C would have been lower while returns for Class Y would
have been higher.
** Historical performance shown for Classes A, B and C prior to their
inception is based on the performance of Class Y, the original class
offered. These historical returns for Classes A, B and C have not been
adjusted to reflect the effect of each Class' 12b-1 fees. The 12b-1 fee for
Class A is 0.25%, for Class B is 1.00% and for Class C is 1.00%. Class Y
does not pay a 12b-1 fee. If these fees had been reflected, returns would
have been lower.

For a detailed discussion of the manner of calculating total return, please
see each Fund's statement of additional information. Generally, the
calculations of total return assume the reinvestment of all dividends and
capital gain distributions on the reinvestment date.

Important information about Income and Growth Fund is also contained in
management's discussion of Income and Growth Fund's performance, attached as
Exhibit B to this prospectus/proxy statement. This information also appears in
Income and Growth Fund's most recent Annual Report.

Who will be the Investment Advisor and Portfolio Manager of my Fund after
the Merger? What will the advisory fee be after the Merger?

Management of the Funds

The overall management of Income and Growth Fund and Equity Income Fund is
the responsibility of, and is supervised by, the Board of Trustees of
Evergreen Equity Trust.

Investment Advisor

Evergreen Asset Management Corp. ("EAMC") is the investment advisor to
Income and Growth Fund.

Facts about EAMC:

. Is a subsidiary of First Union National Bank ("FUNB"), which is a
subsidiary of First Union Corporation ("First Union"), the 6th
largest bank holding company in the United States based on total
assets as of March 31, 2000.

. Has served as investment advisor, along with its predecessors, since
1971.

. Manages over $23.4 billion in assets for 20 of the Evergreen Funds.

. Manages with its affiliates the Evergreen family of mutual funds
with assets of approximately $82.8 billion as of March 31, 2000.

. Is located at 1311 Mamaroneck Avenue, White Plains, New York 10605.

9
<PAGE>

Portfolio Management

The day-to-day management of Income and Growth Fund is handled by Irene D.
O'Neill, CFA and Phillip M. Foreman, CFA.

. Ms. O'Neill is lead manager of Income and Growth Fund and has co-
managed the Fund since December 1997. Ms. O'Neill has been a
portfolio manager at EAMC since March 1988.

. Mr. Foreman has been co-manager of Income and Growth Fund since
September 1999. Mr. Foreman has been a portfolio manager at EAMC
since he joined EAMC in January 1999. From November 1991 until he
joined EAMC, he was a portfolio manager at Washington Mutual
Advisors, Inc.

Investment Sub-Advisor

Lieber & Company ("Lieber") is the investment sub-advisor to Income and
Growth Fund.

Facts about Lieber:

. Has provided investment research and other investment services since
1971.

. Is located at 1311 Mamaroneck Avenue, White Plains, New York 10605.

Advisory Fees

For its management and supervision of the daily business affairs of Income
and Growth Fund, EAMC is entitled to receive an annual fee equal to:

. 0.90% of the first $750 million of the Fund's average daily net
assets, plus 0.80% of the next $250 million in assets, plus 0.70% of
the amounts over $1 billion.

. EAMC may, at its discretion, reduce or waive its fee or reimburse
the Fund for certain of its other expenses in order to reduce the
expense ratios. Unless otherwise agreed upon, EAMC may also reduce
or cease these voluntary waivers and reimbursements at any time. If
the Merger takes place, EAMC has agreed to waive the management fee
and/or reimburse expenses for a period of two years beginning in
July 2000 in order to limit Income and Growth Fund's Total Fund
Operating Expenses to 1.42% for Class A, 2.17% for Class B, 2.17%
for Class C and 1.17% for Class Y.

Sub-Advisory Fees

Under the terms of the sub-advisory agreement, Lieber is entitled to be
reimbursed by EAMC for the costs of providing sub-advisory services. Income and
Growth Fund does not pay a fee to Lieber.

What will be the primary federal tax consequences of the Merger?

Prior to or at the completion of the Merger, Equity Income Fund will have
received an opinion from Sullivan & Worcester LLP that the Merger has been
structured so that no gain or loss will be realized by the Fund or its
shareholders for federal income tax purposes as a result of receiving Income
and Growth Fund shares in connection with the Merger. The holding period and
aggregate tax basis of shares of Income and Growth Fund that are received by
Equity Income Fund's shareholders will be the same as the holding period and
aggregate tax basis of shares of the Fund previously held by such shareholders,
provided that shares of the Fund are held as capital assets. In addition, the
holding period and tax basis of the assets of Equity Income Fund in the hands
of Income and Growth Fund as a result of the Merger will be the same as in the

10
<PAGE>

hands of the Fund immediately prior to the Merger, and no gain or loss will be
recognized by Income and Growth Fund upon the receipt of the assets of the Fund
in exchange for shares of Income and Growth Fund and the assumption by Income
and Growth Fund of Equity Income Fund's identified liabilities.

RISKS

What are the primary risks of investing in each Fund?

An investment in each Fund is subject to certain risks. There is no assurance
that investment performance of either Fund will be positive and that the Funds
will meet their investment objectives. The following tables and discussions
highlight the primary risks associated with investment in each of the Funds.

- --------------------------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- --------------------------------------------------------------------------------
Both Funds are subject to Stock Market Risk.
Both Funds invest a significant portion of their assets in equity securities.
- --------------------------------------------------------------------------------

The Funds' value will be affected by general economic conditions such as
prevailing economic growth, inflation and interest rates. When economic growth
slows, or interest or inflation rates increase, equity securities tend to
decline in value. Such events could also cause companies to decrease the
dividends they pay. If these events were to occur, the value of and dividend
yield and total return earned a shareholder's investment would likely decline.
Even if general economic conditions do not change, a shareholder's investment
in a Fund may decline if the particular sectors, industries or issuers in which
the Fund invests do not perform well.

- --------------------------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- --------------------------------------------------------------------------------
Both Funds are subject to Market Capitalization Risk.
Equity Income Fund invests primarily in large capitalization companies and
Income and Growth Fund invests its assets across all market capitalizations.
- --------------------------------------------------------------------------------

Stocks fall into three broad market capitalization categories--large, medium
and small. Investing primarily in one category carries the risk that due to
current market conditions that category may be out of favor with investors. If
valuations of large capitalization companies appear to be greatly out of
proportion to the valuations of small or medium capitalization companies,
investors may migrate to the stocks of small and mid-sized companies causing a
Fund that invests in these companies to increase in value more rapidly than a
Fund that invests in larger, fully-valued companies. Investing in medium and
small capitalization companies may be subject to special risks associated with
narrower product lines, more limited financial resources, smaller management
groups, and a more limited trading market for their stocks as compared with
larger companies. As a result, stocks of small and medium capitalization
companies may decline significantly in market downturns. Because Equity Income
Fund invests its assets primarily in large capitalization stocks, its market
capitalization risk is greater than for Income and Growth Fund which invests
its assets across all market capitalizations.

- --------------------------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- --------------------------------------------------------------------------------
Both Funds are subject to Investment Style Risk.
Equity Income Fund invests in value stocks and Income and Growth Fund
invests in both value and growth stocks.
- --------------------------------------------------------------------------------

11
<PAGE>

Stocks with different characteristics tend to shift in and out of favor
depending upon market and economic conditions as well as investor sentiment. A
Fund may outperform or underperform other funds that employ a different style.
A Fund may also employ a combination of styles that impact its risk
characteristics. Examples of different styles include growth and value
investing. Growth stocks may be more volatile than other stocks because they
are more sensitive to investor perceptions of the issuing company's growth of
earnings potential. Growth oriented funds will typically underperform when
value investing is in favor. Value stocks are those that are out of favor or
undervalued in comparison to their peers due to adverse business developments
or other factors. Value oriented funds will typically underperform when growth
investing is in favor. Equity Income Fund invests in stocks that the portfolio
manager believes are undervalued relative to their true values and exhibit
positive trends in their underlying operations and earnings expectations.
Income and Growth Fund's stock selection is based on a diversified style of
equity management that allows it to invest in both value and growth-oriented
securities.

Equity Income Fund may invest up to 35% of its assets in debt securities and
Income and Growth Fund may invest up to 25% of its assets in debt securities.
- -------------------------------------------------------------------------------

Interest rate risk is triggered by the tendency for the value of debt
securities and certain dividend paying stocks to fall when interest rates go
up. Since both Funds invest a significant portion of their portfolios in debt
securities, if interest rates rise, then the value of the Funds' securities
may decline. The longer the term of the bond or fixed income instrument, the
more sensitive it will be to fluctuations in value from interest rate changes.
When interest rates go down, interest earned by the Funds on their investments
may also decline, which could cause the Funds to reduce the dividend they pay.

- -------------------------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- -------------------------------------------------------------------------------
Both Funds are subject to Credit Risk.
Both Funds may invest a significant portion of their portfolios in debt
securities.
- -------------------------------------------------------------------------------

The value of a debt security is directly affected by the issuer's ability to
repay principal and pay interest on time. Since the Funds invest in debt
securities, the value of and total return earned on a shareholder's investment
in a Fund may decline if an issuer fails to pay an obligation on a timely
basis. Because Equity Income Fund can invest in below investment grade
securities, it is subject to increased credit risk (see below).

- -------------------------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- -------------------------------------------------------------------------------
Both Funds are subject to Foreign Investment Risk.
Both Funds may invest up to 50% of their assets in foreign securities.
- -------------------------------------------------------------------------------

Investments in foreign securities require consideration of certain factors
not normally associated with investments in securities of U.S. issuers. For
example, a change in the value of any foreign currency relative to the U.S.
dollar will result in a corresponding change in the U.S. dollar value of
securities denominated in that currency. Securities markets of foreign
countries generally are not subject to the same degree of regulation as the
U.S. markets and may be more volatile and less liquid. Lack of liquidity may
affect a Fund's ability to purchase or sell large blocks of securities and
thus obtain the best price. In addition, a Fund may incur costs associated
with currency hedging and the conversion of foreign currency into U.S. dollars
and may be adversely affected by restrictions on the conversion or transfer of
foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. When a Fund invests in foreign securities, they usually will be
denominated in foreign currencies, and a Fund temporarily may hold funds in
foreign currencies. Thus, the value of a Fund's shares will be affected by
changes in exchange rates.

12
<PAGE>

- --------------------------------------------------------------------------------
Equity Income Fund Income and Growth Fund
- --------------------------------------------------------------------------------
Is subject to Below Investment Grade Is not subject to Below
Securities Risk. Investment Grade Securities Risk.
- --------------------------------------------------------------------------------

Equity Income Fund may invest up to 35% of its assets in bonds including
securities rated below Baa by Moody's Investors Service, Inc. ("Moody's") or
BBB by Standard & Poor's Ratings Services ("S&P") (commonly known as "junk
bonds"). Below investment grade securities, or junk bonds, generally are
considered to be subject to greater credit risk than higher quality securities
because the issuers of below investment grade securities generally are viewed
as having greater potential for default than issuers of higher quality bonds.
An issuer's ability to make principal and interest payments on its below
investment grade debt may be dramatically affected by developments impacting
its financial performance, including developments within the markets or
industries in which it operates and changes in general economic conditions.
Issuers of lower-rated securities are often highly leveraged and may not have
more traditional methods of financing available to them, so that their ability
to service their debt obligations during an economic downturn or during
sustained periods of rising interest rates may be impaired. Further, the risk
of loss due to default by such issuers is significantly greater because lower-
rated securities generally are unsecured and frequently are subordinated to the
prior payment of senior indebtedness.

Are there any other risks of investing in each Fund?

Both Funds may invest in futures and options which are forms of derivatives.
Such practices are used to hedge a Fund's portfolio to protect against changes
in interest rates, to adjust a portfolio's duration, to maintain a Fund's
exposure to its market, to manage cash or to attempt to increase income.
Although these practices are intended to increase returns, they may actually
reduce returns or increase volatility. Equity Income Fund's portfolio turnover
has been significantly higher than Income and Growth Fund's portfolio turnover.
High portfolio turnover results in greater brokerage and other transaction
costs which are borne by a Fund and its shareholders. It may also result in a
Fund realizing greater net short-term capital gains, distributions from which
are taxable to shareholders as ordinary income.

MERGER INFORMATION

Reasons for the Merger

At a regular meeting held on March 23-24, 2000, all of the Trustees of
Evergreen Equity Trust, including the Independent Trustees, considered and
approved the Merger; they determined that it was in the best interests of
shareholders of each of Equity Income Fund and Income and Growth Fund and that
the interests of existing shareholders of each of Equity Income Fund and Income
and Growth Fund will not be diluted as a result of the transactions
contemplated by the Merger.

Before approving the Plan, the Trustees reviewed various factors about the
Funds and the proposed Merger. The Trustees considered among other things:

. the terms and conditions of the Merger;

. whether the Merger would result in the dilution of shareholders'
interests;

. expense ratios, fees and expenses of Income and Growth Fund and Equity
Income Fund;

. the comparative performance records of each Fund;

. compatibility of the Funds' investment objectives and principal
investment strategies;

. the fact that FUNB will bear the expenses incurred by Equity Income Fund
and Income and Growth Fund in connection with the Merger;

. the fact that Income and Growth Fund will assume the identified
liabilities of Equity Income Fund;

. the fact that the Merger is expected to be tax free for federal income
tax purposes; and

. alternatives available to shareholders of Equity Income Fund, including
the ability to redeem their shares.

13
<PAGE>

During their consideration of the Merger, the Trustees met with counsel to
the Independent Trustees regarding the legal issues involved.

In approving the Merger, the Trustees considered the relative size of Equity
Income Fund as well as the similarity of the Funds' investment objectives. The
Trustees evaluated the potential economies of scale associated with larger
mutual funds and concluded that operational efficiencies may be achieved by
combining Equity Income Fund with Income and Growth Fund. As of March 31, 2000,
Income and Growth Fund's total net assets were approximately $974.1 million and
Equity Income Fund's total assets were approximately $92.2 million. The
Trustees considered that Equity Income Fund's size has decreased significantly
since the first quarter of 1998 when the Fund had approximately $185 million in
total assets. The Fund has been in continual net redemption since that time. By
merging into Income and Growth Fund, shareholders of Equity Income Fund would
have the benefit of a larger fund with greater investment flexibility across
market capitalizations than Equity Income Fund, which is more conservative in
nature.

The Trustees also considered that the past one-year and three-years'
performance (for the period ended February 29, 2000) has been higher for Income
and Growth Fund than for Equity Income Fund. The Trustees also considered that
for the month ended February 29, 2000 Income and Growth Fund's Class A share
30-day yield was over three percentage points higher than for Equity Income
Fund's Class A shares. In addition, the Trustees considered the fact that
Evergreen Investment Management Company, Equity Income Fund's investment
advisor, has indicated that absent the Merger it would propose liquidating
Equity Income Fund due to its lack of size and relative underperformance. For
the one-year period ended February 29, 2000, the average annual total return
for the Class A shares of Equity Income Fund was -5.89% while the total return
for Class A shares of Income and Growth Fund was 13.11%.

The Trustees also considered the relative expenses of the Funds. Currently,
the expense ratio of Equity Income Fund is lower that that of Income and Growth
Fund. If the Merger takes place, EAMC has agreed to waive the management fee
and/or reimburse expenses for a period of two years beginning in July 2000 in
order to limit Total Fund Operating Expenses of Income and Growth Fund to 1.42%
for Class A, 2.17% for Class B, 2.17% for Class C and 1.17% for Class Y. The
Trustees recognized that even with this expense limitation, the expenses of
Income and Growth Fund will be higher than those of Equity Income Fund.
However, as an alternative to liquidation of Equity Income Fund, the Trustees
determined that shareholders of Equity Income Fund should have the opportunity,
on an expected tax-free basis, to have their assets moved to a better-
performing, similar Fund within the Evergreen Family of Funds. The Trustees
also considered the economies of scale that may be achieved in operating a
larger mutual fund.

Accordingly, for the reasons noted above and recognizing that there can be no
assurance that any economies of scale or other benefits will be realized, the
Trustees believe that the proposed Merger would be in the best interests of
each Fund and its shareholders.

Agreement and Plan of Reorganization

The following summary is qualified in its entirety by reference to the Plan
(Exhibit A hereto).

The Plan provides that Income and Growth Fund will acquire all of the assets
of Equity Income Fund in exchange for shares of Income and Growth Fund and the
assumption by Income and Growth Fund of the identified liabilities of Equity
Income Fund on or about July 24, 2000 or such other date as may be agreed upon
by the parties (the "Closing Date"). Prior to the Closing Date, Equity Income
Fund will endeavor to discharge all of its known liabilities and obligations.
Income and Growth Fund will not assume any liabilities or obligations of Equity
Income Fund other than those reflected in an unaudited statement of assets and
liabilities of Equity Income Fund prepared as of the close of regular trading
on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern Time, on
the business day immediately prior to the Closing Date (the "Valuation Time").
The number of full and fractional shares of each class of Income and Growth
Fund to be received by the shareholders of Equity Income Fund will be
determined by multiplying the number of full

14
<PAGE>

and fractional shares of the corresponding class of Equity Income Fund by a
factor which shall be computed by dividing the net asset value per share of the
respective class of shares of Equity Income Fund by the net asset value per
share of the respective class of shares of Income and Growth Fund. Such
computations will take place as of the Valuation Time. The net asset value per
share of each class will be determined by dividing assets, less liabilities, in
each case attributable to the respective class, by the total number of
outstanding shares.

State Street Bank and Trust Company, the custodian for the Funds, will
compute the value of each Fund's respective portfolio of securities. The method
of valuation employed will be consistent with the procedures set forth in the
prospectus and statement of additional information of Income and Growth Fund,
Rule 22c-1 under the 1940 Act, and with the interpretations of such Rule by the
SEC's Division of Investment Management.

At or prior to the Closing Date, Equity Income Fund will have declared a
dividend and distribution which, together with all previous dividends and
distributions, shall have the effect of distributing to the Fund's shareholders
(in shares of the Fund, or in cash, as the shareholder has previously elected)
all of the Fund's net investment company taxable income for the taxable period
ending on the Closing Date (computed without regard to any deduction for
dividends paid), all of the Fund's net tax exempt income and all of its net
capital gains realized in all taxable periods ending on the Closing Date (after
the reductions for any capital loss carryforward).

As soon after the Closing Date as conveniently practicable, Equity Income
Fund will liquidate and distribute pro rata to shareholders of record as of the
close of business on the Closing Date the full and fractional shares of Income
and Growth Fund received by Equity Income Fund. Such liquidation and
distribution will be accomplished by the establishment of accounts in the names
of Equity Income Fund's shareholders on Income and Growth Fund's share records
of its transfer agent. Each account will represent the respective pro rata
number of full and fractional shares of Income and Growth Fund due to the
Fund's shareholders. All issued and outstanding shares of Equity Income Fund,
including those represented by certificates, will be canceled. The shares of
Income and Growth Fund to be issued will have no preemptive or conversion
rights. After these distributions and the winding up of its affairs, Equity
Income Fund will be terminated.

The consummation of the Merger is subject to the conditions set forth in the
Plan, including approval by Equity Income Fund's shareholders, accuracy of
various representations and warranties and receipt of opinions of counsel,
including opinions with respect to those matters referred to in "Federal Income
Tax Consequences" below. Notwithstanding approval of Equity Income Fund's
shareholders, the Plan may be terminated (a) by the mutual agreement of Equity
Income Fund and Income and Growth Fund; or (b) at or prior to the Closing Date
by either party (i) because of a breach by the other party of any
representation, warranty, or agreement contained therein to be performed at or
prior to the Closing Date if not cured within 30 days, or (ii) because a
condition to the obligation of the terminating party has not been met and it
reasonably appears that it cannot be met.

Whether or not the Merger is consummated, FUNB will pay the expenses incurred
by Equity Income Fund and Income and Growth Fund in connection with the Merger
(including the cost of any proxy-soliciting agent). No portion of the expenses
will be borne directly or indirectly by Equity Income Fund, Income and Growth
Fund or their shareholders.

If Equity Income Fund's shareholders do not approve the Merger, the Trustees
will consider other possible courses of action which may be in the best
interests of shareholders including the possible liquidation of the Fund.

15
<PAGE>

Federal Income Tax Consequences

The Merger is intended to qualify for federal income tax purposes as a tax
free reorganization under section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). As a condition to the closing of the Merger, Equity
Income Fund will receive an opinion from Sullivan & Worcester LLP to the effect
that, on the basis of the existing provisions of the Code, U.S. Treasury
regulations issued thereunder, current administrative rules, pronouncements and
court decisions, for federal income tax purposes, upon consummation of the
Merger:

(1) The transfer of all of the assets of Equity Income Fund solely in
exchange for shares of Income and Growth Fund and the assumption by
Income and Growth Fund of the identified liabilities of Equity Income
Fund followed by the distribution of Income and Growth Fund's shares to
the shareholders of Equity Income Fund in dissolution and liquidation
of Equity Income Fund, will constitute a "reorganization" within the
meaning of section 368(a)(1)(C) of the Code, and Income and Growth Fund
and Equity Income Fund will each be a "party to a reorganization"
within the meaning of section 368(b) of the Code;

(2) No gain or loss will be recognized by Income and Growth Fund upon the
receipt of the assets of Equity Income Fund solely in exchange for the
shares of Income and Growth Fund and the assumption by Income and
Growth Fund of the identified liabilities of Equity Income Fund;

(3) No gain or loss will be recognized by Equity Income Fund on the
transfer of its assets to Income and Growth Fund in exchange for Income
and Growth Fund's shares and the assumption by Income and Growth Fund
of the identified liabilities of Equity Income Fund or upon the
distribution (whether actual or constructive) of Income and Growth
Fund's shares to Equity Income Fund's shareholders in exchange for
their shares of Equity Income Fund;

(4) No gain or loss will be recognized by Equity Income Fund's shareholders
upon the exchange of their shares of Equity Income Fund for shares of
Income and Growth Fund in liquidation of Equity Income Fund;

(5) The aggregate tax basis of the shares of Income and Growth Fund
received by each shareholder of Equity Income Fund pursuant to the
Merger will be the same as the aggregate tax basis of the shares of
Equity Income Fund held by such shareholder immediately prior to the
Merger, and the holding period of the shares of Income and Growth Fund
received by each shareholder of Equity Income Fund will include the
period during which the shares of Equity Income Fund exchanged therefor
were held by such shareholder (provided that the shares of Equity
Income Fund were held as a capital asset on the date of the Merger);
and

(6) The tax basis of the assets of Equity Income Fund acquired by Income
and Growth Fund will be the same as the tax basis of such assets to
Equity Income Fund immediately prior to the Merger, and the holding
period of such assets in the hands of Income and Growth Fund will
include the period during which the assets were held by Equity Income
Fund.

Opinions of counsel are not binding upon the Internal Revenue Service or the
courts. If the Merger is consummated but does not qualify as a tax free
reorganization under the Code, a shareholder of Equity Income Fund would
recognize a taxable gain or loss equal to the difference between his or her tax
basis in his or her Fund shares and the fair market value of Income and Growth
Fund shares he or she received. Shareholders of Equity Income Fund should
consult their tax advisors regarding the effect, if any, of the proposed Merger
in light of their individual circumstances. Since the foregoing discussion
relates only to the federal income tax consequences of the Merger, shareholders
of Equity Income Fund should also consult their tax advisors as to the state
and local tax consequences, if any, of the Merger.

Any capital loss carryforwards of Equity Income Fund will be available to
Income and Growth Fund to offset capital gains recognized after the Merger
subject to limitations imposed by the Code.

16
<PAGE>

Pro Forma Capitalization

The following table sets forth the capitalizations of Equity Income Fund and
Income and Growth Fund as of January 31, 2000 and the capitalization of Income
and Growth Fund on a pro forma basis as of that date, giving effect to the
proposed acquisition of assets at net asset value. The pro forma data reflects
an exchange ratio of approximately 0.72, 0.72, 0.72 and 0.72 Class A, Class B,
Class C and Class Y shares, respectively, of Income and Growth Fund issued for
each Class A, Class B, Class C and Class Y share, respectively, of Equity
Income Fund.

Capitalization of Equity Income Fund, Income and Growth Fund and Income and
Growth Fund (Pro Forma)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Income and
Income and Growth Growth Fund (Pro
Net Assets Equity Income Fund Fund Forma)
<S> <C> <C> <C>
Class A $38,680,469 $36,138,486 $74,818,955
Class B $55,955,938 $157,782,029 $213,737,967
Class C $11,937,502 $2,325,530 $14,263,032
Class Y $104,908 $803,126,792 $803,231,700
------------ ------------ --------------
Total Net Assets $106,678,817 $999,372,837 $1,106,051,654
Net Asset Value Per
Share
Class A $15.71 $21.87 $21.87
Class B $15.60 $21.68 $21.68
Class C $15.62 $21.68 $21.68
Class Y $15.66 $21.88 $21.88
Shares Outstanding
Class A 2,462,451 1,652,578 3,421,401
Class B 3,586,914 7,277,199 9,857,987
Class C 764,049 107,265 657,883
Class Y 6,699 36,708,037 36,712,832
- --------------------------------------------------------------------------------
</TABLE>

The table set forth above should not be relied upon to reflect the number of
shares to be received in the Merger; the actual number of shares to be received
will depend upon the net asset value and number of shares outstanding of each
Fund at the time of the Merger.

Distribution of Shares

Evergreen Distributor, Inc. ("EDI"), an affiliate of BISYS Fund Services,
acts as underwriter of shares of Income and Growth Fund and Equity Income Fund.
EDI distributes each Fund's shares directly or through broker-dealers, banks
(including FUNB), or other financial intermediaries. Each Fund offers four
classes of shares: Class A, Class B, Class C and Class Y. Each class has a
separate distribution arrangement and bears its own distribution expenses. (See
"Distribution-Related and Shareholder Servicing-Related Expenses" below).

In the proposed Merger, Equity Income Fund shareholders will receive shares
of Income and Growth Fund having the same class designation and the same
arrangements with respect to the imposition of Rule 12b-1 distribution and
service fees as the shares they currently hold. Because the Merger will be
effected at net asset value without the imposition of a sales charge, Equity
Income Fund shareholders will receive Income and Growth Fund shares without
paying any initial sales charge or CDSC as a result of the Merger. Income and
Growth Fund Class B and Class C shares received by Equity Income Fund
shareholders as a result of the Merger will continue to be subject to a CDSC
upon subsequent redemption, but the CDSC will

17
<PAGE>

be based on the date of the original purchase of Equity Income Fund shares and
will be subject to the CDSC schedule applicable to the shares on the date of
the original purchase of Equity Income Fund shares.

The following is a summary description of charges and fees for the Class A,
Class B, Class C and Class Y shares of Income and Growth Fund which will be
received by Equity Income Fund shareholders in the Merger. More detailed
descriptions of the distribution arrangements applicable to the classes of
shares are contained in the Income and Growth Fund and Equity Income Fund
prospectus and in the Funds' statement of additional information.

Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.75% of the offering price and, as indicated below, are
subject to distribution-related fees. For a description of the initial sales
charge applicable to the purchase of Class A shares see "How to Choose the
Share Class that Best Suits You" in the prospectus of Income and Growth Fund.
No initial sales charge will be imposed on Class A shares of Income and Growth
Fund received by Equity Income Fund's shareholders as a result of the Merger.

Class B Shares. Class B shares are sold without an initial sales charge but
are subject to a CDSC, which ranges from 5% to 1% if shares are redeemed
during the first six years after the month of purchase. In addition, Class B
shares are subject to distribution related fees and shareholder servicing-
related fees as described below. Class B shares convert to Class A after seven
years following the month in which they were purchased. For purposes of
determining when Class B shares issued in the Merger to shareholders of Equity
Income Fund will convert to Class A shares, such shares will be deemed to have
been purchased as of the date the Class B shares of Equity Income Fund were
originally purchased.

Class B shares are subject to higher distribution-related and shareholder
servicing-related fees than the corresponding Class A shares on which a front-
end sales charge is imposed (until they convert to Class A shares). 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 of the
Fund.

Class C Shares. Class C shares are sold without initial sales charges, but,
as indicated below, are subject to distribution-related and shareholder
servicing-related fees. Class C shares issued in connection with the Merger
are subject to the CDSC schedule in place at the time of their original
purchase. Class C shares purchased before February 1, 2000 are subject to a
1.00% CDSC if such shares are redeemed within 13 months of purchase. No CDSC
is imposed on amounts redeemed thereafter. Class C shares purchased on or
after February 1, 2000 are subject to a 2.00% CDSC if such shares are redeemed
within 13 months of purchase, and a 1.00% CDSC if redeemed within 12 months
thereafter. No CDSC is imposed on amounts redeemed after 25 months. Class C
shares incur higher distribution-related and shareholder servicing-related
fees than Class A shares, but unlike Class B shares, do not convert to any
other class of shares.

Class Y Shares. Class Y shares are sold at net asset value without any
initial or deferred sales charges and are not subject to distribution-related
or shareholder servicing-related fees. Class Y shares are only available to
certain classes of investors as is more fully described in the prospectus for
Income and Growth Fund.

Additional information regarding the classes of shares of each Fund is
included in its prospectus and statement of additional information.

Distribution-Related and Shareholder Servicing-Related Expenses. Each Fund
has adopted a Rule 12b-1 plan with respect to its Class A shares under which
the class may pay for distribution-related expenses at an annual rate which
may not exceed 0.75% of average daily net assets attributable to the class.
Payments with respect to Class A shares are currently limited to 0.25% of
average daily net assets attributable to the class. This amount may be
increased to the full plan rate for each Fund by the Trustees without
shareholder approval.

18
<PAGE>

Each Fund has also adopted a Rule 12b-1 plan with respect to its Class B and
Class C shares under which the class may pay for distribution-related expenses
at an annual rate which may not exceed 1.00%. Of the total 1.00% Rule 12b-1
fees, up to 0.25% may be for payment with respect to "shareholder services."
Consistent with the requirements of Rule 12b-1 and the applicable rules of the
National Association of Securities Dealers, Inc., following the Merger, Income
and Growth Fund may make distribution-related and shareholder servicing-related
payments with respect to Equity Income Fund shares sold prior to the Merger.

Additional information regarding the Rule 12b-1 plans adopted by each Fund is
included in its prospectus and statement of additional information.

No Rule 12b-1 plan has been adopted for the Class Y shares of either Fund.

Purchase and Redemption Procedures

Information concerning applicable sales charges and distribution-related and
shareholder servicing-related fees is provided above. Investments in the Funds
are not insured. The minimum initial purchase requirement for each Fund is
$1,000. There is no minimum for subsequent purchases of shares of either Fund.
For more information, see "How to Buy Shares--Minimum Investments" in the
Funds' prospectus. Each Fund provides for telephone, mail or wire redemption of
shares at net asset value, less any CDSC, as next determined after receipt of a
redemption request on each day the NYSE is open for trading. Each Fund reserves
the right to redeem in-kind, under certain circumstances, by paying you the
proceeds of a redemption in securities rather than in cash. Each Fund may
involuntarily redeem shareholders' accounts that have less than $1,000 of
invested funds. Additional information concerning purchases and redemptions of
shares, including how each Fund's net asset value is determined, is contained
in the Funds' prospectus. All funds invested in each Fund are invested in full
and fractional shares. The Funds reserve the right to reject any purchase
order.

Exchange Privileges

Holders of shares of a class of each Fund may exchange their shares for
shares of the same class of any other Evergreen fund. Each Fund limits
exchanges to five per calendar year and three per calendar quarter. No sales
charge is imposed on an exchange. An exchange which represents an initial
investment in another Evergreen fund must amount to at least $1,000. The
current exchange privileges, and the requirements and limitations attendant
thereto, are described in each Fund's prospectus and statement of additional
information.

Dividend Policy

Each Fund distributes its investment company taxable income quarterly and its
net realized gains at least annually to shareholders of record on the dividend
record date. Dividends and distributions are reinvested in additional shares of
the same class of the respective Fund, or paid in cash, as a shareholder has
elected. See each Fund's prospectus for further information concerning
dividends and distributions.

After the Merger, shareholders of Equity Income Fund who have elected to have
their dividends and/or distributions reinvested will have dividends and/or
distributions received from Income and Growth Fund reinvested in shares of
Income and Growth Fund. Shareholders of Equity Income Fund who have elected to
receive dividends and/or distributions in cash will receive dividends and/or
distributions from Income and Growth Fund in cash after the Merger, although
they may, after the Merger, elect to have such dividends and/or distributions
reinvested in additional shares of Income and Growth Fund.

Both Income and Growth Fund and Equity Income Fund have qualified and intend
to continue to qualify to be treated as regulated investment companies under
the Code. To remain qualified as a regulated investment company, a Fund must
distribute 90% of its taxable and tax-exempt income. While so qualified, so
long as each Fund distributes all of its net investment company taxable and
tax-exempt income and any

19
<PAGE>

net realized gains to shareholders, it is expected that a Fund will not be
required to pay any federal income taxes on the amounts so distributed. A 4%
nondeductible excise tax will be imposed on amounts not distributed if a Fund
does not meet certain distribution requirements by the end of each calendar
year. Each Fund anticipates meeting such distribution requirements.

INFORMATION ON SHAREHOLDERS' RIGHTS

Form of Organization

Evergreen Equity Trust is an open-end management investment company
registered with the SEC under the 1940 Act, which continuously offers shares to
the public. Evergreen Equity Trust is organized as a Delaware business trust
and is governed by its Declaration of Trust, By-Laws, a Board of Trustees and
by applicable Delaware and federal law. Income and Growth Fund and Equity
Income Fund are series of Evergreen Equity Trust.

Capitalization

The beneficial interests in Income and Growth Fund and Equity Income Fund are
represented by an unlimited number of transferable shares of beneficial
interest, $.001 par value per share. Evergreen Equity Trust's Declaration of
Trust permits the Trustees to allocate shares into an unlimited number of
series, and classes thereof, with rights determined by the Trustees, all
without shareholder approval. Fractional shares may be issued by either Fund.
Each Fund's shares represent equal proportionate interests in the assets
belonging to the Fund. Shareholders of each Fund are entitled to receive
dividends and other amounts as determined by the Trustees. Shareholders of each
Fund vote separately, by class, as to matters, such as approval of or
amendments to Rule 12b-1 distribution plans, that affect only their particular
class and by Fund as to matters, such as approval of or amendments to
investment advisory agreements or proposed mergers, that affect only their
particular Fund.

Shareholder Liability

Under Delaware law, shareholders of a Delaware business trust are entitled to
the same limitation of personal liability extended to stockholders of Delaware
corporations. Other than in a limited number of states, no similar statutory or
other authority limiting business trust shareholder liability exists in any
other state. As a result, to the extent that Evergreen Equity Trust or a
shareholder is subject to the jurisdiction of courts in those states, it is
possible that a court may not apply Delaware law, and may thereby subject
shareholders of Evergreen Equity Trust to liability. To guard against this
risk, the Declaration of Trust of Evergreen Equity Trust (a) provides that any
written obligation of the Trust may contain a statement that such obligation
may only be enforced against the assets of the Trust or the particular series
in question and the obligation is not binding upon the shareholders of the
Trust; however, the omission of such a disclaimer will not operate to create
personal liability for any shareholder; and (b) provides for indemnification
out of Trust property of any shareholder held personally liable for the
obligations of the Trust. Accordingly, the risk of a shareholder of Evergreen
Equity Trust incurring financial loss beyond that shareholder's investment
because of shareholder liability is limited to circumstances in which: (i) the
court refuses to apply Delaware law; (ii) no contractual limitation of
liability was in effect; and (iii) the Trust itself is unable to meet its
obligations. In light of Delaware law, the nature of the Trust's business, and
the nature of its assets, the risk of personal liability to a shareholder of
Evergreen Equity Trust is remote.

Shareholder Meetings and Voting Rights

Evergreen Equity Trust on behalf of Income and Growth Fund and Equity Income
Fund is not required to hold annual meetings of shareholders. However, a
meeting of shareholders for the purpose of voting upon the question of removal
of a Trustee must be called when requested in writing by the holders of at
least 10% of the outstanding shares of Evergreen Equity Trust. In addition,
Evergreen Equity Trust is required to call a

20
<PAGE>

meeting of shareholders for the purpose of electing Trustees if, at any time,
less than a majority of the Trustees then holding office were elected by
shareholders. Evergreen Equity Trust does not currently intend to hold regular
shareholder meetings. Cumulative voting is not permitted. Except when a larger
quorum is required by applicable law, with respect to both Funds, 25% of the
outstanding shares entitled to vote constitutes a quorum for consideration of a
matter. For each Fund, a majority (greater than 50%) of the votes cast and
entitled to vote is sufficient to act on a matter (unless otherwise
specifically required by the applicable governing documents or other law,
including the 1940 Act).

Under the Declaration of Trust of Evergreen Equity Trust, each share of
Income and Growth Fund and Equity Income Fund will be entitled to one vote for
each dollar of net asset value applicable to such share.

Liquidation

In the event of the liquidation of Income and Growth Fund or Equity Income
Fund, the shareholders are entitled to receive, when and as declared by the
Trustees, the excess of the assets belonging to such Fund or attributable to
the class over the liabilities belonging to the Fund or attributable to the
class. In either case, the assets so distributable to shareholders of the Fund
will be distributed among the shareholders in proportion to the number of
shares of a class of the Fund held by them and recorded on the books of the
Fund.

Liability and Indemnification of Trustees

Under the Declaration of Trust of Evergreen Equity Trust, a Trustee is liable
to the Trust and its shareholders only for such Trustee's own willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the office of Trustee or the discharge of such
Trustee's functions. As provided in the Declaration of Trust, each Trustee of
the Trust is entitled to be indemnified against all liabilities against him or
her, including the costs of litigation, unless it is determined that the
Trustee (i) did not act in good faith in the reasonable belief that such
Trustee's action was in or not opposed to the best interests of the Trust; (ii)
had acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of such Trustee's duties; and (iii) in a criminal proceeding, had
reasonable cause to believe that such Trustee's conduct was unlawful
(collectively, "disabling conduct"). A determination that the Trustee did not
engage in disabling conduct and is, therefore, entitled to indemnification may
be based upon the outcome of a court action or administrative proceeding or by
(a) a vote of a majority of those Trustees who are neither "interested persons"
within the meaning of the 1940 Act nor parties to the proceeding or (b) an
independent legal counsel in a written opinion. The Trust may also advance
money for such litigation expenses provided that the Trustee undertakes to
repay the Trust if his or her conduct is later determined to preclude
indemnification and certain other conditions are met.

The foregoing is only a summary of certain characteristics of the operations
of the Declaration of Trust of Evergreen Equity Trust, its By-Laws and Delaware
law and is not a complete description of those documents or law. Shareholders
should refer to the provisions of such Declaration of Trust, By-Laws and
Delaware law directly for more complete information.

VOTING INFORMATION CONCERNING THE MEETING

This prospectus/proxy statement is being sent to shareholders of Equity
Income Fund in connection with a solicitation of proxies by the Trustees of
Evergreen Equity Trust, to be used at the Special Meeting of Shareholders (the
"Meeting") to be held at 2:00 p.m., July 14, 2000, at the offices of the
Evergreen Funds, 200 Berkeley Street, 26th Floor, Boston, Massachusetts 02116,
and at any adjournments thereof. This prospectus/proxy statement, along with a
Notice of the Meeting and a proxy card, is first being mailed to shareholders
of Equity Income Fund on or about May 26, 2000. Only shareholders of record as
of the close

21
<PAGE>

of business on April 28, 2000 (the "Record Date") will be entitled to notice
of, and to vote at, the Meeting or any adjournment thereof.

If the enclosed form of proxy is properly executed and returned in time to be
voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted FOR the proposed Merger and FOR any other
matters deemed appropriate. Proxies that reflect abstentions and "broker non-
votes" (i.e., shares held by brokers or nominees as to which (i) instructions
have not been received from the beneficial owners or the persons entitled to
vote and (ii) the broker or nominee does not have discretionary voting power on
a particular matter) will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum, but will not have
the effect of being counted as votes against the Plan, which must be approved
by a majority of the votes cast and entitled to vote. A proxy may be revoked at
any time on or before the Meeting by written notice to the Secretary of
Evergreen Equity Trust at the address set forth on the cover of this
prospectus/proxy statement. Unless revoked, all valid proxies will be voted in
accordance with the specifications thereon or, in the absence of such
specifications, FOR approval of the Plan and the Merger contemplated thereby.

Approval of the Merger will require the affirmative vote of a majority
(greater than 50%) of Equity Income Fund's shares voted and entitled to vote at
the Meeting, assuming a quorum (at least 25% of the Fund's outstanding shares
entitled to vote) is present.

In voting for the Merger, all classes of Equity Income Fund will vote
together as if they were a single class, and each share will be entitled to one
vote for each dollar of net asset value applicable to such share.

Proxy solicitations will be made primarily by mail, but proxy solicitations
may also be made by telephone, through the Internet or personal solicitations
conducted by officers and employees of FUNB, its affiliates or other
representatives of Equity Income Fund (who will not be paid for their
soliciting activities). In addition, proxy solicitations may be made by
Shareholder Communications Corporation, the Fund's proxy solicitor. If you wish
to participate in the Meeting, you may submit the proxy card included with this
prospectus/proxy statement, vote by telephone, fax or by the Internet or attend
in person. (See the back of this prospectus/proxy statement for voting
instructions.) Any proxy given by you is revocable.

If Equity Income Fund shareholders do not vote to approve the Merger, the
Trustees will consider other possible courses of action in the best interests
of shareholders. In the event that sufficient votes to approve the Merger are
not received before the Meeting, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Meeting, the following factors may be
considered: the percentage of votes actually cast, the percentage of negative
votes actually cast, the nature of any further solicitation and the information
to be provided to shareholders with respect to the reasons for the
solicitation. Any such adjournment will require an affirmative vote by the
holders of a majority of the shares present in person or by proxy at the
Meeting. The persons named as proxies will vote upon such adjournment after
consideration of all circumstances which may bear upon a decision to adjourn
the Meeting.

A shareholder who objects to the proposed Merger will not be entitled under
either Delaware law or the Declaration of Trust of Evergreen Equity Trust to
demand payment for, or an appraisal of, his or her shares. However,
shareholders should be aware that the Merger as proposed is not expected to
result in recognition of gain or loss to shareholders for federal income tax
purposes and that, if the Merger is consummated, shareholders will be free to
redeem the shares of Income and Growth Fund which they receive in the
transaction at their then-current net asset value. Shares of Equity Income Fund
may be redeemed at any time prior to the consummation of the Merger.
Shareholders of Equity Income Fund may wish to consult their tax advisors as to
any differing consequences of redeeming Fund shares prior to the Merger or
exchanging such shares in the Merger.

22
<PAGE>

Equity Income Fund does not hold annual shareholder meetings. If the Merger
is not approved, shareholders wishing to submit proposals to be considered for
inclusion in a proxy statement for a subsequent shareholder meeting should send
their written proposals to the Secretary of Evergreen Equity Trust at the
address set forth on the cover of this prospectus/proxy statement so that they
will be received by the Fund in a reasonable period of time prior to the
meeting.

The votes of the shareholders of Income and Growth Fund are not being
solicited by this prospectus/proxy statement and are not required to carry out
the Merger.

NOTICE TO BANKS, BROKER-DEALERS AND VOTING TRUSTEES AND THEIR NOMINEES.
Please advise Equity Income Fund whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of copies
of this prospectus/proxy statement needed to supply copies to the beneficial
owners of the respective shares.

Shareholder Information

As of the Record Date, the following number of each class of shares of
beneficial interest of Equity Income Fund was outstanding:

<TABLE>
<CAPTION>
----------------------------------
Class of Shares Number of Shares
----------------------------------
<S> <C>
Class A 2,086,359.245
Class B 2,986,860.128
Class C 464,169.092
Class Y 7,514.767
--------------
All Classes 5,544,903.232
----------------------------------
</TABLE>

23
<PAGE>

As of March 31, 2000, the officers and Trustees of Evergreen Equity Trust
beneficially owned as a group less than 1% of the outstanding shares of Equity
Income Fund and Income and Growth Fund. To Evergreen Equity Trust's knowledge,
the following persons owned beneficially or of record more than 5% of Equity
Income Fund's total outstanding shares as of March 31, 2000:

<TABLE>
<CAPTION>
Percentage Percentage
of Shares of of Shares of
No. of Class Before Class After
Name and Address Class Shares Merger Merger
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MLPF & S For the Sole Benefit B 242,931.98 7.95% 1.95%
Of Its Customers
Attn.: Fund Administration
4800 Deer Lake Drive, East
2nd Floor
Jacksonville, FL 32246-6484

MLPF & S For the Sole Benefit C 64,080.03 13.24% 10.22%
Of Its Customers
Attn.: Fund Administration
4800 Deer Lake Drive, East
2nd Floor
Jacksonville, FL 32246-6484

Douglas Luther Mons Ellingson C 26,110.38 5.40% 4.16%
TTEE Douglas Luther Mons
Ellingson Revocable
Living Trust
U/A Dated 5/27/99
1833 East Carver Street
Tempe, AZ 85284-2509

First Union National Bank Y 2,033.90 25.75% 0.0%
Cash Account
Attn: Trust Operations
Fund Group
401 S. Tryon St., 3rd Fl
Charlotte, NC 28202-1911

State Street Bank and Y 1,977.22 25.03% 0.0%
Trust Company
Cust. IRA FBO
Mitchell S. Cohen
23 Gregory Lane
Millwood, NY 10546-1039

State Street Bank and Y 1,240.14 15.70% 0.0%
Trust Company
Cust. Roth IRA FBO
Katherine Ann Mewhinney
2323 Fairway Drive
Winston Salem, NC 27103-3653

State Street Bank and Y 778.07 9.85% 0.0%
Trust Company
Cust. Roth IRA FBO
Vicki M. Furrer
23811 SR2
Monroe, WA 98272

</TABLE>

To Evergreen Equity Trust's knowledge, no persons owned beneficially or of
record more than 5% of Income and Growth Fund's total outstanding shares as of
March 31, 2000.

24
<PAGE>

FINANCIAL STATEMENTS AND EXPERTS

The Annual Reports of both Funds as of July 31, 1999, and the financial
statements and financial highlights for the periods indicated therein, have
been incorporated by reference herein and in the Registration Statement in
reliance upon the reports of KPMG LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.

LEGAL MATTERS

Certain legal matters concerning the issuance of shares of Income and Growth
Fund will be passed upon by Sullivan & Worcester LLP, Washington, D.C.

ADDITIONAL INFORMATION

Equity Income Fund and Income and Growth Fund are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, and in accordance therewith file reports and other information including
proxy material and charter documents with the SEC. These items can be inspected
and copies obtained at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices located at Northwest Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511 and Seven World Trade Center, Suite 1300, New York, New
York 10048.

OTHER BUSINESS

The Trustees of Evergreen Equity Trust do not intend to present any other
business at the Meeting. If, however, any other matters are properly brought
before the Meeting, the persons named in the accompanying form of proxy will
vote thereon in accordance with their judgment.

THE TRUSTEES OF EVERGREEN EQUITY TRUST RECOMMEND APPROVAL OF THE PLAN AND
ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN
FAVOR OF APPROVAL OF THE PLAN.

May 26, 2000

25
<PAGE>

INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and may help to avoid the time and expense involved in validating your vote
if you fail to sign your proxy card properly.

1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in the
Registration on the proxy card.

2. JOINT ACCOUNTS: Either party may sign, but the name of the party signing
should conform exactly to a name shown in the Registration on the proxy
card.

3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of Registration. For
example:

<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
<S> <C>
CORPORATE ACCOUNTS
(1)ABC Corp. ABC Corp.
(2)ABC Corp. John Doe, Treasurer
(3)ABC Corp. c/o John Doe, Treasurer John Doe, Treasurer
(4)ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78 Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
</TABLE>

After completing your proxy card, return it in the enclosed postage paid
envelope.

OTHER WAYS TO VOTE YOUR PROXY

VOTE BY TELEPHONE:

1. Read the prospectus/proxy statement and have your proxy card at hand.
2. Call the toll-free number found on your proxy card.
3. Enter the 12-digit control number found on your proxy card.
4. Follow the simple recorded instructions.

VOTE BY FAX:

1. Read the prospectus/proxy statement and have your completed proxy card at
hand.
2. Fax both front and back sides of your proxy card by calling the number
indicated on your proxy card and following the voting instructions.

VOTE BY INTERNET:

1. Read the prospectus/proxy statement and have your proxy card at hand.
2. Go to the website indicated on your proxy card and follow the voting
instructions.

The above methods of voting are generally available 24 hours a day. Do not
mail the proxy card if you are voting by telephone, fax or the Internet.

If you have any questions about the proxy card, please call Shareholder
Communications Corporation, our proxy solicitor, at 800-645-8640.

26
<PAGE>

EXHIBIT A

AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 30th day of April, 2000, by and between Evergreen Equity Trust, a Delaware
business trust, with its principal place of business at 200 Berkeley Street,
Boston, Massachusetts 02116 (the "Trust"), with respect to its Evergreen Income
and Growth Fund series (the "Acquiring Fund"), and the Trust, with respect to
its Evergreen Equity Income Fund series (the "Selling Fund").

This Agreement is intended to be, and is adopted as, a plan of reorganization
and liquidation within the meaning of Section 368(a)(1)(C) of the United States
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of (i) the transfer of all of the assets of the
Selling Fund in exchange solely for Class A, Class B, Class C and Class Y
shares of beneficial interest, $.001 par value per share, of the Acquiring Fund
(the "Acquiring Fund Shares"); (ii) the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund; and (iii) the distribution, after
the Closing Date hereinafter referred to, of the Acquiring Fund Shares to the
shareholders of the Selling Fund in liquidation of the Selling Fund as provided
herein, all upon the terms and conditions hereinafter set forth in this
Agreement.

WHEREAS, the Selling Fund and the Acquiring Fund are each a separate
investment series of an open-end, registered investment company of the
management type and the Selling Fund owns securities that generally are assets
of the character in which the Acquiring Fund is permitted to invest;

WHEREAS, both Funds are authorized to issue their shares of beneficial
interest;

WHEREAS, the Trustees of the Trust have determined that the exchange of all
of the assets of the Selling Fund for Acquiring Fund Shares and the assumption
of the identified liabilities of the Selling Fund by the Acquiring Fund on the
terms and conditions hereinafter set forth are in the best interests of the
Acquiring Fund's shareholders;

WHEREAS, the Trustees of the Trust have determined that the Selling Fund
should exchange all of its assets and the identified liabilities for Acquiring
Fund Shares and that the interests of the existing shareholders of the Selling
Fund will not be diluted as a result of the transactions contemplated herein;

NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:

ARTICLE I

TRANSFER OF ASSETS OF THE SELLING FUND IN EXCHANGE FOR
THE ACQUIRING FUND SHARES AND ASSUMPTION OF SELLING FUND
LIABILITIES AND LIQUIDATION OF THE SELLING FUND

1.1 THE EXCHANGE. Subject to the terms and conditions herein set forth and on
the basis of the representations and warranties contained herein, the Selling
Fund agrees to transfer all of the Selling Fund's assets as set forth in
paragraph 1.2 to the Acquiring Fund. The Acquiring Fund agrees in exchange
therefor (i) to deliver to the Selling Fund the number of Acquiring Fund
Shares, including fractional Acquiring Fund Shares, computed in the manner and
as of the time and date set forth in paragraphs 2.2 and 2.3; and (ii) to assume
the identified liabilities of the Selling Fund, as set forth in paragraph 1.3.
Such transactions shall take place on the Closing Date provided for in
paragraph 3.1.

A-1
<PAGE>

1.2 ASSETS TO BE ACQUIRED. The assets of the Selling Fund to be acquired by
the Acquiring Fund shall consist of all property, including, without
limitation, all cash, securities, commodities, interests in futures and
dividends or interest receivables, that is owned by the Selling Fund and any
deferred or prepaid expenses shown as an asset on the books of the Selling
Fund on the Closing Date.

The Selling Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of Selling Fund's
assets as of the date thereof. The Selling Fund hereby represents that as of
the date of the execution of this Agreement there have been no changes in its
financial position as reflected in said financial statements other than those
occurring in the ordinary course of its business in connection with the
purchase and sale of securities and the payment of its normal operating
expenses. The Selling Fund reserves the right to sell any of such securities,
but will not, without the prior written approval of the Acquiring Fund,
acquire any additional securities other than securities of the type in which
the Acquiring Fund is permitted to invest.

The Acquiring Fund will, within a reasonable time prior to the Closing Date,
furnish the Selling Fund with a list of the securities, if any, on the Selling
Fund's list referred to in the second sentence of this paragraph that do not
conform to the Acquiring Fund's investment objectives, policies, and
restrictions. The Selling Fund will, within a reasonable period of time prior
to the Closing Date, furnish the Acquiring Fund with a list of its portfolio
securities and other investments. In the event that the Selling Fund holds any
investments that the Acquiring Fund may not hold, the Selling Fund, if
requested by the Acquiring Fund, will dispose of such securities prior to the
Closing Date. In addition, if it is determined that the Selling Fund and the
Acquiring Fund portfolios, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the Acquiring Fund with
respect to such investments, the Selling Fund if requested by the Acquiring
Fund will dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
Notwithstanding the foregoing, nothing herein will require the Selling Fund to
dispose of any investments or securities if, in the reasonable judgment of the
Selling Fund, such disposition would adversely affect the tax free nature of
the Reorganization or would violate the Selling Fund's fiduciary duty to its
shareholders.

1.3 LIABILITIES TO BE ASSUMED. The Selling Fund will endeavor to discharge
all of its known liabilities and obligations prior to the Closing Date. The
Acquiring Fund shall assume only those liabilities, expenses, costs, charges
and reserves reflected on a Statement of Assets and Liabilities of the Selling
Fund prepared on behalf of the Selling Fund, as of the Valuation Date (as
defined in paragraph 2.1), in accordance with generally accepted accounting
principles consistently applied from the prior audited period. The Acquiring
Fund shall assume only those liabilities of the Selling Fund reflected in such
Statement of Assets and Liabilities and shall not assume any other
liabilities, whether absolute or contingent, known or unknown, accrued or
unaccrued, all of which shall remain the obligation of the Selling Fund.

In addition, upon completion of the Reorganization, for purposes of
calculating the maximum amount of sales charges (including asset based sales
charges) permitted to be imposed by the Acquiring Fund under the National
Association of Securities Dealers, Inc. Conduct Rule 2830 ("Aggregate NASD
Cap"), the Acquiring Fund will add to its Aggregate NASD Cap immediately prior
to the Reorganization the Aggregate NASD Cap of the Selling Fund immediately
prior to the Reorganization, in each case calculated in accordance with such
Rule 2830.

1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), (a) the Selling Fund will
liquidate and distribute pro rata to the Selling Fund's shareholders of
record, determined as of the close of business on the Valuation Date (the
"Selling Fund Shareholders"), the Acquiring Fund Shares received by the
Selling Fund pursuant to paragraph 1.1; and (b) the Selling Fund will
thereupon proceed to dissolve as set forth in paragraph 1.8 below. Such
liquidation and distribution will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Selling Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Selling Fund Shareholders and representing
the respective pro rata

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number of the Acquiring Fund Shares due such shareholders. All issued and
outstanding shares of the Selling Fund will simultaneously be canceled on the
books of the Selling Fund. The Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares in connection with such exchange.

1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be shown on
the books of the Acquiring Fund's transfer agent. Shares of the Acquiring Fund
will be issued in the manner described in the Prospectus/Proxy Statement on
Form N-14 which has been distributed to shareholders of the Selling Fund as
described in paragraph 4.1(o).

1.6 TRANSFER TAXES. Any transfer taxes payable upon issuance of the
Acquiring Fund Shares in a name other than the registered holder of the
Selling Fund shares on the books of the Selling Fund as of that time shall, as
a condition of such issuance and transfer, be paid by the person to whom such
Acquiring Fund Shares are to be issued and transferred.

1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the Selling
Fund is and shall remain the responsibility of the Selling Fund up to and
including the Closing Date and such later date on which the Selling Fund is
terminated.

1.8 TERMINATION. The Selling Fund shall be terminated promptly following the
Closing Date and the making of all distributions pursuant to paragraph 1.4.

ARTICLE II

VALUATION

2.1 VALUATION OF ASSETS. The value of the Selling Fund's assets to be
acquired by the Acquiring Fund hereunder shall be the value of such assets
computed as of the close of business on the New York Stock Exchange on the
business day next preceding the Closing Date (such time and date being
hereinafter called the "Valuation Date"), using the valuation procedures set
forth in the Trust's Declaration of Trust and the Acquiring Fund's then
current prospectus and statement of additional information or such other
valuation procedures as shall be mutually agreed upon by the parties.

2.2 VALUATION OF SHARES. The net asset value per share of the Acquiring Fund
Shares shall be the net asset value per share computed as of the close of
business on the New York Stock Exchange on the Valuation Date, using the
valuation procedures set forth in the Trust's Declaration of Trust and the
Acquiring Fund's then current prospectus and statement of additional
information.

2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares of each
class to be issued (including fractional shares, if any) in exchange for the
Selling Fund's assets shall be determined by multiplying the shares
outstanding of each class of the Selling Fund by the ratio computed by
dividing the net asset value per share of the Selling Fund attributable to
each of its classes by the net asset value per share of the respective classes
of the Acquiring Fund determined in accordance with paragraph 2.2. Holders of
Class A, Class B, Class C and Class Y shares of the Selling Fund will receive
Class A, Class B, Class C and Class Y shares, respectively, of the Acquiring
Fund.

2.4 DETERMINATION OF VALUE. All computations of value shall be made by State
Street Bank and Trust Company in accordance with its regular practice in
pricing the shares and assets of the Acquiring Fund.

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ARTICLE III

CLOSING AND CLOSING DATE

3.1 CLOSING DATE. The closing of the Reorganization (the "Closing") shall
take place on or about July 24, 2000 or such other date as the parties may
agree to in writing (the "Closing Date"). All acts taking place at the Closing
shall be deemed to take place simultaneously immediately prior to the opening
of business on the Closing Date unless otherwise provided. The Closing shall
be held as of 9:00 a.m. at the offices of the Evergreen Funds, 200 Berkeley
Street, Boston, MA 02116, or at such other time and/or place as the parties
may agree.

3.2 EFFECT OF SUSPENSION IN TRADING. In the event that on the Valuation Date
(a) the New York Stock Exchange or another primary trading market for
portfolio securities of the Acquiring Fund or the Selling Fund shall be closed
to trading or trading thereon shall be restricted; or (b) trading or the
reporting of trading on said Exchange or elsewhere shall be disrupted so that
accurate appraisal of the value of the net assets of the Acquiring Fund or the
Selling Fund is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed
and reporting shall have been restored.

3.3 TRANSFER AGENT'S CERTIFICATE. Evergreen Service Company, as transfer
agent for the Selling Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses of
the Selling Fund Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver or cause Evergreen Service
Company, its transfer agent, to issue and deliver a confirmation evidencing
the Acquiring Fund Shares to be credited on the Closing Date to the Secretary
of the Trust or provide evidence satisfactory to the Selling Fund that such
Acquiring Fund Shares have been credited to the Selling Fund's account on the
books of the Acquiring Fund. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, share certificates, if any,
receipts and other documents as such other party or its counsel may reasonably
request.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

4.1 REPRESENTATIONS OF THE SELLING FUND. The Selling Fund represents and
warrants to the Acquiring Fund as follows:

(a) The Selling Fund is a separate investment series of a Delaware
business trust duly organized, validly existing, and in good standing under
the laws of the State of Delaware.

(b) The Selling Fund is a separate investment series of a Delaware
business trust that is registered as an investment company classified as a
management company of the open-end type, and its registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940
Act"), is in full force and effect.

(c) The current prospectus and statement of additional information of the
Selling Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act"),
and the 1940 Act and the rules and regulations of the Commission thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.

(d) The Selling Fund is not, and the execution, delivery, and performance
of this Agreement (subject to shareholder approval) will not result, in
violation of any provision of the Trust's Declaration of Trust

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or By-Laws or of any material agreement, indenture, instrument, contract,
lease, or other undertaking to which the Selling Fund is a party or by
which it is bound.

(e) The Selling Fund has no material contracts or other commitments
(other than this Agreement) that will be terminated with liability to it
prior to the Closing Date, except for liabilities, if any, to be discharged
or reflected in the Statement of Assets and Liabilities as provided in
paragraph 1.3 hereof.

(f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Selling Fund or any of its properties or
assets, which, if adversely determined, would materially and adversely
affect its financial condition, the conduct of its business, or the ability
of the Selling Fund to carry out the transactions contemplated by this
Agreement. The Selling Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects its business or its ability to
consummate the transactions herein contemplated.

(g) The unaudited semi-annual financial statements of the Selling Fund at
January 31, 2000 are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies of which have
been furnished to the Acquiring Fund) fairly reflect the financial
condition of the Selling Fund as of such date, and there are no known
contingent liabilities of the Selling Fund as of such date not disclosed
therein.

(h) Since January 31, 2000 there has not been any material adverse change
in the Selling Fund's financial condition, assets, liabilities, or business
other than changes occurring in the ordinary course of business, or any
incurrence by the Selling Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed
to and accepted by the Acquiring Fund. For the purposes of this
subparagraph (h), a decline in the net asset value of the Selling Fund
shall not constitute a material adverse change.

(i) At the Closing Date, all federal and other tax returns and reports of
the Selling Fund required by law to have been filed by such dates shall
have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid, or provision shall have been made for the
payment thereof. To the best of the Selling Fund's knowledge, no such
return is currently under audit, and no assessment has been asserted with
respect to such returns.

(j) For each fiscal year of its operation, the Selling Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has distributed in each such year all
net investment income and realized capital gains.

(k) All issued and outstanding shares of the Selling Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable by the Selling Fund. All of the issued and outstanding
shares of the Selling Fund will, at the time of the Closing Date, be held
by the persons and in the amounts set forth in the records of the transfer
agent as provided in paragraph 3.3. The Selling Fund does not have
outstanding any options, warrants, or other rights to subscribe for or
purchase any of the Selling Fund shares, nor is there outstanding any
security convertible into any of the Selling Fund shares.

(l) At the Closing Date, the Selling Fund will have good and marketable
title to the Selling Fund's assets to be transferred to the Acquiring Fund
pursuant to paragraph 1.2 and full right, power, and authority to sell,
assign, transfer, and deliver such assets hereunder, and, upon delivery and
payment for such assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the 1933 Act,
other than as disclosed to the Acquiring Fund and accepted by the Acquiring
Fund.

(m) The execution, delivery, and performance of this Agreement have been
duly authorized by all necessary action on the part of the Selling Fund
and, subject to approval by the Selling Fund's shareholders, this Agreement
constitutes a valid and binding obligation of the Selling Fund, enforceable

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in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium, and other laws relating to or
affecting creditors' rights and to general equity principles.

(n) The information furnished by the Selling Fund for use in no-action
letters, applications for orders, registration statements, proxy materials,
and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and
other laws and regulations thereunder applicable thereto.

(o) The Selling Fund has provided the Acquiring Fund with information
reasonably necessary for the preparation of a prospectus, which included
the proxy statement of the Selling Fund (the "Prospectus/Proxy Statement"),
all of which was included in a Registration Statement on Form N-14 of the
Acquiring Fund (the "Registration Statement"), in compliance with the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") and
the 1940 Act in connection with the meeting of the shareholders of the
Selling Fund to approve this Agreement and the transactions contemplated
hereby. The Prospectus/Proxy Statement included in the Registration
Statement (other than information therein that relates to the Acquiring
Fund) does not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading.

4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The Acquiring Fund represents and
warrants to the Selling Fund as follows:

(a) The Acquiring Fund is a separate investment series of a Delaware
business trust duly organized, validly existing and in good standing under
the laws of the State of Delaware.

(b) The Acquiring Fund is a separate investment series of a Delaware
business trust that is registered as an investment company classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect.

(c) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations
of the Commission thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(d) The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of the Trust's
Declaration of Trust or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the Acquiring
Fund is a party or by which it is bound.

(e) Except as otherwise disclosed in writing to the Selling Fund and
accepted by the Selling Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or any of
its properties or assets, which, if adversely determined, would materially
and adversely affect its financial condition and the conduct of its
business or the ability of the Acquiring Fund to carry out the transactions
contemplated by this Agreement. The Acquiring Fund knows of no facts that
might form the basis for the institution of such proceedings and is not a
party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially and adversely affects its
business or its ability to consummate the transactions contemplated herein.

(f) The unaudited semi-annual financial statements of the Acquiring Fund
at January 31, 2000 are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies of which have
been furnished to the Selling Fund) fairly reflect the financial condition
of the Acquiring Fund as of such date, and there are no known contingent
liabilities of the Acquiring Fund as of such date not disclosed therein.

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(g) Since January 31, 2000 there has not been any material adverse change
in the Acquiring Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Selling Fund. For the purposes of this
subparagraph (g), a decline in the net asset value of the Acquiring Fund
shall not constitute a material adverse change.

(h) At the Closing Date, all federal and other tax returns and reports of
the Acquiring Fund required by law then to be filed by such dates shall
have been filed, and all federal and other taxes shown due on said returns
and reports shall have been paid or provision shall have been made for the
payment thereof. To the best of the Acquiring Fund's knowledge, no such
return is currently under audit, and no assessment has been asserted with
respect to such returns.

(i) For each fiscal year of its operation, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a regulated investment company and has distributed in each such year all
net investment income and realized capital gains.

(j) All issued and outstanding Acquiring Fund Shares are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and non-assessable. The Acquiring Fund does not have outstanding any
options, warrants, or other rights to subscribe for or purchase any
Acquiring Fund Shares, nor is there outstanding any security convertible
into any Acquiring Fund Shares.

(k) The execution, delivery, and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring Fund,
and this Agreement constitutes a valid and binding obligation of the
Acquiring Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights and to general equity
principles.

(l) The Acquiring Fund Shares to be issued and delivered to the Selling
Fund, for the account of the Selling Fund Shareholders, pursuant to the
terms of this Agreement will, at the Closing Date, have been duly
authorized and, when so issued and delivered, will be duly and validly
issued Acquiring Fund Shares, and will be fully paid and non-assessable.

(m) The information furnished by the Acquiring Fund for use in no-action
letters, applications for orders, registration statements, proxy materials,
and other documents that may be necessary in connection with the
transactions contemplated hereby is accurate and complete in all material
respects and complies in all material respects with federal securities and
other laws and regulations applicable thereto.

(n) The Prospectus/Proxy Statement included in the Registration Statement
(only insofar as it relates to the Acquiring Fund) does not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which such statements were made, not
misleading.

(o) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and
such of the state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.

ARTICLE V

COVENANTS OF THE ACQUIRING FUND AND THE SELLING FUND

5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the Selling Fund
each will operate its business in the ordinary course between the date hereof
and the Closing Date, it being understood that such ordinary course of business
will include customary dividends and distributions.

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5.2 INVESTMENT REPRESENTATION. The Selling Fund covenants that the Acquiring
Fund Shares to be issued hereunder are not being acquired for the purpose of
making any distribution thereof other than in accordance with the terms of
this Agreement.

5.3 APPROVAL BY SHAREHOLDERS. The Trust will call a meeting of the
shareholders of the Selling Fund to act upon this Agreement and to take all
other action necessary to obtain approval of the transactions contemplated
herein.

5.4 ADDITIONAL INFORMATION. The Selling Fund will assist the Acquiring Fund
in obtaining such information as the Acquiring Fund reasonably requests
concerning the beneficial ownership of the Selling Fund shares.

5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Selling Fund will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by
this Agreement, including any actions required to be taken after the Closing
Date.

5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable, but in
any case within sixty days after the Closing Date, the Selling Fund shall
furnish the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Selling Fund
for federal income tax purposes that will be carried over by the Acquiring
Fund as a result of Section 381 of the Code, and which will be reviewed by
KPMG LLP and certified by the Trust's President and Treasurer.

ARTICLE VI

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLING FUND

The obligations of the Selling Fund to consummate the transactions provided
for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:

6.1 All representations, covenants, and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct as of the date hereof
and as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, and the Acquiring Fund shall have delivered to the
Selling Fund a certificate executed in its name by a duly authorized officer
of the Trust, in form and substance reasonably satisfactory to the Selling
Fund and dated as of the Closing Date, to such effect and as to such other
matters as the Selling Fund shall reasonably request.

6.2 The Selling Fund shall have received on the Closing Date an opinion from
Sullivan & Worcester LLP, counsel to the Acquiring Fund, dated as of the
Closing Date, in a form reasonably satisfactory to the Selling Fund, covering
the following points:

(a) The Acquiring Fund is a separate investment series of a Delaware
business trust duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.

(b) The Acquiring Fund is a separate investment series of a Delaware
business trust registered as an investment company under the 1940 Act, and,
to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.

(c) This Agreement has been duly authorized, executed, and delivered by
the Acquiring Fund and, assuming due authorization, execution and delivery
of this Agreement by the Selling Fund, is a valid and binding obligation of
the Acquiring Fund enforceable against the Acquiring Fund in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and to general equity principles.

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(d) Assuming that a consideration therefor not less than the net asset
value thereof has been paid, the Acquiring Fund Shares to be issued and
delivered to the Selling Fund on behalf of the Selling Fund Shareholders as
provided by this Agreement are duly authorized and upon such delivery will
be legally issued and outstanding and fully paid and non-assessable, and no
shareholder of the Acquiring Fund has any preemptive rights in respect
thereof.

(e) The Registration Statement, to such counsel's knowledge, has been
declared effective by the Commission and no stop order under the 1933 Act
pertaining thereto has been issued, and to the knowledge of such counsel,
no consent, approval, authorization or order of any court or governmental
authority of the United States or the State of Delaware is required for
consummation by the Acquiring Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the
1940 Act, and as may be required under state securities laws.

(f) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-Laws or any provision
of any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Acquiring
Fund is a party or by which it or any of its properties may be bound or to
the knowledge of such counsel, result in the acceleration of any obligation
or the imposition of any penalty, under any agreement, judgment, or decree
to which the Acquiring Fund is a party or by which it is bound.

(g) Only insofar as they relate to the Acquiring Fund, the descriptions
in the Prospectus/Proxy Statement of statutes, legal and governmental
proceedings and material contracts, if any, are accurate and fairly present
the information required to be shown.

(h) Such counsel does not know of any legal or governmental proceedings,
only insofar as they relate to the Acquiring Fund, existing on or before
the effective date of the Registration Statement or the Closing Date
required to be described in the Registration Statement or to be filed as
exhibits to the Registration Statement which are not described or filed as
required.

(i) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to the Acquiring Fund or any of its
properties or assets and the Acquiring Fund is not a party to or subject to
the provisions of any order, decree or judgment of any court or
governmental body, which materially and adversely affects its business,
other than as previously disclosed in the Registration Statement.

Such opinion shall contain such assumptions and limitations as shall be in the
opinion of Sullivan & Worcester LLP appropriate to render the opinions
expressed therein.

In this paragraph 6.2, references to the Prospectus/Proxy Statement include
and relate to only the text of such Prospectus/Proxy Statement and not to any
exhibits or attachments thereto or to any documents incorporated by reference
therein.

ARTICLE VII

CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND

The obligations of the Acquiring Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Selling
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:

7.1 All representations, covenants, and warranties of the Selling Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date with the same force and effect as if made on and as of
the Closing Date, and the Selling Fund shall have delivered to the Acquiring
Fund on the Closing Date a certificate executed in its name by a duly
authorized officer of the Trust, in form and substance

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satisfactory to the Acquiring Fund and dated as of the Closing Date, to such
effect and as to such other matters as the Acquiring Fund shall reasonably
request.

7.2 The Selling Fund shall have delivered to the Acquiring Fund a statement
of the Selling Fund's assets and liabilities, together with a list of the
Selling Fund's portfolio securities showing the tax costs of such securities by
lot and the holding periods of such securities, as of the Valuation Date,
certified by the Treasurer or Assistant Treasurer of the Trust.

7.3 The Acquiring Fund shall have received on the Closing Date an opinion of
Sullivan & Worcester LLP, counsel to the Selling Fund, in a form satisfactory
to the Acquiring Fund covering the following points:

(a) The Selling Fund is a separate investment series of a Delaware
business trust duly organized, validly existing and in good standing under
the laws of the State of Delaware and has the power to own all of its
properties and assets and to carry on its business as presently conducted.

(b) The Selling Fund is a separate investment series of a Delaware
business trust registered as an investment company under the 1940 Act, and,
to such counsel's knowledge, such registration with the Commission as an
investment company under the 1940 Act is in full force and effect.

(c) This Agreement has been duly authorized, executed and delivered by
the Selling Fund and, assuming due authorization, execution, and delivery
of this Agreement by the Acquiring Fund, is a valid and binding obligation
of the Selling Fund enforceable against the Selling Fund in accordance with
its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general equity principles.

(d) To the knowledge of such counsel, no consent, approval, authorization
or order of any court or governmental authority of the United States or the
State of Delaware is required for consummation by the Selling Fund of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act, and as may be required under
state securities laws.

(e) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, result in a
violation of the Trust's Declaration of Trust or By-laws, or any provision
of any material agreement, indenture, instrument, contract, lease or other
undertaking (in each case known to such counsel) to which the Selling Fund
is a party or by which it or any of its properties may be bound or, to the
knowledge of such counsel, result in the acceleration of any obligation or
the imposition of any penalty, under any agreement, judgment, or decree to
which the Selling Fund is a party or by which it is bound.

(f) Only insofar as they relate to the Selling Fund, the descriptions in
the Prospectus/Proxy Statement of statutes, legal and government
proceedings and material contracts, if any, are accurate and fairly present
the information required to be shown.

(g) Such counsel does not know of any legal or governmental proceedings,
only insofar as they relate to the Acquired Fund, existing on or before the
effective date of the Registration Statement or the Closing Date required
to be described in the Registration Statement or to be filed as exhibits to
the Registration Statement which are not described or filed as required.

(h) To the knowledge of such counsel, no litigation or administrative
proceeding or investigation of or before any court or governmental body is
presently pending or threatened as to the Selling Fund or any of its
respective properties or assets and the Selling Fund is neither a party to
nor subject to the provisions of any order, decree or judgment of any court
or governmental body, which materially and adversely affects its business
other than as previously disclosed in the Prospectus/Proxy Statement.

(i) Assuming that a consideration therefor of not less than the net asset
value thereof has been paid, and assuming that such shares were issued in
accordance with the terms of the Selling Fund's registration statement, or
any amendment thereto, in effect at the time of such issuance, all issued
and outstanding shares of the Selling Fund are legally issued and fully
paid and non-assessable.

A-10
<PAGE>

Such opinion shall contain such other assumptions and limitations as shall be
in the opinion of Sullivan & Worcester LLP appropriate to render the opinions
expressed therein.

In this paragraph 7.3, references to the Prospectus/Proxy Statement include
and relate to only the text of such Prospectus/Proxy Statement and not to any
exhibits or attachments thereto or to any documents incorporated by reference
therein.

ARTICLE VIII

FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING
FUND AND THE SELLING FUND

If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Selling Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:

8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite vote of the holders of the outstanding shares of the
Selling Fund in accordance with the provisions of the Trust's Declaration of
Trust and By-Laws and certified copies of the resolutions evidencing such
approval shall have been delivered to the Acquiring Fund. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund or the Selling Fund
may waive the conditions set forth in this paragraph 8.1.

8.2 On the Closing Date, the Commission shall not have issued an unfavorable
report under Section 25(b) of the 1940 Act, nor instituted any proceeding
seeking to enjoin the consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act and no action, suit or other
proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or
other relief in connection with, this Agreement or the transactions
contemplated herein.

8.3 All required consents of other parties and all other consents, orders,
and permits of federal, state and local regulatory authorities (including those
of the Commission and of state Blue Sky securities authorities, including any
necessary "no-action" positions of and exemptive orders from such federal and
state authorities) to permit consummation of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order, or permit would not involve a risk of a material adverse effect
on the assets or properties of the Acquiring Fund or the Selling Fund, provided
that either party hereto may for itself waive any of such conditions.

8.4 No stop orders suspending the effectiveness of the Registration Statement
shall have been issued and, to the best knowledge of the parties hereto, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.

8.5 The Selling Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of
distributing to the shareholders of the Selling Fund all of the Selling Fund's
net investment company taxable or tax-exempt income for all taxable periods
ending on or prior to the Closing Date (computed without regard to any
deduction for dividends paid) and all of its net capital gains realized in all
taxable periods ending on or prior to the Closing Date (after reduction for any
capital loss carryforward).

8.6 The parties shall have received a favorable opinion of Sullivan &
Worcester LLP addressed to the Acquiring Fund and the Selling Fund
substantially to the effect that for federal income tax purposes:

(a) The transfer of all of the Selling Fund assets in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund followed by the

A-11
<PAGE>

distribution of the Acquiring Fund Shares to the Selling Fund Shareholders
in dissolution and liquidation of the Selling Fund will constitute a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code and
the Acquiring Fund and the Selling Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.

(b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Selling Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund.

(c) No gain or loss will be recognized by the Selling Fund upon the
transfer of the Selling Fund assets to the Acquiring Fund in exchange for
the Acquiring Fund Shares and the assumption by the Acquiring Fund of the
identified liabilities of the Selling Fund or upon the distribution
(whether actual or constructive) of the Acquiring Fund Shares to Selling
Fund Shareholders in exchange for their shares of the Selling Fund.

(d) No gain or loss will be recognized by the Selling Fund Shareholders
upon the exchange of their Selling Fund shares for the Acquiring Fund
Shares in liquidation of the Selling Fund.

(e) The aggregate tax basis for the Acquiring Fund Shares received by
each Selling Fund Shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the Selling Fund shares held by such
shareholder immediately prior to the Reorganization, and the holding period
of the Acquiring Fund Shares to be received by each Selling Fund
Shareholder will include the period during which the Selling Fund shares
exchanged therefor were held by such shareholder (provided the Selling Fund
shares were held as capital assets on the date of the Reorganization).

(f) The tax basis of the Selling Fund assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Selling Fund
immediately prior to the Reorganization, and the holding period of the
assets of the Selling Fund in the hands of the Acquiring Fund will include
the period during which those assets were held by the Selling Fund.

Notwithstanding anything herein to the contrary, neither the Acquiring Fund
nor the Selling Fund may waive the conditions set forth in this paragraph 8.6.

8.7 The Acquiring Fund shall have received from KPMG LLP a letter addressed
to the Acquiring Fund, in form and substance satisfactory to the Acquiring
Fund, to the effect that:

(a) they are independent certified public accountants with respect to the
Selling Fund within the meaning of the 1933 Act and the applicable
published rules and regulations thereunder;

(b) on the basis of limited procedures agreed upon by the Acquiring Fund
and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus/Proxy Statement has been
obtained from and is consistent with the accounting records of the Selling
Fund;

(c) on the basis of limited procedures agreed upon by the Acquiring Fund
and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the pro forma financial statements
that are included in the Registration Statement and Prospectus/Proxy
Statement agree to the underlying accounting records of the Acquiring Fund
and the Selling Fund or with written estimates provided by each Fund's
management, and were found to be mathematically correct; and

(d) on the basis of limited procedures agreed upon by the Acquiring Fund
and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the data utilized in the
calculations of the pro forma expense ratios appearing in the Registration
Statement and Prospectus/Proxy Statement agree with underlying accounting
records of the Selling Fund or with written estimates by the Selling Fund's
management and were found to be mathematically correct.

In addition, unless waived by the Acquiring Fund, the Acquiring Fund shall
have received from KPMG LLP a letter addressed to the Acquiring Fund dated on
the Closing Date, in form and substance satisfactory

A-12
<PAGE>

to the Acquiring Fund, to the effect that on the basis of limited procedures
agreed upon by the Acquiring Fund (but not an examination in accordance with
generally accepted auditing standards), the net asset value per share of the
Selling Fund as of the Valuation Date was computed and the valuation of the
portfolio was consistent with the valuation practices of the Acquiring Fund.

8.8 The Selling Fund shall have received from KPMG LLP a letter addressed to
the Selling Fund, in form and substance satisfactory to the Selling Fund, to
the effect that:

(a) they are independent certified public accountants with respect to the
Acquiring Fund within the meaning of the 1933 Act and the applicable
published rules and regulations thereunder;

(b) they had performed limited procedures agreed upon by the Selling Fund
and described in such letter (but not an examination in accordance with
generally accepted auditing standards) which consisted of a reading of any
unaudited pro forma financial statements included in the Registration
Statement and Prospectus/Proxy Statement, and making inquiries of
appropriate officials of the Trust responsible for financial and accounting
matters whether such unaudited pro forma financial statements comply as to
form in all material respects with the applicable accounting requirements
of the 1933 Act and the published rules and regulations thereunder;

(c) on the basis of limited procedures agreed upon by the Selling Fund
and described in such letter (but not an examination in accordance with
generally accepted auditing standards), the Capitalization Table appearing
in the Registration Statement and Prospectus/Proxy Statement has been
obtained from and is consistent with the accounting records of the
Acquiring Fund; and

(d) on the basis of limited procedures agreed upon by the Selling Fund
(but not an examination in accordance with generally accepted auditing
standards), the data utilized in the calculations of the pro forma expense
ratios appearing in the Registration Statement and Prospectus/Proxy
Statement agree with written estimates by each Fund's management and were
found to be mathematically correct.

ARTICLE IX

EXPENSES

9.1 Except as otherwise provided for herein, all expenses of the transactions
contemplated by this Agreement incurred by the Selling Fund and the Acquiring
Fund, whether incurred before or after the date of this Agreement, will be
borne by First Union National Bank. Such expenses include, without limitation,
(a) expenses incurred in connection with the entering into and the carrying out
of the provisions of this Agreement; (b) expenses associated with the
preparation and filing of the Registration Statement under the 1933 Act
covering the Acquiring Fund Shares to be issued pursuant to the provisions of
this Agreement; (c) registration or qualification fees and expenses of
preparing and filing such forms as are necessary under applicable state
securities laws to qualify the Acquiring Fund Shares to be issued in connection
herewith in each state in which the Selling Fund Shareholders are resident as
of the date of the mailing of the Prospectus/Proxy Statement to such
shareholders; (d) postage; (e) printing; (f) accounting fees; (g) legal fees;
and (h) solicitation costs of the transaction. Notwithstanding the foregoing,
the Acquiring Fund shall pay its own federal and state registration fees.

ARTICLE X

ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES

10.1 The Acquiring Fund and the Selling Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.

A-13
<PAGE>

10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall not survive the consummation of the transactions contemplated
hereunder.

ARTICLE XI

TERMINATION

11.1 This Agreement may be terminated by the mutual agreement of the
Acquiring Fund and the Selling Fund. In addition, either the Acquiring Fund or
the Selling Fund may at its option terminate this Agreement at or prior to the
Closing Date because:

(a) of a breach by the other of any representation, warranty, or
agreement contained herein to be performed at or prior to the Closing Date,
if not cured within 30 days; or

(b) a condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.

11.2 In the event of any such termination, in the absence of willful default,
there shall be no liability for damages on the part of either the Acquiring
Fund, the Selling Fund, the Trust, its Trustees or officers, to the other
party, but each shall bear the expenses incurred by it incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.

ARTICLE XII

AMENDMENTS

12.1 This Agreement may be amended, modified, or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Selling Fund and the Acquiring Fund; provided, however, that no such amendment
may have the effect of changing the provisions for determining the number of
the Acquiring Fund Shares to be issued to the Selling Fund Shareholders under
this Agreement to the detriment of such Shareholders without their further
approval.

ARTICLE XIII

HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY

13.1 The Article and paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

13.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.

13.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the conflicts of laws
provisions thereof.

13.4 This Agreement shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns, but, except as provided in this
paragraph, no assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of the other
party. Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm, or corporation, other than the parties
hereto and their respective successors and assigns, any rights or remedies
under or by reason of this Agreement.

A-14
<PAGE>

13.5 It is expressly agreed that the obligations of the Acquiring Fund and
the Selling Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Trust personally,
but shall bind only the trust property of the Acquiring Fund and of the Selling
Fund, as provided in the Declaration of Trust of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust on
behalf of the Acquiring Fund and the Selling Fund and signed by authorized
officers of the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Acquiring Fund
and of the Selling Fund as provided in the Declaration of Trust of the Trust.

IN WITNESS WHEREOF, the parties have duly executed this Agreement, all as of
the date first written above.

EVERGREEN EQUITY TRUST
ON BEHALF OF EVERGREEN INCOME AND
GROWTH FUND

By: /s/ William M. Ennis
---------------------------------
Name: William M. Ennis
Title: President

EVERGREEN EQUITY TRUST
ON BEHALF OF EVERGREEN EQUITY
INCOME FUND

By: /s/ Carol Kosel
---------------------------------
Name: Carol Kosel
Title: Treasurer

A-15
<PAGE>

EVERGREEN
Income and Growth Fund
Fund at a Glance as of July 31, 1999

Portfolio Management
--------------------

[PHOTO OF PHILLIP M. FOREMAN APPEARS HERE]

Phillip M. Foreman,
CFP, CFA
Tenure: September 1999

[PHOTO OF IRENE D. O'NEILL APPEARS HERE]

Irene D. O'Neill, CFA
Tenure: December 1997

-------------------------------------------------------------------------------
CURRENT INVESTMENT STYLE/1/
-------------------------------------------------------------------------------
[CHART APPEARS HERE]

Size Style
Value Blend Growth
Large
Medium X
Small

Morningstar's Style Box is based on a portfolio date as of 7/31/99.

The Equity Style Box placement is based on a fund's price-to-earnings and
price-to-book ratio relative to the S&P 500, as well as the size of the
companies in which it invests, or median market capitalization.

/1/ Source: 1999 Morningstar, Inc.

/2/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than original cost. The performance of each class may
vary based on differences in loads and fees paid by the shareholders investing
in each class.

Historical performance shown for Classes A, B, and C prior to their inception is
based on the performance of Class Y, the original class offered. These
historical returns for Classes A, B, and C have not been adjusted to reflect the
effect of each class' 12b-1 fees. These fees for Class A are 0.25%, for Class B
are 1.00% and for Class C are 1.00%. Class Y does not pay a 12b-1 fee. If these
fees had been reflected, returns would have been lower. Returns reflect expense
limits previously in effect, without which returns would have been lower.

-------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/2/
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Portfolio Inception Date: 8/31/78 Class A Class B Class C Class Y
Class Inception Date 1/3/95 1/3/95 1/3/95 8/31/78
Average Annual Returns*
<S> <C> <C> <C> <C>
1 year with sales charge 6.80% 6.48% 10.37% n/a
1 year w/o sales charge 12.14% 11.34% 11.34% 12.46%
3 years 13.94% 14.21% 14.96% 16.11%
5 years 12.68% 12.79% 13.01% 14.02%
10 years 9.42% 9.58% 9.58% 10.07%
Since Portfolio Inception 13.85% 13.94% 13.93% 14.18%
Maximum Sales Charge 4.75% 5.00% 1.00% n/a
Front End CDSC CDSC
30-day SEC Yield 2.02% 1.37% 1.37% 2.38%
12-month income dividends per share $0.93 $0.80 $0.80 $1.02
12-month capital gain distributions per share $2.13 $2.13 $2.13 $2.13
</TABLE>

* Adjusted for maximum applicable sales charge unless noted.

-------------------------------------------------------------------------------
LONG TERM GROWTH
-------------------------------------------------------------------------------

[LINE GRAPH APPEARS HERE]

Evergreen Income and Consumer Price Wilshire 5000
Period End Growth A Market Value Index - US Value Value

1/31/95 9,526 10,000 10,000
7/31/95 10,843 10,146 12,149
7/31/96 11,718 10,443 13,933
7/31/97 15,045 10,679 20,510
7/31/98 16,230 10,858 24,005
7/31/99 18,201 11,058 28,314

Comparison of change in value of a $10,000 investment in Evergreen Income and
Growth Fund, Class A, the Wilshire 5000 Index (Wilshire 5000) and the Consumer
Price Index (CPI).

The Wilshire 5000 is an unmanaged market index and does not include transaction
costs associated with buying and selling securities nor any management fees. The
CPI is a commonly used measure of inflation and does not represent an investment
return. It is not possible to invest directly in an index.

<PAGE>

EVERGREEN
Income and Growth Fund
Portfolio Manager Interview

How did the Fund perform?

The Fund had very strong performance. For the 12 months ended July 31, 1999, the
Evergreen Income and Growth Fund's Class A shares had a total return, before the
deduction of any applicable sales charges, of 12.14%. During the same 12-month
period, the average return among funds in the income fund category was 5.41%,
according to Lipper, Inc., an independent monitor of mutual fund performance.
The Wilshire 5000 Index reported an 18.35% return for this same period.

One of the noteworthy developments during the year was the merger of the former
Evergreen American Retirement Fund into the Evergreen Income and Growth Fund on
July 31, 1999.

Portfolio
Characteristics
---------------
(as of 7/31/1999 unless noted)

Total Net Assets $1,070,659,522
Number of Holdings 193
P/E Ratio* 19.2x
Beta* 0.66

* as of 6/30/1999

-------------------------------------------------------------------------------
PORTFOLIO COMPOSITION AS OF JULY 31, 1999
-------------------------------------------------------------------------------
(as a percentage of net assets)

[PIE CHART APPEARS HERE]

Common Stock - 65.7%
Convertible Preferred Stock - 17.9%
Cash Equivalents and other - 15.0%
Convertible Debentures - 1.4%

What factors affected performance?

The Fund benefited from its emphasis on telecommunications and energy-related
stocks. The rapid growth in telecommunications helped a number of Fund holdings
during the year, while the rise in oil prices early in 1999 led to strong
performance by a number of energy holdings late in the fiscal year. Acquisition
offers for several companies held by the Fund in both the telecommunications and
energy sectors also contributed to performance. In addition, as the 12-month
period progressed, investors began to show renewed interest in value stocks as
market leadership broadened beyond a narrow band of large-cap growth stocks.

During the early months of the fiscal year, value stocks were particularly hard
hit as investors worried that problems in emerging markets would hurt world
economic growth. After interest rates abroad began declining, however, investors
began to regain confidence in foreign markets and in the stocks of many
companies in cyclical industries, i.e., those closely linked to changes in the
economic cycle. This renewed confidence in the direction of the world economy
supported the performance of many value-related stocks in the commodity,
industrial and other cyclical sectors.

What investment themes did you emphasize?

We maintained our long-term, value-oriented focus, looking for opportunities
among consolidating industries where the potential for mergers and acquisitions
would be high, and in companies that were undergoing re-structuring and
cost-cutting programs. We also looked for opportunities in industries undergoing
significant growth, such as in telecommunications. We also took profits from
successful investments in the banking sector and used

<PAGE>

EVERGREEN
Income and Growth Fund
Portfolio Manager Interview

them to re-allocate the portfolio into other areas. We believed, especially in
light of rising interest rates, that there were better opportunities outside
banking.

Although the Fund finished the fiscal year with a relatively high cash position
of about 9.5% of net assets, this was more a temporary result of portfolio
re-allocation moves than a decision to become more defensive by raising cash.

Top 5 Industries
----------------
(as a percentage of net assets)

Banks 13.8%
Utilities -- Electric 11.8%
Healthcare Products & Services 6.3%
Oil / Energy 6.0%
Electrical Equipment & Services 5.4%

What were some examples of Fund investments involved in mergers and
acquisitions?

In the energy sector, worthy of note, is the pending acquisition of Atlantic
Richfield by BP Amoco.

In addition, two fund holdings in the banking industry also are the subject of
pending acquisitions by larger banks. Mercantile Bank Corp. is to be taken over
by Firstar Corp, while First American Corp is scheduled to be acquired by
AmSouth Bank Corp.

Finally, two investments in the utility sector also are the subject of pending
takeovers. TNP Enterprises, an electric company, is being acquired by an
investor group, while Frontier Corp. a telecommunications firm, has received an
acquisition offer from Global Crossing.

What Fund holdings have been involved in restructuring?

The Fund has a long-term record of finding interesting opportunities among
undervalued stocks of companies that are undergoing restructuring programs which
have the potential to increase the value of the business. Two recent examples,
one in the energy sector and one in the transportation sector, illustrate that
theme.

New management has taken over at Equitable Resources, an integrated energy
company whose primary focus is in natural gas, predominately in the Appalachian
region. The new management has undertaken an aggressive cost-cutting program
that also involves redeploying assets and share buybacks. As a result, the
company's return on capital and earnings growth rate have increased, and the
stock has started to perform exceptionally well.

In transportation, Union Pacific had been having problems digesting its
acquisition of another railroad company, Southern Pacific. Union Pacific started
an aggressive re-structuring program in the spring of 1998, resulting in a
substantial improvement in earnings and a rebound in its stock price.

How has the Fund taken advantage of the opportunities in telecommunications?

Telecommunications has been a spectacular performer for the Fund. This industry
has been restructuring since 1984 when the old AT&T was broken up and that
process is accelerating. The recent catalyst for growth is the explosion in
telecommunications traffic in wireless, data transmission and over the internet.
This explosion has created the need for equipment with greater capacity, greater
speed and improved security. Companies are scrambling to gain access to
customers. The need for many companies quickly to become full-service providers
also has led to a heightened rate of industry consolidation.

<PAGE>

EVERGREEN
Income and Growth Fund
Portfolio Manager Interview

Qualcomm, the best-performing stock for the Fund during the fiscal year, is an
excellent example. Qualcomm has developed a proprietary wireless technology that
is being adopted as a global standard for digital systems because of its ability
to increase capacity, add clarity, and secure transmissions.

Frontier Corp. is another example. It started out as a local telephone company
in the Rochester, N.Y., area, but has developed a long distance business and
made strategic investments in a data transmission fiber optic system. With its
access to a customer base, Frontier was an attractive acquisition target in the
current industry consolidation. It is now the subject of an acquisition offer by
Global Crossing.

Another example is Qwest Communications, a long distance fiber optic system
builder and operator that is a relatively recent investment for the Fund. It has
made an acquisition offer for a regional telephone company, U.S. West. This
transaction will expand Qwest's product offering beyond basic long haul service
and provide a new base of customers, resulting in greater revenue and earnings
growth potential.

In addition, Vodafone, a major British-based company, recently acquired
AirTouch, another Fund holding, to gain entry into the U.S. wireless phone
market as well as to expand its international presence.

Finally, a good example of the Fund's search for unusual opportunities is
Houston Industries, a diversified company that sold its cable TV business to
Time Warner. We bought the convertible security of Houston Industries that is
convertible into shares of Time Warner stock.

Top 10 Holdings
---------------
(as a percentage of net assets)

Williams Companies, Inc. 2.4%
Thomas & Betts Corp. 2.3%
Qualcomm Financial Trust I, convertible preferred 2.2%
Dana Corp. 2.2%
New Holland NV 2.2%
National Australia Bank Ltd. 2.1%
Southern Co. 2.0%
Qwest Trends Trust, convertible preferred 1.8%
Frontier Corp. 1.8%
Murphy Oil Corp. 1.7%

What other Fund investments have been particularly notable?

Shared Medical Systems has done exceptionally well. This company provides
healthcare information systems to hospitals and other large healthcare
institutions. Shared Medical has been in a very strong position as the
healthcare sector needs to reduce costs to offset lower rates of Medicare
reimbursement by the government. This trend is driving expanded use of
information technology by hospitals.

What is your outlook?

We have a favorable outlook because we think stocks with significant dividend
yields should provide protection for investors, even in a market downturn. In
the near-term, the market will be focused on interest rates and will be
concerned about whether rising rates could slow economic growth. Inflation,
however, does not appear to be a threat, and so it does not appear likely the
Federal Reserve Board will raise short-term interest rates significantly. Longer
term, we think the Fund's emphasis on value stocks and higher yielding stocks
should continue to provide good investment opportunities.

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

Acquisition of Assets of

EVERGREEN EQUITY INCOME FUND

a Series of

EVERGREEN EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898

By and In Exchange For Shares of

EVERGREEN INCOME AND GROWTH FUND

a Series of

EVERGREEN EQUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 343-2898

This Statement of Additional Information, relating specifically to the
proposed transfer of the assets and liabilities of Evergreen Equity Income Fund
("Equity Income Fund"), a series of Evergreen Equity Trust, to Evergreen Income
and Growth Fund ("Income and Growth Fund"), a series of Evergreen Equity Trust,
in exchange for Class A, Class B, Class C and Class Y shares (to be issued to
holders of Class A, Class B, Class C and Class Y shares, respectively, of Equity
Income Fund,) of beneficial interest, $0.001 par value per share, of Income and
Growth Fund, consists of this cover page and the following described documents,
each of which is attached hereto and incorporated by reference herein:

(1) The Statement of Additional Information of Equity Income Fund and Income
and Growth Fund dated December 1, 1999;

(2) Annual Report of Equity Income Fund and Income and Growth Fund for the year
ended July 31, 1999;

(3) Semi-Annual Report of Equity Income Fund and Income and Growth Fund for the
six-month period ended January 31, 2000; and

(4) Pro Forma Financial Statements as of January 31, 2000.

This Statement of Additional Information, which is not a prospectus,
supplements, and should be read in conjunction with, the Prospectus/Proxy
Statement of Equity Income Fund and Income and Growth Fund dated May 26, 2000. A
copy of the Prospectus/Proxy Statement may be obtained without charge by calling
or writing to Evergreen Equity Trust at the telephone numbers or addresses set
forth above.

The date of this Statement of Additional Information is May 26, 2000.
<PAGE>

EVERGREEN EQUITY TRUST

200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700

GROWTH AND INCOME FUNDS

STATEMENT OF ADDITIONAL INFORMATION

December 1, 1999

Evergreen Blue Chip Fund ("Blue Chip Fund")
Evergreen Equity Income Fund ("Equity Income Fund")
Evergreen Growth and Income Fund ("Growth and Income Fund")
Evergreen Income and Growth Fund ("Income and Growth Fund")
Evergreen Small Cap Value Fund ("Small Cap Value Fund")
Evergreen Utility Fund ("Utility Fund")
Evergreen Value Fund ("Value Fund")
(Each a "Fund"; together, the "Funds")

Each Fund is a series of Evergreen Equity
Trust (the "Trust").

This Statement of Additional Information ("SAI") pertains to all
classes of shares of the Funds listed above. It is not a prospectus but should
be read in conjunction with the prospectus dated December 1, 1999 for the Fund
in which you are interested. The Funds are offered through a single prospectus
offering Class A, Class B, Class C and Class Y shares of each Fund. You may
obtain the prospectus by calling (800) 343-2898.

Certain information may be incorporated by reference to the Funds'
Annual Report dated July 31, 1999. You may obtain a copy of the Annual Report
without charge by calling (800) 343-2898 or downloading it off our website at
www.evergreen-funds.com.

<PAGE>

TABLE OF CONTENTS

PART 1

TRUST HISTORY................................................................1-1
INVESTMENT POLICIES..........................................................1-1
OTHER SECURITIES AND PRACTICES...............................................1-2
PRINCIPAL HOLDERS OF FUND SHARES.............................................1-3
EXPENSES.....................................................................1-8
PERFORMANCE.................................................................1-16
SERVICE PROVIDERS...........................................................1-18
FINANCIAL STATEMENTS........................................................1-20

PART 2

ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES................2-1
PURCHASE AND REDEMPTION OF SHARES...........................................2-17
SALES CHARGE WAIVERS AND REDUCTIONS.........................................2-19
PRICING OF SHARES...........................................................2-22
PERFORMANCE CALCULATIONS....................................................2-23
PRINCIPAL UNDERWRITER.......................................................2-25
DISTRIBUTION EXPENSES UNDER RULE 12b-1......................................2-25
TAX INFORMATION.............................................................2-28
BROKERAGE...................................................................2-31
ORGANIZATION................................................................2-32
INVESTMENT ADVISORY AGREEMENT...............................................2-34
MANAGEMENT OF THE TRUST.....................................................2-35
CORPORATE AND MUNICIPAL BOND RATINGS........................................2-38
ADDITIONAL INFORMATION......................................................2-48

<PAGE>

PART 1

TRUST HISTORY

The Trust is an open-end management investment company, which was
organized as a Delaware business trust on September 18, 1997. Each Fund is a
diversified series of the Trust. A copy of the Declaration of Trust is on file
as an exhibit to the Trust's Registration Statement, of which this SAI is a
part. Evergreen Equity Income Fund (formerly Evergreen Fund for Total Return)
changed its name on April 6, 1999. Also on April 6, 1999, Evergreen Small Cap
Value Fund (formerly Evergreen Small Cap Equity Fund) changed its name.

INVESTMENT POLICIES

FUNDAMENTAL INVESTMENT RESTRICTIONS

Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940 (the "1940
Act"). Where necessary, an explanation beneath a fundamental policy describes
the Fund's practices with respect to that policy, as allowed by current law. If
the law governing a policy changes, the Fund's practices may change accordingly
without a shareholder vote. Unless otherwise stated, all references to the
assets of the Fund are in terms of current market value.

1. Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.

Further Explanation of Diversification Policy:

To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States ("U.S.") government or its agencies or
instrumentalities.

2. Concentration

Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S. government or its agencies or
instrumentalities), except that Utility Fund will concentrate its investments in
utility industries.

Further Explanation of Concentration Policy: Each Fund except Utility
Fund may not invest more than 25% of its total assets, taken at market value, in
the securities of issuers primarily engaged in any particular industry (other
than securities issued or guaranteed by the U.S. government or its agencies or
instrumentalities), except that Utility Fund is required to invest at least 65%
of its total assets in utility industries.

<PAGE>

3. Issuing Senior Securities

Except as permitted under the 1940 Act, each Fund may not issue senior
securities.

4. Borrowing

Each Fund may not borrow money, except to the extent permitted by
applicable law.

Further Explanation of Borrowing Policy:

Each Fund may borrow from banks and enter into reverse repurchase
agreements in an amount up to 33 1/3% of its total assets, taken at market
value. Each Fund may also borrow up to an additional 5% of its total assets from
banks or others. A Fund may borrow only as a temporary measure for extraordinary
or emergency purposes such as the redemption of Fund shares. A Fund may purchase
additional securities so long as borrowings do not exceed 5% of its total
assets. Each Fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities. Each Fund may purchase
securities on margin and engage in short sales to the extent permitted by
applicable law

5. Underwriting

Each Fund may not underwrite securities of other issuers, except
insofar as a Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.

6. Real Estate

Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, a Fund may invest in (a) securities that are
directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.

7. Commodities

Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that a Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.

8. Lending

Each Fund may not make loans to other persons, except that a Fund may
lend its portfolio securities in accordance with applicable law. The acquisition
of investment securities or other investment instruments shall not be deemed to
be the making of a loan.

Further Explanation of Lending Policy:

To generate income and offset expenses, a Fund may lend portfolio
securities to broker-dealers and other financial institutions in an amount up to
33 1/3% of its total assets, taken at market value. While securities are on
loan, the borrower will pay the Fund any income accruing on the security. The
Fund may invest any collateral it receives in additional portfolio securities,
such as U.S. Treasury notes, certificates of deposit, other high-grade,
short-term obligations or interest bearing cash equivalents. Gains or losses in
the market value of a security lent will affect the Fund and its shareholders.

When a Fund lends its securities, it will require the borrower to give
the Fund collateral in cash or government securities. The Fund will require
collateral in an amount equal to at least 100% of the current market value of
the securities lent, including accrued interest. The Fund has the right to call
a loan and obtain the securities lent any time on notice of not more than five
business days. The Fund may pay reasonable fees in connection with such loans.

OTHER SECURITIES AND PRACTICES

For information regarding securities the Funds may purchase and
investment practices the Funds may use, see the following section in Part 2 of
this SAI under "Additional Information on Securities and Investment Practices."
Information provided in the sections listed below expands upon and supplements
information provided in the Funds' prospectus. The list below applies to all
Funds unless otherwise noted.

Money Market Instruments
Convertible Securities
U.S. Government Securities
When-Issued, Delayed-Delivery and Forward Commitment Transactions (not
applicable to Growth and Income Fund, Income and Growth Fund and Small Cap
Value Fund)
Repurchase Agreements
Reverse Repurchase Agreements (not applicable to Growth and Income Fund and
Income and Growth Fund)
Options
Futures Transactions
Foreign Securities (not applicable to Growth and Income Fund)
Foreign Currency Transactions (not applicable to Growth and Income Fund)
High Yield, High Risk Bonds (applicable only to Equity Income Fund and Growth
and Income Fund)
Illiquid and Restricted Securities
Investment in Other Investment Companies
Short Sales (applicable only to Growth and Income Fund and
Income and Growth Fund)
Warrants (applicable only to Blue Chip Fund)
Limited Partnerships (applicable only to Blue Chip Fund)
Payment-in-kind Securities
Securities Lending Swaps, Caps, Floors and Collars
Real Estate Investment Trusts
(applicable only to Income and Growth Fund and Small Cap Value Fund)

PRINCIPAL HOLDERS OF FUND SHARES

As of November 1, 1999, the officers and Trustees of the Trust owned as
a group less than 1% of the outstanding shares of any class of each Fund.

Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of the
outstanding shares of any class of each Fund as of November 1, 1999.

<PAGE>

----------------------------------------------------------------

Blue Chip Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Blue Chip Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Blue Chip Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------

Douglas M. Ellingson 12.74%
1833 East Carver Street
Tempe, AZ 85284-2509
---------------------------------------------------- -----------
---------------------------------------------------- -----------

Douglas M. Ellingson TTEE 8.49%
Ellingson Irrevocable Trust
1833 East Carver Street
Tempe, AZ 85284-2509
---------------------------------------------------- -----------
---------------------------------------------------- -----------

MLPF&S For the Sole Benefit of Its Customers 5.80%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
---------------------------------------------------- -----------

Blue Chip Fund Class Y
---------------------------------------------------- -----------
---------------------------------------------------- -----------

First Union National Bank BK/EB/INT 56.69%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------

First Union National Bank EB/INT 19.45%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------

<PAGE>

----------------------------------------------------------------

Equity Income Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------

MLPF&S For the Sole Benefit of Its Customers 5.13%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------

Equity Income Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------

MLPF&S For the Sole Benefit of Its Customers 8.86%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------

<PAGE>

----------------------------------------------------------------

Equity Income Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------

Lavedna Ellingson 19.11%
Douglas Ellingson TTEES
Lavedna Ellingson Marital Trust U/A Dtd 5-1-86
8510 McClintock
Tempe, AZ 85284-2527
---------------------------------------------------- -----------
---------------------------------------------------- -----------

MLPF&S for the Sole Benefit of Its Customers 10.60%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
---------------------------------------------------- -----------

State Street Bank and Trust Company Custodian 5.07%
Rollover IRA FBO
Warren C. Smothers
C/O Linsco Private Ledger
4402 Vance Jackson Suite 101
San Antonio, TX 78230-5333
---------------------------------------------------- -----------
----------------------------------------------------------------

Equity Income Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------

First Union National Bank/EB/INT 70.99%
Reinvest Account
Attn: Joe Gainey
401 S. Tryon St. 3rd Fl.
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------

State Street Bank and Trust Company 6.36%
Custodian Rollover IRA FBO
Arnold Lieber
33 W. 88th Street
New York, NY 10024-2537
---------------------------------------------------- -----------
---------------------------------------------------- -----------

State Street Bank and Trust Company Custodian IRA 5.62%
FBO
Mitchell S. Cohen
23 Gregory Lane
Millwood, NY 10546-1039
---------------------------------------------------- -----------
----------------------------------------------------------------

Growth and Income Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Growth and Income Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------

<PAGE>

----------------------------------------------------------------

Growth and Income Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------

MLPF&S For the Sole Benefit of Its Customers 19.38%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------

Growth and Income Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------

First Union National Bank EB/INT 49.34%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------

First Union National Bank EB/INT 25.51%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------

<PAGE>

----------------------------------------------------------------

Income and Growth Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Income and Growth Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Income and Growth Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Income and Growth Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Small Cap Value Fund Class A
----------------------------------------------------------------
---------------------------------------------------- -----------

None
---------------------------------------------------- -----------
----------------------------------------------------------------

Small Cap Value Fund Class B
----------------------------------------------------------------
---------------------------------------------------- -----------

MLPF&S For the Sole Benefit of Its Customers 8.28%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------

Small Cap Value Fund Class C
----------------------------------------------------------------
---------------------------------------------------- -----------

MLPF&S For the Sole Benefit of Its Customers 17.12%
Attn: Fund Administration
4800 Deer Lake Drive E. 2nd Floor
Jacksonville, FL 32246-6484
---------------------------------------------------- -----------
----------------------------------------------------------------

Small Cap Value Fund Class Y
----------------------------------------------------------------
---------------------------------------------------- -----------

First Union National BK EB/INT 64.06%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
---------------------------------------------------- -----------

First Union National Bank EB/INT 17.55%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon St. 3rd Fl. CMG 1151
Charlotte, NC 28202-1911
---------------------------------------------------- -----------
----------------------------------------------------------------