EVERGREEN SELECT FIXED INCOME TRUST
1933 Act File No. 333-36019
1940 Act File No. 811-08365
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. --- [ ]
Post-Effective Amendment No. 4 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 4 [X]
EVERGREEN SELECT FIXED INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
200 Berkeley Street
Boston, Massachusetts 02116-5034
(Address of Principal Executive Offices)
(617) 210-3200
(Registrant's Telephone Number)
Michael H. Koonce, Esquire
200 Berkeley Street
Boston, Massachusetts 02116
(Name and Address of Agent for Service)
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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)(i) [ ] on (date) pursuant to
paragraph (a)(i) [ ] 75 days after filing pursuant to paragraph (a)(ii) [ ] on
(date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
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EVERGREEN SELECT FIXED INCOME TRUST
CONTENTS OF POST-EFFECTIVE AMENDMENT NO. 4 to
REGISTRATION STATEMENT ON
FORM N-1A
This Post-Effective Amendment No. 4 to Registrant's Registration Statement
No. 333-36019/811-08365 consists of the following pages, items of information
and documents, together with the exhibits indicated in Part C as being filed
herewith:
Facing Sheet
Contents Page
Cross-Reference Sheet
PART A
Prospectuses for the Institutional shares and Institutional Service shares
of Evergreen Select International Bond Fund are contained herein.
Prospectuses for the Institutional Shares and Institutional Service
Shares of Evergreen Select Limited Duration Fund, Evergreen Select Fixed Income
Fund, Evergreen Select Income Plus Fund, Evergreen Select Intermediate Tax
Exempt Bond Fund, Evergreen Select Core Bond Fund, and Evergreen Select
Intermediate Bond Fund contained in Pre-Effective Amendment No. 1 to
Registration Statement No. 333-36019/811-08365 filed on November 17, 1997 are
incorporated by reference herein.
Prospectuses for the Institutional Shares and Institutional Service Shares
of Evergreen Select Adjustable Rate Fund contained in Post-Effective Amendment
No. 3 to Registration Statement No. 333-36019/811-08365 filed on June 30, 1998
is incorporated by reference herein.
PART B
Statement of Additional Information for Evergreen Select International
Bond Fund is contained herein.
Statement of Additional Information for Evergreen Select Limited
Duration Fund, Evergreen Select Fixed Income Fund, Evergreen Select Income Plus
Fund, Evergreen Select Intermediate Tax Exempt Bond Fund, Evergreen Select Core
Bond Fund, and Evergreen Select Intermediate Bond Fund contained in Pre-
Effective Amendment No. 1 to Registration Statement No. 333- 36019/811-08365
filed on November 17, 1997 is incorporated by reference herein.
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Statement of Additional Information for Evergreen Select Adjustable Rate
Fund contained in Post-Effective Amendment No. 3 to Registration Statement No.
333-36019/811-08365 filed on June 30, 1998 is incorporated by reference herein.
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PART C
Exhibits
Number of Security Holders
Indemnification
Business and Other Connections
of Investment Advisers
Principal Underwriter
Location of Accounts and Records
Signatures
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EVERGREEN SELECT FIXED INCOME TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a) under the Securities Act of 1933
ITEM OF PART A OF FORM N-1A LOCATION IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis and Fee Table Cover Page; Expenses
3. Condensed Financial Not applicable
Information
4. General Description of Cover Page; Fund Description
Registrant
5. Management of the Fund Fund Description
6. Capital Stock and Other Fund Description; Buying and
Securities Selling Shares
7. Purchase of Securities Being Buying and Selling Shares
Offered
8. Redemption or Repurchase Buying and Selling Shares
9. Pending Legal Proceedings Not Applicable
ITEM IN PART B OF FORM N-1A LOCATION IN STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives and Investment Policies
Policies
14. Management of the Fund Investment Advisory and
Other Services
15. Control Persons and Not Applicable
Principal Holders of
Securities
16. Investment Advisory and Investment Advisory and
Other Services Other Services
17. Brokerage Allocation Brokerage Allocation and
Other Practices
18. Capital Stock and Other Description of Shares;
Securities Voting Rights; Limitation of
Trustees' Liability
19. Purchase, Redemption and Purchase, Redemption and
Pricing of Securities Being Pricing of Fund Shares
Offered
20. Tax Status Additional Tax Information
21. Underwriters Principal Underwriter
22. Calculation of Performance Calculation of Performance
Data Data
23. Financial Statements Not applicable
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PROSPECTUS July 24,
1998
EVERGREEN SELECT FIXED INCOME FUNDS
Evergreen Select International Bond Fund
(The "Fund")
INSTITUTIONAL SHARES
This prospectus contains important information about the Institutional
shares of the Evergreen Select International Bond Fund, including how the Fund
invests and services available to shareholders. Please read this prospectus
before investing, and
keep it for future reference.
When you consider investing in the Fund, remember that the higher the
risk of losing money, the higher the potential reward. The reverse is also
generally true: the lower the risk, the lower the potential reward.
By itself, no fund is a complete investment plan. When considering an
investment in the Fund, remember to consider your overall investment objectives
and any other investments you own. You should also carefully evaluate your
ability to handle the risks posed by your investment in the Fund. You can find
information on the risks associated with investing in the Fund in the section
entitled "Fund Description."
To learn more about the Evergreen Select International Bond Fund, call
1-800-343-2898 for a free copy of the Fund's statement of additional information
("SAI") dated July 24, 1998, as supplemented from time to time. The Fund has
filed the SAI with the Securities and Exchange Commission. The SAI is
incorporated by reference herein (i.e., legally the SAI is part of this
prospectus).
Please remember that shares of the Fund are:
o Not deposits or obligations of any bank.
o Not endorsed or guaranteed by any bank.
o Not insured or otherwise protected by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other
government agency.
o Subject to investment risks, including possible loss of the
principal amount.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
EXPENSES 4
FINANCIAL HIGHLIGHTS 5
FUND DESCRIPTION 5
The Fund's Investment Objective 5
The Fund's Investment Approach 5
Securities and Investment Practices 6
BUYING AND SELLING SHARES 12
How To Buy Shares 12
How To Redeem Shares 13
Additional Transaction Policies 14
Exchanges 15
Dividends 16
Taxes 16
Shareholder Services 17
FUND DETAILS 17
Fund Organization and Service Providers 17
Other Information and Policies 19
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EXPENSES
The table and example below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest in
Institutional shares of the Fund. There are no shareholder transaction expenses,
which are fees paid directly from your account when you buy or sell shares of
the Fund.
Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's estimated annual operating expenses for the fiscal
period ending September 30, 1998, expressed as a percentage of the Fund's
estimated average net assets. The examples show what you would pay if you
invested $1,000 over the periods indicated. The examples assume that you
reinvest all of your dividends and redeem at the end of each period, and that
the Fund's average annual return will be 5%. The examples are for illustration
purposes only and should not be considered a representation of past or future
expenses. The Fund's actual expenses and returns will vary. For a more complete
description of the various costs and expenses borne by the Fund see "Fund
Details."
Annual Fund Operating Expenses as a percentage of
average daily net assets)
Management Fees (After Waivers) (1) 0.47%
12b-1 Fees None
Other Expenses 0.37%
Total Operating Expenses
(After Waivers) (2) 0.84%
Example of Fund Expenses 1 Year 3 Years
$9 $27
- --------
(1) The Fund's investment adviser currently limits the Fund's investment
advisory fee to 0.47%. Without such waiver the Management Fee set forth
above would be 0.60%. The investment adviser currently intends to
continue this expense waiver through November 30, 1999. However, it may
modify or cancel this limit at any time. See "Fund Details" for more
information.
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(2) The investment adviser of the Fund has undertaken to limit the Total
Operating Expenses of the Fund for a period of at least two years to
1.03% for Institutional shares. Absent expense waivers, the Total
Operating Expenses for the Fund would be 0.97% of average daily net
assets.
FINANCIAL HIGHLIGHTS
As of the date of this prospectus, the Fund had not commenced
operations. Therefore, no financial highlights are currently available.
FUND DESCRIPTION
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks capital appreciation and current income.
The Fund's investment objective is nonfundamental, which means that the
investment objective can be changed without a shareholder vote. There can be no
assurance that the Fund's investment objective will be achieved.
The Fund has also adopted fundamental investment policies designed to
limit the Fund's exposure to risk. Fundamental policies can be changed only with
a shareholder vote. For more information regarding investment policies, see "The
Fund's Investment Approach" and "Securities and Investment Practices" below, and
the SAI.
THE FUND'S INVESTMENT APPROACH
Under normal circumstances, the Fund invests at least 65% of its total
assets in investment grade fixed income securities or debt obligations of
supranational agencies, government entities or corporations denominated in
various currencies. Investment grade means that the security is rated in one of
the highest four rating categories by a nationally recognized statistical rating
organization ("NRSRO").
The Fund will invest at least 65% of its total assets in securities or
obligations of supranational agencies (such as the World Bank) or issuers or
governments located in at least three countries other than the United States.
No more than 5% of the Fund's assets will be invested in debt
obligations or similar securities denominated in the currencies of developing
countries.
The Fund may invest in derivative instruments, including options,
futures, interest rate swaps and index swaps, that are consistent with its
investment objectives and policies. The Fund may also invest in mortgage-backed
and asset-backed securities and bank obligations, and may enter into forward
currency exchange contracts. For more information, see "Derivatives",
"Mortgage-Backed and Asset-Backed Securities", and "Forward Currency
Transactions" below.
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The Fund may lend portfolio securities and enter into repurchase and
reverse repurchase agreements, and forward commitment and when-issued
transactions.
The Fund may also invest no more than 5% of its total assets in
warrants.
SECURITIES AND INVESTMENT PRACTICES
You can find information below about the types of securities in which
the Fund may invest, the types of investment techniques the Fund may employ in
pursuit of its objective and a summary of related risks. The Fund's SAI contains
additional information about these investments and investment techniques.
Foreign Securities. The Fund will invest primarily in obligations of foreign
governments and corporations denominated in various currencies. Because foreign
markets operate differently than the U.S. market, a Fund investing abroad will
encounter risks not normally associated with U.S. companies. For example,
information about foreign corporate securities is frequently less available than
information about U.S. securities, which may reduce the reliability of
investment decisions regarding foreign securities. Political or financial
problems more likely to occur in foreign countries may cause foreign investments
to lose money. Foreign markets may be less liquid than U.S. markets. Foreign
issuers may not be subject to the same accounting, auditing and financial
reporting standards and practices as U.S. issuers, making it more difficult to
value the investment. Foreign governments may regulate or supervise foreign
issuers less than in the United States. Unfavorable changes in a foreign
country's currency may adversely affect the value of foreign securities held by
the Fund. All of these factors can make foreign investments more volatile than
U.S.
investments.
Debt Securities. The Fund may invest in bonds or other instruments used by
corporations or governments to borrow money from investors, including all kinds
of convertible securities. When the Fund buys a debt security, it generally
expects a variable or fixed rate of interest and repayment of the principal at
maturity. Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. The main risks
of investing in debt securities are:
Interest Rate Risk: The risk that a fixed income security's
price will fall when interest rates rise, and vice versa. Debt
securities have varying levels of sensitivity to interest
rates. Longer-term bonds are generally more sensitive to
changes in interest rates than short-term bonds.
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o Credit Risk: The chance that the issuer will have its credit
rating downgraded or will default (fail to make scheduled
interest and principal payments), potentially reducing the
Fund's income and/or share price.
Debt securities have varying degrees of quality. Investment grade bonds
are generally rated within the four highest grades as determined by Standard &
Poor's Ratings Group ("S&P") (AAA, AA, A or BBB), Moody's Investors Service
("Moody's") (Aaa, Aa, A or Baa), or Fitch IBCA, Inc. ("Fitch") (AAA, AA, A or
BBB) or their respective equivalent ratings or, if not rated or rated by another
system, determined by the Fund's investment adviser to be of equivalent credit
quality to securities so rated. Securities rated in the fourth highest category
may have speculative characteristics; changes in economic or business conditions
are more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher grade bonds. Like the three highest grades,
however, these securities are considered investment grade.
The Fund is not required to sell or otherwise dispose of any security
that loses its rating or has its rating reduced after the Fund has purchased it.
Also, if S&P, Moody's or Fitch changes its ratings system, the Fund will try to
use comparable ratings as standards according to the Fund's investment
objectives and policies.
Concentration. The Fund may not concentrate its investments 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 the Fund intends to invest more than 25% of its
total assets in the utilities industry worldwide.
Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate.
The Fund may invest in derivatives, including options, futures and
swaps, only if the expected risks and rewards are consistent with its objectives
and policies. The Fund may use futures and options for hedging purposes only,
not for speculation.
Losses from derivatives can sometimes be substantial. This is true
partly because small price movements in the underlying asset can result in
immediate and substantial gains or losses in the value of the derivative.
Derivatives can also cause a Fund to lose money if the Fund fails to correctly
predict the direction in which the underlying assets or economic factor will
move.
Forward Currency Transactions. As discussed above, the Fund may invest in
securities of foreign issuers. When the Fund invests in foreign securities, they
usually will be denominated in foreign currencies, and the Fund temporarily may
hold funds in foreign currencies. Thus, the value of Fund shares will be
affected by changes in exchange rates.
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As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell. The
Fund also intends to use these contracts to hedge the U.S. dollar value of a
security it already owns, particularly if the Fund expects a decrease in the
value of the currency in which the foreign security is denominated. Although the
Fund will attempt to benefit from using forward contracts, the success of its
hedging strategy will depend on the investment adviser's ability to predict
accurately the future exchange rates between foreign currencies and the U.S.
dollar. The value of the Fund's investments denominated in foreign currencies
will depend on the relative strength of those currencies and the U.S. dollar,
and the Fund may be affected favorably or unfavorably by changes in the exchange
rates or exchange control regulations between foreign currencies and the U.S.
dollar. Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. The Fund does not intend to enter into foreign
currency transactions for speculation or leverage.
Borrowing. The Fund may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. The
specific limits applicable to borrowing by the Fund are set forth in the SAI.
Securities Lending. To generate income and offset expenses, the Fund may lend
securities to broker-dealers and other financial institutions, provided that the
loan is collateralized 100% by cash, government securities or government agency
securities, and that the value of all securities loaned does not exceed 33 1/3%
of the Fund's total assets. While securities are on loan, the borrower will pay
the Fund any income accruing on the security. Also, the Fund may invest any
collateral it receives in additional securities.
Gains or losses in the market value of a lent security will affect a
Fund and its shareholders. When a Fund lends its securities, it may not be able
to retrieve the securities on a timely basis, possibly losing the opportunity to
sell the securities at a desirable price. Also, if the borrower files for
bankruptcy or becomes insolvent, the Fund's ability to dispose of the securities
may be delayed.
Investing in Securities of Other Investment Companies. The Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, the Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that the
Fund currently pays for its own operations and may result in some duplication of
fees.
Repurchase Agreements. The Fund may invest in repurchase agreements. A
repurchase agreement is an agreement by which the Fund purchases a security
(usually U.S. government securities) for cash and obtains a simultaneous
commitment from the seller (usually a bank or
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broker-dealer)to repurchase the security at an agreed-upon price and specified
future date. The repurchase price reflects an agreed-upon interest rate for the
time period of the agreement. The Fund's risk is the inability of the seller to
pay the agreed-upon price on the delivery date. However, this risk is tempered
by the ability of the Fund to sell the security in the open market in the case
of a default. In such a case, the Fund may incur costs in disposing of the
security which would possibly increase Fund expenses. The Fund's investment
adviser will monitor the creditworthiness of the firms with which the Fund
enters into repurchase agreements.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by the Fund to sell a
security and repurchase it at a specified time and price. The Fund could lose
money if the market values of the securities it sold decline below their
repurchase prices. Reverse repurchase agreements may be considered a form of
borrowing, and, therefore, a form of leverage. Leverage may magnify gains or
losses of the Fund.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. The Fund may
enter into transactions whereby it commits to buying a security, but does not
pay for or take delivery of the security until some specified date in the
future. The value of these securities is subject to market fluctuation during
this period, and no income accrues to the Fund until settlement. At the time of
settlement, a when-issued security may be valued at less than its purchase
price. When entering into these transactions, the Fund relies on the other party
to consummate the transaction; if the other party fails to do so, the Fund may
be disadvantaged. The Fund will purchase when- issued securities only to meet
its investment objective, and not for speculative purposes.
Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid
securities and other securities which are not readily marketable. Repurchase
agreements with maturities longer than seven days will be included for the
purpose of the foregoing 15% limit. The inability of the Fund to dispose of
illiquid investments readily or at a reasonable price could impair the Fund's
ability to raise cash for redemptions or other purposes.
Restricted Securities. The Fund may invest in restricted securities, including
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act"). Generally, Rule 144A established a safe harbor from the
registration requirements of the 1933 Act for resale by large institutional
investors of securities not publicly traded in the United States. The Fund's
investment adviser determines the liquidity of Rule 144A securities according to
guidelines and procedures adopted by the Board of Trustees of Evergreen Select
Fixed Income Trust (the "Trust"). The Board of Trustees monitors the investment
adviser's application of those guidelines and procedures. Securities eligible
for resale pursuant to Rule 144A, which the Fund's investment adviser has
determined to be liquid or readily marketable, are not subject to the 15% limit
on illiquid securities.
Mortgage-Backed and Asset-Backed Securities. The Fund may invest up to 35% of
its total assets in mortgage-backed and asset-backed securities. Early repayment
of the mortgages or other collateral underlying these securities may expose the
Fund to a lower rate of return when it reinvests the principal. The rate of
prepayments will affect the price and volatility of the mortgage-backed security
and may have the effect of shortening or extending the effective maturity beyond
what the Fund anticipated at the time of purchase. In addition, asset-backed
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securities present certain risks. For instance, in the case of credit card
receivables, these securities may not have the benefit of any security interest
in the related collateral. Credit card receivables are generally unsecured and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of automobile receivables permit the servicer to retain possession of
the underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related automobile receivables. In
addition, because of the large number of vehicles involved in a typical issuance
and technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
Bank Obligations. The Fund may invest up to 35% of its total assets in bank
obligations, including certificates of deposit and bankers' acceptances.
Defensive Instruments. The Fund may invest without limitation in high quality
money market instruments, such as notes, commercial paper, certificates of
deposit or bankers' acceptances and other bank obligations, or U.S. government
securities and short-term obligations of foreign issuers denominated in U.S.
dollars or other currencies and traded in the United States if, in the opinion
of the Fund's investment adviser or sub-adviser, market conditions warrant a
temporary defensive investment strategy.
Other Investment Policies. The Fund has adopted additional investment policies
and guidelines that are set forth in the SAI.
BUYING AND SELLING SHARES
HOW TO BUY SHARES
Institutional investors may buy Institutional shares of the Fund
through broker-dealers, banks and certain other financial intermediaries, or
directly through the Fund's distributor, Evergreen Distributor, Inc. Investors
may purchase Institutional shares at the public offering price, which equals the
class's net asset value per share ("NAV"). See "Offering Price and Other
Purchase Information" below.
Minimum Investment. The minimum initial investment in Institutional shares is $1
million, which may be waived in certain situations. There is no minimum amount
required for subsequent purchases.
Opening an Account. You may open an account by mailing a signed account
application to the Fund c/o Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121. You may obtain an account application by calling
1-800-343-2898.
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Except as provided below, you can purchase shares only by wiring
federal funds to Evergreen Service Company. You may obtain wiring instructions
by calling 1-800-343-2898. When you call, the Evergreen Service Company
representative will ask you for the following information: name of authorized
person; shareholder name; shareholder account number; name of the Fund and share
class; amount being wired; and wiring bank name.
Offering Price and Other Purchase Information. When you buy the Fund's shares,
you pay its NAV next determined after the Fund receives and accepts your order.
When you buy shares of the Fund, the Fund must receive and accept your order by
the close of regular trading (currently 4:00 p.m. Eastern time), in order to
receive that day's offering price; otherwise, you will receive the next day's
offering price. For more information, see "How the Fund Calculates Its NAV."
You may, at the Fund's discretion, pay for shares of the Fund with
securities instead of cash. Additionally, if you want to buy the Fund's shares
equal in amount to $5 million or more, the Fund may require you to pay for those
shares with securities instead of cash. The Fund will only accept securities
that are consistent with its investment objective, policies and restrictions.
Also, the Fund will value the securities in the manner described under "How the
Fund Calculates Its NAV." Investors who receive the Fund's shares for securities
instead of cash may pay such transaction costs as broker's commissions, taxes or
governmental fees.
HOW TO REDEEM SHARES
You may redeem shares of the Fund by mail, telephone or other types of
telecommunication. Once a redemption request has been telephoned, mailed or
otherwise transmitted, it may not be changed or canceled.
Mail Redemptions. You may redeem shares on each day that the New York Stock
Exchange ("NYSE") is open by mailing a written request to Evergreen Service
Company at the following address:
Evergreen Service Company
P.O. Box 2121
Boston, Massachusetts 02106-2121
The signatures on the written request must be properly guaranteed, as
described below.
How To Redeem By Telephone. You may redeem your shares by calling 1-800-343-2898
between the hours of 8:00 a.m. and 6:00 p.m. (Eastern time) on each business
day. You may also redeem shares by sending a facsimile to (617) 210-2711 or by
other means of wire communication. You must state the Fund and class from which
you want to redeem, the number or dollar amount of shares you want to redeem and
your account number. The telephone redemption service is not available to you
automatically. You must elect it on your account application.
If you are unable to reach the Fund or Evergreen Service Company by
telephone, you should redeem by mail.
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Evergreen Service Company will wire your redemption proceeds to the
commercial bank account designated on the account application. If Evergreen
Service Company deems it appropriate, it may require additional documentation.
Although at present Evergreen Service Company pays the wire costs involved, it
reserves the right at any time to require the shareholder to pay such costs.
Redemption Value and Other Redemption Policies. When you sell shares, you
receive the NAV next computed after the Fund receives your request. When you
sell shares of the Fund, you receive the NAV computed at the close of the NYSE
on the day that the Fund receives your request, if your request is received
before 4:00 p.m. Eastern time. Redemption requests received after 4:00 p.m.
Eastern time will be processed using the NAV determined on the next business
day.
Generally, the Fund pays redemption proceeds within seven days. The
Fund may, at any time, change, suspend or terminate any of the redemption
methods described in this prospectus, except redemptions by mail. For more
information, see "How the Fund Calculates Its NAV."
The Fund may, at its discretion, pay your redemption proceeds with
securities instead of cash. However, the Fund is obligated to redeem shares
solely in cash, up to the lesser of $250,000 or 1% of the Fund's total net
assets during any ninety day period for any one shareholder. See the SAI for
further details.
Except as otherwise noted, neither the Fund, Evergreen Service Company
nor the Fund's distributor assumes responsibility for the authenticity of any
instructions received by any of them from a shareholder by telephone. Evergreen
Service Company will employ reasonable procedures to confirm that instructions
received over the telephone or otherwise are genuine. The Fund, Evergreen
Service Company and Fund's distributor will not be liable
when following instructions received by telephone or otherwise that Evergreen
Service Company reasonably believes to be genuine.
Shareholders may only change information contained in their
account registration (such as the bank account designated to receive wire
redemption proceeds) by writing to Evergreen Service Company. Signatures on such
written instructions must be guaranteed.
The Fund may temporarily suspend the right to redeem shares when:
(1) the NYSE is closed, other than customary weekend and
holiday closings;
(2) trading on the NYSE is restricted;
(3) an emergency exists and the Fund cannot dispose of its
investments or fairly determine their value; or
(4) the SEC so orders.
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ADDITIONAL TRANSACTION POLICIES
How the Fund Calculates Its NAV. The Fund's NAV equals the value of its shares
without sales charges. The Fund calculates its NAV by adding up the total value
of its investments and other assets, subtracting its liabilities and then
dividing the result by the number of shares outstanding. All expenses, including
fees paid to the Fund's investment adviser, are accrued daily. The Fund computes
its NAV as of the close of regular trading (generally 4:00 p.m. Eastern time) on
each day that the NYSE is open.
The Fund's assets are valued primarily on the basis of market
quotations. Short-term securities with remaining maturities of sixty days or
less for which quotations are not readily available are valued on the basis of
amortized cost. Non-dollar denominated securities will be valued as of the close
of the exchange at the closing price of such securities in their principal
trading markets unless such closing price does not represent current market
value. In addition, securities for which quotations are not readily available,
including fixed-income securities, are valued by a method that the Board of
Trustees believes accurately reflects fair value.
Signature Guarantee. For your protection, signatures on stock powers, and
written orders or authorizations must have a signature guarantee. A signature
guarantee can be provided by a U.S. stock exchange member, a bank, or other
persons eligible to guarantee signatures under the Securities Exchange Act of
1934 and Evergreen Service Company's policies. Evergreen Service Company may
waive this requirement or may require additional documentation in certain cases.
EXCHANGES
You may exchange Institutional shares of the Fund for Institutional
shares of any other Evergreen "Select" fund. You may exchange your shares
through your broker-dealer, by mail or by telephone. All exchange orders must
comply with the applicable requirements for purchases and redemptions and must
include your account number, the number or value of shares to be exchanged, the
class of shares, and the funds to and from which you wish to exchange. Exchanges
will be based on the relative NAV of the shares exchanged next determined after
the exchange request is received. Once an exchange request has been telephoned
or mailed, it may not be changed or canceled.
Signatures on exchange orders must be guaranteed, as described above.
The Fund reserves the right to change or revoke the exchange privilege
of any shareholder or to limit or revoke any exchange.
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Currently, you may not make more than five exchanges in a calendar year or three
exchanges in a calendar quarter.
Please read the prospectus of the fund that you want to exchange into
before requesting your exchange.
For federal income tax purposes, an exchange is treated as a sale for
taxable investors.
DIVIDENDS
As a shareholder, you are entitled to your share of earnings on the
Fund's investments. You receive such earnings as either an income dividend or a
capital gains distribution. Income dividends come from the dividends that the
Fund earns from its stocks plus any interest it receives from its bonds. The
Fund realizes a capital gain whenever it sells a security for a higher price
than its tax basis.
Dividend Schedule. The Fund declares dividends from its net investment income
daily and pays such dividends monthly. The Fund pays shareholders its net
capital gains at least once a year.
Payment Options. Unless you select another option on your account application,
your dividends and capital gains will be reinvested in additional Institutional
shares of the Fund. Shareholders will receive dividends on investments made by
federal funds bank wire the same day the wire is received provided that wire
purchases are received by State Street Bank and Trust Company, custodian for the
Fund, by 12:00 noon (Eastern time). Shares purchased by qualified institutions
via telephone will receive the dividend declared on that day if the telephone
order is placed by 12:00 noon (Eastern time), and federal funds are received by
4:00 p.m. (Eastern time). All other wire purchases received after 12:00 noon
(Eastern time) will earn dividends beginning the following business day.
Dividends accruing on the day of redemption will be paid to redeeming
shareholders except for redemptions where proceeds are wired the same day.
You may elect to receive some or all of your dividends and capital
gains in cash. Should you select this option, a check will be mailed to you or
your agent or trustee no later than seven days after the payment date.
TAXES
The Fund intends to qualify as a regulated investment company (a "RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended. As long as
the Fund qualifies as a RIC and
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distributes substantially all of its net investment income and capital gains, it
will not pay federal income taxes on the earnings it distributes to
shareholders.
Distributions to shareholders, whether taken in cash or reinvested in
shares, are generally considered taxable for federal income tax purposes as
follows:
o Income distributions and net short-term capital gains are
taxable as ordinary income.
o Long-term capital gains distributions are taxable as capital gains,
regardless of how long you have held your shares.
After each calendar year, Evergreen Service Company will mail you a
statement indicating which of that year's distributions you should treat as
ordinary income and which you should treat as capital gains. Distributions of
income or capital gains may also be subject to state and local taxes. You should
always consult your tax adviser for specific guidance as to the tax consequences
of your investment in the Fund.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from Evergreen
Service Company by calling toll free 1-800-343-2898 or by writing to Evergreen
Service Company.
Subaccount. Special processing has been arranged with Evergreen Service Company
for banks and other institutions that wish to open multiple accounts (a master
account and subaccounts). An investor wishing to use Evergreen Service Company's
subaccounting facilities will be required to enter into a separate agreement,
with the charges to be determined on the basis of the level of services to be
rendered. Subaccounts may be opened with the initial investment or at a later
date and may be established by an investor with registration either by name or
by number.
FUND DETAILS
FUND ORGANIZATION AND SERVICE PROVIDERS
Fund Structure. The Fund is an investment pool, which invests shareholders'
money towards a specified goal. The Fund is a diversified series of an open-end,
investment management company, called Evergreen Select Fixed Income Trust. The
Trust is a Delaware business trust organized on September 18, 1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of
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shareholders. The Trustees meet periodically throughout the year to oversee the
Fund's activities, reviewing, among other things, its performance and its
contractual arrangements with various service providers.
Shareholder Rights. All shareholders participate equally in distributions from
the Fund's assets and have equal voting, liquidation and other rights.
Shareholders may exchange shares as described under "Exchanges," but will have
no other preference, conversion, exchange or preemptive rights. When issued and
paid for, your shares will be fully paid and non-assessable. Fund shares are
redeemable, transferable and freely assignable as collateral. The Trust may
establish additional classes or series of shares.
The Fund does not hold annual shareholder meetings; the Fund may,
however, hold special meetings for such purposes as electing or removing
Trustees, changing fundamental policies and approving investment advisory
agreements or 12b-1 plans. In addition, the Fund is prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect Trustees. If any matters are to be voted on by shareholders,
each share owned as of the record date for the meeting would be entitled to one
vote for each dollar of NAV applicable to such share.
Adviser. The investment adviser to the Fund is AnalyticoTSA International, Inc.
("Analytic"). Analytic is a specialist manager of fixed income securities and
cash for institutional investors. Analytic is located at 25/28 Old Burlington
Street, London W1X 1LB, England, and is a wholly-owned subsidiary of United
Asset Management Corporation ("UAM") of Boston, Massachusetts. First Union
National Bank ("FUNB"), a subsidiary of First Union Corporation ("First Union")
, has entered into an agreement with UAM to acquire all the outstanding common
stock of Analytic. It is anticipated that this transaction will be consummated
on or about August 21, 1998 and that the name of Analytic will be changed to
First International Advisors, Inc. at that time.
Analytic is entitled to receive an advisory fee from the Fund equal to
0.60% of average daily net assets, computed daily and paid monthly.
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<PAGE>
Portfolio Manager. The portfolio manager of the Fund is George McNeill. Mr.
McNeill has been Managing Director of Analytic since 1996. He has over 35 years
of experience in managing fixed income portfolios. He served as the senior
investment officer for Gillett Brothers (1977-1981), Reserve Asset Managers
(1981-1989) and Axe-Houghton, Ltd. (1989- 1996). In 1996, together with UAM, Mr.
McNeill founded Alpha Global Fixed Income Managers, Inc., which then merged with
Analytic.
Distributor. Evergreen Distributor, Inc., 125 West 55th Street, New York, New
York 10019, markets the Fund and distributes its shares through broker-dealers,
financial planners and other financial representatives. Evergreen Distributor,
Inc. is a subsidiary of The BISYS Group, Inc. and is not affiliated with First
Union.
Transfer Agent. Evergreen Service Company, 200 Berkeley Street, Boston, MA
02116-5034, handles shareholder services, including record keeping and account
statements, distribution of dividends and capital gains and processing of
transactions.
Administrator. Evergreen Investment Services, Inc., subject to the supervision
and control of the Trust's Board of Trustees, provides the Fund with facilities,
equipment and personnel. For its services as administrator, Evergreen Investment
Services, Inc. is entitled to receive a fee based on the aggregate average daily
net assets of the Fund at a rate based on the total assets of all mutual funds
advised by First Union subsidiaries. The administration fee is calculated in
accordance with the following schedule:
Aggregate Average Daily Net Assets Of Mutual
Funds For Which Any
Subsidiary Of First Union Serves
Administrative Fee As Investment Adviser
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, keeps custody of the Fund's securities and cash and
performs other related duties.
OTHER INFORMATION AND POLICIES
Year 2000 Risks. The Fund could be adversely affected if computers used by the
Fund's service providers do not properly process information dated January 1,
2000 and after. The Fund's
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service providers are taking steps to address Year 2000 risks with respect to
computer systems on which the Fund depends. At this time, however, there can be
no assurance that these steps will be sufficient to avoid any adverse impact on
the Fund.
Banking Laws. The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company or its affiliates (a "Bank") from
sponsoring, organizing, controlling, or distributing the shares of a registered
open-end investment company such as the Fund. However, a Bank may act as
investment adviser, transfer agent or custodian to a registered open-end
investment company. A Bank may also purchase shares of such company and pay
third parties for performing these functions.
Securities Transactions. Under policies established by the Trust's Board of
Trustees, Analytic selects broker-dealers to execute portfolio transactions
subject to the receipt of best execution. In so doing, Analytic may select
broker-dealers who are affiliated with Analytic. Moreover, the Fund may pay
higher commissions to broker-dealers that provide research services, which
Analytic may use in advising the Fund or its other clients.
Portfolio Turnover. The estimated annual portfolio turnover rate for the Fund is
not expected to exceed 100%.
Code of Ethics. The Fund and Analytic have each adopted a code of ethics
incorporating policies on personal securities trading. In general, these codes
of ethics require that certain personnel of the Fund and Analytic (1) abstain
from engaging in certain personal trading practices and (2) report certain
personal trading activities.
Other Classes of Shares. The Fund offers two classes of shares, Institutional
and Institutional Service. Only Institutional shares are offered through this
prospectus. Call Evergreen Service Company for further information or a
prospectus offering Institutional Service shares of the Fund.
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<PAGE>
Investment Adviser
AnalyticoTSA International, Inc.
25/28 Old Burlington Street
London W1X 1LB
England
Custodian State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827
Transfer Agent
Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116-5034
Legal Counsel
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
Independent Auditors
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
Distributor
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
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PROSPECTUS July 24,
1998
EVERGREEN SELECT FIXED INCOME FUNDS
Evergreen Select International Bond Fund
(The "Fund")
INSTITUTIONAL SERVICE SHARES
This prospectus contains important information about the Institutional
Service shares of the Evergreen Select International Bond Fund, including how
the Fund invests and services available to shareholders. Please read this
prospectus before investing, and keep it for future reference.
When you consider investing in the Fund, remember that the higher the
risk of losing money, the higher the potential reward. The reverse is also
generally true: the lower the risk, the lower the potential reward.
By itself, no fund is a complete investment plan. When considering an
investment in the Fund, remember to consider your overall investment objectives
and any other investments you own. You should also carefully evaluate your
ability to handle the risks posed by your investment in the Fund. You can find
information on the risks associated with investing in the Fund in the section
entitled "Fund Description."
To learn more about the Evergreen Select International Bond Fund, call
1-800-343-2898 for a free copy of the Fund's statement of additional information
("SAI") dated July 24, 1998, as supplemented from time to time. The Fund has
filed the SAI with the Securities and Exchange Commission. The SAI is
incorporated by reference herein (i.e., legally the SAI is part of this
prospectus).
Please remember that shares of the Fund are:
o Not deposits or obligations of any bank.
o Not endorsed or guaranteed by any bank.
o Not insured or otherwise protected by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other
government agency.
o Subject to investment risks, including possible loss of the
principal amount.
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<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
EXPENSES 4
FINANCIAL HIGHLIGHTS 5
FUND DESCRIPTION 5
The Fund's Investment Objective 5
The Fund's Investment Approach 5
Securities and Investment Practices 6
BUYING AND SELLING SHARES 12
How To Buy Shares 12
How To Redeem Shares 13
Additional Transaction Policies 14
Exchanges 15
Dividends 16
Taxes 16
Shareholder Services 17
FUND DETAILS 17
Fund Organization and Service Providers 17
Other Information and Policies 19
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EXPENSES
The table and example below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest in
Institutional Service shares of the Fund. There are no shareholder transaction
expenses, which are fees paid directly from your account when you buy or sell
shares of the Fund.
Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's estimated annual operating expenses for the fiscal
period ending September 30, 1998, expressed as a percentage of the Fund's
estimated average net assets. The examples show what you would pay if you
invested $1,000 over the periods indicated. The examples assume that you
reinvest all of your dividends and redeem at the end of each period, and that
the Fund's average annual return will be 5%. The examples are for illustration
purposes only and should not be considered a representation of past or future
expenses. The Fund's actual expenses and returns will vary. For a more complete
description of the various costs and expenses borne by the Fund see "Fund
Details."
Annual Fund Operating Expenses (as a
percentage of average daily net assets)
Management Fees (After Waivers) 1 0.47%
12b-1 Fees O.25%
Other Expenses 0.37%
Total Operating Expenses
(After Waivers) 2
1.09%
Example of Fund Expenses 1 Year 3 Years
$11 $35
- --------
(1) The Fund's investment adviser currently limits the Fund's investment
advisory fee to 0.47%. Without such waiver the Management Fee set forth
above would be 0.60%. The investment adviser currently intends to
continue this expense waiver through November
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<PAGE>
30, 1999. However, it may modify or cancel this limit at any time. See
"Fund Details" for more information.
(2) The investment adviser of the Fund has undertaken to limit the Total
Operating Expenses of the Fund for a period of at least two years to
1.28% for Institutional Service shares. Absent expense waivers, the
Total Operating Expenses for the Fund would be 1.22% of average daily
net assets.
FINANCIAL HIGHLIGHTS
As of the date of this prospectus, the Fund had not commenced
operations. Therefore, no financial highlights are currently available.
FUND DESCRIPTION
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks capital appreciation and current income.
The Fund's investment objective is nonfundamental, which means that the
investment objective can be changed without a shareholder vote. There can be no
assurance that the Fund's investment objective will be achieved.
The Fund has also adopted fundamental investment policies designed to
limit the Fund's exposure to risk. Fundamental policies can be changed only with
a shareholder vote. For more information regarding investment policies, see "The
Fund's Investment Approach" and "Securities and Investment Practices" below, and
the SAI.
THE FUND'S INVESTMENT APPROACH
Under normal circumstances, the Fund invests at least 65% of its total
assets in investment grade fixed income securities or debt obligations of
supranational agencies, government entities or corporations denominated in
various currencies. Investment grade means that the security is rated in one of
the highest four rating categories by a nationally recognized statistical rating
organization ("NRSRO").
The Fund will invest at least 65% of its total assets in securities or
obligations of supranational agencies (such as the World Bank) or issuers or
governments located in at least three countries other than the United States.
No more than 5% of the Fund's assets will be invested in debt
obligations or similar securities denominated in the currencies of developing
countries.
The Fund may invest in derivative instruments, including options, futures,
interest rate swaps and index swaps, that are consistent with its investment
objectives and policies. The Fund
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<PAGE>
may also invest in mortgage-backed and asset-backed securities and bank
obligations, and may enter into forward currency exchange contracts. For more
information, see "Derivatives", "Mortgage-Backed and Asset-Backed Securities",
and "Forward Currency Transactions" below.
The Fund may lend portfolio securities and enter into repurchase and
reverse repurchase agreements, and forward commitment and when-issued
transactions.
The Fund may also invest no more than 5% of its total assets in
warrants.
SECURITIES AND INVESTMENT PRACTICES
You can find information below about the types of securities in which
the Fund may invest, the types of investment techniques the Fund may employ in
pursuit of its objective and a summary of related risks. The Fund's SAI contains
additional information about these investments and investment techniques.
Foreign Securities. The Fund will invest primarily in obligations of foreign
governments and corporations denominated in various currencies. Because foreign
markets operate differently than the U.S. market, a Fund investing abroad will
encounter risks not normally associated with U.S. companies. For example,
information about foreign corporate securities is frequently less available than
information about U.S. securities, which may reduce the reliability of
investment decisions regarding foreign securities. Political or financial
problems more likely to occur in foreign countries may cause foreign investments
to lose money. Foreign markets may be less liquid than U.S. markets. Foreign
issuers may not be subject to the same accounting, auditing and financial
reporting standards and practices as U.S. issuers, making it more difficult to
value the investment. Foreign governments may regulate or supervise foreign
issuers less than in the United States. Unfavorable changes in a foreign
country's currency may adversely affect the value of foreign securities held by
the Fund. All of these factors can make foreign investments more volatile than
U.S.
investments.
Debt Securities. The Fund may invest in bonds or other instruments used by
corporations or governments to borrow money from investors, including all kinds
of convertible securities. When the Fund buys a debt security, it generally
expects a variable or fixed rate of interest and repayment of the principal at
maturity. Some debt securities, such as zero coupon bonds, do not pay current
interest, but are purchased at a discount from their face values. The main risks
of investing in debt securities are:
Interest Rate Risk: The risk that a fixed income security's
price will fall when interest rates rise, and vice versa. Debt
securities have varying levels of sensitivity to interest
rates. Longer-term bonds are generally more sensitive to
changes in interest rates than short-term bonds.
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<PAGE>
o Credit Risk: The chance that the issuer will have its credit
rating downgraded or will default (fail to make scheduled
interest and principal payments), potentially reducing the
Fund's income and/or share price.
Debt securities have varying degrees of quality. Investment grade bonds
are generally rated within the four highest grades as determined by Standard &
Poor's Ratings Group ("S&P") (AAA, AA, A or BBB), Moody's Investors Service
("Moody's") (Aaa, Aa, A or Baa), or Fitch IBCA, Inc. ("Fitch") (AAA, AA, A or
BBB) or their respective equivalent ratings or, if not rated or rated by another
system, determined by the Fund's investment adviser to be of equivalent credit
quality to securities so rated. Securities rated in the fourth highest category
may have speculative characteristics; changes in economic or business conditions
are more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher grade bonds. Like the three highest grades,
however, these securities are considered investment grade.
The Fund is not required to sell or otherwise dispose of any security
that loses its rating or has its rating reduced after the Fund has purchased it.
Also, if S&P, Moody's or Fitch changes its ratings system, the Fund will try to
use comparable ratings as standards according to the Fund's investment
objectives and policies.
Concentration. The Fund may not concentrate its investments 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 the Fund intends to invest more than 25% of its
total assets in the utilities industry worldwide.
Derivatives. Derivatives are financial contracts whose value is based on an
underlying asset, such as a stock or a bond, or an underlying economic factor,
such as an index or an interest rate.
The Fund may invest in derivatives, including options, futures and
swaps, only if the expected risks and rewards are consistent with its objectives
and policies. The Fund may use futures and options for hedging purposes only,
not for speculation.
Losses from derivatives can sometimes be substantial. This is true
partly because small price movements in the underlying asset can result in
immediate and substantial gains or losses in the value of the derivative.
Derivatives can also cause a Fund to lose money if the Fund fails to correctly
predict the direction in which the underlying assets or economic factor will
move.
Forward Currency Transactions. As discussed above, the Fund may invest in
securities of foreign issuers. When the Fund invests in foreign securities, they
usually will be denominated in foreign currencies, and the Fund temporarily may
hold funds in foreign currencies. Thus, the value of Fund shares will be
affected by changes in exchange rates.
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<PAGE>
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Fund may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency the Fund
will deliver or receive when the contract is completed) is fixed when the Fund
enters into the contract. The Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell. The
Fund also intends to use these contracts to hedge the U.S. dollar value of a
security it already owns, particularly if the Fund expects a decrease in the
value of the currency in which the foreign security is denominated. Although the
Fund will attempt to benefit from using forward contracts, the success of its
hedging strategy will depend on the investment adviser's ability to predict
accurately the future exchange rates between foreign currencies and the U.S.
dollar. The value of the Fund's investments denominated in foreign currencies
will depend on the relative strength of those currencies and the U.S. dollar,
and the Fund may be affected favorably or unfavorably by changes in the exchange
rates or exchange control regulations between foreign currencies and the U.S.
dollar. Changes in foreign currency exchange rates also may affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. The Fund does not intend to enter into foreign
currency transactions for speculation or leverage.
Borrowing. The Fund may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. The
specific limits applicable to borrowing by the Fund are set forth in the SAI.
Securities Lending. To generate income and offset expenses, the Fund may lend
securities to broker-dealers and other financial institutions, provided that the
loan is collateralized 100% by cash, government securities or government agency
securities, and that the value of all securities loaned does not exceed 33 1/3%
of the Fund's total assets. While securities are on loan, the borrower will pay
the Fund any income accruing on the security. Also, the Fund may invest any
collateral it receives in additional securities.
Gains or losses in the market value of a lent security will affect a
Fund and its shareholders. When a Fund lends its securities, it may not be able
to retrieve the securities on a timely basis, possibly losing the opportunity to
sell the securities at a desirable price. Also, if the borrower files for
bankruptcy or becomes insolvent, the Fund's ability to dispose of the securities
may be delayed.
Investing in Securities of Other Investment Companies. The Fund may invest in
the securities of other investment companies. As a shareholder of another
investment company, the Fund would pay its portion of the other investment
company's expenses. These expenses would be in addition to the expenses that the
Fund currently pays for its own operations and may result in some duplication of
fees.
Repurchase Agreements. The Fund may invest in repurchase agreements. A
repurchase agreement is an agreement by which the Fund purchases a security
(usually U.S. government securities) for cash and obtains a simultaneous
commitment from the seller (usually a bank or
33
<PAGE>
broker-dealer)to repurchase the security at an agreed-upon price and specified
future date. The repurchase price reflects an agreed-upon interest rate for the
time period of the agreement. The Fund's risk is the inability of the seller to
pay the agreed-upon price on the delivery date. However, this risk is tempered
by the ability of the Fund to sell the security in the open market in the case
of a default. In such a case, the Fund may incur costs in disposing of the
security which would possibly increase Fund expenses. The Fund's investment
adviser will monitor the creditworthiness of the firms with which the Fund
enters into repurchase agreements.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by the Fund to sell a
security and repurchase it at a specified time and price. The Fund could lose
money if the market values of the securities it sold decline below their
repurchase prices. Reverse repurchase agreements may be considered a form of
borrowing, and, therefore, a form of leverage. Leverage may magnify gains or
losses of the Fund.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. The Fund may
enter into transactions whereby it commits to buying a security, but does not
pay for or take delivery of the security until some specified date in the
future. The value of these securities is subject to market fluctuation during
this period, and no income accrues to the Fund until settlement. At the time of
settlement, a when-issued security may be valued at less than its purchase
price. When entering into these transactions, the Fund relies on the other party
to consummate the transaction; if the other party fails to do so, the Fund may
be disadvantaged. The Fund will purchase when- issued securities only to meet
its investment objective, and not for speculative purposes.
Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid
securities and other securities which are not readily marketable. Repurchase
agreements with maturities longer than seven days will be included for the
purpose of the foregoing 15% limit. The inability of the Fund to dispose of
illiquid investments readily or at a reasonable price could impair the Fund's
ability to raise cash for redemptions or other purposes.
Restricted Securities. The Fund may invest in restricted securities, including
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act"). Generally, Rule 144A established a safe harbor from the
registration requirements of the 1933 Act for resale by large institutional
investors of securities not publicly traded in the United States. The Fund's
investment adviser determines the liquidity of Rule 144A securities according to
guidelines and procedures adopted by the Board of Trustees of Evergreen Select
Fixed Income Trust (the "Trust"). The Board of Trustees monitors the investment
adviser's application of those guidelines and procedures. Securities eligible
for resale pursuant to Rule 144A, which the Fund's investment adviser has
determined to be liquid or readily marketable, are not subject to the 15% limit
on illiquid securities.
Mortgage-Backed and Asset-Backed Securities. The Fund may invest up to 35% of
its total assets in mortgage-backed and asset-backed securities. Early repayment
of the mortgages or other collateral underlying these securities may expose the
Fund to a lower rate of return when it reinvests the principal. The rate of
prepayments will affect the price and volatility of the mortgage-backed security
and may have the effect of shortening or extending the effective maturity beyond
what the Fund anticipated at the time of purchase. In addition, asset-backed
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<PAGE>
securities present certain risks. For instance, in the case of credit card
receivables, these securities may not have the benefit of any security interest
in the related collateral. Credit card receivables are generally unsecured and
the debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of automobile receivables permit the servicer to retain possession of
the underlying obligations. If the servicer were to sell these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related automobile receivables. In
addition, because of the large number of vehicles involved in a typical issuance
and technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
Bank Obligations. The Fund may invest up to 35% of its total assets in bank
obligations, including certificates of deposit and bankers' acceptances.
Defensive Instruments. The Fund may invest without limitation in high quality
money market instruments, such as notes, commercial paper, certificates of
deposit or bankers' acceptances and other bank obligations, or U.S. government
securities and short-term obligations of foreign issuers denominated in U.S.
dollars or other currencies and traded in the United States if, in the opinion
of the Fund's investment adviser , market conditions warrant a temporary
defensive investment strategy.
Other Investment Policies. The Fund has adopted additional investment policies
and guidelines that are set forth in the SAI.
BUYING AND SELLING SHARES
HOW TO BUY SHARES
Institutional investors may buy Institutional Service shares of the
Fund through broker-dealers, banks and certain other financial intermediaries,
or directly through the Fund's distributor, Evergreen Distributor, Inc.
Investors may purchase Institutional Service shares at the public offering
price, which equals the class's net asset value per share ("NAV"). See "Offering
Price and Other Purchase Information" below.
Minimum Investment. The minimum initial investment in Institutional Service
shares is $1 million, which may be waived in certain situations. There is no
minimum amount required for subsequent purchases.
Opening an Account. You may open an account by mailing a signed account
application to the Fund c/o Evergreen Service Company, P.O. Box 2121, Boston,
Massachusetts 02106-2121. You may obtain an account application by calling
1-800-343-2898.
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Except as provided below, you can purchase shares only by wiring
federal funds to Evergreen Service Company. You may obtain wiring instructions
by calling 1-800-343-2898. When you call, the Evergreen Service Company
representative will ask you for the following information: name of authorized
person; shareholder name; shareholder account number; name of the Fund and share
class; amount being wired; and wiring bank name.
Offering Price and Other Purchase Information. When you buy the Fund's shares,
you pay its NAV next determined after the Fund receives and accepts your order.
When you buy shares of the Fund, the Fund must receive and accept your order by
the close of regular trading (currently 4:00 p.m. Eastern time), in order to
receive that day's offering price; otherwise, you will receive the next day's
offering price. For more information, see "How the Fund Calculates Its NAV."
You may, at the Fund's discretion, pay for shares of the Fund with
securities instead of cash. Additionally, if you want to buy the Fund's shares
equal in amount to $5 million or more, the Fund may require you to pay for those
shares with securities instead of cash. The Fund will only accept securities
that are consistent with its investment objective, policies and restrictions.
Also, the Fund will value the securities in the manner described under "How the
Fund Calculates Its NAV." Investors who receive the Fund's shares for securities
instead of cash may pay such transaction costs as broker's commissions, taxes or
governmental fees.
HOW TO REDEEM SHARES
You may redeem shares of the Fund by mail, telephone or other types of
telecommunication. Once a redemption request has been telephoned, mailed or
otherwise transmitted, it may not be changed or canceled.
Mail Redemptions. You may redeem shares on each day that the New York Stock
Exchange ("NYSE") is open by mailing a written request to Evergreen Service
Company at the following address:
Evergreen Service Company
P.O. Box 2121
Boston, Massachusetts 02106-2121
The signatures on the written request must be properly guaranteed, as
described below.
How To Redeem By Telephone. You may redeem your shares by calling 1-800-343-2898
between the hours of 8:00 a.m. and 6:00 p.m. (Eastern time) on each business
day. You may also redeem shares by sending a facsimile to (617) 210-2711 or by
other means of wire communication. You must state the Fund and class from which
you want to redeem, the number or dollar amount of shares you want to redeem and
your account number. The telephone redemption service is not available to you
automatically. You must elect it on your account application.
If you are unable to reach the Fund or Evergreen Service Company by
telephone, you should redeem by mail.
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Evergreen Service Company will wire your redemption proceeds to the
commercial bank account designated on the account application. If Evergreen
Service Company deems it appropriate, it may require additional documentation.
Although at present Evergreen Service Company pays the wire costs involved, it
reserves the right at any time to require the shareholder to pay such costs.
Redemption Value and Other Redemption Policies. When you sell shares, you
receive the NAV next computed after the Fund receives your request. When you
sell shares of the Fund, you receive the NAV computed at the close of the NYSE
on the day that the Fund receives your request, if your request is received
before 4:00 p.m. Eastern time. Redemption requests received after 4:00 p.m.
Eastern time will be processed using the NAV determined on the next business
day.
Generally, the Fund pays redemption proceeds within seven days. The
Fund may, at any time, change, suspend or terminate any of the redemption
methods described in this prospectus, except redemptions by mail. For more
information, see "How the Fund Calculates Its NAV."
The Fund may, at its discretion, pay your redemption proceeds with
securities instead of cash. However, the Fund is obligated to redeem shares
solely in cash, up to the lesser of $250,000 or 1% of the Fund's total net
assets during any ninety day period for any one shareholder. See the SAI for
further details.
Except as otherwise noted, neither the Fund, Evergreen Service Company
nor the Fund's distributor assumes responsibility for the authenticity of any
instructions received by any of them from a shareholder by telephone. Evergreen
Service Company will employ reasonable procedures to confirm that instructions
received over the telephone or otherwise are genuine. The Fund, Evergreen
Service Company and Fund's distributor will not be liable
when following instructions received by telephone or otherwise that Evergreen
Service Company reasonably believes to be genuine.
Shareholders may only change information contained in their
account registration (such as the bank account designated to receive wire
redemption proceeds) by writing to Evergreen Service Company. Signatures on such
written instructions must be guaranteed.
The Fund may temporarily suspend the right to redeem shares when:
(1) the NYSE is closed, other than customary weekend and
holiday closings;
(2) trading on the NYSE is restricted;
(3) an emergency exists and the Fund cannot dispose of its
investments or fairly determine their value; or
(4) the SEC so orders.
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ADDITIONAL TRANSACTION POLICIES
How the Fund Calculates Its NAV. The Fund's NAV equals the value of its shares
without sales charges. The Fund calculates its NAV by adding up the total value
of its investments and other assets, subtracting its liabilities and then
dividing the result by the number of shares outstanding. All expenses, including
fees paid to the Fund's investment adviser, are accrued daily. The Fund computes
its NAV as of the close of regular trading (generally 4:00 p.m. Eastern time) on
each day that the NYSE is open.
The Fund's assets are valued primarily on the basis of market
quotations. Short-term securities with remaining maturities of sixty days or
less for which quotations are not readily available are valued on the basis of
amortized cost. Non-dollar denominated securities will be valued as of the close
of the exchange at the closing price of such securities in their principal
trading markets unless such closing price does not represent current market
value. In addition, securities for which quotations are not readily available,
including fixed-income securities, are valued by a method that the Board of
Trustees believes accurately reflects fair value.
Signature Guarantee. For your protection, signatures on stock powers, and
written orders or authorizations must have a signature guarantee. A signature
guarantee can be provided by a U.S. stock exchange member, a bank, or other
persons eligible to guarantee signatures under the Securities Exchange Act of
1934 and Evergreen Service Company's policies. Evergreen Service Company may
waive this requirement or may require additional documentation in certain cases.
EXCHANGES
You may exchange Institutional Service shares of the Fund for
Institutional Service shares of any other Evergreen "Select" fund. You may
exchange your shares through your broker-dealer, by mail or by telephone. All
exchange orders must comply with the applicable requirements for purchases and
redemptions and must include your account number, the number or value of shares
to be exchanged, the class of shares, and the funds to and from which you wish
to exchange. Exchanges will be based on the relative NAV of the shares exchanged
next determined after the exchange request is received. Once an exchange request
has been telephoned or mailed, it may not be changed or canceled.
Signatures on exchange orders must be guaranteed, as described above.
The Fund reserves the right to change or revoke the exchange privilege
of any shareholder or to limit or revoke any exchange.
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Currently, you may not make more than five exchanges in a calendar year or three
exchanges in a calendar quarter.
Please read the prospectus of the fund that you want to exchange into
before requesting your exchange.
For federal income tax purposes, an exchange is treated as a sale for
taxable investors.
DIVIDENDS
As a shareholder, you are entitled to your share of earnings on the
Fund's investments. You receive such earnings as either an income dividend or a
capital gains distribution. Income dividends come from the dividends that the
Fund earns from its stocks plus any interest it receives from its bonds. The
Fund realizes a capital gain whenever it sells a security for a higher price
than its tax basis.
Dividend Schedule. The Fund declares dividends from its net investment income
daily and pays such dividends monthly. The Fund pays shareholders its net
capital gains at least once a year.
Payment Options. Unless you select another option on your account application,
your dividends and capital gains will be reinvested in additional Institutional
Service shares of the Fund. Shareholders will receive dividends on investments
made by federal funds bank wire the same day the wire is received provided that
wire purchases are received by State Street Bank and Trust Company, custodian
for the Fund, by 12:00 noon (Eastern time). Shares purchased by qualified
institutions via telephone will receive the dividend declared on that day if the
telephone order is placed by 12:00 noon (Eastern time), and federal funds are
received by 4:00 p.m. (Eastern time). All other wire purchases received after
12:00 noon (Eastern time) will earn dividends beginning the following business
day. Dividends accruing on the day of redemption will be paid to redeeming
shareholders except for redemptions where proceeds are wired the same day.
You may elect to receive some or all of your dividends and capital
gains in cash. Should you select this option, a check will be mailed to you or
your agent or trustee no later than seven days after the payment date.
TAXES
The Fund intends to qualify as a regulated investment company (a "RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended. As long as
the Fund qualifies as a RIC and
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distributes substantially all of its net investment income and capital gains, it
will not pay federal income taxes on the earnings it distributes to
shareholders.
Distributions to shareholders, whether taken in cash or reinvested in
shares, are generally considered taxable for federal income tax purposes as
follows:
o Income distributions and net short-term capital gains are
taxable as ordinary income.
o Long-term capital gains distributions are taxable as capital gains,
regardless of how long you have held your shares.
After each calendar year, Evergreen Service Company will mail you a
statement indicating which of that year's distributions you should treat as
ordinary income and which you should treat as capital gains. Distributions of
income or capital gains may also be subject to state and local taxes. You should
always consult your tax adviser for specific guidance as to the tax consequences
of your investment in the Fund.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from Evergreen
Service Company by calling toll free 1-800-343-2898 or by writing to Evergreen
Service Company.
Subaccount. Special processing has been arranged with Evergreen Service Company
for banks and other institutions that wish to open multiple accounts (a master
account and subaccounts). An investor wishing to use Evergreen Service Company's
subaccounting facilities will be required to enter into a separate agreement,
with the charges to be determined on the basis of the level of services to be
rendered. Subaccounts may be opened with the initial investment or at a later
date and may be established by an investor with registration either by name or
by number.
FUND DETAILS
FUND ORGANIZATION AND SERVICE PROVIDERS
Fund Structure. The Fund is an investment pool, which invests shareholders'
money towards a specified goal. The Fund is a diversified series of an open-end,
investment management company, called Evergreen Select Fixed Income Trust. The
Trust is a Delaware business trust organized on September 18, 1997.
Board of Trustees. The Trust is supervised by a Board of
Trustees that is responsible for representing the interests of
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shareholders. The Trustees meet periodically throughout the year to oversee the
Fund's activities, reviewing, among other things, its performance and its
contractual arrangements with various service providers.
Shareholder Rights. All shareholders participate equally in distributions from
the Fund's assets and have equal voting, liquidation and other rights.
Shareholders may exchange shares as described under "Exchanges," but will have
no other preference, conversion, exchange or preemptive rights. When issued and
paid for, your shares will be fully paid and non-assessable. Fund shares are
redeemable, transferable and freely assignable as collateral. The Trust may
establish additional classes or series of shares.
The Fund does not hold annual shareholder meetings; the Fund may,
however, hold special meetings for such purposes as electing or removing
Trustees, changing fundamental policies and approving investment advisory
agreements or 12b-1 plans. In addition, the Fund is prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect Trustees. If any matters are to be voted on by shareholders,
each share owned as of the record date for the meeting would be entitled to one
vote for each dollar of NAV applicable to such share.
Adviser. The investment adviser to the Fund is AnalyticoTSA International, Inc.
("Analytic"). Analytic is a specialist manager of fixed income securities and
cash for institutional investors. Analytic is located at 25/28 Old Burlington
Street, London W1X 1LB, England, and is a wholly-owned subsidiary of United
Asset Management Corporation ("UAM") of Boston, Massachusetts. First Union
National Bank ("FUNB"), a subsidiary of First Union Corporation ("First Union")
, has entered into an agreement with UAM to acquire all the outstanding common
stock of Analytic. It is anticipated that this transaction will be consummated
on or about August 21, 1998 and that the name of Analytic will be changed to
First International Advisors, Inc. at that time.
Analytic is entitled to receive an advisory fee from the Fund equal to
0.60% of average daily net assets, computed daily and paid monthly.
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Portfolio Manager. The portfolio manager of the Fund is George McNeill. Mr.
McNeill has been Managing Director of Analytic since 1996. He has over 35 years
of experience in managing fixed income portfolios. He served as the senior
investment officer for Gillett Brothers (1977-1981), Reserve Asset Managers
(1981-1989) and Axe-Houghton, Ltd. (1989- 1996). In 1996, together with UAM, Mr.
McNeill founded Alpha Global Fixed Income Managers, Inc., which then merged with
Analytic.
Distributor. Evergreen Distributor, Inc., 125 West 55th Street, New York, New
York 10019, markets the Fund and distributes its shares through broker-dealers,
financial planners and other financial representatives. Evergreen Distributor,
Inc. is a subsidiary of The BISYS Group, Inc. and is not affiliated with First
Union.
Transfer Agent. Evergreen Service Company, 200 Berkeley Street, Boston, MA
02116-5034, handles shareholder services, including record keeping and account
statements, distribution of dividends and capital gains and processing of
transactions.
Administrator. Evergreen Investment Services, Inc., subject to the supervision
and control of the Trust's Board of Trustees, provides the Fund with facilities,
equipment and personnel. For its services as administrator, Evergreen Investment
Services, Inc. is entitled to receive a fee based on the aggregate average daily
net assets of the Fund at a rate based on the total assets of all mutual funds
advised by First Union subsidiaries. The administration fee is calculated in
accordance with the following schedule:
Aggregate Average Daily Net Assets Of Mutual
Funds For Which Any
Subsidiary Of First Union Serves
Administrative Fee As Investment Adviser
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, keeps custody of the Fund's securities and cash and
performs other related duties.
OTHER INFORMATION AND POLICIES
Distribution Plan. The Trust has adopted a distribution plan for the
Institutional Service shares of the Fund as allowed under the Investment Company
Act of 1940. The Fund's distribution plan permits the Fund to pay an annual
service fee of up to 0.25% of the average daily net assets of
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the class for personal services rendered to shareholders and/or the maintenance
of accounts. The Fund's distribution plan may be terminated at any time by vote
of the Independent Trustees or by vote of a majority of the outstanding
Institutional Service shares. For more information about the Fund's distribution
plan, see the SAI.
Year 2000 Risks. The Fund could be adversely affected if computers used by the
Fund's service providers do not properly process information dated January 1,
2000 and after. The Fund's service providers are taking steps to address Year
2000 risks with respect to computer systems on which the Fund depends. At this
time, however, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Fund.
Banking Laws. The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company or its affiliates (a "Bank") from
sponsoring, organizing, controlling, or distributing the shares of a registered
open-end investment company such as the Fund. However, a Bank may act as
investment adviser, transfer agent or custodian to a registered open-end
investment company. A Bank may also purchase shares of such company and pay
third parties for performing these functions.
Securities Transactions. Under policies established by the Trust's Board of
Trustees, Analytic selects broker-dealers to execute portfolio transactions
subject to the receipt of best execution. In so doing, Analytic may select
broker-dealers who are affiliated with Analytic. Moreover, the Fund may pay
higher commissions to broker-dealers that provide research services, which
Analytic may use in advising the Fund or its other clients.
Portfolio Turnover. The estimated annual portfolio turnover rate for the Fund is
not expected to exceed 100%.
Code of Ethics. The Fund and Analytic have each adopted a code of ethics
incorporating policies on personal securities trading. In general, these codes
of ethics require that certain personnel of the Fund and Analytic (1) abstain
from engaging in certain personal trading practices and (2) report certain
personal trading activities.
Other Classes of Shares. The Fund offers two classes of shares, Institutional
and Institutional Service. Only Institutional Service shares are offered through
this prospectus. Call Evergreen Service Company for further information or a
prospectus offering Institutional shares of the Fund.
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Investment Adviser
AnalyticoTSA International, Inc.
25/28 Old Burlington Street
London W1X 1LB
England
Custodian State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827
Transfer Agent
Evergreen Service Company, 200 Berkeley Street, Boston, Massachusetts 02116-5034
Legal Counsel
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
Independent Auditors
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
Distributor
Evergreen Distributor, Inc., 125 West 55th Street, New York, New York 10019
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EVERGREEN SELECT FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
STATEMENT OF ADDITIONAL INFORMATION
JULY 24, 1998
Evergreen Select International Bond Fund
(the "Fund")
The Fund is a series of an open-end management
investment company, known as "Evergreen Select Fixed
Income Trust" (the "Trust").
This statement of additional information ("SAI") provides additional
information about all classes of shares of the Fund. It is not a prospectus and
you should read it in conjunction with the Fund's prospectuses dated July 24,
1998, as supplemented from time to time. You may obtain a copy of the
prospectuses from Evergreen Distributor, Inc.
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TABLE OF CONTENTS
INVESTMENT POLICIES........................................ 3
Additional Information on Securities and Investment
Practices............................................. 3
Investment Restrictions and Guidelines................ 22
MANAGEMENT OF THE TRUST.................................... 25
INVESTMENT ADVISORY AND OTHER SERVICES..................... 29
Investment Adviser.................................... 29
Distributor........................................... 31
Distribution Plan..................................... 31
Additional Service Providers.......................... 32
BROKERAGE ALLOCATION AND OTHER PRACTICES................... 33
Selection of Brokers.................................. 33
Brokerage Commissions................................. 33
General Brokerage Policies............................ 33
TRUST ORGANIZATION......................................... 34
Form of Organization.................................. 34
Description of Shares................................. 34
Voting Rights......................................... 34
Limitation of Trustees' Liability..................... 35
PURCHASE, REDEMPTION AND PRICING OF FUND SHARES............ 35
Exchanges............................................. 35
How the Fund Values Shares............................ 35
Shareholder Services.................................. 37
PRINCIPAL UNDERWRITER...................................... 37
ADDITIONAL TAX INFORMATION ................................ 38
ADDITIONAL INFORMATION..................................... 40
APPENDIX................................................... A-1
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INVESTMENT POLICIES
The investment objective of the Fund and a description of the
securities in which the Fund may invest is set forth in the Fund's prospectuses.
The following expands upon the discussion in the prospectuses regarding certain
investments of the Fund.
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES
Foreign Securities
The Fund may invest in foreign securities or U.S. securities traded in
foreign markets. Permissible investments may consist of obligations of foreign
branches of U.S. banks and of foreign banks, including European certificates of
deposit, European time deposits, Canadian time deposits and Yankee certificates
of deposit, and investments in Canadian commercial paper, foreign securities and
Europaper. These instruments may subject the Fund to investment risks that
differ in some respects from those related to investments in obligations of U.S.
issuers. Such risks include future adverse political and economic developments;
the possible imposition of withholding taxes on interest or other income; the
possible seizure, nationalization, or expropriation of foreign deposits; the
possible establishment of exchange controls or taxation at the source; greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
Derivatives
Derivatives are financial contracts whose value depends on, or is
derived from, the value of an underlying asset, reference rate or index. These
assets, rates, and indices may include bonds, stocks, mortgages, commodities,
interest rates, currency exchange rates, bond indices, and stock indices.
Derivatives may be standardized, exchange-traded contracts or customized,
privately negotiated contracts. Exchange-traded derivatives tend to be more
liquid and subject to less credit risk than those that are privately negotiated.
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There are four principal types of derivative instruments -- options,
futures, forwards, and swaps -- from which virtually any type of derivative
transaction can be created. Debt instruments that incorporate one or more of
these building blocks for the purpose of determining the principal amount of
and/or rate of interest payable on the debt instruments are often referred to as
"structured securities." An example of this type of structured security is
indexed commercial paper. The term is also used to describe certain securities
issued in connection with the restructuring of certain foreign obligations. The
term "derivative" is also sometimes used to describe securities involving rights
to a portion of the cash flows from an underlying pool of mortgages or other
assets from which payments are passed through to the owner of, or that
collateralize, the securities.
The Fund can use derivatives to earn income, to enhance returns, to
hedge or adjust the risk profile of the portfolio, in place of more traditional
direct investments or to obtain exposure to otherwise inaccessible markets. The
Fund's use of derivatives for non-hedging purposes entails greater risks than if
the Fund were to derivatives solely for hedging purposes.
Derivatives are a valuable tool which, when used properly, can provide
significant benefits to the Fund's shareholders. The Fund's Adviser (as
hereinafter defined) is not an aggressive user of derivatives with respect to
the Fund. However, the Fund may take positions in those derivatives that are
within its investment policies if, in the Adviser's judgment, this represents an
effective response to current or anticipated market conditions. The Adviser's
use of derivatives is subject to continuous risk assessment and control from the
standpoint of the Fund's investment objective and policies. While the judicious
use of derivatives by an experienced investment manager, such as the Adviser,
can be beneficial, derivatives also involve risks different from, and, in
certain cases, greater than, the risks presented by more traditional
investments. Following is a general discussion of important risk factors and
issues concerning the use of derivatives that investors should understand before
investing in the Fund.
Market Risk -- This is the general risk attendant to all investments
that the value of a particular investment will decline or otherwise change in a
way detrimental to the Fund's interest.
Management Risk -- Derivative products are highly specialized
instruments that require investment techniques and risk analyses different from
those associated with stocks and bonds. The use of a derivative requires an
understanding not only of the underlying instrument, but also of the derivative
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itself, without the benefit of observing the performance of the derivative under
all possible market conditions. Because derivatives are complex, the Fund and
the Adviser must (1) maintain controls to monitor the transactions entered into,
(2) assess the risk that a derivative adds to the Fund's portfolio and (3)
forecast price, interest rate or currency exchange rate movements correctly.
Credit Risk -- This is the risk that the Fund may lose money because
the other party to a derivative (usually called a "counterparty") failed to
comply with the terms of the derivative contract. The credit risk for
exchange-traded derivatives is generally less than for privately negotiated
derivatives, because the clearing house, which is the issuer or counter party to
each exchange-traded derivative, guarantees performance. This guarantee is
supported by a daily payment system (i.e., margin requirements) operated by the
clearing house to reduce overall credit risk. For privately negotiated
derivatives, there is no similar clearing agency guarantee. Therefore, the Fund
considers the creditworthiness of each counterparty to a privately negotiated
derivative in evaluating potential credit risk.
Liquidity Risk -- Liquidity risk is the possibility that the Fund will
have difficulty buying or selling a particular instrument. If a derivative
transaction is particularly large or if the relevant market is illiquid (as is
the case with many privately negotiated derivatives), the Fund may not be able
to initiate a transaction or liquidate a position at an advantageous price.
Leverage Risk -- Since many derivatives have a leverage component,
adverse changes in the value or level of the underlying asset, rate or index can
result in a loss substantially greater than the amount invested in the
derivative itself. In the case of swaps, the risk of loss generally is related
to a notional principal amount, even if the parties have not made any initial
investment. Certain derivatives have the potential for unlimited loss,
regardless of the size of the initial investment.
Other Risks -- Other risks in using derivatives include the risk of
mispricing or improper valuation and the inability of derivatives to correlate
perfectly with underlying assets, rates, and indices. Many derivatives, in
particular privately negotiated derivatives, are complex and often valued
subjectively. Improper valuations can result in increased cash payment
requirements to counterparties or a loss of value to the Fund. Derivatives do
not always perfectly or even highly correlate or track the value of the assets,
rates or indices they are designed to closely track. Consequently, the Fund's
use of
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derivatives may not always be an effective means of, and sometimes could be
counterproductive to, furthering the Fund's investment objective.
Options Transactions
Writing Covered Options. The Fund may write (i.e., sell) covered call
and put options. By writing a call option, the Fund becomes obligated during the
term of the option to deliver the securities underlying the option upon payment
of the exercise price. Writing a put option obligates the Fund during the term
of the option to purchase the securities underlying the option at the exercise
price if the option buyer exercises the option. The Fund also may write
straddles (combinations of covered puts and calls on the same underlying
security).
The Fund may only write "covered" options. This means that while the
Fund is obligated as the writer of a call option it will own the underlying
securities subject to the option or, with call options on U.S. Treasury bills,
it might own similar U.S. Treasury bills. If the Fund has written options
against all of its securities that are available for writing options, the Fund
may be unable to write additional options unless it sells some of its portfolio
holdings to obtain new securities against which it can write options. If this
were to occur, higher portfolio turnover and correspondingly greater brokerage
commissions and other transaction costs may result. The Fund does not expect,
however, that this will occur. The Fund will be considered "covered" with
respect to a put option it writes if, while it is obligated as the writer of the
put option, it deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the exercise price of the
option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Fund receives a premium from writing a
call or put option, which it retains whether or not the option is exercised. By
writing a call option, the Fund might lose the potential for gain on the
underlying security while the option is open, and, by writing a put option, the
Fund might become obligated to purchase the underlying security for more than
its current market price upon exercise.
Purchasing Options. The Fund may purchase put or call options,
including put or call options for offsetting previously written put or call
options of the same series, except that premiums on all puts outstanding will
not exceed 2% of total assets. Once the Fund has written a covered option, it
will continue to hold the segregated securities or assets until it
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effects a closing purchase transaction. If the Fund is unable to close the
option position, it must hold the segregated securities or assets until the
option expires or is exercised. An option position may be closed out only in a
secondary market for an option of the same series. Although the Fund generally
writes only those options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market will exist for any
particular option at any particular time, and, for some options, no secondary
market may exist. In such event, effecting a closing transaction for a
particular option might not be possible.
Options on some securities are relatively new, and predicting how much
trading interest there will be for such options is impossible. There can be no
assurance that viable markets will develop or continue. The failure of such
markets to develop or continue could significantly impair the Fund's ability to
use such options to achieve its investment objective.
The Fund will include the premiums it has paid for the purchase of
unlisted options and the value of securities used to cover options it has
written for purposes of calculating whether the Fund has complied with its
policies on illiquid securities.
Futures Transactions and Related Options Transactions
The Fund intends to enter into financial futures contracts as a hedge
against changes in prevailing levels of interest rates to seek relative
stability of principal and to establish more definitely the effective return on
securities held or intended to be acquired by the Fund or as a hedge against
changes in the prices of securities held by the Fund or to be acquired by the
Fund. The Fund's hedging may include sales of futures as an offset against the
effect of expected increases in interest rates or securities prices and
purchases of futures as an offset against the effect of expected declines in
interest rates.
For example, when the Fund anticipates a significant market or market
sector advance, it will purchase a stock index futures contract as a hedge
against not participating in such advance at a time when the Fund is not fully
invested. The purchase of a futures contract serves as a temporary substitute
for the purchase of individual securities which may then be purchased in an
orderly fashion. As such purchases are made, an equivalent amount of index based
futures contracts would be terminated by offsetting sales. In contrast, the Fund
would sell stock index futures contracts in anticipation of or in a general
market or market sector decline that may adversely affect the market value of
the Fund's portfolio. To the extent that the Fund's portfolio changes in value
in correlation with a given index, the sale of futures contracts on that index
would substantially reduce the
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risk to the portfolio of a market decline or change in interest rates, and, by
doing so, provide an alternative to the liquidation of the Fund's securities
positions and the resulting transaction costs.
The Fund intends to engage in options transactions which are related to
financial futures contracts for hedging purposes and in connection with the
hedging strategies described above.
Although techniques other than sales and purchases of futures contracts
and related options transactions could be used to reduce the Fund's exposure to
interest rate and/or market fluctuations, the Fund may be able to hedge its
exposure more effectively and perhaps at a lower cost through using futures
contracts and related options transactions. While the Fund does not intend to
take delivery of the instruments underlying futures contracts it holds, the Fund
does not intend to engage in such futures contracts for speculation.
Futures Contracts. Futures contracts are transactions in the
commodities markets rather than in the securities markets. A futures contract
creates an obligation by the seller to deliver to the buyer the commodity
specified in the contract at a specified future time for a specified price. The
futures contract creates an obligation by the buyer to accept delivery from the
seller of the commodity specified at the specified future time for the specified
price. In contrast, a spot transaction creates an immediate obligation for the
seller to deliver and the buyer to accept delivery of and pay for an identified
commodity. In general, futures contracts involve transactions in fungible goods
such as wheat, coffee and soybeans. However, in the last decade an increasing
number of futures contracts have been developed which specify financial
instruments or financially based indexes as the underlying commodity.
Interest Rate Futures Contracts. The sale of an interest rate futures
contract creates an obligation by the Fund, as seller, to deliver the type of
financial instrument specified in the contract at a specified future time for a
specified price. The purchase of an interest rate futures contract creates an
obligation by the Fund, as purchaser, to accept delivery of the type of
financial instrument specified at a specified future time for a specified price.
The specific securities delivered or accepted, respectively, at settlement date,
are not determined until at or near that date. The determination is in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Index Based Futures Contracts, Other Than Stock Index Based. It is expected
that bond index and other financially based index
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futures contracts will be developed in the future. It is anticipated that such
index based futures contracts will be structured in the same way as stock index
futures contracts but will be measured by changes in interest rates, related
indexes or other measures, such as the consumer price index. In the event that
such futures contracts are developed, the Fund will sell interest rate index and
other index based futures contracts to hedge against changes which are expected
to affect the Fund's portfolio.
The purchase or sale of a futures contract differs from the purchase or
sale of a security, in that no price or premium is paid or received. Instead, to
initiate trading an amount of cash, cash equivalents, money market instruments,
or U.S. Treasury bills equal to approximately 1 1/2% (up to 5%) of the contract
amount must be deposited by the Fund with the broker. This amount is known as
initial margin. The nature of initial margin in futures transactions is
different from that of margin in security transactions. Futures contract margin
does not involve the borrowing of funds by the customer to finance the
transactions. Rather, the initial margin is in the nature of a performance bond
or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract assuming all contractual obligations have
been satisfied. The margin required for a particular futures contract is set by
the exchange on which the contract is traded and may be significantly modified
from time to time by the exchange during the term of the contract.
Subsequent payments, called variation margin, to the broker and from
the broker, are made on a daily basis as the value of the underlying instrument
or index fluctuates making the long and short positions in the futures contract
more or less valuable, a process known as mark-to-market. For example, when the
Fund has purchased a futures contract and the price of the underlying financial
instrument or index has risen, that position will have increased in value, and
the Fund will receive from the broker a variation margin payment equal to that
increase in value. Conversely, where the Fund has purchased a futures contract
and the price of the underlying financial instrument or index has declined, the
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, the Fund may elect to close the position. A final
determination of variation margin is then made, additional cash is required to
be paid to or released by the broker, and the Fund realizes a loss or gain.
The Trust intends to enter into arrangements with its custodian and
with brokers to enable the initial margin of the
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Fund and any variation margin to be held in a segregated account by its
custodian on behalf of the broker.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of financial instruments, and index based futures
contracts call for the delivery of cash equal to the difference between the
closing value of the index on the expiration date of the contract and the price
at which the futures contract is originally made, in most cases such futures
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out a futures contract sale is effected by an offsetting
transaction in which the Fund enters into a futures contract purchase for the
same aggregate amount of the specific type of financial instrument or index and
same delivery date. If the price in the sale exceeds the price in the offsetting
purchase, the Fund is paid the difference and thus realizes a gain. If the
offsetting purchase price exceeds the sale price, the Fund pays the difference
and realizes a loss. Similarly, the closing out of a futures contract purchase
is effected by an offsetting transaction in which the Fund enters into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the Fund
realizes a gain. If the purchase price exceeds the offsetting sale price the
Fund realizes a loss. The amount of the Fund's gain or loss on any transaction
is reduced or increased, respectively, by the amount of any transaction costs
incurred by the Fund.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one contract of September U.S. Treasury bills on an
exchange may be fulfilled at any time before delivery of the contract is
required (i.e., on a specified date in September, the "delivery month") by the
purchase of one contract of September U.S. Treasury bills on the same exchange.
In such instance the difference between the price at which the futures contract
was sold and the price paid for the offsetting purchase, after allowance for
transaction costs, represents the profit or loss to the Fund.
There can be no assurance, however, that the Fund will be able to enter
into an offsetting transaction with respect to a particular contract at a
particular time. If the Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms.
Options on Financial Futures. The Fund intends to purchase call and put
options on financial futures contracts and sell such options to terminate an
existing position. Options on futures are similar to options on stocks except
that an option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
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position if the option is a call and a short position if the option is a put)
rather than to purchase or sell stock at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures margin account. This amount represents the amount by which the market
price of the futures contract at exercise exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the futures
contract. If an option is exercised the last trading day prior to the expiration
date of the option, the settlement will be made entirely in cash equal to the
difference between the exercise price of the option and value of the futures
contract.
The Fund intends to use options on financial futures contracts in
connection with hedging strategies. In the future the Fund may use such options
for other purposes.
Purchase of Put Options on Futures Contracts. The purchase of
protective put options on financial futures contracts is analogous to the
purchase of protective puts on individual stocks, where an absolute level of
protection is sought below which no additional economic loss would be incurred
by the Fund. Put options may be purchased to hedge a portfolio of stocks or debt
instruments or a position in the futures contract upon which the put option is
based.
Purchase of Call Options on Futures Contracts. The purchase of call
options on financial futures contracts represents a means of obtaining temporary
exposure to market appreciation at limited risk. It is analogous to the purchase
of a call option on an individual stock, which can be used as a substitute for a
position in the stock itself. Depending on the pricing of the option compared to
either the futures contract upon which it is based, or upon the price of the
underlying financial instrument or index itself, purchase of a call option may
be less risky than the ownership of the interest rate or index based futures
contract or the underlying securities. Call options on commodity futures
contracts may be purchased to hedge against an interest rate increase or a
market advance when the Fund is not fully invested.
Use of New Investment Techniques Involving Financial Futures Contracts
or Related Options. The Fund may employ new investment techniques involving
financial futures contracts and related options. The Fund intends to take
advantage of new techniques in these areas which may be developed from time to
time and which are consistent with the Fund's investment objective. The Trust
believes that no additional techniques have been identified for
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employment by the Fund in the foreseeable future other than those
described above.
Limitations on Purchase and Sale of Futures Contracts and Related
Options on Such Futures Contracts. The Fund will not enter into a futures
contract or an option if, as a result thereof, more than 5% of the Fund's total
assets (taken at market value at the time of entering into the contract) would
be committed to margin deposits on such futures contracts, including any
premiums paid for options on futures, or where the Fund's obligations under such
futures and options would exceed 20% of the Fund's total assets.
The Fund intends that its futures contracts and related options
transactions will be entered into for traditional hedging purposes. That is,
futures contracts will be sold to protect against a decline in the price of
securities that the Fund owns, or futures contracts will be purchased to protect
the Fund against an increase in the price of securities it intends to purchase.
The Fund does not intend to enter into futures contracts for speculation.
In instances involving the purchase of futures contracts by the Fund,
an amount of cash and cash equivalents, equal to the market value of the futures
contracts, will be deposited in a segregated account with the Trust's custodian
and/or in a margin account with a broker to collateralize the position and
thereby insure that the use of such futures is unleveraged.
Risks of Futures Contracts. Financial futures contracts prices are
volatile and are influenced, among other things, by changes in stock prices,
market conditions, prevailing interest rates and anticipation of future stock
prices, market movements or interest rate changes, all of which in turn are
affected by economic conditions, such as government fiscal and monetary policies
and actions, and national and international political and economic events.
At best, the correlation between changes in prices of futures contracts
and of the securities being hedged can be only approximate. The degree of
imperfection of correlation depends upon circumstances, such as variations in
speculative market demand for futures contracts and for securities, including
technical influences in futures contracts trading; differences between the
securities being hedged and the financial instruments and indexes underlying the
standard futures contracts available for trading, in such respects as interest
rate levels, maturities and creditworthiness of issuers, or identities of
securities comprising the index and those in the Fund's portfolio. In addition,
futures contract transactions involve the remote risk that a party will be
unable to fulfill its obligations and that
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the amount of the obligation will be beyond the ability of the clearing broker
to satisfy. A decision of whether, when and how to hedge involves the exercise
of skill and judgment, and even a well conceived hedge may be unsuccessful to
some degree because of market behavior or unexpected interest rate trends.
Because of the low margin deposits required, futures trading involves
an extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a 10% decrease in the
value of the futures contract would result in a total loss of the margin
deposit, before any deduction for the transaction costs, if the account were
then closed out, and a 15% decrease would result in a loss equal to 150% of the
original margin deposit. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the futures contract.
However, the Fund would presumably have sustained comparable losses if, instead
of entering into the futures contract, it had invested in the underlying
financial instrument. Furthermore, in order to be certain that the Fund has
sufficient assets to satisfy its obligations under a futures contract, the Fund
will establish a segregated account in connection with its futures contracts
which will hold cash or cash equivalents equal in value to the current value of
the underlying instruments or indices less the margins on deposit.
Risks of Options on Futures Contracts. In addition to the risks
described above for financial futures contracts, there are several special risks
relating to options on futures contracts. The ability to establish and close out
positions on such options will be subject to the development and maintenance of
a liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. The Fund will
not purchase options on any futures contract unless and until it believes that
the market for such options has developed sufficiently that the risks in
connection with such options are not greater than the risks in connection with
the futures contracts. Compared to the use of futures contracts, the purchase of
options on such futures involves less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the use of an option on a
futures contract would result in a loss to the Fund, even though the use of a
futures contract would not, such as when there is no movement in the level of
the futures contract.
Loans of Securities
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To generate income and offset expenses, the Fund may lend portfolio
securities to broker-dealers and other financial institutions. Loans of
securities by the Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any income
accruing on the security. 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 the 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.
Although voting rights attendant to securities lent pass to the
borrower, the Fund may call such loans at any time and may vote the securities
if it believes a material event affecting the investment is to occur. The Fund
may experience a delay in receiving additional collateral or in recovering the
securities lent or may even suffer a loss of rights in the collateral should the
borrower of the securities fail financially. The Fund may only make loans to
borrowers deemed to be of good standing, under standards approved by the Board
of Trustees, when the income to be earned from the loan justifies the attendant
risks.
Payment-in-kind Securities
Payment-in-kind ("PIK") securities pay interest in either cash or
additional securities, at the issuer's option, for a specified period. The
issuer's option to pay in additional securities typically ranges from one to six
years, compared to an average maturity for all PIK securities of eleven years.
Call protection and sinking fund features are comparable to those offered on
traditional debt issues.
PIKs, like zero coupon bonds, are designed to give an issuer
flexibility in managing cash flow. Several PIKs are senior debt. In other cases,
where PIKs are subordinated, most senior lenders view them as equity
equivalents.
An advantage of PIKs for the issuer -- as with zero coupon securities
- -- is that interest payments are automatically compounded (reinvested) at the
stated coupon rate, which is not the case with cash-paying securities. However,
PIKs are gaining
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popularity over zero coupon bonds since interest payments in additional
securities can be monetized and are more tangible than accretion of a discount.
As a group, PIK bonds trade flat (i.e., without accrued interest).
Their price is expected to reflect an amount representing credited interest
since the last payment. PIKs generally trade at higher yields than comparable
cash-paying securities of the same issuer. Their premium yield is the result of
the lesser desirability of non-cash interest, the more limited audience for
non-cash paying securities, and the fact that many PIKs have been issued to
equity investors who do not normally own or hold such securities.
Calculating the true yield on a PIK security requires a discounted cash
flow analysis if the security (ex interest) is trading at a premium or a
discount because the realizable value of additional payments is equal to the
current market value of the underlying security, not par.
Regardless of whether PIK securities are senior or deeply subordinated,
issuers are highly motivated to retire them because they are usually their most
costly form of capital.
Repurchase Agreements
The Fund may invest up to 35% of its total assets in repurchase
agreements. The Fund may enter into repurchase agreements with entities that are
registered U.S. government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
Fund's Adviser to be creditworthy. A repurchase agreement is an agreement by
which a person (e.g., the Fund) obtains a security and simultaneously commits to
return the security to the seller (a member bank of the Federal Reserve System
or recognized securities dealer) at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
The Fund or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such
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securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker-dealers, which are deemed by the Adviser to be
creditworthy pursuant to guidelines established by the Trustees.
Restricted and Illiquid Securities
Pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A"),
the Board of Trustees of the Trust determines the liquidity of certain
restricted securities. Rule 144A is a non-exclusive safe harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under federal securities laws. Rule 144A provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. Rule 144A was expected to further enhance the liquidity of
the secondary market for securities eligible for sale under Rule 144A. In
determining the liquidity of certain restricted securities the Trustees
consider: (i) the frequency of trades and quotes for the security; (ii) the
number of dealers willing to purchase or sell the security and the number of
other potential buyers; (iii) dealer undertakings to make a market in the
security; and (iv) the nature of the security and the nature of the marketplace
trades.
Reverse Repurchase Agreements
The Fund may invest up to 33 1/3% of its total assets in reverse
repurchase agreements. Under a reverse repurchase agreement, the Fund would sell
securities and agree to repurchase them at a mutually agreed upon date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities the Fund is obligated to repurchase may decline below the
repurchase price.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may invest
generally include obligations that the U.S. government agencies or
instrumentalities issued or guaranteed.
These securities are backed by:
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(1) the discretionary authority of the U.S. government to
purchase certain obligations of agencies or
instrumentalities; or
(2) the credit of the agency or instrumentality issuing the
obligations. Examples of agencies and instrumentalities that
may not always receive financial support from the U.S.
government are:
(i) Farm Credit System, including the National Bank
for Cooperatives, Farm Credit Banks and Banks for
Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
GNMA Securities
The Fund may invest in securities issued by the Government National
Mortgage Association ("GNMA"), a wholly-owned U.S. government corporation, which
guarantees the timely payment of principal and interest, but not premiums paid
to purchase these instruments. The market value and interest yield of these
instruments can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages. These securities represent ownership in a
pool of federally insured mortgage loans. GNMA certificates consist of
underlying mortgages with a maximum maturity of 30 years. However, due to
scheduled and unscheduled principal payments, GNMA certificates have a shorter
average maturity and, therefore, less principal volatility than a comparable
30-year bond. Since prepayment rates vary widely, it is not possible to
accurately predict the average maturity of a particular GNMA pool. The scheduled
monthly interest and principal payments relating to mortgages in the pool will
be "passed through" to investors. GNMA securities differ from conventional bonds
in that principal is paid back to the certificate holders over the life of the
loan rather than at maturity. As a result, there will be monthly scheduled
payments of principal and interest. In addition, there may be unscheduled
principal payments representing prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. government securities,
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GNMA certificates may be less effective than other types of securities as a
means of "locking in" attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, the value of a GNMA
certificate likely will not rise as much as comparable debt securities due to
the prepayment feature. In addition, these prepayments can cause the price of a
GNMA certificate originally purchased at a premium to decline in price compared
to its par value, which may result in a loss.
Mortgage-Backed and Asset-Backed Securities
The Fund may invest in mortgage-backed securities and asset-backed
securities. Two principal types of mortgage-backed securities are collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"). CMOs are securities collateralized by mortgages, mortgage
pass-throughs, mortgage pay-through bonds (bonds representing an interest in a
pool of mortgages where the cash flow generated from the mortgage collateral
pool is dedicated to bond repayment), and mortgage-backed bonds (general
obligations of the issuers payable out of the issuers' general funds and
additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different maturities and are retired in sequence.
Investors purchasing CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. Government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities.
In addition to mortgage-backed securities, the Fund may invest in
securities secured by other assets, including company receivables, truck and
auto loans, leases, and credit card receivables. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending
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on the pay down characteristics of the underlying financial assets which are
passed through to the security holder.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by automobile receivables permit the servicers of
such receivables to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
rated asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to
include additional collateral and/or additional credit support to protect
against the risk that a portion of the collateral supporting the asset-backed
securities may default and/or may suffer from these defects. In evaluating the
strength of particular issues of asset-backed securities, the Adviser considers
the financial strength of the guarantor or other provider of credit support, the
type and extent of credit enhancement provided as well as the documentation and
structure of the issue itself and the credit support.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Fund may invest up to 33 1/3% of its total assets in
when-issued securities, delayed-delivery and forward commitment transactions.
The Fund may purchase securities on a when-issued or delayed delivery basis and
may purchase or sell securities on a forward commitment basis. These
transactions involve the purchase of debt obligations with delivery and payment
normally to take place within a month or more after the date of commitment to
purchase. The Fund will only make commitments to purchase obligations on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date. The when-issued securities are subject
to market fluctuation, and no interest accrues on the security to the purchaser
during this period. The payment obligation and the interest rate that will be
received on the securities are each fixed at the time the purchaser enters into
the commitment.
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Segregated accounts will be established with the custodian, and the
Fund will maintain liquid assets in an amount at least equal in value to the
Fund's commitments to purchase when-issued securities. If the value of these
assets declines, the Fund will place additional liquid assets in the account on
a daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
Purchasing obligations on a when-issued basis is a form of
leveraging and can involve a risk that the yields available in the market when
the delivery takes place may actually be higher than those obtained in the
transaction itself. In that case there could be an unrealized loss at the time
of delivery.
The Fund uses when-issued, delayed-delivery and forward commitment
transactions to secure what it considers to be an advantageous price and yield
at the time of purchase. When the Fund engages in when-issued, delayed-delivery
and forward commitment transactions, it relies on the buyer or seller, as the
case may be, to consummate the sale. If the buyer or seller fails to complete
the sale, then the Fund may miss the opportunity to obtain the security at a
favorable price or yield.
Typically, no income accrues on securities the Fund has committed
to purchase prior to the time delivery of the securities is made, although the
Fund may earn income on securities it has deposited in a segregated account.
When purchasing a security on a when-issued, delayed delivery, or forward
commitment basis, the Fund assumes the rights and risks of ownership of the
security, including the risk of price and yield fluctuations, and takes such
fluctuations into account when determining its net asset value. Because the Fund
is not required to pay for the security until the delivery date, these risks are
in addition to the risks associated with the Fund's other investments.
Zero Coupon "Stripped" Bonds
A zero coupon "stripped" bond represents ownership in serially
maturing interest payments or principal payments on specific underlying notes
and bonds, including coupons relating to such notes and bonds. The interest and
principal payments are direct obligations of the issuer. Coupon zero coupon
bonds of any series mature periodically from the date of issue of such series
through the maturity date of the securities related to such series. Principal
zero coupon bonds mature on the date specified therein, which is the final
maturity date of the related securities. Each zero coupon bond entitles the
holder to receive a single payment at maturity. There are no periodic interest
payments on a zero coupon bond. Zero coupon bonds are offered at discounts from
their face amounts.
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<PAGE>
In general, owners of zero coupon bonds have substantially all the
rights and privileges of owners of the underlying coupon obligations or
principal obligations. Owners of zero coupon bonds have the right upon default
on the underlying coupon obligations or principal obligations to proceed
directly and individually against the issuer and are not required to act in
concert with other holders of zero coupon bonds.
For federal income tax purposes, a purchaser of principal zero
coupon bonds or coupon zero coupon bonds (either initially or in the secondary
market) is treated as if the buyer had purchased a corporate obligation issued
on the purchase date with an original issue discount equal to the excess of the
amount payable at maturity over the purchase price. The purchaser is required to
take into income each year as ordinary income an allocable portion of such
discounts determined on a "constant yield" method. Any such income increases the
holder's tax basis for the zero coupon bond, and any gain or loss on a sale of
the zero coupon bonds relative to the holder's basis, as so adjusted, is a
capital gain or loss. If the holder owns both principal zero coupon bonds and
coupon zero coupon bonds representing interest in the same underlying issue of
securities, a special basis allocation rule (requiring the aggregate basis to be
allocated among the items sold and retained based on their relative fair market
value at the time of sale) may apply to determine the gain or loss on a sale of
any such zero coupon bonds.
INVESTMENT RESTRICTIONS AND GUIDELINES
Fundamental Policies
The 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"). Unless otherwise stated, all references to the assets of the Fund
are in terms of current market value.
Diversification
The Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Concentration
The Fund may not concentrate its investments in the
securities of issuers primarily engaged in any particular
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industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities), except that the Fund intends to invest more
than 25% of its total assets in the utilities industry worldwide.
Issuing Senior Securities
Except as permitted under the 1940 Act, the Fund may not issue
senior securities.
Borrowing
The Fund may not borrow money, except to the extent permitted by
applicable law.
Underwriting Securities Issued by Other Persons
The Fund may not underwrite securities of other issuers, except
insofar as the Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
Real Estate
The Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, the Fund may invest in (a) securities that
are directly or indirectly secured by real estate, or (b) securities issued by
companies that invest in real estate.
Commodities
The Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that the 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.
Loans to Other Persons
The Fund may not make loans to other persons, except that the 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.
Guidelines
Unlike the Fundamental Policies above, to the extent
permitted by law, the following guidelines may be changed by the
Trust's Board of Trustees without shareholder approval. Unless
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<PAGE>
otherwise stated, all references to the assets of a Fund are in
terms of current market value.
Diversification
To remain classified as a diversified investment company under the
1940 Act, the Fund must conform with the following: With respect to 75% of its
total assets, a diversified investment company may not invest more than 5% of
its total assets, determined at market or other fair value at the time of
purchase, in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
Borrowings
The Fund may borrow money from banks or enter into reverse
repurchase agreements in an amount up to one third of its total assets. The Fund
may also borrow an additional 5% of its total assets from banks or others. The
Fund may borrow only as a temporary measure for extraordinary or emergency
purposes. The Fund will not purchase securities while borrowings are outstanding
except to exercise prior commitments and to exercise subscription rights. The
Fund may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities. The Fund may purchase securities on
margin and engage in short sales to the extent permitted by applicable law.
Illiquid securities
The Fund may not invest more than 15% of its net assets in
securities that are illiquid. A security is illiquid when the Fund may not
dispose of it in the ordinary course of business within seven days at
approximately the value at which the Fund has the investment on its books.
Investment in other investment companies
The Fund may purchase the shares of other investment companies to
the extent permitted under the 1940 Act. Currently, the Fund may not: (1) own
more than 3% of the outstanding voting stock of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, the Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
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<PAGE>
MANAGEMENT OF THE TRUST
Set forth below are the Trustees and officers of the Trust and
their principal occupations and some of their affiliations over the last five
years. Unless otherwise indicated, the address for each Trustee and officer is
200 Berkeley Street, Boston, Massachusetts 02116. Each Trustee is also a Trustee
of each of the other Trusts in the Evergreen Fund complex.
<TABLE>
<CAPTION>
Name Position Principal Occupations for Last
with Trust Five Years
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and
(DOB: 2/2/28) construction consultant; and
President of Centrum Equities
and Centrum Properties, Inc.
Charles A. Austin Trustee Investment Counselor to
III Appleton Partners, Inc.; and
(DOB: 10/23/34) former Managing Director,
Seaward Management Corporation
(investment advice)
K. Dun Gifford Trustee Trustee, Treasurer and
(DOB: 10/12/38) Chairman of the Finance
Committee,
Cambridge
College;
Chairman
Emeritus and
Director,
American
Institute of
Food and Wine;
Chairman and
President,
Oldways
Preservation and
Exchange Trust
(education);
former Chairman
of the Board,
Director, and
Executive Vice
President, The
London Harness
Company; former
Managing Part
ner, Roscommon
Capital Corp.;
former Chief
Executive Offi
cer, Gifford
Gifts of Fine
Foods; and
former Chairman,
Gifford,
Drescher &
Associates
(environmental
consulting)
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<PAGE>
Name Position Principal Occupations for Last
with Trust Five Years
James S. Howell Chairman Former Chairman of the
(DOB: 8/13/24) of the Distribution Foundation for
Board of the Carolinas; and former Vice
Trustees President of Lance Inc. (food
manufacturing)
Leroy Keith, Jr. Trustee Chairman of the Board and
(DOB: 2/14/39) Chief Executive Officer,
Carson Products Company;
Director of Phoenix Total
Return Fund and Equifax, Inc.;
Trustee of Phoenix Series
Fund, Phoenix Multi-Portfolio
Fund, and The Phoenix Big Edge
Series Fund; and former
President, Morehouse College
Gerald M. McDonnell Trustee Sales Representative with
(DOB: 7/14/39) Nucor-Yamoto, Inc. (steel
producer)
Thomas L. McVerry Trustee Former Vice President and
(DOB: 8/2/39) Director of Rexham
Corporation; and former
Director of Carolina
Cooperative Federal Credit
Union
William Walt Pettit Trustee Partner in the law firm of
(DOB: 8/26/55) William Walt Pettit, P.A.
David M. Richardson Trustee Vice Chair and former
(DOB: 9/14/41) Executive Vice President, DHR
International, Inc. (executive
recruitment); former Senior
Vice President, Boyden
International Inc. (executive
recruitment); and Director,
Commerce and Industry
Association of New Jersey, 411
International, Inc., and J&M
Cumming Paper Co.
Russell A. Salton, Trustee Medical Director, U.S. Health
III MD Care/Aeta Health Services;
(DOB: 6/2/47) former Managed Health Care
Consultant; and former
President, Primary Physician
Care
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<PAGE>
Name Position Principal Occupations for Last
with Trust Five Years
Michael S. Scofield Trustee Attorney, Law Offices of
(DOB: 2/20/43) Michael S. Scofield
Richard J. Shima Trustee Chairman, Environmental
(DOB: 8/11/39) Warranty, Inc. (insurance
agency);
Executive
Consultant,
Drake Beam
Morin, Inc.
(executive
outplacement);
Director of
Connecticut
Natural Gas
Corporation,
Hartford
Hospital, Old
State House
Association,
Middlesex Mutual
Assurance
Company, and
Enhance
Financial
Services, Inc.;
Chairman, Board
of Trustees,
Hartford
Graduate Center;
Trustee, Greater
Hartford YMCA;
former Director,
Vice Chairman
and Chief
Investment
Officer, The
Travelers
Corporation;
former Trustee,
Kingswood-Oxford
School; and
former Managing
Director and
Consultant,
Russell Miller,
Inc.
William J. Tomko* President Senior Vice President and
(DOB: 8/30/58) and Operations Executive, BISYS
Treasurer Fund Services
Nimish S. Bhatt* Vice Vice President, Tax, BISYS
(DOB: 6/6/63) President Fund Services; former
and Assistant Vice President,
Assistant Evergreen Asset Management
Treasurer Corp./First Union Bank; former
Senior Tax Consulting/Acting
Manager, Investment Companies
Group, Price Waterhouse LLP,
New York
Bryan Haft* Vice Team Leader, Fund
(DOB: 1/23/65) President Administration, BISYS Fund
Services
D'Ray Moore* Secretary Vice President, Client
(DOB: 3/30/59) Services, BISYS Fund Services
</TABLE>
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<PAGE>
* Address: BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio
43219-8001.
Listed below is the estimated Trustee compensation for calendar
year 1998.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Name of Person, Aggregate Total
Position Compensation Compensation
From From Registrant
Registrant and Fund Complex
Paid to Trustees
<S> <C> <C>
Laurence B. Ashkin $7,109 $ 70,274
Charles A. Austin $6,729 $ 48,125
K. Dun Gifford $6,164 $ 44,309
James S. Howell $8,880 $ 106,198
Leroy Keith Jr. $6,219 $ 44,709
Gerald M. McDonnell $8,409 $ 90,000
Thomas L. McVerry $8,241 $ 94,093
William Walt Pettit $7,969 $ 88,620
David M. Richardson $6,729 $ 48,125
Russell A. Salton, III $7,774 $ 90,012
Michael S. Scofield $7,808 $ 87,176
Richard J. Shima $6,854 $ 65,556
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
AnalyticoTSA International, Inc. ("Analytic"), located at 25/28 Old
Burlington Street, London W1X 1LB, England, is the Adviser (the "Adviser") to
the Fund.
Pursuant to the advisory agreement (the "Advisory Agreement")
between the Trust and the Adviser, and subject to the supervision of the Trust's
Board of Trustees, the Adviser furnishes to the Fund investment advisory,
management and administrative services, office facilities, and equipment in
connection with its services for managing the investment and reinvestment of the
Fund's assets. The Adviser pays for all of the expenses incurred in connection
with the provision of its services.
The Fund pays all charges and expenses, other than those
specifically referred to as being borne by the Adviser, including, but not
limited to, (1) custodian charges and expenses; (2) bookkeeping and independent
auditors' charges and expenses; (3) transfer agent charges and expenses; (4)
fees and expenses of Independent Trustees (Trustees who are not interested
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<PAGE>
persons of the Fund, as defined in the 1940 Act); (5) brokerage commissions,
brokers' fees and expenses; (6) issue and transfer taxes; (7) costs and expenses
under the Distribution Plan; (8) taxes and trust fees payable to governmental
agencies; (9) the cost of share certificates; (10) fees and expenses of the
registration and qualification of such Fund and its shares with the Securities
and Exchange Commission ("SEC") or under state or other securities laws; (11)
expenses of preparing, printing and mailing prospectuses, statements of
additional information, notices, reports and proxy materials to shareholders of
such Fund; (12) expenses of shareholders' and Trustees' meetings; (13) charges
and expenses of legal counsel for such Fund and for the Independent Trustees of
the Trust on matters relating to such Fund; (14) charges and expenses of filing
annual and other reports with the SEC and other authorities; and (15) all
extraordinary charges and expenses of such Fund.
The Fund pays the Adviser a fee for its services equal to 0.60% of
average net assets. The Adviser, however, has voluntarily agreed to reduce its
fee by 0.13%, resulting in a net advisory fee of 0.47%.
Under the Advisory Agreement, any liability of the Adviser in
connection with rendering services thereunder is limited to situations involving
its willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties.
The Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
Fund's outstanding shares (as defined in the 1940 Act). In either case, the
terms of the Advisory Agreement and continuance thereof must be approved by the
vote of a majority of the Independent Trustees (Trustees who are not interested
persons of the Fund, as defined in the 1940 Act, and who have no direct or
indirect financial interest in the Fund's Distribution Plan or any agreement
related thereto) cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement may be terminated, without penalty, on 60
days' written notice by the Trust's Board of Trustees or by a vote of a majority
of outstanding shares. The Advisory Agreement will terminate automatically upon
its "assignment" as that term is defined in the 1940 Act.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the Fund through
broker-dealers and other financial representatives. Its address is 125 West 55th
Street, New York, New York 10019.
DISTRIBUTION PLAN
Rule 12b-1 under the 1940 Act permits mutual funds to use their
assets to pay for distributing their shares. However, to take advantage of Rule
12b-1, the 1940 Act requires that mutual funds comply with various conditions,
including adopting a distribution plan. The Fund has adopted a distribution plan
for its Institutional Service shares (the "Plan") that permits the Fund to
deduct up to 0.25% of the average net assets of the Institutional Service class
to pay for
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<PAGE>
shareholder services. The Board of Trustees, including a majority of the
Independent Trustees, has approved the Plan.
The National Association of Securities Dealers, Inc. ("NASD")
limits the amount that a mutual fund may pay annually in distribution costs for
sale of its shares and shareholder service fees. The NASD limits annual
expenditures to 1.00% of the aggregate average daily net asset value of its
shares, of which 0.75% may be used to pay such distribution costs and 0.25% may
be used to pay shareholder service fees. The NASD also limits the aggregate
amount that the Fund may pay for such distribution costs to 6.25% of gross share
sales since the inception of the distribution plan, plus interest at the prime
rate plus 1.00% on such amounts remaining unpaid from time to time.
The Independent Trustees or a majority of the outstanding voting
shares of the Fund's Institutional Service Class may terminate the Plan.
The Fund cannot change the Plan in a way that materially increases the
distribution expenses of the Institutional Service Class without obtaining
shareholder approval. Otherwise, the Trustees may amend the Plan.
Management must report the amounts and purposes of expenditures
under the Plan to the Independent Trustees quarterly.
While the Institutional Service Distribution Plan is in effect, the
Fund will be required to commit the selection and nomination of candidates for
Independent Trustees to the discretion of the Independent Trustees.
The Independent Trustees of the Trust have determined that the Fund
will benefit from the Institutional Service shares distribution plan.
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator
to the Fund, subject to the supervision and control of the Trust's Board of
Trustees. EIS provides the Fund with facilities, equipment and personnel and is
entitled to receive a fee based on the aggregate average daily net assets of the
Fund at a rate based on the total assets of all mutual funds advised by
subsidiaries of First Union Corporation for which EIS acts as administrator.
EIS' fee is calculated in accordance with the following schedule: 0.050% on the
first $7 billion; 0.0035% on the next $3 billion; 0.030% on the next $5 billion;
0.020% on the next $10 billion; 0.015% on the next $5 billion and 0.010% on
assets in excess of $30 billion.
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union
Corporation, is the Fund's transfer agent. The transfer agent issues and redeems
shares, pays dividends and performs
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<PAGE>
other duties in connection with the maintenance of shareholder accounts. The
transfer agent's address is 200 Berkeley Street, Boston, Massachusetts
02116-5034.
Independent Auditors
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New
York 10036, audits the Fund's financial statements.
Custodian
State Street Bank and Trust Company is the Fund's custodian. The bank keeps
custody of the Fund's securities and cash and performs other related duties. The
custodian's address is P.O. Box 9021, Boston, Massachusetts 02205-9827.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Fund. Its address is
1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
BROKERAGE ALLOCATION AND OTHER PRACTICES
SELECTION OF BROKERS
In effecting transactions in portfolio securities for the Fund, the
Adviser seeks the best execution of orders at the most favorable prices. The
Adviser determines whether a broker has provided the Fund with best execution
and price in the execution of a securities transaction by evaluating, among
other things, the broker's ability to execute large or potentially difficult
transactions, and the financial strength and stability of the broker.
BROKERAGE COMMISSIONS
The Fund expects to buy and sell its fixed-income securities
through principal transactions, that is, directly from the issuer or from an
underwriter or market maker for the securities. Generally, the Fund will not pay
brokerage commissions for such purchases. Usually, when the Fund buys a security
from an underwriter, the purchase price will include an underwriting commission
or concession. The purchase price for securities bought from dealers serving as
market makers will similarly include the dealer's mark up or reflect a dealer's
mark down. When the Fund executes transactions in the over-the-counter market,
it will deal with primary market makers unless more favorable prices are
otherwise obtainable.
GENERAL BROKERAGE POLICIES
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<PAGE>
The Adviser makes investment decisions for the Fund independently
from those of its other clients. It may frequently develop, however, that the
Adviser will make the same investment decision for more than one client.
Simultaneous transactions are inevitable when the same security is suitable for
the investment objective of more than one account. When two or more of its
clients are engaged in the purchase or sale of the same security, the Adviser
will allocate the transactions according to a formula that is equitable to each
of its clients. Although, in some cases, this system could have a detrimental
effect on the price or volume of the Fund's securities, the Fund believes that
in other cases its ability to participate in volume transactions will produce
better executions. In order to take advantage of the availability of lower
purchase prices, the Fund may occasionally participate in group bidding for the
direct purchase from an issuer of certain securities.
The Board of Trustees periodically reviews the Fund's brokerage
policy. Because of the possibility of further regulatory developments affecting
the securities exchanges and brokerage practices generally, the Board of
Trustees may change, modify or eliminate any of the foregoing practices.
TRUST ORGANIZATION
FORM OF ORGANIZATION
The Trust was formed as a Delaware business trust on September 18,
1997 (the "Declaration of Trust"). A copy of the Declaration of Trust is on file
at the SEC as an exhibit to the Trust's Registration Statement, of which this
statement of additional information is a part. This summary is qualified in its
entirety by reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited
number of shares of beneficial interest of series and classes of shares. Each
share of the Fund represents an equal proportionate interest with each other
share of that series and/or class. Upon liquidation, shares are entitled to a
pro rata share of the Trust based on the relative net assets of each series
and/or class. Shareholders have no preemptive or conversion rights. Shares are
redeemable and transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not
required to hold annual meetings. At meetings called for the initial election of
Trustees or to consider other matters, each share is entitled to one vote for
each dollar of net asset value applicable to that share. Shares generally vote
together as one class on all matters. Classes of shares of the Fund have equal
voting rights. No amendment may be made to the Declaration of Trust that
adversely affects any class of shares without the approval of a majority of the
shares of that class. Shares have non-cumulative voting rights, which means that
the holders of more than 50% of the shares
75
<PAGE>
voting for the election of Trustees can elect 100% of the Trustees to be elected
at a meeting and, in such event, the holders of the remaining shares voting will
not be able to elect any Trustees.
After the initial meeting as described above, no further meetings
of shareholders for the purpose of electing Trustees will be held, unless
required by law, unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election of
Trustees.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable
for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of his duties involved in the conduct of his
office.
PURCHASE, REDEMPTION AND PRICING OF FUND
SHARES
EXCHANGES
Investors may exchange shares of the Fund for shares of the same
class of any other Evergreen "Select" fund, as described under Exchanges in the
Fund's prospectus. Before you make an exchange, you should read the prospectus
of the "Select" fund into which you wish to exchange. The Trust reserves the
right to discontinue, alter or limit the exchange privilege at any time.
HOW THE FUND VALUES SHARES
How and When the Fund Calculates Its Net Asset Value Per Share ("NAV")
The Fund computes its net asset value once daily on Monday through
Friday, as described in the Prospectus. The Fund will not compute its net asset
value on days on which there have been no purchases or sales of its shares.
Also, the Fund will not compute its NAV on the day the following legal holidays
are observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Each class of shares of the Fund calculates its net asset value per
share by adding up its investments and other assets, subtracting its liabilities
and then dividing the result by the number of shares outstanding.
How the Fund Values Securities It Owns
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<PAGE>
Current values for the Fund's portfolio securities are determined
in the following manner:
(1) securities that are traded on a national securities exchange or
the over-the-counter National Market System ("NMS") are valued on the basis of
the last sales price on the exchange where primarily traded or NMS prior to the
time of the valuation, provided that a sale has occurred;
(2) securities traded in the over-the-counter market, other than on
NMS are valued at the mean of the bid and asked prices at the time of valuation;
(3) short-term investments maturing in more than sixty days for
which market quotations are readily available are valued at current market
value;
(4) short-term investments maturing in sixty days or less
(including all master demand notes) are valued at amortized cost (original
purchase cost as adjusted for amortization of premium or accretion of discount),
which, when combined with accrued interest, approximates market;
(5) short-term investments maturing in more than sixty days when
purchased that are held on the sixtieth day prior to maturity are valued at
amortized cost (market value on the sixtieth day adjusted for amortization of
premium or accretion of discount), which, when combined with accrued interest,
approximates market; and
(6) securities, including restricted securities, for which complete
quotations are not readily available; listed securities or those on NMS if, in
the Fund's opinion, the last sales price does not reflect a current market value
or if no sale occurred; and other assets are valued at prices deemed in good
faith to be fair under procedures established by the Board of Trustees.
SHAREHOLDER SERVICES
As described in the prospectuses, a shareholder may elect to
receive dividends and capital gains distributions in cash instead of shares.
However, ESC will automatically convert a shareholder's distribution option so
that the shareholder reinvests all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. The Fund will hold the returned distribution or redemption proceeds in a
non-interest-bearing account in the shareholder's name until the shareholder
updates the shareholder's address. Therefore, no interest will accrue on amounts
represented by uncashed distribution or redemption checks
PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with respect
to each class of the Fund. The Trust has entered into a Principal Underwriting
Agreement ( "Underwriting
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<PAGE>
Agreement") with the Distributor with respect to each class of the Fund. The
Distributor is a subsidiary of The BISYS Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to
find purchasers for the shares. The Distributor may retain and employ
representatives to promote distribution of the shares and may obtain orders from
broker-dealers, and others, acting as principals, for sales of shares to them.
The Underwriting Agreement provides that the Distributor will bear the expense
of preparing, printing, and distributing advertising and sales literature and
prospectuses used by it.
All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and statement of additional information. All orders are subject to acceptance by
the respective Fund and the Fund reserves the right, in its sole discretion, to
reject any order received. Under the Underwriting Agreement, the Fund is not
liable to anyone for failure to accept any order.
The Distributor has agreed that it will, in all respects, duly
comply with all state and federal laws applicable to the sale of the shares. The
Distributor has also agreed that it will indemnify and hold harmless the Trust
and each person who has been, is, or may be a Trustee or officer of the Trust
against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect
as long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Independent Trustees, and (ii) by vote of a majority of
the Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.
The Underwriting Agreement may be terminated, without penalty, on
60 days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could
benefit the sales of shares, the Distributor may provide to selected
broker-dealers promotional materials and selling aids, including, but not
limited to, personal computers, related software, and data files.
ADDITIONAL TAX INFORMATION
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<PAGE>
The Fund intends to qualify for and elect the tax treatment
applicable to regulated investment companies ("RICs") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). By so qualifying, the
Fund is not subject to federal income tax if it timely distributes its
investment company taxable income and any net realized capital gains. A 4%
nondeductible excise tax will be imposed on the Fund to the extent it does not
meet certain distribution requirements by the end of each calendar year. The
Fund anticipates meeting such distribution requirements.
If more than 50% of the value of the Fund's total assets at the end
of a fiscal year is represented by securities of foreign corporations and the
Fund elects to make foreign tax credits available to its shareholders, a
shareholder will be required to include in his gross income both cash dividends
and the amount the Fund advises him is his pro rata portion of income taxes
withheld by foreign governments from interest and dividends paid on the Fund's
investments. The shareholder may be entitled, however, to take the amount of
such foreign taxes withheld as a credit against his U.S. income tax, or to treat
the foreign tax withheld as an itemized deduction from his gross income, if that
should be to his advantage. In substance, this policy enables the shareholder to
benefit from the same foreign tax credit or deduction that he would have
received if he had been the individual owner of foreign securities and had paid
foreign income tax on the income therefrom. As in the case of individuals
receiving income directly from foreign sources, the credit or deduction is
subject to a number of limitations.
Upon a sale or exchange of Fund shares, a shareholder may realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Also, a shareholder must treat as long-term
capital gains or losses any capital gains or losses on Fund shares held for more
than one year. Capital gain on assets held for more than twelve months is
generally subject to a maximum federal income tax rate of 20% for an individual.
Generally, the Code will not allow a shareholder to realize a loss on shares he
or she has sold or exchanged and replaced within a sixty-one day period
beginning thirty days before and ending thirty days after he or she sold or
exchanged the shares. The Code will not allow a shareholder to realize a loss on
the sale of Fund shares held by the shareholder for six months or less to the
extent the shareholder received exempt-interest dividends on such shares.
Moreover, the Code will treat a shareholder's loss on shares held for six months
or less as a long-term capital loss to the extent the shareholder received
distributions of net capital gains on such shares.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectuses or required by law,
the Fund reserves the right to change the terms of the offer stated in its
prospectuses without shareholder approval, including the right to impose or
change fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Fund's
prospectuses, statement of additional information
79
<PAGE>
or in supplemental sales literature issued by such Fund or the Distributor, and
no person is entitled to rely on any information or representation not contained
therein.
The Fund's prospectuses and SAI omit certain information contained
in its registration statement, which may be obtained for a fee from the SEC in
Washington, D.C.
80
<PAGE>
APPENDIX A
CORPORATE BOND RATINGS
Standard & Poor's Ratings Group ("S&P") Corporate Bond Ratings
A. Corporate Bond Ratings
An S&P corporate bond rating is a current assessment of the
creditworthiness of an obligor, including obligors outside the U.S., with
respect to a specific obligation. This assessment may take into consideration
obligors such as guarantors, insurers or lessees. Ratings of foreign obligors do
not take into account currency exchange and related uncertainties. The ratings
are based on current information furnished by the issuer or obtained by S&P from
other sources it considers reliable.
The ratings are based, in varying degrees, on the following
considerations:
a. Likelihood of default and capacity and willingness of the
obligor to make timely payment of interest and repayment of
principal in accordance with the terms of the obligation;
b. Nature of and provisions of the obligation; and
c. Protection afforded by and relative position of the obligation
in the event of bankruptcy reorganization or other arrangement
under the laws of bankruptcy and other laws affecting
creditors' rights.
PLUS (+) OR MINUS (-): To provide more detailed indications of
credit quality, ratings from "AA" to "BBB" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
A provisional rating is sometimes used by S&P. It assumes the
successful completion of the project being financed by the debt being rated and
indicates that payment of debt service requirements is largely or entirely
dependent upon the successful and timely completion of the project. This rating,
however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of, or the risk of default upon
failure of, such completion.
B. Bond ratings are as follows:
1. AAA - Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
A-1
<PAGE>
2. AA - Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in small
degree.
3. A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
4. BBB - Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
5. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
C. Moody's Investors Service, Inc. ("Moody's") Corporate Bond Ratings
Moody's ratings are as follows:
1. Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
2. Aa - Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
3. A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
4. Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
A-2
<PAGE>
5. Ba - Bonds which are rated Ba are judged to have speculative
elements. Their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
6. B - Bonds which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through Baa in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Those municipal bonds in the Aa, A, and Baa groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols Aa 1, A 1, and Baa 1.
MONEY MARKET INSTRUMENTS
Money market securities are instruments with remaining maturities
of one year or less such as bank certificates of deposit, bankers' acceptances,
commercial paper (including variable rate master demand notes), and obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
some of which may be subject to repurchase agreements.
Commercial Paper
Commercial paper will consist of issues rated at the time of
purchase A-1, by S&P, or Prime-1 by Moody's or F-1 by Fitch IBCA, Inc. (Fitch);
or, if not rated, will be issued by companies which have an outstanding debt
issue rated at the time of purchase Aaa, Aa or A by Moody's, or AAA, AA or A by
S&P, or will be determined by the Fund's investment adviser to be of comparable
quality.
A. S&P Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The top category is as
follows:
A-3
<PAGE>
1. A: Issues assigned this highest rating are regarded as having
the greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.
2. A-1: This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus (+) sign designation.
B. Moody's Ratings
The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following designation, judged to be investment
grade, to indicate the relative repayment capacity of rated issuers.
1. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1 (or related supporting institutions)
are deemed to have a superior capacity for repayment of short term promissory
obligations. Repayment capacity of Prime-1 issuers is normally evidenced by the
following characteristics:
1) leading market positions in well-established industries;
2) high rates of return on funds employed;
3) conservative capitalization structures with moderate reliance
on debt and ample asset protection;
4) broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and
5) well established access to a range of financial markets and
assured sources of alternate liquidity.
In assigning ratings to issuers whose commercial paper obligations
are supported by the credit of another entity or entities, Moody's evaluates the
financial strength of the affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment.
A-4
<PAGE>
EVERGREEN SELECT EQUITY TRUST
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not Applicable
(b) Exhibits
Unless otherwise indicated, each of the Exhibits listed below is filed
herewith.
Exhibit
Number Description Location
1 Declaration of Trust Incorporated by
reference to
Registrant's Pre-
Effective Amendment
No. 1 Filed on
November 17, 1997
2 By-laws Incorporated by
reference to
Registrant's Pre-
Effective Amendment
No. 1 Filed on
November 17, 1997
3 Not applicable
4 Provisions of instruments Included as part of
defining the rights of holders of Exhibits 1 and 2 of
the securities being registered Registrant's Pre-
are contained in the Declaration Effective No. 1 Filed
of Trust Articles II, V, VI, on November 17, 1997
VIII, IX and By-laws Articles II
and VI
5(a) Investment Advisory Agreement Incorporated by
between the Registrant and First reference to
Union National Bank Registrant's Post-
Effective Amendment No.
3 Filed on June 30,
1998
A-5
<PAGE>
Exhibit
Number Description Location
5(b) Investment Advisory Agreement Incorporated by
between the Registrant and reference to
Keystone Investment Management Registrant's Post-
Company Effective Amendment No.
3 Filed on June 30,
1998
5(c) Form of Investment Advisory Form of Agreement filed
Agreement between the registrant herein
and AnalyticoTSA International,
Inc.
6 Principal Underwriting Agreement Incorporated by
between the Registrant and reference to
Evergreen Distributor, Inc. Registrant's Post-
Effective Amendment No.
3 Filed on June 30,
1998
7 Form of Deferred Compensation Form of Plan,
Plan incorporated by
reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
8 Custodian Agreement between the Incorporated by
Registrant and State Street Bank reference to
and Trust Company Registrant's Post-
Effective Amendment No.
3 Filed on June 30,
1998
9(a) Administration Services Agreement Incorporated by
between the Registrant and reference to
Evergreen Investment Services, Registrant's Post-
Inc. Effective Amendment No.
3 Filed on June 30,
1998
A-6
<PAGE>
Exhibit
Number Description Location
9(b) Form of Transfer Agent Agreement Incorporated by
between the Registrant and reference to
Evergreen Service Company Registrant's Post-
Effective Amendment No.
3 Filed on June 30,
1998
10 Opinion and Consent of Sullivan & Incorporated by
Worcester LLP reference to
Registrant's Post-
Effective Amendment No.
1 Filed on December 12,
1997
11 Not applicable
12 Not applicable
13 Not applicable
14 Not applicable
15 12b-1 Distribution Plan for Incorporated by
Institutional Service Shares reference to
Registrant's Post-
Effective Amendment No.
3 Filed on June 30,
1998
16 Not applicable
17 Not applicable
18 Multiple Class Plan Form of Plan,
incorporated by
reference to
Registrant's Pre-
Effective Amendment No.
1 Filed on November 17,
1997
19 Powers of Attorney Incorporated by
reference to
Registrant's Post-
Effective Amendment No.
2 filed on June 8, 1998
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
None
A-7
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (AS OF May 31, 1998).
NUMBER OF
RECORD
TITLE OF CLASS SHAREHOLDERS
Shares of Beneficial Interest without par value:
Evergreen Select Limited Duration Fund
Institutional Shares 2
Institutional Service Shares 0
Evergreen Select Fixed Income Fund
Institutional Shares 2
Institutional Service Shares 63
Evergreen Select Income Plus Fund
Institutional Shares 2
Institutional Service Shares 60
Evergreen Select Intermediate Tax Exempt
Bond Fund
Institutional Shares 2
Institutional Service Shares 37
Evergreen Select Core Bond Fund
Institutional Shares 2
Institutional Service Shares 2
Charitable Shares 2
Evergreen Select Total Return Fund
Institutional Shares 2
Institutional Service Shares 0
Evergreen Select International Bond Fund
Institutional Shares 0
Institutional Service Shares 0
Evergreen Select Adjustable Rate Fund
Institutional Shares 4
Institutional Service Shares 54
ITEM 27. INDEMNIFICATION.
Provisions for the indemnification of the Registrant's Trustees and
officers are contained in the Registrant's Declaration of Trust, incorporated by
reference to Registrant's Pre-Effective Amendment No. 1 filed on November 17,
1997.
Provisions for the indemnification of Evergreen Distributor, Inc., the
Registrant's principal underwriter, are contained in the Principal Underwriting
Agreement between Evergreen Distributor, Inc. and the Registrant, incorporated
by reference
A-8
<PAGE>
to Registrant's Pre-Effective Amendment No. 1 filed on November
17, 1997.
ITEM 28. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISERS.
(a) For the information required by this item with respect to
AnalyticoTSA International, Inc., see the section entitled
"Management of the Fund - Investment Adviser" in Part A.
The Directors and principal executive officers of First Union National
Bank are:
Edward E. Crutchfield, Jr. Chairman and Chief Executive
Officer, First Union
Corporation; Chief Executive
Officer and Chairman, First
Union National Bank
John R. Georgius Vice Chairman, First Union
Corporation; Vice Chairman,
First Union National Bank
Marion A. Cowell, Jr. Executive Vice President,
Secretary & General Counsel,
First Union Corporation;
Secretary and Executive Vice
President, First Union
National Bank
Robert T. Atwood Executive Vice President and
Chief Financial Officer, First
Union Corporation; Chief
Financial Officer and
Executive Vice President
All of the above persons are located at the following address: First Union
National Bank, One First Union Center, Charlotte, NC 28288.
The information required by this item with respect to Keystone
Investment Management Company is incorporated by reference to the Form ADV (File
No. 801-5436) of Keystone
Investment Management Company.
The information required by this item with respect to AnalyticoTSA
International, Inc. is incorporated by reference to the Form ADV (File No.
801-42427) of AnalyticoTSA International, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS.
A-9
<PAGE>
Evergreen Distributor, Inc. The Director and principal
executive officers are:
Director: Lynn J. Mangum
Officers: Lynn J. Mangum Chairman/CEO
Robert J. McMullan Executive Vice President/
J. David Huber Treasurer President
Kevin J. Dell Vice President/General
Counsel/Secretary
Mark J. Rybarczyk Senior Vice President
Dennis Sheehan Senior Vice President
D'Ray Moore Vice President
Dale Smith Vice President
Michael Burns Vice President
Bruce Treff Assistant Secretary
Annamaria Procaro Assistant Secretary
Evergreen Distributor, Inc. acts as principal underwriter for each
registered investment company or series thereof that is a part of the Evergreen
"fund complex" as such term is defined in Item 22(a) of Schedule 14A under the
Securities Exchange Act of 1934.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Keystone Investment Management Company, Evergreen Investment
Services, Inc. and Evergreen Service Company, 200 Berkeley
Street, Boston, Massachusetts 02116-5034
First Union National Bank, One First Union Center, 301 S.
College Street, Charlotte, North Carolina 28288
Evergreen Asset Management Corp., 2500 Westchester Avenue,
Purchase, New York 10577
AnalyticoTSA International, Inc., 25/28 Old Burlington
Street, London W1X 1LB, England
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts
02720
State Street Bank and Trust Company, 2 Heritage Drive,
North Quincy, Massachusetts 02171
ITEM 31. MANAGEMENT SERVICES.
A-10
<PAGE>
Not Applicable.
ITEM 32. UNDERTAKINGS.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
A-11
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of Columbus and State
of Ohio, on the 27th day of July, 1998.
EVERGREEN SELECT FIXED INCOME
TRUST
By: /s/ William J. Tomko
Name: William J. Tomko
Title: President
As required by the Securities Act of 1933, the following persons have
signed this Registration Statement in the capacities indicated on the 27th day
of July, 1998.
/s/William J. Tomko /s/Thomas L. McVerry*
William J. Tomko Thomas L. McVerry
President and Treasurer Trustee
(Principal Financial and
Accounting Officer
/s/Laurence B. Ashkin* /s/William Walt Pettit*
Laurence B. Ashkin William Walt Pettit
Trustee Trustee
/s/Charles A. Austin III* /s/David M. Richardson*
Charles A. Austin III David M. Richardson
Trustee Trustee
/s/K. Dun Gifford* /s/Russell A. Salton III*
K. Dun Gifford Russell A. Salton III
Trusteee Trustee
/s/James S. Howell* /s/Michael S. Scofield*
James S. Howell Michael S. Scofield
Trustee Trustee
A-12
<PAGE>
/s/Leroy Keith, Jr.* /s/Richard J. Shima*
Leroy Keith, Jr. Richard J. Shima
Trustee Trustee
/s/Gerald M. McDonnell*
Gerald M. McDonnell
Trustee
*By:/s/ William J. Tomko
William J. Tomko
Attorney-in-Fact
William J. Tomko, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons and included as Exhibit 19 to the
Registration Statement on Form N-1A filed on June 8, 1998.
A-13
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
5(c) Investment Advisory Agreement between
Registrant and AnalyticoTSA International, Inc.
A-14
<PAGE>
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made as of the 24th day of July 1998, by and between
EVERGREEN SELECT FIXED INCOME TRUST, a Delaware business trust (the "Trust") and
ANALYTIC.TSA INTERNATIONAL, INC (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the Securities Exchange Act of 1934 (the "1934 Act")) provided
to a Fund and/or other accounts over which the Adviser or an affiliate of the
Adviser exercises investment discretion. The Adviser is authorized to pay a
broker-dealer who provides such brokerage and research
A-15
<PAGE>
services a commission for executing a portfolio transaction for a Fund which is
in excess of the amount of commission another broker-dealer would have charged
for effecting that transaction if, but only if, the Adviser determines in good
faith that such commission was reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer viewed in terms
of that particular transaction or in terms of all of the accounts over which
investment discretion is so exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds; (i) all fees and expenses involved in registering and
maintaining registrations of the
Trust, its Funds and of their shares with the Securities and Exchange Commission
(the "Commission") and registering or qualifying the Funds' shares under state
or other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
A-16
<PAGE>
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the
A-17
<PAGE>
Trust or any of its Funds and not as an officer, Director, partner, employee, or
agent or one under the control or direction of the Adviser even though paid by
it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
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12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN SELECT FIXED INCOME TRUST
By:
Name:
Title:
ANALYTIC.TSA INTERNATIONAL, INC.
By:
Name:
Title:
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Schedule 1
Evergreen Select International Bond Fund
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Schedule 2
As compensation for the Adviser's services to the Fund during the
period of this Agreement, the Fund will pay to the Adviser a fee at the annual
rate of:
Evergreen Select International Bond Fund
0.60 of 1% of the Daily Net Assets of the Fund
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