1933 Act No. 333-37433
1940 Act No. 811-07246
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. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 3 [X]
EVERGREEN 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)
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 31, 1998 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)
<PAGE>
EVERGREEN FIXED INCOME TRUST
CONTENTS OF
POST-EFFECTIVE AMENDMENT NO. 3
to
REGISTRATION STATEMENT
This Post-Effective Amendment No. 3 to Registrant's Registration Statement
No. 333-37433/811-07246 consists of the following pages, items of information
and documents:
The Facing Sheet
The Contents Page
The Cross-Reference Sheet
PART A
------
Prospectuses for Evergreen U.S. Government Fund, Evergreen Strategic
Income Fund, Evergreen Diversified Bond Fund and Evergreen High Yield Bond Fund
are contained herein.
Prospectuses for the following funds are contained in Registration Statement
No. 333-37433/811-07246 filed on December 12, 1997: Evergreen Capital
Preservation and Income Fund, Evergreen Intermediate-Term Government Securities
Fund and Evergreen Short-Intermediate Bond Fund.
Prospectuses for Evergreen Intermediate Term Bond Fund are contained in
Registration Statement No. 333-37433/811-07246 filed on November 10, 1997.
PART B
------
Statement of Additional Information for Evergreen U.S. Government Fund,
Evergreen Strategic Income Fund, Evergreen Diversified Bond Fund and
Evergreen High Yield Bond Fund is contained herein.
Statement of Additional Information for the following funds is contained in
Registration Statement No. 333-37433/811-07246 filed on December 12, 1997:
Evergreen Captial Preservation and Income Fund, Evergreen Intermediate-Term
Government Securities Fund, Evergreen Short-Intermediate Bond Fund.
Statement of Additional Information for Evergreen Intermediate Term Bond Fund
is contained in Registration Statement No. 333-37433/811-07246 filed on
November 10, 1997.
PART C
------
Financial Statements
Exhibits
Number of Holders of Securities
Indemnification
Business and Other Connections of Investment Adviser
Principal Underwriter
Location of Accounts and Records
Management Services
Undertakings
Signatures
<PAGE>
EVERGREEN FIXED INCOME TRUST
Cross-Reference Sheet pursuant to Rules 404 and 495 under the Securities
Act of 1933.
<TABLE>
<CAPTION>
N-1A Item No.
Part A Location in Prospectus(es)
- ------ --------------------------
<S> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Expense Information; Performance Data
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of the Funds; Investment Objectives
and Policies; Investment Practices and Restrictions; General Information
Item 5. Management of the Fund Organization and Service Providers; Expenses
Item 6. Capital Stock and Other Securities Description of the Funds; Dividends, Distributions and Taxes; General Information;
Shareholder Services
Item 7. Purchase of Securities Being Offered Dividends, Distributions and Taxes; How to Buy Shares; Exchange Privilege;
Shareholders Services
Item 8. Redemption or Repurchase How to Redeem Shares
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
- ------ ------------------------
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Fund Investments; Appendix
Item 14. Management of the Fund Management of the Trust
Item 15. Control Persons and Principal Principal Holders of Fund Shares
Holders of Securities
Item 16. Investment Advisory and Other Services Additional Information; Distribution Plans and Agreements; Expenses; Investment
Advisors; Principal Underwriter; Additional Service Providers
Item 17. Brokerage Allocation Brokerage
Item 18. Capital Stock and Other Securities Trust Organization
Item 19. Purchase, Redemption and Pricing of Purchase, Redemption and Pricing of Shares; Distribution Plans and Agreements;
Securities Being Offered Additional Information
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Principal Underwriter
Item 22. Calculation of Performance Data Performance
Item 23. Financial Statements Financial Statements
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
EVERGREEN FIXED INCOME TRUST
PART A
PROSPECTUSES
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS September 1, 1998
- -------------------------------------------------------------------------------
EVERGREEN LONG TERM BOND FUNDS [LOGO OF EVERGREEN FUNDS APPEARS HERE]
- -------------------------------------------------------------------------------
EVERGREEN U.S. GOVERNMENT FUND
EVERGREEN STRATEGIC INCOME FUND
EVERGREEN HIGH YIELD BOND FUND
EVERGREEN DIVERSIFIED BOND FUND
(EACH A "FUND;" TOGETHER, THE "FUNDS")
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Funds are designed to provide investors with a selection of
investment alternatives which seek to provide a high level of current income.
This prospectus provides information regarding the Class A, Class B and Class
C shares offered by the Funds. Each Fund is a diversified series of an open-
end, management investment company. This prospectus sets forth concise
information about the Funds that a prospective investor should know before
investing. The address of the Funds is 200 Berkeley Street, Boston,
Massachusetts 02116.
A Statement of Additional Information ("SAI") for the Funds dated
September 1, 1998, as supplemented from time to time, has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference
herein. The SAI provides information regarding certain matters discussed in
this prospectus and other matters which may be of interest to investors, and
may be obtained without charge by calling the Funds at (800) 343-2898. There
can be no assurance that the investment objective of any Fund will be
achieved. Investors are advised to read this prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN THE FUNDS INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
<PAGE>
TABLE OF CONTENTS
EXPENSE INFORMATION....................... 3
FINANCIAL HIGHLIGHTS...................... 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies..... 11
Investment Practices and Restrictions.. 14
ORGANIZATION AND SERVICE PROVIDERS
Organization........................... 22
Service Providers...................... 22
Distribution Plans and Agreements...... 23
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares...................... 24
How to Redeem Shares................... 28
Exchange Privilege..................... 29
Shareholder Services................... 30
Banking Laws........................... 31
OTHER INFORMATION
Dividends, Distributions and Taxes..... 31
General Information.................... 32
2
<PAGE>
- -------------------------------------------------------------------------------
EXPENSE INFORMATION
- -------------------------------------------------------------------------------
The tables and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest
in a Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of a Fund.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
------- ------- -------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a
% of offering price) 4.75% None None
Maximum Contingent Deferred Sales Charge (as a %
of original purchase price or
redemption proceeds, whichever is lower) None(1) 5.00%(2) 1.00%(2)
</TABLE>
Annual operating expenses reflect the normal operating expenses of a
Fund, and include costs such as management, distribution and other fees. The
tables below show the Funds' actual annual operating expenses for the fiscal
year ended April 30, 1998 for EVERGREEN U.S. GOVERNMENT FUND and estimated
annual operating expenses for the fiscal year ending April 30, 1999 for
EVERGREEN DIVERSIFIED BOND FUND, EVERGREEN HIGH YIELD BOND FUND and EVERGREEN
STRATEGIC INCOME FUND. The examples show what expenses you would pay if you
invested $1,000 over the periods indicated. The examples assume that you
reinvest all of your dividends and that the Funds' average annual return will
be 5%. THE EXAMPLES ARE FOR ILLUSTRATION PURPOSES ONLY AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. THE
FUNDS' ACTUAL EXPENSES AND RETURNS WILL VARY. For a more complete description
of the various costs and expenses borne by the Funds see "Organization and
Service Providers."
EVERGREEN U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
EXAMPLES
--------
ASSUMING REDEMPTION AT ASSUMING NO
END OF PERIOD REDEMPTION
----------------------- ---------------
CLASS A CLASS B CLASS C CLASS B CLASS C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
After 1 Year $ 58 $ 68 $ 28 $ 18 $ 18
After 3 Years $ 79 $ 86 $ 56 $ 56 $ 56
After 5 Years $102 $116 $ 96 $ 96 $ 96
After 10 Years $167 $180 $209 $180 $209
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
--------------------------------
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
Management Fees .50% .50% .50%
12b-1 Fees(3) .25% 1.00% 1.00%
Other Expenses .28% .28% .28%
-------- -------- --------
Total 1.03% 1.78% 1.78%
======== ======== ========
</TABLE>
EVERGREEN STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
EXAMPLES
--------
ASSUMING REDEMPTION AT ASSUMING NO
END OF PERIOD REDEMPTION
----------------------- ---------------
CLASS A CLASS B CLASS C CLASS B CLASS C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
After 1 Year $ 60 $ 70 $ 30 $ 20 $ 20
After 3 Years $ 86 $ 93 $ 63 $ 63 $ 63
After 5 Years $113 $128 $108 $108 $108
After 10 Years $193 $205 $234 $205 $234
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
--------------------------------
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
Management Fees .63% .63% .63%
12b-1 Fees(3) .25% 1.00% 1.00%
Other Expenses .38% .38% .38%
-------- -------- --------
Total 1.26% 2.01% 2.01%
======== ======== ========
</TABLE>
3
<PAGE>
EVERGREEN HIGH YIELD BOND FUND
EXAMPLES
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
--------------------------------
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
Management Fees .57% .57% .57%
12b-1 Fees(3) .25% 1.00% 1.00%
Other Expenses .36% .36% .36%
-------- -------- --------
Total 1.18% 1.93% 1.93%
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT ASSUMING NO
END OF PERIOD REDEMPTION
----------------------- ---------------
CLASS A CLASS B CLASS C CLASS B CLASS C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
After 1 Year $ 59 $ 70 $ 30 $ 20 $ 20
After 3 Years $ 83 $ 91 $ 61 $ 61 $ 61
After 5 Years $109 $124 $104 $104 $104
After 10 Years $184 $197 $225 $197 $225
</TABLE>
EVERGREEN DIVERSIFIED BOND FUND
EXAMPLES
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
--------------------------------
CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
Management Fees .56% .56% .56%
12b-1 Fees(3) .25% 1.00% 1.00%
Other Expenses .36% .36% .36%
-------- -------- --------
Total 1.17% 1.92% 1.92%
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
ASSUMING REDEMPTION AT ASSUMING NO
END OF PERIOD REDEMPTION
----------------------- ---------------
CLASS A CLASS B CLASS C CLASS B CLASS C
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
After 1 Year $ 59 $ 70 $ 30 $ 20 $ 20
After 3 Years $ 83 $ 90 $ 60 $ 60 $ 60
After 5 Years $109 $124 $104 $104 $104
After 10 Years $183 $196 $224 $196 $224
</TABLE>
- -------
(1) Investments of $1 million or more are not subject to a front-end sales
charge, but may be subject to a contingent deferred sales charge upon
redemption within one year after the month of purchase.
(2) The deferred sales charge on Class B shares declines from 5% to 1% on
amounts redeemed within six years after the month of purchase. The
deferred sales charge on Class C shares is 1% on amounts redeemed within
one year after the month of purchase. No sales charge is imposed on
redemptions made thereafter. See "Purchase and Redemption of Shares" for
more information.
(3) Long-term shareholders may pay more than the economic equivalent front-end
sales charges permitted by the National Association of Securities Dealers,
Inc.
4
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the ten most recent fiscal years or the life of
a Fund, if shorter, has been audited by KPMG Peat Marwick LLP, the Funds'
independent auditors. The tables appear in the Funds' Annual Report to
shareholders and should be read in conjunction with each Fund's financial
statements and related notes, which also appear, together with the independent
auditors' report, in the Funds' Annual Report to shareholders. The Funds'
financial statements, related notes, and independent auditors' report are
incorporated by reference into the Funds' SAI.
Further information about each Fund's performance is contained in the
Funds' Annual Report to shareholders, which may be obtained without charge.
EVERGREEN U.S. GOVERNMENT FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 11, 1993
TEN MONTHS SIX MONTHS (COMMENCEMENT OF
YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED CLASS OPERATIONS) TO
APRIL 30, APRIL 30, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997(D) 1996 1995 (C) 1994 1993
---------- ---------- ---------- ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.39 $9.42 $9.65 $9.07 $10.05 $10.00
------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income.. 0.61 0.52 0.63 0.33 0.66 0.68
Net realized and
unrealized gain (loss)
on investments........ 0.29 (0.03) (0.23) 0.58 (0.98) 0.05
------- ------- ------- ------- ------- -------
Total from investment
operations............. 0.90 0.49 0.40 0.91 (0.32) 0.73
------- ------- ------- ------- ------- -------
Less distributions from
net investment income.. (0.61) (0.52) (0.63) (0.33) (0.66) (0.68)
------- ------- ------- ------- ------- -------
Net asset value end of
year................... $9.68 $9.39 $9.42 $9.65 $9.07 $10.05
======= ======= ======= ======= ======= =======
TOTAL RETURN(A)......... 9.78% 5.30% 4.28% 10.17% (3.18%) 7.43%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets
Expenses............... 1.03% 0.98%(b) 0.99% 1.04%(b) 0.96% 0.68%(b)
Expenses excluding
indirectly paid
expenses.............. 1.03% 0.98%(b) -- -- -- --
Expenses excluding
waivers and/or
reimbursements........ 1.03% 0.98%(b) 0.99% 1.05%(b) 1.00% 0.99%(b)
Net investment income.. 6.25% 6.60%(b) 6.61% 7.07%(b) 6.97% 6.93%(b)
Portfolio turnover
rate................... 21% 12% 23% 0% 19% 39%
NET ASSETS END OF YEAR
(THOUSANDS)............ $40,136 $17,913 $20,345 $22,445 $23,706 $38,851
</TABLE>
EVERGREEN U.S. GOVERNMENT FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
JANUARY 11, 1993
TEN MONTHS SIX MONTHS (COMMENCEMENT OF
YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED CLASS OPERATIONS) TO
APRIL 30, APRIL 30, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1998 1997(D) 1996 1995(C) 1994 1993
---------- ---------- ---------- ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.39 $9.42 $9.65 $9.07 $10.05 $10.00
-------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income.. 0.53 0.46 0.56 0.29 0.61 0.63
Net realized and
unrealized gain (loss)
on investments........ 0.29 (0.03) (0.23) 0.58 (0.98) 0.05
-------- -------- -------- -------- -------- --------
Total from investment
operations............. 0.82 0.43 0.33 0.87 (0.37) 0.68
Less distributions from
net investment income.. (0.53) (0.46) (0.56) (0.29) (0.61) (0.63)
-------- -------- -------- -------- -------- --------
Net asset value end of
year................... $9.68 $9.39 $9.42 $9.65 $9.07 $10.05
======== ======== ======== ======== ======== ========
TOTAL RETURN(A)......... 8.96% 4.65% 3.50% 9.76% (3.75%) 6.91%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets:
Expenses............... 1.78% 1.73%(b) 1.74% 1.79%(b) 1.54% 1.19%(b)
Expenses excluding
indirectly paid
expenses.............. 1.78% 1.73%(b) -- -- -- --
Expenses excluding
waivers and/or
reimbursements........ 1.78% 1.73%(b) 1.74% 1.80%(b) 1.58% 1.50%(b)
Net investment income.. 5.56% 5.85%(b) 5.85% 6.32%(b) 6.42% 6.44%(b)
Portfolio turnover
rate................... 21% 12% 23% 0% 19% 39%
NET ASSETS END OF YEAR
(THOUSANDS)............ $130,576 $142,371 $165,988 $192,490 $195,571 $236,696
</TABLE>
- -------
(a) Excluding applicable sales charges.
(b) Annualized.
(c) The Fund changed its fiscal year end from December 31 to June 30.
(d) The Fund changed its fiscal year end from June 30 to April 30.
5
<PAGE>
EVERGREEN U.S. GOVERNMENT FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
SEPTEMBER 2, 1994
TEN MONTHS SIX MONTHS (COMMENCEMENT OF
YEAR ENDED ENDED YEAR ENDED ENDED CLASS OPERATIONS) TO
APRIL 30, APRIL 30, JUNE 30, JUNE 30, DECEMBER 31,
1998 1997(D) 1996 1995(C) 1994
---------- ---------- ---------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $9.39 $9.42 $9.65 $9.07 $9.39
------ ----- ----- ----- -----
Income from investment
operations:
Net investment income.. 0.53 0.46 0.56 0.29 0.20
Net realized and
unrealized gain (loss)
on investments........ 0.29 (0.03) (0.23) 0.58 (0.32)
------ ----- ----- ----- -----
Total from investment
operations............. 0.82 0.43 0.33 0.87 (0.12)
------ ----- ----- ----- -----
Less distributions from
net investment income.. (0.53) (0.46) (0.56) (0.29) (0.20)
------ ----- ----- ----- -----
Net asset value end of
year................... $9.68 $9.39 $9.42 $9.65 $9.07
====== ===== ===== ===== =====
TOTAL RETURN(A)......... 8.96% 4.65% 3.50% 9.76% (1.30%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets:
Expenses............... 1.78% 1.73%(b) 1.74% 1.79%(b) 1.71%(b)
Expenses excluding
indirectly paid
expenses.............. 1.78% 1.73%(b) -- -- --
Expenses excluding
waivers and/or
reimbursements ....... 1.78% 1.73%(b) 1.74% 1.80%(b) 1.75%(b)
Net investment income.. 5.49% 5.85%(b) 5.87% 6.36%(b) 6.70%(b)
Portfolio turnover
rate................... 21% 12% 23% 0% 19%
NET ASSETS END OF YEAR
(THOUSANDS)............ $5,697 $455 $649 $350 $266
</TABLE>
- -------
(a) Excluding applicable sales charges.
(b) Annualized.
(c) The Fund changed its fiscal year end from December 31 to June 30.
(d) The Fund changed its fiscal year end from June 30 to April 30.
EVERGREEN STRATEGIC INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
APRIL 30, APRIL 30,
1998 1997(D)
---------- -----------
<S> <C> <C>
NET ASSET VALUE
BEGINNING OF
YEAR.............. $6.82 $6.77
-------- -------
Income from
investment
operations:
Net investment
income........... 0.50(b) 0.37
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
related
transactions..... 0.38 0.09
-------- -------
Total from
investment
operations........ 0.88 0.46
-------- -------
Less distributions
from:
Net investment
income........... (0.49) (0.38)
In excess of
investment
income........... 0 (0.03)
Tax basis return
of capital....... 0 0
Net realized gains
on investments ... 0 0
-------- -------
Total
distributions..... (0.49) (0.41)
-------- -------
Net asset value end
of year........... $7.21 $6.82
======== =======
TOTAL RETURN(A).... 13.20% 6.80%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average
net assets:
Expenses.......... 1.27% 1.28%(c)
Expenses excluding
indirectly paid
expenses......... 1.26% 1.26%(c)
Expenses excluding
reimbursement.... 1.27% 1.28%(c)
Net investment
income........... 6.80% 7.28%(c)
Portfolio turnover
rate.............. 237% 86%
NET ASSETS END OF
YEAR (THOUSANDS).. $193,618 $58,725
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- ----------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF
YEAR.............. $6.89 $7.35 $7.86 $7.02 $6.10 $7.17 $9.02 $9.36 $10.04
-------- -------- ----------- -------- -------- -------- -------- --------- ---------
Income from
investment
operations:
Net investment
income........... 0.54 0.64 0.61(b) 0.69 0.78 0.89 1.03 1.10 1.05
Net realized and
unrealized gain
(loss) on
investments and
foreign currency
related
transactions..... (0.09) (0.45) (0.44) 0.89 0.89 (1.01) (1.79) (0.31) (0.65)
-------- -------- ----------- -------- -------- -------- -------- --------- ---------
Total from
investment
operations........ 0.45 0.19 0.17 1.58 1.67 (0.12) (0.76) 0.79 0.40
-------- -------- ----------- -------- -------- -------- -------- --------- ---------
Less distributions
from:
Net investment
income........... (0.52) (0.60) (0.61) (0.72) (0.75) (0.89) (1.04) (1.11) (1.08)
In excess of
investment
income........... 0 (0.03) (0.03) (0.02) 0 (0.06) (0.05) 0 0
Tax basis return
of capital....... (0.05) (0.02) (0.04) 0 0 0 0 0 0
Net realized gains
on investments ... 0 0 0 0 0 0 0 (0.02) 0
-------- -------- ----------- -------- -------- -------- -------- --------- ---------
Total
distributions..... (0.57) (0.65) (0.68) (0.74) (0.75) (0.95) (1.09) (1.13) (1.08)
-------- -------- ----------- -------- -------- -------- -------- --------- ---------
Net asset value end
of year........... $6.77 $6.89 $7.35 $7.86 $7.02 $6.10 $7.17 $9.02 $9.36
======== ======== =========== ======== ======== ======== ======== ========= =========
TOTAL RETURN(A).... 6.84% 3.00% 1.86% 24.13% 28.73% 0.54% (8.55%) 9.00% 4.49%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average
net assets:
Expenses.......... 1.30% 1.33% 1.32% 1.80% 2.09% 2.00% 2.00% 1.81% 1.28%
Expenses excluding
indirectly paid
expenses......... 1.28% -- -- -- -- -- -- -- --
Expenses excluding
reimbursement.... 1.30% 1.33% 1.32% 1.80% 2.12% 2.25% 2.01% 1.90% 2.08%
Net investment
income........... 8.05% 9.31% 7.79% 9.50% 11.73% 15.23% 12.91% 12.06% 10.98%
Portfolio turnover
rate.............. 101% 95% 92% 151% 95% 82% 36% 73% 46%
NET ASSETS END OF
YEAR (THOUSANDS).. $68,118 $85,970 $105,181 $85,793 $70,459 $70,246 $83,106 $138,499 $114,310
</TABLE>
- -------
(a) Excluding applicable sales charges.
(b) Calculation based on average shares outstanding.
(c) Annualized.
(d) The Fund changed its fiscal year end from July 31 to April 30 during the
period.
6
<PAGE>
EVERGREEN STRATEGIC INCOME FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
NINE MONTHS FEBRUARY 1, 1993
YEAR ENDED ENDED YEAR ENDED JULY 31, (COMMENCEMENT OF
APRIL, 30, APRIL 30, ---------------------------- CLASS OPERATIONS) TO
1998 1997(D) 1996 1995 1994 JULY 31, 1993
---------- ----------- -------- -------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $6.85 $6.81 $6.92 $7.38 $7.89 $7.07
-------- -------- -------- -------- -------- -------
Income from investment
operations:
Net investment
income................ 0.44(b) 0.34 0.50 0.60 0.55(b) 0.24
Net realized and
unrealized gain (loss)
on investments and
foreign currency
related transactions.. 0.39 0.07 (0.09) (0.47) (0.44) 0.92
-------- -------- -------- -------- -------- -------
Total from investment
operations............. 0.83 0.41 0.41 0.13 0.11 1.16
-------- -------- -------- -------- -------- -------
Less distributions from:
Net investment
income................ (0.43) (0.34) (0.47) (0.55) (0.55) (0.24)
In excess of net
investment income..... 0 (0.03) 0 (0.03) (0.03) (0.10)
Tax basis return of
capital............... 0 0 (0.05) (0.01) (0.04) 0
-------- -------- -------- -------- -------- -------
Total distributions..... (0.43) (0.37) (0.52) (0.59) (0.62) (0.34)
-------- -------- -------- -------- -------- -------
Net asset value end of
year................... $7.25 $6.85 $6.81 $6.92 $7.38 $7.89
======== ======== ======== ======== ======== =======
TOTAL RETURN(A)......... 12.47% 6.06% 6.21% 2.12% 1.10% 16.75%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets:
Expenses............... 2.05% 2.04%(c) 2.07% 2.06% 2.07% 2.37%(c)
Expenses excluding
indirectly paid
expenses.............. 2.04% 2.02%(c) 2.05% -- -- --
Net investment
income................ 6.08% 6.52%(c) 7.28% 8.58% 7.11% 7.18%(c)
Portfolio turnover
rate................... 237% 86% 101% 95% 92% 151%
NET ASSETS END OF YEAR
(THOUSANDS)............ $113,136 $110,082 $123,389 $149,091 $162,866 $35,415
</TABLE>
EVERGREEN STRATEGIC INCOME FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
NINE MONTHS FEBRUARY 1, 1993
YEAR ENDED ENDED YEAR ENDED JULY 31, (COMMENCEMENT OF
APRIL, 30, APRIL 30, ------------------------- CLASS OPERATIONS) TO
1998 1997(D) 1996 1995 1994 JULY 31, 1993
---------- ----------- ------- ------- ------- --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $6.84 $6.80 $6.92 $7.37 $7.88 $7.07
------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income.. 0.44(b) 0.33 0.49 0.59 0.55(b) 0.24
Net realized and
unrealized gain (loss)
on investments and
foreign currency
related transactions.. 0.39 0.08 (0.09) (0.45) (0.44) 0.91
------- ------- ------- ------- ------- -------
Total from investment
operations............. 0.83 0.41 0.40 0.14 0.11 1.15
------- ------- ------- ------- ------- -------
Less distributions from:
Net investment income.. (0.43) (0.34) (0.47) (0.55) (0.55) (0.24)
In excess of net
investment income..... 0 (0.03) 0 (0.03) (0.03) (0.10)
Tax basis return of
capital............... 0 0 (0.05) (0.01) (0.04) 0
------- ------- ------- ------- ------- -------
Total distributions..... (0.43) (0.37) (0.52) (0.59) (0.62) (0.34)
------- ------- ------- ------- ------- -------
Net asset value end of
year................... $7.24 $6.84 $6.80 $6.92 $7.37 $7.88
======= ======= ======= ======= ======= =======
TOTAL RETURN(A)......... 12.48% 6.07% 6.07% 2.27% 1.09% 16.61%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net
assets:
Expenses............... 2.05% 2.04%(c) 2.07% 2.08% 2.07% 2.25%(c)
Expenses excluding
indirectly paid
expenses.............. 2.05% 2.03%(c) 2.05% -- -- --
Net investment income.. 6.10% 6.52%(c) 7.29% 8.56% 7.09% 7.35%(c)
Portfolio turnover
rate................... 237% 86% 101% 95% 92% 151%
NET ASSETS END OF YEAR
(THOUSANDS)............ $19,639 $24,304 $31,816 $46,221 $59,228 $19,706
</TABLE>
- -------
(a) Excluding applicable sales charges.
(b) Calculation based on average shares outstanding.
(c) Annualized.
(d) The Fund changed its fiscal year end from July 31 to April 30 during the
period.
7
<PAGE>
EVERGREEN HIGH YIELD BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 20, 1998
(COMMENCEMENT OF
CLASS OPERATIONS) TO
APRIL 30, 1998
--------------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD....................... $4.52
--------
Income from investment operations:
Net investment income.................................... 0.11(b)
Net realized and unrealized gain on investments and
foreign currency related transactions................... 0.01
--------
Total from investment operations.......................... 0.12
--------
Less distributions from net investment income............ (0.11)
--------
Net asset value end of period............................. $4.53
========
TOTAL RETURN(A)........................................... 2.57%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Expenses................................................. 1.24%(c)
Expenses excluding indirectly paid expenses.............. 1.23%(c)
Net investment income.................................... 8.48%(c)
Portfolio turnover rate................................... 155%
NET ASSETS END OF PERIOD (THOUSANDS)...................... $420,778
</TABLE>
EVERGREEN HIGH YIELD BOND FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
APRIL 30,
1998(D)
-----------
<S> <C>
NET ASSET VALUE
BEGINNING OF
PERIOD.......... $4.37
-------
Income from
investment
operations:
Net investment
income......... 0.25(b)
Net realized and
unrealized gain
(loss) on
investments and
foreign
currency
related
transactions... 0.16
-------
Total from
investment
operations...... 0.41
-------
Less
distributions
from:
Net investment
income......... (0.25)
In excess of net
investment
income......... 0
Tax basis return
of capital..... 0
-------
Total
distributions.. (0.25)
-------
NET ASSET VALUE
END OF PERIOD... $4.53
=======
TOTAL RETURN(A).. 9.57%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average
net assets:
Expenses........ 1.94%(c)
Expenses
excluding
indirectly paid
expenses....... 1.93%(c)
Net investment
income......... 7.27%(c)
Portfolio
turnover rate... 155%
NET ASSETS END OF
PERIOD
(THOUSANDS)..... $96,535
<CAPTION>
YEAR ENDED JULY 31,
---------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
--------- --------- --------- ---------- --------- --------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF
PERIOD.......... $4.10 $4.42 $4.68 $5.13 $4.74 $4.19 $5.02 $6.38 $6.91 $7.66
--------- --------- --------- ---------- --------- --------- --------- ---------- ----------- -----------
Income from
investment
operations:
Net investment
income......... 0.32 0.32 0.38 0.38 0.45 0.49 0.61 0.68 0.83 0.80
Net realized and
unrealized gain
(loss) on
investments and
foreign
currency
related
transactions... 0.28 (0.27) (0.15) (0.38) 0.44 0.58 (0.72) (1.18) (0.51) (0.71)
--------- --------- --------- ---------- --------- --------- --------- ---------- ----------- -----------
Total from
investment
operations...... 0.60 0.05 0.23 0 0.89 1.07 (0.11) (0.50) 0.32 0.09
--------- --------- --------- ---------- --------- --------- --------- ---------- ----------- -----------
Less
distributions
from:
Net investment
income......... (0.32) (0.31) (0.37) (0.38) (0.45) (0.50) (0.72) (0.78) (0.85) (0.84)
In excess of net
investment
income......... (0.01) (0.06) (0.02) (0.07) (0.05) (0.02) 0 (0.08) 0 0
Tax basis return
of capital..... 0 0 (0.10) 0 0 0 0 0 0 0
--------- --------- --------- ---------- --------- --------- --------- ---------- ----------- -----------
Total
distributions.. (0.33) (0.37) (0.49) (0.45) (0.50) (0.52) (0.72) (0.86) (0.85) (0.84)
--------- --------- --------- ---------- --------- --------- --------- ---------- ----------- -----------
NET ASSET VALUE
END OF PERIOD... $4.37 $4.10 $4.42 $4.68 $5.13 $4.74 $4.19 $5.02 $6.38 $6.91
========= ========= ========= ========== ========= ========= ========= ========== =========== ===========
TOTAL RETURN(A).. 15.32% 1.38% 5.66% (0.41%) 20.28% 27.25% 0.03% (7.84%) 4.95% 1.66%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average
net assets:
Expenses........ 1.96% 1.94% 2.03% 1.84% 2.06% 2.17% 2.34% 2.06% 1.97% 1.82%
Expenses
excluding
indirectly paid
expenses....... 1.95% 1.93% -- -- -- -- -- -- -- --
Net investment
income......... 7.63% 7.92% 8.64% 7.57% 9.30% 10.86% 14.64% 12.77% 12.36% 11.29%
Portfolio
turnover rate... 138% 116% 82% 110% 125% 94% 78% 45% 75% 81%
NET ASSETS END OF
PERIOD
(THOUSANDS)..... $547,390 $593,681 $764,965 $766,283 $972,164 $841,757 $710,590 $820,940 $1,188,660 $1,274,673
</TABLE>
- -------
(a) Excluding applicable sales charges.
(b) Calculation based on average shares outstanding.
(c) Annualized.
(d) The Fund changed its fiscal year end from July 31 to April 30 during the
period.
8
<PAGE>
EVERGREEN HIGH YIELD BOND FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
JANUARY 22, 1998
(COMMENCEMENT OF
CLASS OPERATIONS) TO
APRIL 30, 1998
--------------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD....................... $4.52
------
Income from investment operations:
Net investment income.................................... 0.10(b)
Net realized and unrealized gain on investments and
foreign currency related transactions................... 0.01
------
Total from investment operations.......................... 0.11
------
Less distributions from net investment income............. (0.10)
------
NET ASSET VALUE END OF PERIOD............................. $4.53
======
TOTAL RETURN(A)........................................... 2.35%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Expenses................................................. 2.04%(c)
Expenses excluding indirectly paid expenses.............. 2.01%(c)
Net investment income.................................... 7.51%(c)
Portfolio turnover rate................................... 155%
NET ASSETS END OF PERIOD (THOUSANDS)...................... $1,155
</TABLE>
- -------
(a) Excluding applicable sales charges.
(b) Calculation based on average shares outstanding.
(c) Annualized.
EVERGREEN DIVERSIFIED BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 20, 1998
(COMMENCEMENT OF
CLASS OPERATIONS) TO
APRIL 30, 1998
--------------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD....................... $16.08
--------
Income from investment operations:
Net investment income.................................... 0.30(b)
Net realized and unrealized loss on investments, futures
contracts and foreign currency related transactions..... (0.16)(d)
--------
Total from investment operations.......................... 0.14
--------
Less distributions from net investment income............. (0.30)
--------
Net asset value end of period............................. $15.92
========
TOTAL RETURN(A)........................................... 0.85%
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Expenses................................................. 1.08%(c)
Expenses excluding indirectly paid expenses.............. 1.07%(c)
Net investment income.................................... 6.68%(c)
Portfolio turnover rate................................... 109%
NET ASSETS END OF PERIOD (THOUSANDS)...................... $501,547
</TABLE>
- -------
(a) Excluding applicable sales charges.
(b) Calculation based on average shares outstanding.
(c) Annualized.
(d) The amount shown for a share outstanding throughout the period may not
accord with the change in the aggregate gains and losses in the portfolio
securities for the period because of the timing of sales and repurchases
of the Fund's shares in relation to the fluctuation of market value for
the portfolio.
9
<PAGE>
EVERGREEN DIVERSIFIED BOND FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED
APRIL 30,
1998(D)
------------
<S> <C>
NET ASSET VALUE
BEGINNING OF
PERIOD.......... $15.42
-------
Income from
investment
operations:
Net investment
income......... 0.61(b)
Net realized and
unrealized gain
(loss) on
investments,
futures
contracts and
foreign
currency
related
transactions... 0.50
-------
Total from
investment
operations...... 1.11
-------
Less
distributions
from
Net investment
income......... (0.61)
In excess of net
investment
income......... 0
Net realized
gain on
investments.... 0
Tax basis return
of capital...... 0
-------
Total
distributions... (0.61)
-------
Net asset value
end of period... $15.92
=======
TOTAL RETURN(A).. 7.26%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average
net assets:
Expenses........ 1.93%(c)
Expenses
excluding
indirectly paid
expenses....... 1.92%(c)
Net investment
income......... 5.74%(c)
Portfolio
turnover rate... 109%
NET ASSETS END OF
PERIOD
(THOUSANDS)..... $70,113
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
--------- --------- --------- ---------- ----------- --------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF
PERIOD.......... $14.65 $15.09 $15.28 $17.06 $16.44 $15.37 $15.51 $17.74 $17.99 $18.91
--------- --------- --------- ---------- ----------- --------- --------- ---------- ----------- ---------
Income from
investment
operations:
Net investment
income......... 0.91 0.95 1.06 1.06 1.28 1.33 1.33 1.53 1.71 1.78
Net realized and
unrealized gain
(loss) on
investments,
futures
contracts and
foreign
currency
related
transactions... 0.84 (0.35) 0.11 (1.62) 0.70 1.14 0.17 (1.94) (0.13) (0.81)
--------- --------- --------- ---------- ----------- --------- --------- ---------- ----------- ---------
Total from
investment
operations...... 1.75 0.60 1.17 (0.56) 1.98 2.47 1.50 (0.41) 1.58 0.97
--------- --------- --------- ---------- ----------- --------- --------- ---------- ----------- ---------
Less
distributions
from
Net investment
income......... (0.93) (0.96) (1.06) (1.22) (1.28) (1.33) (1.63) (1.61) (1.83) (1.85)
In excess of net
investment
income......... (0.05) 0 (0.22) 0 (0.08) (0.07) (0.01) (0.21) 0 0
Net realized
gain on
investments.... 0 0 0 0 0 0 0 0 0 (0.04)
Tax basis return
of capital...... 0 (0.08) (0.08) 0 0 0 0 0 0 0
--------- --------- --------- ---------- ----------- --------- --------- ---------- ----------- ---------
Total
distributions... (0.98) (1.04) (1.36) (1.22) (1.36) (1.40) (1.64) (1.82) (1.83) (1.89)
--------- --------- --------- ---------- ----------- --------- --------- ---------- ----------- ---------
Net asset value
end of period... $15.42 $14.65 $15.09 $15.28 $17.06 $16.44 $15.37 $15.51 $17.74 $17.99
========= ========= ========= ========== =========== ========= ========= ========== =========== =========
TOTAL RETURN(A).. 12.25% 4.03% 8.13% (3.53%) 12.73% 16.88% 10.58% (2.44%) 9.23% 5.61%
RATIOS/SUPPLEMENTAL
DATA
Ratios to average
net assets:
Expenses........ 1.88% 1.84% 1.81% 1.75% 1.89% 1.99% 1.94% 1.89% 1.84% 1.68%
Expenses
excluding
indirectly paid
expenses....... 1.87% 1.83% -- -- -- -- -- -- -- --
Net investment
income......... 6.07% 6.42% 7.05% 6.48% 7.73% 8.29% 8.74% 9.26% 9.52% 9.82%
Portfolio
turnover rate... 138% 246% 178% 200% 133% 117% 101% 43% 47% 46%
NET ASSETS END OF
PERIOD
(THOUSANDS)..... $457,701 $559,792 $734,837 $814,245 $1,004,393 $902,339 $814,528 $860,615 $1,000,305 $838,892
</TABLE>
<TABLE>
<CAPTION>
APRIL 7, 1998
(COMMENCEMENT OF
CLASS OPERATIONS) TO
APRIL 30, 1998
--------------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD....................... $16.06
------
Income from investment operations:
Net investment income.................................... 0.04(b)
Net realized and unrealized loss on investments, futures
contracts and foreign currency related transactions..... (0.14)(e)
------
Total from investment operations.......................... (0.10)
------
Less distributions from net investment income............. (0.04)
------
Net asset value end of period............................. $15.92
======
TOTAL RETURN(A)........................................... (0.60%)
RATIOS/SUPPLEMENTAL DATA
Ratios to average net assets
Expenses................................................. 1.88%(c)
Expenses excluding indirectly paid expenses.............. 1.88%(c)
Net investment income.................................... 6.11%(c)
Portfolio turnover rate................................... 109%
NET ASSETS END OF PERIOD (THOUSANDS)...................... $23
</TABLE>
EVERGREEN DIVERSIFIED BOND FUND -- CLASS C SHARES
- -------
(a) Excluding applicable sales charges.
(b) Calculations based on average shares outstanding.
(c) Annualized.
(d) The Fund changed its fiscal year end from August 31 to April 30 during the
period.
(e) The amount shown for a share outstanding throughout the period may not
accord with the change in the aggregate gains and losses in the portfolio
securities for the period because of the timing of sales and repurchases of
the Fund's shares in relation to the fluctuation of market value for the
portfolio.
10
<PAGE>
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is nonfundamental; as a result a Fund
may change its objective without a shareholder vote. Each Fund has also
adopted certain fundamental investment policies which are mainly designed to
limit a Fund's exposure to risk. Each Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
a Fund's fundamental investment policies or other related investment policies.
There can be no assurance that a Fund's investment objectives will be
achieved.
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below.
EVERGREEN U.S. GOVERNMENT FUND
The investment objective of EVERGREEN U.S. GOVERNMENT FUND is to achieve
a high level of current income consistent with stability of principal. The
Fund will invest in debt instruments issued or guaranteed by the U.S.
government, its agencies, or instrumentalities ("U.S. government securities"),
and is suitable for conservative investors seeking high current yields plus
relative safety. It permits an investor to participate in a portfolio that
benefits from active management of a blend of securities and maturities to
maximize the opportunities and minimize the risks created by changing interest
rates.
In addition to U.S. government securities, the Fund may invest in:
1. Securities representing ownership interests in mortgage pools
("mortgage-backed securities"). The yield and maturity characteristics of
mortgage-backed securities correspond to those of the underlying mortgages,
with interest and principal payments including prepayments (i.e., paying
remaining principal before the mortgage's scheduled maturity) passed through
to the holder of the mortgage-backed securities. The yield and price of
mortgage-backed securities will be affected by prepayments which substantially
shorten effective maturities. Thus, during periods of declining interest
rates, prepayments may be expected to increase, requiring the Fund to reinvest
the proceeds at lower interest rates, making it difficult to effectively lock
in high interest rates. Conversely, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
2. Securities representing ownership interests in a pool of assets
("asset-backed securities"), for which automobile and credit card receivables
are the most common collateral. Because much of the underlying collateral is
unsecured, asset-backed securities are structured to include additional
collateral and/or additional credit support to protect against default. The
Fund's investment advisor evaluates the strength of each particular issue of
asset-backed security, taking into account the structure of the issue and its
credit support. (See "Investment Practices and Restrictions--Asset-Backed
Securities.")
3. Collateralized mortgage obligations ("CMOs") issued by single-purpose,
stand-alone entities. A CMO is a mortgage-backed security that manages the
risk of prepayment by separating mortgage pools into short, medium and long-
term portions. These portions are generally retired in sequence as the
underlying mortgage loans in the mortgage pool are repaid. Similarly, as
prepayments are made, the portion of CMO first to mature will be retired prior
to its maturity, thus having the same effect as the prepayment of mortgages
underlying a mortgage-backed security. The issuer of a series of CMOs may
elect to be treated as a Real Estate Mortgage Investment Conduit (a "REMIC"),
which has certain special tax attributes. The Fund will invest only in CMOs
which are rated AAA by a nationally recognized statistical rating organization
and which may be: (a) collateralized by pools of mortgages in which each
mortgage is guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (b) collateralized by pools of
mortgages in which payment of principal and interest is guaranteed by the
issuer and such guarantee is collateralized by U.S. government securities; or
(c) securities in which the proceeds of the issuance are invested in mortgage
securities and payment of the principal and interest are supported by the
credit of an agency or instrumentality of the U.S. government.
11
<PAGE>
The Fund may invest up to 20% of its total assets in (i) CMOs and
commercial paper which mature in 270 days or less so long as at least two of
its ratings are high quality ratings by nationally recognized statistical
rating organizations (i.e., A-1 or A-2 by Standard & Poor's Rating Services
("S&P"), Prime-1 or Prime-2 by Moody's Investors Service ("Moody's"), or F-1
or F-2 by Fitch IBCA, Inc. ("Fitch")), and (ii) bonds and other debt
securities rated Baa or higher by Moody's or BBB or higher by S&P, or which,
if unrated, are considered to be of comparable quality by the investment
advisor.
Bonds rated Baa by Moody's or BBB by S&P have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to weaken such bonds' prospects for principal and interest
payments than higher rated bonds. However, like the higher rated bonds, these
securities are considered to be investment grade. (See the description of the
rating categories contained in the SAI.)
EVERGREEN STRATEGIC INCOME FUND
The investment objective of EVERGREEN STRATEGIC INCOME FUND is high
current income from interest on debt securities. Secondarily, the Fund
considers potential for growth of capital in selecting securities. The Fund
intends to allocate its assets principally between eligible domestic high-
yield, high-risk bonds and debt securities of foreign governments and foreign
corporations. In addition, the Fund will, from time to time, allocate a
portion of its assets to U.S. government securities. This allocation will be
made on the basis of the investment advisor's assessment of global
opportunities for high income. From time to time, the Fund may invest 100% of
its assets in U.S. or foreign securities.
The Fund may invest in:
Domestic High-Yield Bonds. The Fund may invest principally in domestic
high-yield, high-risk bonds, commonly known as "junk bonds." High-yield bonds
in which the Fund may invest include zero-coupon bonds and payment-in-kind
securities ("PIKs"), debentures, convertible debentures, fixed, increasing and
adjustable rate bonds, stripped bonds, mortgage bonds, mortgage-backed
securities, corporate notes (including convertible notes) with maturities at
the date of issue of at least five years (which may be senior or junior to
other bonds), equipment trust certificates, and units consisting of bonds with
stock or warrants to buy stock attached. For information about the risks of
investing in high-yield bonds, see the section entitled "Investment Practices
and Restrictions."
Foreign Securities. The Fund may invest in debt obligations (which may be
denominated in U.S. dollars or in non-U.S. currencies) issued or guaranteed by
foreign corporations, certain supranational entities (such as the World Bank),
foreign governments, their agencies and instrumentalities, and debt
obligations issued by U.S. corporations denominated in non-U.S. currencies.
These debt obligations may include bonds, debentures, notes and short-term
obligations.
U.S. Government Securities. The Fund may invest in U.S. government
securities, including zero-coupon U.S. Treasury securities, mortgage-backed
securities and money market instruments.
While the Fund may invest in securities of any maturity, it is currently
expected that the Fund will not invest in securities with maturities of more
than 30 years.
Other Eligible Securities. Under ordinary circumstances, the Fund may also
invest a limited portion of its assets in the securities described below.
Equity Securities. The Fund may invest in preferred stocks, including
adjustable rate and convertible preferred stocks, common stocks and other
equity securities, including convertible securities and warrants, which may be
used to create other permissible investments. Such investments must be
consistent with the Fund's primary objective of seeking a high level of
current income or be acquired as part of a unit combining income and equity
securities. In addition, the Fund may invest in limited partnerships,
including master limited partnerships.
Money Market Securities. The Fund may invest in the following types of
money market securities: (1) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; (2) commercial paper, including
master demand notes, that at the date of investment is rated A-1, the highest
grade by S&P, Prime-1,
12
<PAGE>
the highest grade by Moody's, or, if not rated by such services, is issued by
a company that at the date of investment has an outstanding issue rated A or
better by S&P or Moody's; (3) obligations, including certificates of deposit
and bankers' acceptances, of banks or savings and loan associations having at
least $1 billion in assets that are members of the Federal Deposit Insurance
Corporation, including U.S. branches of foreign banks and foreign branches of
U.S. banks; and (4) obligations of U.S. corporations that at the date of
investment are rated A or better by S&P or Moody's.
EVERGREEN HIGH YIELD BOND FUND
The investment objective of EVERGREEN HIGH YIELD BOND FUND is generous
income. The generous income sought by the Fund is ordinarily associated with
high-yield, high-risk bonds and similar securities in the lower rating
categories of the recognized rating agencies or with securities that are
unrated. While growth of capital is not a Fund objective, the Fund may
purchase securities that offer the possibility of capital appreciation in
addition to income, provided the acquisition of such securities does not
conflict with the Fund's objective of generous income.
The Fund intends to invest at least 65% of its total assets in bonds,
debentures and other income obligations. The Fund's portfolio ordinarily
includes a substantial number of bonds, debentures, and other income
obligations that are rated by S&P or Moody's as below-investment grade, i.e.,
S&P rating below BBB and Moody's rating below Baa.
The Fund may purchase securities with any rating or may purchase unrated
securities, which are not necessarily of lower quality than rated securities,
but may not be as attractive to as many buyers. While the Fund's investment
advisor performs its own credit analyses of the Fund's investments and does
not rely on ratings assigned by rating services, bonds rated below-investment
grade generally involve greater volatility of price and risk or principal and
income than bonds in the higher rating categories and are, on balance,
considered predominantly speculative.
The Fund may invest up to 50% of its assets in securities that are
principally traded in securities markets located outside the United States.
In addition, the Fund may invest in limited partnerships, including
master limited partnerships. The Fund may also invest in participations in
bank loans.
Other Eligible Securities. The Fund may also invest in preferred stock,
including convertible preferred and adjustable rate preferred stocks;
warrants, which may be used to create permissible investments; and common
stock of issuers that are objects of acquisition attempts, are undergoing
reorganization through bankruptcy or otherwise, or are in the process of
refinancing. Investments in common stocks of such issuers are expected to
provide the Fund with the opportunity to receive high-yielding, fixed-income
securities. Investments in common stocks will be limited to those stocks that
the Fund's investment advisor believes will assist the Fund in achieving its
investment objective.
EVERGREEN DIVERSIFIED BOND FUND
The Fund seeks maximum income without undue risk of principal.
The Fund invests at least 65% of its total assets in bonds, which are
debt instruments used by issuers to borrow money from investors. The Fund
invests in debt instruments that are normally characterized by relatively
liberal returns and moderate price fluctuations. Such debt instruments, which
include both secured and unsecured debt obligations, will have a rating of BBB
or higher by S&P, Baa or higher by Moody's, BBB or higher by Fitch, or, if not
rated or rated under a different system, will be of comparable quality to
obligations so rated as determined by another nationally recognized
statistical ratings organization or by the Fund's investment advisor. As a
group, such debt instruments usually possess a fairly high degree of
dependability of interest payments. While the Fund's primary objective is
income, the Fund gives careful consideration to security of principal,
marketability and diversification.
The Fund seeks to maximize return with respect to a portion of its
assets. Such maximum return is ordinarily associated with high-yield, high-
risk bonds and similar securities in the lower rating categories of the
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<PAGE>
recognized rating agencies or with securities that are unrated (high-yield
bonds). The degree to which the Fund will hold such securities will depend on
various factors, including its investment advisor's economic forecast and its
judgment as to the comparative values offered by high-yield, high-risk bonds
and higher quality issues. The Fund's investments in high-yield, high-risk
bonds will not exceed 35% of its assets.
The Fund may invest up to 50% of its assets in securities that are
principally traded in securities markets located outside of the United States.
Other Eligible Securities. The Fund's investments may include limited
partnerships, including master limited partnerships, participations in bank
loans, fixed and adjustable rate or stripped bonds, including zero-coupon
bonds and PIKs, debentures, notes, equipment trust certificates, U.S.
government securities, and debt securities convertible into or exchangeable
for preferred or common stock. The Fund may invest in preferred stock,
including adjustable rate preferred stock, and warrants, which can be used to
purchase or create otherwise permissible investments. The Fund may continue to
hold preferred or common stock received in connection with convertible or
exchangeable securities and may hold common stock received in connection with
the purchase of a permitted security.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond prices move inversely to interest rates, i.e., as interest
rates decline the values of the bonds increase, and vice versa. The longer the
maturity of a bond, the greater the exposure to market price fluctuations. The
same market factors are reflected in the share price or net asset value of
bond funds which will vary with interest rates. In addition, certain of the
obligations in which each Fund may invest may be variable or floating rate
instruments, which may involve a conditional or unconditional demand feature,
and may include variable amount master demand notes. While these types of
instruments may, to a certain degree, offset the risk to principal associated
with rising interest rates, they would not be expected to appreciate in a
falling interest rate environment.
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of each Fund's
investment advisor, market conditions warrant a temporary defensive investment
strategy.
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 Funds may invest in derivatives only if the expected risks and rewards
are consistent with their investment objectives and policies.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains and 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 asset or economic factor will move.
Downgrades. If any security invested in by any of the Funds loses its rating
or has its rating reduced after a Fund has purchased it, the Fund is not
required to sell or otherwise dispose of the security, but may consider doing
so.
Repurchase Agreements. The Funds may invest in repurchase agreements. A
repurchase agreement is an agreement by which a Fund purchases a security
(usually a U.S. government security) for cash and obtains a simultaneous
commitment from the seller (usually a bank or broker-dealer) to repurchase the
security at an agreed-upon price and specified future date. The repurchase
price reflects an agreed-upon interest rate for the time period of the
agreement. A 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 a
Fund to sell the security in the open market in the case of a default. In such
a case, a Fund may incur costs in disposing of the security which would
increase Fund expenses. A Fund's investment advisor will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by a Fund to sell a
security and repurchase it at a specified time and
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<PAGE>
price. A 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. Each 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 values of these securities are subject to market fluctuations
during this period and no income accrues to a 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, a Fund relies on the
other party to consummate the transaction; if the other party fails to do so,
the Fund may be disadvantaged. Each Fund does not intend to purchase when-
issued securities for speculative purposes, but only in furtherance of its
investment objective.
Securities Lending. To generate income and offset expenses, the Funds may lend
securities to broker-dealers and other financial institutions. Loans of
securities by a Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any
income accruing on the security. Also, the Fund may invest any collateral it
receives in additional securities. Gains or losses in the market value of a
lent security will affect a Fund and its shareholders. When a Fund lends its
securities, it runs the risk that it could not retrieve the securities on a
timely basis, possibly losing the opportunity to sell the securities at a
desirable price. Also, if the borrower files for bankruptcy or becomes
insolvent, a Fund's ability to dispose of the securities may be delayed.
Options and Futures. The Funds may engage in options and futures transactions.
Options and futures transactions are intended to enable a Fund to manage
market, interest rate or exchange rate risk. The Funds do not use these
transactions for speculation or leverage.
The Funds may attempt to hedge all or a portion of their portfolios
through the purchase of both put and call options on their portfolio
securities and listed put options on financial futures contracts for portfolio
securities. EVERGREEN STRATEGIC INCOME FUND and EVERGREEN HIGH YIELD BOND FUND
may also purchase call options on financial futures contracts. The Funds may
also write covered call options on their portfolio securities to attempt to
increase their current income. The Funds will maintain their positions in
securities, option rights, and segregated cash subject to puts and calls until
the options are exercised, closed, or have expired. An option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series.
The Funds may write (i.e., sell) covered call and put options. By writing
a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, a Fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price if the option is exercised. The Funds may also write straddles
(combinations of covered puts and calls on the same underlying security). The
Funds may only write "covered" options. This means that so long as a Fund is
obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, a Fund might own substantially similar U.S. Treasury bills. A
Fund will be considered "covered" with respect to a put option it writes if,
so long as it is obligated as the writer of the put option, it deposits and
maintains with its custodian in a segregated account liquid assets having a
value equal to or greater than the exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised.
By writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more
than their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of
15
<PAGE>
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specified agencies or instrumentalities of the U.S. government. If a Fund
would enter into financial futures contracts directly to hedge its holdings of
fixed income securities, it would enter into contracts to deliver securities
at an undetermined price (i.e., "go short") to protect itself against the
possibility that the prices of its fixed income securities may decline during
a Fund's anticipated holding period. A Fund would "go long" (agree to purchase
securities in the future at a predetermined price) to hedge against a decline
in market interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies, or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy
or sell securities or currencies during a designated month at whatever price
exists at that time. A futures contract on a securities index does not involve
the actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Funds do not make
payment or deliver securities upon entering into a futures contract. Instead,
they put down a margin deposit, which is adjusted to reflect changes in the
value of the contract and which remains in effect until the contract is
terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the
contract will tend to rise when the value of the underlying securities or
currencies declines and to fall when the value of such securities or
currencies increases. Thus, the Funds sell futures contracts in order to
offset a possible decline in the value of their securities or currencies. If a
futures contract is purchased by a Fund, the value of the contract will tend
to rise when the value of the underlying securities or currencies increases
and to fall when the value of such securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for
the purpose of closing out their options positions. The Funds' ability to
enter into closing transactions depends on the development and maintenance of
a liquid secondary market. There is no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. As a
result, there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case
the Funds would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Funds' use of them can result in poorer performance (i.e., the Funds' returns
may be reduced). A Fund's attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk
that the prices of the securities subject to the financial futures contracts
and options on financial futures contracts may not correlate perfectly with
the prices of the securities in the Funds' portfolios. This may cause the
financial futures contract and any related options to react to market changes
differently than the portfolio securities. In addition, each Fund's investment
advisor could be incorrect in its expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities
price movements, and other economic factors. Even if a Fund's investment
advisor correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although each Fund's investment advisor
will consider liquidity before entering into financial futures contracts or
options on financial futures contracts transactions, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
financial futures contract or option on a financial futures contract at any
particular time. The Funds' ability to establish and close out financial
futures contracts and options on financial futures contract positions depends
on this secondary market. If a Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, a Fund may lose money on the
futures contract or option, and the losses to a Fund could be significant.
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<PAGE>
Zero-Coupon and Stripped Securities. The Funds may invest in zero-coupon and
stripped securities. Zero-coupon securities in which the Funds may invest are
debt obligations which are generally issued at a discount and payable in full
at maturity, and which do not provide for current payments of interest prior
to maturity. Zero-coupon securities usually trade at a deep discount from
their face or par value and are subject to greater market value fluctuations
from changing interest rates than debt obligations of comparable maturities
which make current distributions of interest. As a result, the net asset value
of shares of the Funds may fluctuate over a greater range than shares of other
mutual funds investing in securities making current distributions of interest
and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly by
the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by
their holder, typically a custodian bank or investment banking firm. A number
of securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold
them in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves
are held in book-entry form at the Federal Reserve Bank or, in the case of
bearer securities (i.e., unregistered securities which are owned ostensibly by
the bearer or holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of zero-
coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under
the STRIPS program, the Funds will be able to have their beneficial ownership
of U.S. Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidence
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
Foreign Investments. EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD
BOND FUND and EVERGREEN DIVERSIFIED BOND FUND may invest in foreign
securities, which may involve additional risks. Specifically, they may be
affected by the strength of foreign currencies relative to the U.S. dollar, or
by political or economic developments in foreign countries. Accounting
procedures and government supervision may be less stringent than those
applicable to U.S. companies. There may be less publicly available information
about a foreign company than about a U.S. company. Foreign markets may be less
liquid or more volatile than U.S. markets and may offer less protection to
investors. It may also be more difficult to enforce contractual obligations
abroad than would be the case in the United States because of differences in
the legal systems. Foreign securities may be subject to foreign taxes, which
may reduce yield, and may be less marketable than comparable U.S. securities.
All these factors are considered by each Fund's investment advisor before
making any of these types of investments.
Foreign Currency Transactions. As discussed above, EVERGREEN STRATEGIC INCOME
FUND, EVERGREEN HIGH YIELD BOND FUND and EVERGREEN DIVERSIFIED BOND FUND may
invest in securities of foreign issuers. When a Fund invests in foreign
securities which are usually denominated in foreign currencies, the Fund
temporarily may hold foreign currencies. Thus, the value of Fund shares may be
affected by changes in exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Funds may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency a Fund
will deliver or receive when the contract is completed) is fixed when a Fund
enters into the contract. A Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell.
Each Fund intends to use these contracts to hedge the U.S. dollar value of a
security it already owns, particularly if the Fund expects
17
<PAGE>
a decrease in the value of the currency in which the foreign security is
denominated. Although a Fund will attempt to benefit from using forward
contracts, the success of its hedging strategy will depend on the investment
advisor's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar. The value of a Fund's investments
denominated in foreign currencies will depend on the relative strength of
those currencies and the U.S. dollar, and a Fund may be affected favorably or
unfavorably by changes in the exchange rates or exchange control regulations
between foreign currencies and the U.S. dollar. Changes in foreign currency
exchange rates also may affect the value of dividends and interest earned,
gains and losses realized on the sale of securities and net investment income
and gains, if any, to be distributed to shareholders by a Fund. Although the
Funds do not currently intend to do so, the Funds may also purchase and sell
options related to foreign currencies. The Funds do not intend to enter into
foreign currency transactions for speculation or leverage.
Structured Securities. Structured securities represent interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations or foreign government
securities. This type of restructuring involves the deposit with or purchase
by an entity, such as a corporation or trust, of specified instruments (such
as commercial bank loans or Brady Bonds) and the issuance by that entity of
one or more classes of structured securities backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued structured securities to
create securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payments made with respect to structured securities is dependent on the
extent of the cash flow on the underlying instruments. Because structured
securities typically involve no credit enhancement, their credit risk
generally will be equivalent to that of the underlying instruments. Structured
securities of a given class may be either subordinated or unsubordinated to
the right of payment of another class. Subordinated structured securities
typically have higher yields and present greater risks than unsubordinated
structured securities.
Asset-Backed Securities. The Funds may invest in asset-backed securities.
Asset-backed securities are created by the grouping of certain governmental,
government-related and private loans, receivables and other lender assets into
pools. Interests in these pools are sold as individual securities. Payments
from the asset pools may be divided into several different tranches of debt
securities, with some tranches entitled to receive regular installments of
principal and interest, other tranches entitled to receive regular
installments of interest, with principal payable at maturity or upon specified
call dates, and other tranches only entitled to receive payments of principal
and accrued interest at maturity or upon specified call dates. Different
tranches of securities will bear different interest rates, which may be fixed
or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities and mortgage-backed securities are
generally subject to higher prepayment risks than most other types of debt
instruments. Prepayment risks on mortgage securities tend to increase during
periods of declining mortgage interest rates, because many borrowers refinance
their mortgages to take advantage of the more favorable rates. Depending upon
market conditions, the yield that the Funds receive from the reinvestment of
such prepayments, or any scheduled principal payments, may be lower than the
yield on the original mortgage security. As a consequence, mortgage securities
may be a less effective means of "locking in" interest rates than other types
of debt securities having the same stated maturity and may also have less
potential for capital appreciation. For certain types of asset pools, such as
CMOs, prepayments may be allocated to one tranche of securities ahead of other
tranches, in order to reduce the risk of prepayment for the other tranches.
Prepayments may result in a capital loss to the Funds to the extent that
the prepaid mortgage securities were purchased at a market premium over their
stated amount. Conversely, the prepayment of mortgage securities purchased at
a market discount from their stated principal amount will accelerate the
recognition of interest income by the Funds which would be taxed as ordinary
income when distributed to the shareholders. The credit characteristics of
asset-backed securities also differ in a number of respects from those of
traditional debt securities. The credit quality of most asset-backed
securities depends primarily upon the credit quality of the assets underlying
such securities, how well the entity issuing the securities is insulated from
the credit risk of the originator or any other affiliated entities, and the
amount and quality of any credit enhancement to such securities.
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<PAGE>
Risk Characteristics of High-Yield Bonds. EVERGREEN STRATEGIC INCOME FUND,
EVERGREEN HIGH YIELD BOND FUND and EVERGREEN DIVERSIFIED BOND FUND may invest
in high-yield bonds. While investment in high-yield bonds provides
opportunities to maximize return over time, investors should be aware of the
following risks associated with high-yield bonds:
(1) High-yield bonds are rated below-investment grade, i.e., BB or lower
by S&P or Ba or lower by Moody's. Securities so rated are considered
predominantly speculative with respect to the ability of the issuer to meet
principal and interest payments.
(2) The lower ratings of these securities reflect a greater possibility
that adverse changes in the financial condition of the issuer or in general
economic conditions, or both, or an unanticipated rise in interest rates may
impair the ability of the issuer to make payments of interest and principal,
especially if the issuer is highly leveraged. Such issuer's ability to meet
its debt obligations may also be adversely affected by specific corporate
developments or the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. Also, an economic
downturn or an increase in interest rates may increase the potential for
default by the issuers of these securities.
(3) Their value may be more susceptible to real or perceived adverse
economic, company or industry conditions and publicity than is the case for
higher quality securities.
(4) Their value, like those of other fixed-income securities, fluctuates
in response to changes in interest rates, generally rising when interest rates
decline and falling when interest rates rise. For example, if interest rates
increase after a fixed-income security is purchased, the security, if sold
prior to maturity, may return less than its cost. The prices of below-
investment grade bonds, however, are generally less sensitive to interest rate
changes than the prices of higher-rated bonds, but are more sensitive to
adverse or positive economic changes or individual corporate developments.
(5) The secondary market for such securities may be less liquid at
certain times than the secondary market for higher quality debt securities,
which may adversely effect (i) the market price of the security, (ii) a Fund's
ability to dispose of particular issues, and (iii) a Fund's ability to obtain
accurate market quotations for purposes of valuing its assets.
(6) Zero-coupon bonds and PIKs involve additional risks. Zero-coupon
bonds and PIKs do not require the periodic payment of interest. PIKs are debt
obligations that provide that the issuer may, at its option, pay interest on
such bonds in cash or in the form of additional debt obligations. Such
investments may experience greater fluctuation in value due to changes in
interest rates than debt obligations that pay interest currently. Even though
these investments do not pay current interest in cash, a Fund is, nonetheless,
required by tax laws to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, a Fund could
be required at times to liquidate investments in order to fulfill its
intention to distribute substantially all of its net income as dividends. A
Fund will not be able to purchase additional income producing securities with
cash used to make such distributions, and its current income ultimately may be
reduced as a result.
The generous income sought by a Fund is ordinarily associated with
securities in the lower rating categories of the recognized rating agencies or
with securities that are unrated. Such securities are generally rated BB or
lower by S&P or Ba or lower by Moody's. The Funds may invest in securities
that are rated as low as D by S&P or C- by Moody's. The Funds may also invest
in unrated securities that, in the investment advisor's judgment, offer
comparable yields and risks as securities that are rated. It is possible for
securities rated D or C-, respectively, to have defaulted on payments of
principal and/or interest at the time of investment. The SAI describes these
rating categories. The Funds intend to invest in D rated debt only in cases
when, in the investment advisor's judgment, there is a distinct prospect of
improvement in the issuer's financial position as a result of the completion
of a reorganization or otherwise.
The investment advisor considers the ratings of S&P and Moody's assigned
to various securities, but does not rely solely on these ratings because (1)
S&P and Moody's assigned ratings are based largely on historical financial
data and may not accurately reflect the current financial outlook of
companies; and (2) there can be large differences among the current financial
conditions of issuers within the same category.
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The following tables show the weighted average percentages of the assets
of EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD BOND FUND and
EVERGREEN DIVERSIFIED BOND FUND invested at the end of each month during the
fiscal period ended April 30, 1998 in securities assigned to the various
rating categories and in unrated securities determined by the investment
advisor to be of comparable quality. The rated asset percentages shown have
received equivalent ratings from S&P and Moody's except where ratings are
"split," i.e., different between S&P and Moody's. In such instances, the
higher of the two ratings is shown and the lower rating is no more than one
grade below the higher one. For the purposes of the tables, only the S&P
rating system is used. Since the percentages in the tables are based on month-
end averages throughout the fiscal period, they do not reflect the Funds'
holdings at any one point in time. The percentages in each category may be
higher or lower on any day than those shown in the table below.
EVERGREEN STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
*UNRATED SECURITIES
OF COMPARABLE
RATED SECURITIES QUALITY AS
AS PERCENTAGE OF PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
------ ---------------- -------------------
<S> <C> <C>
AAA 27.49% 0.00%
AA 8.81% 0.00%
A 2.15% 0.00%
BBB 1.00% 0.00%
BBB split 0.91% 0.00%
BB 6.59% 0.00%
BB split 4.37% 0.00%
B 21.75% 6.41%
B split 5.44% 0.00%
CCC 1.84% 1.98%
D 0.00% 0.00%
Unrated* 8.39%
U.S. governments,
cash, equities and
others 11.26%
------
TOTAL 100.00%
======
</TABLE>
EVERGREEN HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
*UNRATED SECURITIES
OF COMPARABLE
RATED SECURITIES QUALITY AS
AS PERCENTAGE OF PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
------ ---------------- -------------------
<S> <C> <C>
AAA 0.00% 0.00%
AA 0.00% 0.00%
A 0.00% 0.00%
BBB 0.00% 0.00%
BBB split 0.42% 0.00%
BB 5.33% 0.00%
BB split 7.56% 0.00%
B 67.61% 4.59%
B split 5.94% 0.00%
CCC 3.75% 1.80%
D 0.00% 0.00%
Unrated* 6.39%
U.S. governments,
cash, equities and
others 3.00%
------
TOTAL 100.00%
======
</TABLE>
20
<PAGE>
EVERGREEN DIVERSIFIED BOND FUND
<TABLE>
<CAPTION>
*UNRATED SECURITIES
OF COMPARABLE
RATED SECURITIES QUALITY AS
AS PERCENTAGE OF PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
------ ---------------- -------------------
<S> <C> <C>
AAA 24.95% 0.00%
AA 14.14% 0.00%
A 12.69% 0.00%
BBB 12.41% 0.00%
BBB split 2.97% 0.00%
BB 7.35% 0.00%
BB split 3.99% 0.00%
B 12.63% 0.00%
B split 0.37% 0.00%
CCC 0.00% 0.00%
D 0.00% 0.00%
Unrated* 0.00%
U.S. governments,
cash, equities and
others 8.52%
------
TOTAL 100.00%
======
</TABLE>
Since the Funds take an aggressive approach to investing, the investment
advisor attempts to maximize the return by controlling risk through
diversification, credit analysis, review of sector and industry trends,
interest rate forecasts and economic analysis. The investment advisor's
analysis of securities focuses on factors such as interest or dividend
coverage, asset values, earning prospects and the quality of management of the
company. In making investment recommendations, the investment advisor also
considers current income, potential for capital appreciation, maturity
structure, quality guidelines, coupon structure, average yield, yield to
maturity and the percentage of zero-coupon bonds, PIKs and non-accruing items
in a Fund's portfolio.
Income and yields on high-yield, high-risk securities, as on all
securities, will fluctuate over time.
Borrowing. The Funds may borrow from banks in an amount up to 33 1/3% of their
total assets, taken at market value. Each Fund may also borrow an additional
5% of its total assets from banks and others. The Funds may only borrow as a
temporary measure for extraordinary or emergency purposes such as the
redemption of Fund shares. The Funds will not purchase securities while
borrowings are outstanding except to exercise prior commitments and to
exercise subscription rights.
Illiquid Securities. Each 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 a Fund to dispose
of illiquid investments readily or at a reasonable price could impair a Fund's
ability to raise cash for redemptions or other purposes.
Restricted Securities. Each Fund may invest in restricted securities,
including securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 (the "1933 Act"). Generally, Rule 144A establishes a
safe harbor from the registration requirements of the 1933 Act for resale by
large institutional investors of securities not publicly traded in the United
States. Each Fund's investment advisor determines the liquidity of Rule 144A
securities according to guidelines and procedures adopted by the Trust's Board
of Trustees. The Board of Trustees monitors the investment advisors'
application of those guidelines and procedures. Securities eligible for resale
pursuant to Rule 144A, which each Fund's investment advisor has determined to
be liquid or readily marketable, are not subject to the 15% limit on illiquid
securities.
21
<PAGE>
- -------------------------------------------------------------------------------
ORGANIZATION AND SERVICE PROVIDERS
- -------------------------------------------------------------------------------
ORGANIZATION
Fund Structure. Each Fund is an investment pool, which invests shareholders'
money towards a specified goal. Each Fund is a diversified series of an open-
end, investment management company called Evergreen Fixed Income Trust (the
"Trust"). The Trust is a Delaware business trust organized on September 18,
1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Funds' activities, reviewing,
among other things, the Funds' performance and their contractual arrangements
with various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, shares will be fully paid and
nonassessable. Shares of the Funds are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Funds do not hold annual shareholder meetings; the Funds 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 Funds are prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect Trustees.
SERVICE PROVIDERS
Investment Advisors. The investment advisor to EVERGREEN U.S. GOVERNMENT FUND
is the Capital Management Group of First Union National Bank ("FUNB"), a
subsidiary of First Union Corporation ("First Union"). First Union is located
at 301 South College Street and FUNB is located at 201 South College Street,
Charlotte, North Carolina 28288-0630. First Union and its subsidiaries provide
a broad range of financial services to individuals and businesses throughout
the United States.
The investment advisor to EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH
YIELD BOND FUND and EVERGREEN DIVERSIFIED BOND FUND is Keystone Investment
Management Company ("Keystone"), a subsidiary of FUNB. Keystone is located at
200 Berkeley Street, Boston, Massachusetts 02116-5034. Keystone has provided
investment advisory and management services to investment companies and
private accounts since it was organized in 1932.
EVERGREEN U.S. GOVERNMENT FUND pays FUNB an annual fee for its services
equal to 0.50 of 1% of the Fund's average daily net assets.
EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD BOND FUND and
EVERGREEN DIVERSIFIED BOND FUND pay Keystone a fee for its services at the
annual rate set forth below:
<TABLE>
<CAPTION>
2.0% OF GROSS DIVIDEND
AND INTEREST INCOME PLUS
AGGREGATE NET
ASSET VALUE OF THE
MANAGEMENT FEE SHARES OF THE FUND
-------------- ------------------------
<S> <C>
0.50% of the first $100,000,000; plus
0.45% of the next $100,000,000; plus
0.40% of the next $100,000,000; plus
0.35% of the next $100,000,000; plus
0.30% of the next $100,000,000; plus
0.25% of amounts over $500,000,000.
</TABLE>
The investment advisors' fee is computed as of the close of business each
business day and is payable monthly.
22
<PAGE>
Portfolio Managers. Rollin C. Williams, CFA, is the Portfolio Manager of
EVERGREEN U.S. GOVERNMENT FUND. Mr. Williams has over 28 years of banking and
investment management experience. In addition to managing First Union's
Diversified Bond Group Trust, he is also responsible for the management of
over $2.2 billion in fixed income portfolios. Prior to joining First Union,
Mr. Williams was the Head of Fixed Income Investment at Dominion Trust Company
in Roanoke, VA. Mr. Williams has been with First Union since 1993 when
Dominion was acquired by the bank; he started with Dominion Trust Company in
1988. Since joining First Union, Mr. Williams has been a Vice President and
Senior Portfolio Manager.
The Portfolio Manager of EVERGREEN STRATEGIC INCOME FUND and EVERGREEN
HIGH YIELD BOND FUND is Prescott B. Crocker, CFA. Mr. Crocker is a Senior Vice
President, Senior Portfolio Manager and Head of the High Yield Bond Team at
Keystone. Mr. Crocker joined Keystone in 1997 and initially served as the
Manager of the domestic high yield bond portion of the Fund's portfolio. From
1993 until he joined Keystone, Mr. Crocker held various positions at Boston
Security Counsellors, including President and Chief Investment Officer, and
was Managing Director and Portfolio Manager at Northstar Investment
Management. Mr. Crocker has 25 years of experience in fixed income investment
management.
The Portfolio Manager of EVERGREEN DIVERSIFIED BOND FUND is Christopher
P. Conkey, CFA. Mr. Conkey has served as Chief Investment Officer of Fixed
Income for the past nine months and as Head of the High Grade Bond Team for
Keystone for the last three years. During the past five years at Keystone, Mr.
Conkey has also served as Portfolio Manager of several high grade fixed income
funds, several high grade-high yield fixed income funds and several off-shore
closed-end fixed income funds.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to EVERGREEN U.S. GOVERNMENT FUND, subject to the supervision
and control of the Trustees. EIS provides the Fund with facilities, equipment
and personnel. For its services as administrator, EIS is entitled to receive a
fee based on the aggregate daily net assets of all the mutual funds
administered by EIS for which any affiliate of FUNB serves as investment
advisor. The administration fee is calculated in accordance with the following
schedule:
<TABLE>
<CAPTION>
ADMINISTRATION FEE
------------------
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
</TABLE>
EIS also provides facilities, equipment and personnel to EVERGREEN
STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD BOND FUND and EVERGREEN
DIVERSIFIED BOND FUND on behalf of the Funds' investment advisor.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company
("ESC"), 200 Berkeley Street, Boston, Massachusetts 02116-5034, acts as each
Fund's transfer agent and dividend disbursing agent. ESC is a subsidiary of
First Union.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as each Fund's custodian.
Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of
The BISYS Group, Inc. located at 125 West 55th Street, New York, New York
10019, is the principal underwriter of each Fund.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution Plans. Each Fund's Class A, Class B and Class C shares pay for
the expenses associated with the distribution of its shares according to
distribution plans adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act") (each a "Plan" or collectively the "Plans").
Under the Plans, each Fund
23
<PAGE>
may incur distribution-related and shareholder servicing-related expenses
which are based upon a maximum annual rate as a percentage of each Fund's
average daily net assets attributable to the Class, as follows:
<TABLE>
<S> <C>
Class A
shares 0.75%, currently limited to 0.25%
Class B
shares 1.00%
Class C
shares 1.00%
Of the amount that each Class may pay under its respective Plan, up to
0.25% may constitute a service fee to be used to compensate organizations,
which may include each Fund's investment advisor or their affiliates, for
personal services rendered to shareholders and/or the maintenance of
shareholder accounts. The Funds may not pay any distribution or services fees
during any fiscal period in excess of the amounts set forth above. Amounts
paid under the Plans are used to compensate the Fund's distributor pursuant to
the distribution agreements entered into by the Fund.
The Plans are in compliance with the Conduct Rules of the National
Association of Securities Dealers, Inc. ("NASD") which effectively limit the
annual asset-based sales charges and service fees that a mutual fund may pay
on a class of shares to an annual rate of 0.75% and 0.25%, respectively, of
the average aggregate annual net assets attributable to that class. The rules
also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest on the unpaid amount at the prime rate plus 1% per annum.
Distribution Agreements. Each Fund has also entered into a distribution
agreement (each a "Distribution Agreement" or collectively the "Distribution
Agreements") with EDI. Pursuant to the Distribution Agreements, each Fund will
compensate EDI for its services as distributor based upon the maximum annual
rate as a percentage of each Fund's average daily net assets attributable to
the Class, as follows:
Class A
shares 0.25%
Class B
shares 1.00%
Class C
shares 1.00%
</TABLE>
The Distribution Agreements provide that EDI will use the distribution
fee received from each Fund for payments (1) to compensate broker-dealers or
other persons for distributing shares of a Fund, including interest and
principal payments made in respect of amounts paid to broker-dealers or other
persons that have been financed (EDI may assign its rights to receive
compensation under the Distribution Agreements to secure such financings), (2)
to otherwise promote the sale of shares of a Fund, and (3) to compensate
broker-dealers, depository institutions and other financial intermediaries for
providing administrative, accounting and other services with respect to a
Fund's shareholders. FUNB or its affiliates may finance the payments made by
EDI to compensate broker-dealers or other persons for distributing shares of a
Fund.
In the event a Fund acquires the assets of other mutual funds,
compensation paid to EDI under the Distribution Agreements may be paid by EDI
to the distributors of the acquired funds or their predecessors.
Since EDI's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EDI, the amount of compensation
received by EDI under the Distribution Agreements during any year may be more
or less than its actual expenses and may result in a profit to EDI.
Distribution expenses incurred by EDI in one fiscal year that exceed the level
of compensation paid to EDI for that year may be paid from distribution fees
received from a Fund in subsequent fiscal years.
- -------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
You may purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EDI. In addition, you
may purchase shares of any of the Funds by mailing to that Fund, c/o ESC, P.O.
Box 2121, Boston, Massachusetts 02106-2121, a completed application and a
check
24
<PAGE>
payable to the Fund. You may also telephone 1-800-343-2898 to obtain the
number of an account to which you can wire or electronically transfer funds
and then send in a completed application. The minimum initial investment is
$1,000, which may be waived in certain situations. Subsequent investments in
any amount may be made by check, by wiring federal funds, by direct deposit or
by an electronic funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. See the application
for more information. Only Class A, Class B and Class C shares are offered
through this prospectus (see "General Information--Other Classes of Shares").
Class A Shares--Front-End Sales Charge Alternative. You may purchase Class A
shares of each Fund at net asset value plus an initial sales charge on
purchases under $1,000,000. You may purchase $1,000,000 or more of Class A
shares without a front-end sales charge; however, a contingent deferred sales
charge ("CDSC") equal to the lesser of 1% of the purchase price or the
redemption value will be imposed on shares redeemed during the month of
purchase and the 12-month period following the month of purchase. The schedule
of charges for Class A shares is as follows:
INITIAL SALES CHARGE
<TABLE>
<CAPTION>
As a % of the Net As a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than 4.99% 4.75% 4.25%
$ 50,000
-------------------------------------------------------------------------------------
$ 50,000-- 4.71% 4.50% 4.25%
$ 99,999
-------------------------------------------------------------------------------------
$100,000-- 3.90% 3.75% 3.25%
$249,999
-------------------------------------------------------------------------------------
$250,000-- 2.56% 2.50% 2.00%
$499,999
-------------------------------------------------------------------------------------
$500,000-- 2.04% 2.00% 1.75%
$999,999
-------------------------------------------------------------------------------------
$1,000,000 None None 1.00% of the amount invested
or more up to $2,999,999; .50% of
the amount invested over
$2,999,999, up to
$4,999,999; and .25% of the
excess over $4,999,999
</TABLE>
No front-end sales charges are imposed on Class A shares purchased by:
(a) institutional investors, which may include bank trust departments and
registered investment advisors; (b) investment advisors, consultants or
financial planners who place trades for their own accounts or the accounts of
their clients and who charge such clients a management, consulting, advisory
or other fee; (c) clients of investment advisors or financial planners who
place trades for their own accounts if the accounts are linked to the master
account of such investment advisors or financial planners on the books of the
broker-dealer through whom shares are purchased; (d) institutional clients of
broker-dealers, including retirement and deferred compensation plans and the
trusts used to fund these plans, which place trades through an omnibus account
maintained with a Fund by the broker-dealer; (e) shareholders of record on
October 12, 1990 in any series of Evergreen Investment Trust in existence on
that date, and the members of their immediate families; (f) current and
retired employees of FUNB and its affiliates, EDI and any broker-dealer with
whom EDI has entered into an agreement to sell shares of the Funds, and
members of the immediate families of such employees; (g) upon the initial
purchase of an Evergreen fund, investors reinvesting the proceeds from a
redemption within the preceding thirty days of shares of other mutual funds,
provided such shares were initially purchased with a front-end sales charge or
subject to a CDSC; and (h) all qualified plan customers holding Evergreen
Class Y shares in connection with a rollover into an individual retirement
account. Certain broker-dealers or other financial institutions may impose a
fee on transactions in shares of the Funds.
Class A shares may also be purchased at net asset value by a corporation
or certain other qualified retirement plan or a non-qualified deferred
compensation plan, or a Title I tax sheltered annuity or TSA plan sponsored by
an organization having 100 or more eligible employees, or a TSA plan sponsored
by a public education entity having 5,000 or more eligible employees.
25
<PAGE>
In connection with sales made to plans of the type described in the
preceding sentence, EDI will pay broker-dealers and others concessions at the
rate of 0.50% of the net asset value of the shares purchased. These payments
are subject to reclaim in the event the shares are redeemed within twelve
months after purchase.
Certain employer-sponsored retirement or savings plans, including
eligible 401(k) plans, may purchase Class A shares at net asset value provided
that such plans meet certain required minimum number of eligible employees or
required amount of assets. The CDSC applicable to Class B shares also is
waived on redemptions of shares by such plans. Additional information
concerning the waiver of sales charges is set forth in the SAI.
When Class A shares are sold, EDI will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EDI may also pay fees
to banks from sales charges for services performed on behalf of the customers
of such banks in connection with the purchase of shares of the Funds. In
addition to compensation paid at the time of sale, entities whose clients have
purchased Class A shares may receive a service fee equal to 0.25% of the
average daily net asset value on an annual basis of Class A shares held by
their clients. Certain purchases of Class A shares may qualify for reduced
sales charges in accordance with a Fund's Concurrent Purchases, Rights of
Accumulation, Letters of Intent, certain Retirement Plans and Reinstatement
Privilege. Consult the application for additional information concerning these
reduced sales charges.
Class B Shares--Deferred Sales Charge Alternative. You may purchase Class B
shares at net asset value without an initial sales charge. However, you may
pay a CDSC if you redeem shares within six years after the month of purchase.
The amount of the CDSC (expressed as a percentage of the lesser of the current
net asset value or original cost) will vary according to the number of years
from the month of purchase of Class B shares as set forth below.
<TABLE>
<CAPTION>
CDSC
REDEMPTION TIMING IMPOSED
- ----------------- -------
<S> <C>
Month of purchase and the first twelve-month period following the month of purchase 5.00%
Second twelve-month period following the month of purchase 4.00%
Third twelve-month period following the month of purchase 3.00%
Fourth twelve-month period following the month of purchase 3.00%
Fifth twelve-month period following the month of purchase 2.00%
Sixth twelve-month period following the month of purchase 1.00%
No CDSC is imposed on amounts redeemed thereafter.
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to
EDI. In the event the Fund acquires the assets of other mutual funds, the CDSC
may be paid by EDI to the distributors of the acquired funds. Class B shares
are subject to higher distribution and/or shareholder service fees than Class
A shares for a period of seven years after the month of purchase (after which
it is expected that they will convert to Class A shares without imposition of
a front-end sales charge). The higher fees mean a higher expense ratio, so
Class B shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares. The Funds will not normally accept any
purchase of Class B shares in the amount of $250,000 or more.
At the end of the period ending seven years after the end of the calendar
month in which the shareholder's purchase order was accepted, Class B shares
will automatically convert to Class A shares and will no longer be subject to
a higher distribution services fee imposed on Class B shares. Such conversion
will be on the basis of the relative net asset values of the two classes,
without the imposition of any sales load, fee or other charge. The purpose of
the conversion feature is to reduce the distribution services fee paid by
holders of Class B shares that have been outstanding long enough for EDI to
have been compensated for the expenses associated with the sale of such
shares.
Class C Shares--Level-Load Alternative. Class C shares are only offered
through broker-dealers who have special distribution agreements with EDI. You
may purchase Class C shares at net asset value without any initial sales
charge and, therefore, the full amount of your investment will be used to
purchase Fund shares. However, you will pay a 1.00% CDSC, if you redeem shares
during the month of purchase and the 12-month period following the month of
purchase. No CDSC is imposed on amounts redeemed thereafter. Class C shares
incur higher distribution and/or shareholder service fees than Class A shares
but, unlike Class B shares, do not convert to any other class of shares of a
Fund. The higher fees mean a higher expense ratio, so Class C shares pay
26
<PAGE>
correspondingly lower dividends and may have a lower net asset value than
Class A shares. The Funds will not normally accept any purchase of Class C
shares in the amount of $500,000 or more. No CDSC will be imposed on Class C
shares purchased by institutional investors, and through employee benefit and
savings plans eligible for the exemption from front-end sales charges
described under "Class A Shares--Front-End Sales Charge Alternative," above.
Broker-dealers and other financial intermediaries whose clients have purchased
Class C shares may receive a service fee equal to 0.75% of the average daily
net asset value of such shares on an annual basis held by their clients more
than one year from the date of purchase. The payment of service fees will
commence immediately with respect to shares eligible for exemption from the
CDSC normally applicable to Class C shares.
Contingent Deferred Sales Charge. Certain shares with respect to which a Fund
did not pay a commission on issuance, including shares obtained from dividend
or distribution reinvestment are not subject to a CDSC. Any CDSC imposed upon
the redemption of Class A, Class B or Class C shares is a percentage of the
lesser of (1) the net asset value of the shares redeemed or (2) the net asset
value at the time of purchase of such shares.
No CDSC is imposed on a redemption of shares of the Fund in the event of
(1) death or disability of the shareholder; (2) a lump-sum distribution from a
401(k) plan or other benefit plan qualified under the Employee Retirement
Income Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA
plans if the shareholder is at least 59 1/2 years old; (4) involuntary
redemptions of accounts having an aggregate net asset value of less than
$1,000; (5) automatic withdrawals under the Systematic Withdrawal Plan of up
to 1.00% per month of the shareholder's initial account balance; (6)
withdrawals consisting of loan proceeds to a retirement plan participant; (7)
financial hardship withdrawals made by a retirement plan participant; or (8)
withdrawals consisting of returns of excess contributions or excess deferral
amounts made to a retirement plan participant.
The Funds may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or CDSC to certain Directors, Trustees,
officers and employees of the Funds, Keystone, FUNB, Evergreen Asset
Management Corp. ("Evergreen Asset"), Meridian Investment Company
("Meridian"), EDI and certain of their affiliates, and to members of the
immediate families of such persons, to registered representatives of firms
with dealer agreements with EDI, and to a bank or trust company acting as a
trustee for a single account.
How the Funds Value their Shares. The net asset value of each class of shares
of a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that class by the number of outstanding shares of that
class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. eastern time).
The securities in a Fund are valued at their current market value determined
on the basis of market quotations or, if such quotations are not readily
available, such other methods as the Trustees believe would accurately reflect
fair value. 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.
General. The decision as to which class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares,
which incur lower ongoing distribution and/or shareholder service fees, after
seven years. If you are unsure of the time period of your investment, you
might consider Class C shares since there are no initial sales charges and,
although there is no conversion feature, the CDSC only applies to redemptions
made during the first year. Consult your financial intermediary for further
information. The compensation received by broker-dealers and agents may differ
depending on whether they sell Class A, Class B or Class C shares. There is no
size limit on purchases of Class A shares.
In addition to the discount or commission paid to broker-dealers, EDI may
from time to time pay to broker-dealers additional cash or other incentives
that are conditioned upon the sale of a specified minimum dollar amount of
shares of a Fund and/or other Evergreen funds. Such incentives will take the
form of payment for attendance at seminars, lunches, dinners, sporting events
or theater performances, or payment for travel, lodging and entertainment
incurred in connection with travel by persons associated with a broker-dealer
and their immediate family members to urban or resort locations within or
outside the U.S. Such a dealer may elect to receive cash incentives of
equivalent amount in lieu of such payments. EDI may also limit the
availability of such incentives to certain specified dealers. EDI from time to
time sponsors promotions involving First Union Brokerage Services, Inc., an
affiliate of each Fund's investment advisor, and select broker-dealers,
pursuant to which
27
<PAGE>
incentives are paid, including gift certificates and payments in amounts up to
1% of the dollar amount of shares of a Fund sold. Awards may also be made
based on the opening of a minimum number of accounts. Such promotions are not
being made available to all broker-dealers. Certain broker-dealers may also
receive payments from EDI or a Fund's investment advisor over and above the
usual service fees or shareholder servicing payments applicable to a given
Class of shares.
Additional Purchase Information. As a condition of this offering, if a
purchase is canceled due to nonpayment or because an investor's check does not
clear, the investor will be responsible for any loss a Fund or its investment
advisor incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
advisor for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen funds. The
Funds will not accept third party checks other than those payable directly to
a shareholder whose account has been in existence at least 30 days.
HOW TO REDEEM SHARES
You may "redeem" (i.e., sell) your shares in a Fund to the Fund for cash
at their net redemption value on any day the Exchange is open, either directly
by writing to the Fund, c/o ESC, or through your financial intermediary. The
amount you will receive is based on the net asset value adjusted for fractions
of a cent (less any applicable CDSC) next calculated after a Fund receives
your request in proper form. Proceeds generally will be sent to you within
seven days. However, for shares recently purchased by check, a Fund will not
send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 15 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (eastern time)
for you to receive that day's net asset value (less any applicable CDSC). Your
financial intermediary is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service. Certain financial
intermediaries may require that you give instructions earlier than 4:00 p.m.
(eastern time).
Redeeming Shares Directly by Mail or Telephone. You may redeem by mail by
sending a signed letter of instruction or stock power form to the Fund, c/o
ESC (the registrar, transfer agent and dividend-disbursing agent for each
Fund). Stock power forms are available from your financial intermediary, ESC,
and many commercial banks. Additional documentation is required for the sale
of shares by corporations, financial intermediaries, fiduciaries and surviving
joint owners. Signature guarantees are required for all redemption requests
for shares with a value of more than $50,000. Currently, the requirement for a
signature guarantee has been waived on redemptions of $50,000 or less when the
account address of record has been the same for a minimum period of 30 days.
Each Fund and ESC reserve the right to withdraw this waiver at any time. A
signature guarantee must be provided by a bank or trust company (not a Notary
Public), a member firm of a domestic stock exchange or by other financial
institutions whose guarantees are acceptable under the Securities Exchange Act
of 1934 and ESC's policies.
Shareholders may redeem amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
prospectus between the hours of 8:00 a.m. and 6:00 p.m. (eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
ESC's offices are closed). The Exchange is closed on New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests
received after 4:00 p.m. (eastern time) will be processed using the net asset
value determined on the next business day. Such redemption requests must
include the shareholder's account name, as registered with the Fund, and the
account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions. If
you cannot reach a Fund by telephone, you should follow the procedures for
redeeming by mail or through a broker-dealer as set forth herein. The
telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service
must complete the appropriate sections on the application and choose how the
redemption proceeds are to be paid. Redemption proceeds will either be (1)
mailed by check to the shareholder at the address in which the account is
registered or (2) wired to an account with the same registration as the
shareholder's account in a Fund at a designated commercial bank.
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<PAGE>
In order to insure that instructions received by ESC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation
of your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if
the address and bank account of record have been the same for a minimum period
of 30 days. Each Fund reserves the right at any time to terminate, suspend, or
change the terms of any redemption method described in this prospectus, except
redemption by mail, and to impose fees.
Except as otherwise noted, the Funds, ESC and EDI will not assume
responsibility for the authenticity of any instructions received by any of
them from a shareholder in writing, over the Evergreen Express Line (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Funds, ESC and EDI will not be liable when following instructions
received over the Evergreen Express Line or by telephone that ESC reasonably
believes are genuine.
Evergreen Express Line. The Evergreen Express Line offers you specific fund
account information and price and yield quotations as well as the ability to
do account transactions, including investments, exchanges and redemptions. You
may access the Evergreen Express Line by dialing toll free 1-800-346-3858 on
any touch-tone telephone, 24 hours a day, seven days a week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists
and the Funds cannot dispose of their investments or fairly determine their
value; or (4) the SEC so orders. The Funds reserve the right to close an
account that through redemption has fallen below $1,000 and has remained so
for 30 days. Shareholders will receive 60 days' written notice to increase the
account value to at least $1,000 before the account is closed. The Funds have
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which each
Fund is obligated to redeem shares solely in cash, up to the lesser of
$250,000 or 1% of a Fund's total net assets, during any 90-day period for any
one shareholder.
EXCHANGE PRIVILEGE
How to Exchange Shares. You may exchange some or all of your shares for shares
of the same class in other Evergreen funds through your financial intermediary
by calling or writing to ESC or by using the Evergreen Express Line as
described above. If the shares being tendered for exchange are still subject
to a CDSC or are eligible for conversion in a specified time, such remaining
charge or remaining time will carry over to the shares being acquired in the
exchange transaction. Once an exchange request has been telephoned or mailed,
it is irrevocable and may not be modified or canceled. Exchanges will be made
on the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. An exchange which represents
an initial investment in another Evergreen fund is subject to the minimum
investment and suitability requirements of each Fund.
Each of the Evergreen funds has different investment objectives and
policies. For more information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at
any time by the Fund upon 60 days' notice to shareholders and is only
available in states in which shares of the fund being acquired may lawfully be
sold.
No CDSC will be imposed in the event shares are exchanged for shares of
the same class of other Evergreen funds. If you redeem shares, the CDSC
applicable to the shares of the Evergreen fund originally purchased for cash
is applied. Also, Class B shares will continue to age following an exchange
for the purpose of conversion to Class A shares and for the purpose of
determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (eastern time)
for you to receive that day's net asset value. Your financial
29
<PAGE>
intermediary is responsible for furnishing all necessary documentation to a
Fund and may charge you for this service.
Exchanges By Telephone and Mail. Exchange requests received by a Fund after
4:00 p.m. (eastern time) will be processed using the net asset value
determined at the close of the next business day. During periods of drastic
economic or market changes, shareholders may experience difficulty in
effecting telephone exchanges. You should follow the procedures outlined below
for exchanges by mail if you are unable to reach ESC by telephone. If you wish
to use the telephone exchange service you should indicate this on the
application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares
communicated by telephone are genuine. A telephone exchange may be refused by
a Fund or ESC if it is believed advisable to do so. Procedures for exchanging
Fund shares by telephone may be modified or terminated at any time. Written
requests for exchanges should follow the same procedures outlined for written
redemption requests in the section entitled "How to Redeem Shares"; however,
no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, ESC
or call the toll-free number on the front page of this prospectus. Some
services are described in more detail in the application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of a Fund with no minimum
initial investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the
Systematic Withdrawal Plan (the "Withdrawal Plan") by filling out the
appropriate part of the application. Under this Withdrawal Plan, you may
receive (or designate a third party to receive) a monthly or quarterly fixed-
withdrawal payment in a stated amount of at least $75 and may be as much as
1.0% per month or 3.0% per quarter of the total net asset value of the Fund
shares in your account when the Withdrawal Plan was opened. Fund shares will
be redeemed as necessary to meet withdrawal payments. All participants must
elect to have their dividends and capital gain distributions reinvested
automatically. Any applicable CDSC will be waived with respect to redemptions
occurring under a Withdrawal Plan during a calendar year to the extent that
such redemptions do not exceed 12% of (1) the initial value of the account
plus (2) the value, at the time of purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified employee benefit and savings plans may make shares of the Funds
and other Evergreen funds available to their participants. Investments made by
such employee benefit plans may be exempt from front-end sales charges if they
meet the criteria set forth under "Class A Shares--Front-End Sales Charge
Alternative." Evergreen Asset, Keystone, Meridian or FUNB may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen funds available to their
participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends
and distributions are automatically reinvested in full and fractional shares
of a Fund at the net asset value per share at the close of business on the
record date, unless otherwise requested by a shareholder in writing. If the
transfer agent does not receive a written request for subsequent dividends
and/or distributions to be paid in cash at least three full business days
prior to a given record date, the dividends and/or distributions to be paid to
a shareholder will be reinvested.
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen fund. This results
in more shares being purchased when the selected fund's net asset value is
relatively low and fewer shares being purchased when the fund's net asset
value is relatively high and may result in a lower average cost per share than
a less systematic investment approach.
30
<PAGE>
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen fund. You should designate on the application (1) the
dollar amount of each monthly or quarterly investment you wish to make and (2)
the fund in which the investment is to be made. Thereafter, on the first day
of the designated month, an amount equal to the specified monthly or quarterly
investment will automatically be redeemed from your initial account and
invested in shares of the designated fund.
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any class of Evergreen fund shares you own automatically
invested to purchase the same class of shares of any other Evergreen fund. You
may select this service on your application and indicate the Evergreen fund(s)
into which distributions are to be invested.
Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Savings
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Medical
Savings Accounts; Pension and Target Benefit and Money Purchase Plans. For
details, including fees and application forms, call toll free 1-800-247-4075
or write to ESC.
BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment advisor, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase
of shares of such an investment company upon the order of its customer. FUNB
and its affiliates are subject to and in compliance with the aforementioned
laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB and its affiliates being
prevented from continuing to perform the services required under the
investment advisory contract or from acting as agent in connection with the
purchase of shares of the Funds by their customers. If FUNB or its affiliates
were prevented from continuing to provide the services called for under the
investment advisory agreement, it is expected that the Trustees would
identify, and call upon each Fund's shareholders to approve, a new investment
advisor. If this were to occur, it is not anticipated that the shareholders of
a Fund would suffer any adverse financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds intend to declare dividends from net investment income daily
and distribute to their shareholders such dividends monthly. The Funds intend
to declare and distribute all net realized capital gains at least annually.
Shareholders receive Fund distributions in the form of additional shares of
that class of shares upon which the distribution is based or, at the
shareholder's option, in cash. Shareholders of a Fund who have not opted to
receive cash prior to the payable date for any dividend from net investment
income or the record date for any capital gains distribution will have the
number of such shares determined on the basis of the Fund's net asset value
per share computed at the end of that day after adjustment for the
distribution. Net asset value is used in computing the number of shares in
both capital gains and income distribution investments.
Because Class A shares bear most of the costs of distribution of such
shares through payment of a front-end sales charge, while Class B and, when
applicable, Class C shares bear such expenses through a higher annual
distribution fee, expenses attributable to Class B shares and Class C shares
will generally be higher than those of Class A shares, and income
distributions paid by the Fund with respect to Class A shares will generally
be greater than those paid with respect to Class B and Class C shares.
31
<PAGE>
Account statements and/or checks, as appropriate, will be mailed within
seven days after a Fund pays a distribution. Unless a Fund receives
instructions to the contrary before the record or payable date, as the case
may be, it will assume that a shareholder wishes to receive that distribution
and future capital gains and income distributions in shares. Instructions
continue in effect until changed in writing. If a shareholder has elected to
receive dividends and/or capital gain distributions in cash and the postal or
other delivery service selected by ESC is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts
represented by uncashed distributions or redemption checks.
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). While so qualified, it is expected that each Fund will not be
required to pay any federal income taxes on that portion of its investment
company taxable income and any net realized capital gains it distributes to
shareholders. The Code imposes a 4% nondeductible excise tax on regulated
investment companies, such as a Fund, to the extent they do not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
Any taxable dividend declared in October, November or December to
shareholders of record in such a month and paid by the following January 31
will be includable in the taxable income of shareholders as if paid on
December 31 of the year in which the dividend was declared.
The Funds may be subject to foreign withholding taxes which would reduce
the yield on their investments. Tax treaties between certain countries and the
U.S. may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to U.S. federal income tax may be entitled, subject to certain rules
and limitations, to claim a federal income tax credit or deduction for foreign
income taxes paid by a Fund. (See the SAI for additional details.) A Fund's
transactions in options, futures and forward contracts may be subject to
special tax rules. These rules can affect the amount, timing and
characteristics of distributions to shareholders.
The Funds are required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any)
and redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the application, or on
a separate form supplied by the Fund's transfer agent, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from
backup withholding. A shareholder who acquires Class A shares of a Fund and
sells or otherwise disposes of such shares within 90 days of acquisition may
not be allowed to include certain sales charges incurred in acquiring such
shares for purposes of calculating gain and loss realized upon a sale or
exchange of shares of a Fund.
The Funds intend to distribute their net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital
gains. A Fund will designate capital gains distributions as such by a written
notice mailed to each shareholder no later than 60 days after the close of a
Fund's taxable year. If a shareholder receives a capital gain dividend and
holds his or her shares for six months or less, then any allowable loss on
disposition of such shares will be treated as a long-term capital loss to the
extent of such capital gain dividend.
The foregoing discussion of federal income tax consequences is based on
tax laws and regulations in effect on the date of this prospectus and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the SAI. In addition,
you should consult your own tax adviser as to the tax consequences of
investing in a Fund, including the application of state and local taxes which
may be different from the federal income tax consequences described above.
GENERAL INFORMATION
Portfolio Turnover. The estimated annual portfolio turnover rate for each Fund
is not expected to exceed 100%. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The
portfolio turnover rate experienced by each Fund directly affects the
transaction costs relating to the purchase and sale of securities which each
Fund bears directly. A high rate of portfolio turnover will increase such
costs. See the SAI for further information regarding the practices of each
Fund affecting portfolio turnover.
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<PAGE>
Portfolio Transactions. Consistent with the Rules of Conduct of NASD, and
subject to seeking best price and execution, a Fund may consider sales of its
shares as a factor in the selection of dealers to enter into portfolio
transactions with the Fund.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this prospectus and are only
available to (1) persons who at or prior to December 31, 1994, owned shares in
a mutual fund advised by Evergreen Asset, (2) certain institutional investors
and (3) investment advisory clients of FUNB, Evergreen Asset, Keystone,
Meridian or their affiliates. The dividends payable with respect to Class A,
Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and shareholder servicing-related
expenses borne by Class A, Class B and Class C shares and the fact that such
expenses are not borne by Class Y shares. Investors should telephone (800)
343-2898 to obtain more information on other classes of shares.
Performance Information. The Funds may quote their "total return" or "yield"
for specified periods in advertisements, reports, or other communications to
shareholders. Total return and yield are computed separately for each class of
shares. Performance data for one or more classes may be included in any
advertisement or sales literature using performance data of a Fund.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC
for all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest and
dividend income it earned from its portfolio of investments (as defined by the
SEC formula) for a 30-day period (net of expenses), divides it by the average
number of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the 30-
day period. This yield does not reflect gains or losses from selling
securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all the
Fund's distributions are reinvested. A cumulative total return reflects a
Fund's performance over a stated period of time. An average annual total
return reflects the hypothetical annually compounded return that would have
produced the same cumulative total return if a Fund's performance had been
constant over the entire period. Because average annual total returns tend to
smooth out variations in a Fund's return, you should recognize that they are
not the same as actual year-by-year results. To illustrate the components of
overall performance, a Fund may separate its cumulative and average annual
total returns into income results and realized and unrealized gain or loss.
Comparative performance information may also be used from time to time in
advertising or marketing each Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar, Inc. and other industry publications.
The Funds may also advertise in items of sales literature an "actual
distribution rate" which is computed by dividing the total ordinary income
distributed (which may include the excess of short-term capital gains over
losses) to shareholders for the latest 12-month period by the maximum public
offering price per share on the last day of the period. Investors should be
aware that past performance may not be reflective of future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering
investment alternatives. The information provided to investors may also
include discussions of other Evergreen funds, products, and services, which
may include: retirement investing; brokerage products and services; the
effects of periodic investment plans and dollar cost averaging; saving for
college; and charitable giving. In addition, the information provided to
investors may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques. EDI may also reprint, and
use as advertising and sales literature, articles from Evergreen Events, a
quarterly magazine provided free of charge to Evergreen fund shareholders.
33
<PAGE>
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Funds' investment advisors and
the Funds' other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Funds' investment advisors are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use and to obtain assurances that comparable steps are being taken
by the Funds' other major service providers. At this time, however, there can
be no assurance that these steps will be sufficient to avoid any adverse
impact on the Funds.
Additional Information. This prospectus and the SAI, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Trust with the SEC under the 1933
Act, as amended. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the
offices of the SEC in Washington, D.C.
34
<PAGE>
NOTES
35
<PAGE>
INVESTMENT ADVISORS
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28228-0630
Evergreen U.S. Government Fund
Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034
Evergreen Strategic Income Fund
Evergreen High Yield Bond Fund
Evergreen Diversified Bond Fund
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-
2121
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Distributor, Inc., 125 W. 55th Street, New York, New York 10019
23152 541291RV2
<PAGE>
- -------------------------------------------------------------------------------
PROSPECTUS September 1, 1998
- -------------------------------------------------------------------------------
EVERGREEN LONG TERM BOND FUNDS LOGO OF EVERGREEN FUNDS APPEARS HERE]
- -------------------------------------------------------------------------------
EVERGREEN U.S. GOVERNMENT FUND
EVERGREEN STRATEGIC INCOME FUND
EVERGREEN HIGH YIELD BOND FUND
EVERGREEN DIVERSIFIED BOND FUND
(EACH A "FUND;" TOGETHER, THE "FUNDS")
CLASS Y SHARES
The Funds are designed to provide investors with a selection of
investment alternatives which seek to provide a high level of current income.
This prospectus provides information regarding the Class Y shares offered by
the Funds. Each Fund is a diversified series of an open-end, management
investment company. This prospectus sets forth concise information about the
Funds that a prospective investor should know before investing. The address of
the Funds is 200 Berkeley Street, Boston, Massachusetts 02116.
A Statement of Additional Information ("SAI") for the Funds dated
September 1, 1998, as supplemented from time to time, has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated by reference
herein. The SAI provides information regarding certain matters discussed in
this prospectus and other matters which may be of interest to investors, and
may be obtained without charge by calling the Funds at (800) 343-2898. There
can be no assurance that the investment objective of any Fund will be
achieved. Investors are advised to read this prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. AN
INVESTMENT IN THE FUNDS INVOLVES RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Keep This Prospectus For Future Reference
<PAGE>
TABLE OF CONTENTS
EXPENSE INFORMATION....................... 3
FINANCIAL HIGHLIGHTS...................... 4
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies..... 7
Investment Practices and Restrictions.. 10
ORGANIZATION AND SERVICE PROVIDERS
Organization........................... 18
Service Providers...................... 18
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares...................... 20
How to Redeem Shares................... 20
Exchange Privilege..................... 21
Shareholder Services................... 22
Banking Laws........................... 23
OTHER INFORMATION
Dividends, Distributions and Taxes..... 23
General Information.................... 24
2
<PAGE>
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EXPENSE INFORMATION
- -------------------------------------------------------------------------------
The tables and examples below are designed to help you understand the
various expenses that you will bear, directly or indirectly, when you invest
in a Fund. Shareholder transaction expenses are fees paid directly from your
account when you buy or sell shares of a Fund.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------
Maximum Sales Charge Imposed on Purchases........................... None
Sales Charge on Dividend Reimbursements............................. None
Contingent Deferred Sales Charge.................................... None
Redemption Fee...................................................... None
</TABLE>
Annual operating expenses reflect the normal operating expenses of a
Fund, and include costs such as management, distribution and other fees. The
tables below show the Fund's actual annual operating expenses for the fiscal
period ending April 30, 1998 for EVERGREEN U.S. GOVERNMENT FUND and estimated
annual operating expenses for EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH
YIELD BOND FUND AND EVERGREEN DIVERSIFIED BOND FUND. The examples show what
you would pay if you invested $1,000 over the periods indicated. The examples
assume that you reinvest all of your dividends and that the Fund's average
annual return will be 5%. THE EXAMPLES ARE FOR ILLUSTRATION PURPOSES ONLY AND
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL
RETURN. THE FUND'S ACTUAL EXPENSES AND RETURNS WILL VARY. For a more complete
description of the various costs and expenses borne by the Funds see
"Organization and Service Providers."
EVERGREEN U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
----------------
<S> <C>
Advisory Fees........... .50%
12b-1 Fees.............. --
Other Expenses.......... .28%
---
Total................... .78%
===
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE
-------
<S> <C>
After 1 Year............ $ 8
After 3 Years........... $25
After 5 Years........... $43
After 10 Years.......... $97
</TABLE>
EVERGREEN STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
----------------
<S> <C>
Advisory Fees........... .63%
12b-1 Fees.............. --
Other Expenses.......... .38%
----
Total 1.01%
====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE
-------
<S> <C>
After 1 Year............ $ 10
After 3 Years........... $ 32
After 5 Years........... $ 56
After 10 Years.......... $124
</TABLE>
EVERGREEN HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
----------------
<S> <C>
Advisory Fees........... .57%
12b-1 Fees.............. --
Other Expenses.......... .36%
---
Total................... .93%
===
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE
-------
<S> <C>
After 1 Year............ $ 9
After 3 Years........... $30
</TABLE>
EVERGREEN DIVERSIFIED BOND FUND
<TABLE>
<CAPTION>
EXAMPLE
-------
<S> <C>
After 1 Year................................... $ 9
After 3 Years.................................. $29
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
----------------
<S> <C>
Advisory Fees............ .56%
12b-1 Fees............... --
Other Expenses........... .36%
---
Total .92%
===
</TABLE>
3
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the ten most recent fiscal periods or the life
of a Fund, if shorter, has been audited by KPMG Peat Marwick LLP, the Funds'
independent auditors. The tables appear in the Funds' Annual Report to
shareholders and should be read in conjunction with each Fund's financial
statements and related notes, which also appear, together with the independent
auditors' report, in the Funds' Annual Report to shareholders. The Funds'
financial statements, related notes, and independent auditors' report are
incorporated by reference into the Funds' SAI.
Further information about each Fund's performance is contained in the
Funds' Annual Report to shareholders, which may be obtained without charge.
EVERGREEN U.S. GOVERNMENT FUND--CLASS Y SHARES
<TABLE>
<CAPTION>
SEPTEMBER 2, 1993
TEN MONTHS SIX MONTHS YEAR (COMMENCEMENT
YEAR ENDED ENDED YEAR ENDED ENDED ENDED OF CLASS OPERATIONS)
APRIL 30, APRIL 30, JUNE 30, JUNE 30, DECEMBER 31, TO DECEMBER 31,
1998 1997(C) 1996 1995(B) 1994 1993
---------- ---------- ---------- ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
BEGINNING OF YEAR...... $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05 $ 10.25
-------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.63 0.54 0.66 0.34 0.69 0.25
Net realized and
unrealized gain (loss)
on investments........ 0.29 (0.03) (0.23) 0.58 (0.98) (0.20)
-------- -------- -------- ------- ------- -------
Total from investment
operations............. 0.92 0.51 0.43 0.92 (0.29) 0.05
-------- -------- -------- ------- ------- -------
Less distributions from
net investment income.. (0.63) (0.54) (0.66) (0.34) (0.69) (0.25)
-------- -------- -------- ------- ------- -------
Net asset value end of
year................... $ 9.68 $ 9.39 $ 9.42 $ 9.65 $ 9.07 $ 10.05
======== ======== ======== ======= ======= =======
TOTAL RETURN............ 10.05% 5.52% 4.54% 10.30% (2.94%) 0.49%
RATIOS/SUPPLEMENTAL
DATA:
Ratios to average net
assets:
Expenses............... 0.78% 0.73%(a) 0.74% 0.79%(a) 0.71% 0.48%(a)
Expenses excluding
indirectly paid
expenses.............. 0.78% 0.73%(a) -- -- -- --
Expenses excluding
waivers and/or
reimbursements........ 0.78% 0.73%(a) 0.74% 0.80%(a) 0.75% 0.79%(a)
Net investment income.. 6.55% 6.85% (a) 6.86% 7.31%(a) 7.27% 7.20%(a)
Portfolio turnover
rate................... 21% 12% 23% 0% 19% 39%
NET ASSETS END OF YEAR
(THOUSANDS)............ $155,836 $127,099 $121,569 $16,934 $15,595 $14,486
</TABLE>
- -------
(a) Annualized.
(b) The Fund changed its fiscal year end from December 31 to June 30.
(c) The Fund changed its fiscal year end from June 30 to April 30.
4
<PAGE>
EVERGREEN STRATEGIC INCOME FUND--CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 13, 1997
(COMMENCEMENT OF
YEAR ENDED CLASS OPERATIONS)
APRIL 30, 1998 TO APRIL 30, 1997
-------------- -----------------
<S> <C> <C>
NET ASSET VALUE BEGINNING OF YEAR............. $6.65 $7.03
------ -----
Income from investment operations:
Net investment income........................ 0.46(b) 0
Net realized and unrealized gain (loss)
on investments and foreign currency related
transactions................................ 0.41 (0.20)
------ -----
Total from investment operations.............. 0.87 (0.20)
------ -----
Less distributions from:
Net investment income........................ (0.48) (0.17)
In excess of net investment income........... 0 (0.01)
------ -----
Total distributions........................... (0.48) (0.18)
------ -----
Net asset value end of year................... $7.04 $6.65
====== =====
TOTAL RETURN.................................. 13.46% (2.87)%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses..................................... 1.01% 0.00%(a)
Expenses excluding indirectly paid expenses.. 1.00% 0.00%(a)
Net investment income........................ 6.83% 0.00%(a)
Portfolio turnover rate....................... 237% 86%
NET ASSETS END OF YEAR (THOUSANDS)............ $1,442 $0
</TABLE>
- -------
(a) Annualized.
(b) Calculation based on average shares outstanding.
EVERGREEN HIGH YIELD BOND FUND--CLASS Y SHARES
<TABLE>
<CAPTION>
APRIL 14, 1998
(COMMENCEMENT OF
CLASS OPERATIONS)
TO
APRIL 30, 1998
-----------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD.......................... $4.56
-----
Income from investment operations:
Net investment income....................................... 0.02(a)
Net realized and unrealized loss on investments and foreign
currency related transactions.............................. (0.03)(c)
-----
Total from investment operations............................. (0.01)
-----
Less distributions from net investment income................ (0.02)
-----
Net asset value end of period................................ $4.53
=====
TOTAL RETURN................................................. (0.27%)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses.................................................... 1.09%(b)
Expenses excluding indirectly paid expenses................. 1.09%(b)
Net investment income....................................... 8.21%(b)
Portfolio turnover rate...................................... 155%
NET ASSETS END OF PERIOD (THOUSANDS)......................... $20
</TABLE>
- -------
(a) Calculation based on average shares outstanding.
(b) Annualized.
(c) The amount shown for a share outstanding throughout the period may not
accord with the change in the aggregate gains and losses in the portfolio
securities for the period because of the timing of sales and repurchases
of the Fund's shares in relation to the fluctuation of market value for
the portfolio.
5
<PAGE>
EVERGREEN DIVERSIFIED BOND FUND--CLASS Y SHARES
<TABLE>
<CAPTION>
FEBRUARY 11, 1998
(COMMENCEMENT OF
CLASS OPERATIONS)
TO APRIL 30, 1998
-----------------
<S> <C>
NET ASSET VALUE BEGINNING OF PERIOD.......................... $16.03
------
Income from investment operations:
Net investment income....................................... 0.24(a)
Net realized and unrealized loss on investments, futures
contracts and foreign currency related transactions........ (0.11)(c)
------
Total from investment operations............................. 0.13
------
Less distributions from net investment income................ (0.24)
------
Net asset value end of period................................ $15.92
======
TOTAL RETURN................................................. 0.80%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses.................................................... 0.83%(b)
Expenses excluding indirectly paid expenses................. 0.82%(b)
Net investment income....................................... 6.89%(b)
Portfolio turnover rate...................................... 109%
NET ASSETS END OF PERIOD (THOUSANDS)......................... $7
</TABLE>
- -------
(a) Calculation based on average shares outstanding.
(b) Annualized.
(c) The amount shown for a share outstanding throughout the period may not
accord with the change in the aggregate gains and losses in the portfolio
securities for the period because of the timing of sales and repurchases
of the Fund's shares in relation to the fluctuation of market value for
the portfolio.
6
<PAGE>
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is nonfundamental; as a result, a Fund
may change its objective without a shareholder vote. Each Fund has also
adopted certain fundamental investment policies which are mainly designed to
limit a Fund's exposure to risk. Each Fund's fundamental policies cannot be
changed without a shareholder vote. See the SAI for more information regarding
a Fund's fundamental investment policies or other related investment policies.
There can be no assurance that a Fund's investment objective will be achieved.
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions."
EVERGREEN U.S. GOVERNMENT FUND
The investment objective of EVERGREEN U.S. GOVERNMENT FUND is to achieve
a high level of current income consistent with stability of principal. The
Fund will invest in debt instruments issued or guaranteed by the U.S.
government, its agencies, or instrumentalities ("U.S. government securities"),
and is suitable for conservative investors seeking high current yields plus
relative safety. It permits an investor to participate in a portfolio that
benefits from active management of a blend of securities and maturities to
maximize the opportunities and minimize the risks created by changing interest
rates.
In addition to U.S. government securities, the Fund may invest in:
1. Securities representing ownership interests in mortgage pools
("mortgage-backed securities"). The yield and maturity characteristics of
mortgage-backed securities correspond to those of the underlying mortgages,
with interest and principal payments including prepayments (i.e., paying
remaining principal before the mortgage's scheduled maturity) passed through
to the holder of the mortgage-backed securities. The yield and price of
mortgage-backed securities will be affected by prepayments which substantially
shorten effective maturities. Thus, during periods of declining interest
rates, prepayments may be expected to increase, requiring the Fund to reinvest
the proceeds at lower interest rates, making it difficult to effectively lock
in high interest rates. Conversely, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
2. Securities representing ownership interests in a pool of assets
("asset-backed securities"), for which automobile and credit card receivables
are the most common collateral. Because much of the underlying collateral is
unsecured, asset-backed securities are structured to include additional
collateral and/or additional credit support to protect against default. The
Fund's investment advisor evaluates the strength of each particular issue of
asset-backed security, taking into account the structure of the issue and its
credit support. (See "Investment Practices and Restrictions--Risk
Characteristics of Asset-Backed Securities.")
3. Collateralized mortgage obligations ("CMOs") issued by single-purpose,
stand-alone entities. A CMO is a mortgage-backed security that manages the
risk of prepayment by separating mortgage pools into short, medium and long-
term portions. These portions are generally retired in sequence as the
underlying mortgage loans in the mortgage pool are repaid. Similarly, as
prepayments are made, the portion of CMO first to mature will be retired prior
to its maturity, thus having the same effect as the prepayment of mortgages
underlying a mortgage-backed security. The issuer of a series of CMOs may
elect to be treated as a Real Estate Mortgage Investment Conduit (a "REMIC"),
which has certain special tax attributes. The Fund will invest only in CMOs
which are rated AAA by a nationally recognized statistical rating organization
and which may be: (a) collateralized by pools of mortgages in which each
mortgage is guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (b) collateralized by pools of
mortgages in which payment of principal and interest is guaranteed by the
issuer and such guarantee is collateralized by U.S. government securities; or
(c) securities in which the proceeds of the issuance are invested in mortgage
securities and payment of the principal and interest are supported by the
credit of an agency or instrumentality of the U.S. government.
7
<PAGE>
The Fund may invest up to 20% of its total assets in (i) CMOs and
commercial paper which matures in 270 days or less so long as at least two of
its ratings are high quality ratings by nationally recognized statistical
rating organizations (i.e., A-1 or A-2 by Standard & Poor's Rating Services
("S&P"), Prime-1 or Prime-2 by Moody's Investors Service ("Moody's"), or F-1
or F-2 by Fitch IBCA, Inc. ("Fitch")), and (ii) bonds and other debt
securities rated Baa or higher by Moody's or BBB or higher by S&P, or which,
if unrated, are considered to be of comparable quality by the investment
advisor.
Bonds rated Baa by Moody's or BBB by S&P have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to weaken such bonds' prospects for principal and interest
payments than higher rated bonds. However, like the higher rated bonds, these
securities are considered to be investment grade. (See the description of the
rating categories contained in the SAI.)
EVERGREEN STRATEGIC INCOME FUND
The investment objective of EVERGREEN STRATEGIC INCOME FUND is high
current income from interest on debt securities. Secondarily, the Fund
considers potential for growth of capital in selecting securities. The Fund
intends to allocate its assets principally between eligible domestic high-
yield, high-risk bonds and debt securities of foreign governments and foreign
corporations. In addition, the Fund will, from time to time, allocate a
portion of its assets to U.S. government securities. This allocation will be
made on the basis of the investment advisor's assessment of global
opportunities for high income. From time to time, the Fund may invest 100% of
its assets in U.S. or foreign securities.
The Fund may invest in:
Domestic High-Yield Bonds. The Fund may invest principally in domestic
high-yield, high-risk bonds, commonly known as "junk bonds." High-yield bonds
in which the Fund may invest include zero-coupon bonds and payment-in-kind
securities ("PIKs"), debentures, convertible debentures, fixed, increasing and
adjustable rate bonds, stripped bonds, mortgage bonds, mortgage-backed
securities, corporate notes (including convertible notes) with maturities at
the date of issue of at least five years (which may be senior or junior to
other bonds), equipment trust certificates, and units consisting of bonds with
stock or warrants to buy stock attached. For information about the risks of
investing in high-yield bonds, see the section entitled "Investment Practices
and Restrictions."
Foreign Securities. The Fund may invest in debt obligations (which may be
denominated in U.S. dollars or in non-U.S. currencies) issued or guaranteed by
foreign corporations, certain supranational entities (such as the World Bank),
foreign governments, their agencies and instrumentalities, and debt
obligations issued by U.S. corporations denominated in non-U.S. currencies.
These debt obligations may include bonds, debentures, notes and short-term
obligations.
U.S. Government Securities. The Fund may invest in U.S. government
securities, including zero-coupon U.S. Treasury securities, mortgage-backed
securities and money market instruments.
While the Fund may invest in securities of any maturity, it is currently
expected that the Fund will not invest in securities with maturities of more
than 30 years.
Other Eligible Securities. Under ordinary circumstances, the Fund may also
invest a limited portion of its assets in the securities described below.
Equity Securities. The Fund may invest in preferred stocks, including
adjustable rate and convertible preferred stocks, common stocks and other
equity securities, including convertible securities and warrants, which may be
used to create other permissible investments. Such investments must be
consistent with the Fund's primary objective of seeking a high level of
current income or be acquired as part of a unit combining income and equity
securities. In addition, the Fund may invest in limited partnerships,
including master limited partnerships.
Money Market Securities. The Fund may invest in the following types of
money market securities: (1) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; (2) commercial paper, including
master demand notes, that at the date of investment is rated A-1, the highest
grade by S&P, Prime-1,
8
<PAGE>
the highest grade by Moody's, or, if not rated by such services, is issued by
a company that at the date of investment has an outstanding issue rated A or
better by S&P or Moody's; (3) obligations, including certificates of deposit
and bankers' acceptances, of banks or savings and loan associations having at
least $1 billion in assets that are members of the Federal Deposit Insurance
Corporation, including U.S. branches of foreign banks and foreign branches of
U.S. banks; and (4) obligations of U.S. corporations that at the date of
investment are rated A or better by S&P or Moody's.
EVERGREEN HIGH YIELD BOND FUND
The investment objective of EVERGREEN HIGH YIELD BOND FUND is generous
income. The generous income sought by the Fund is ordinarily associated with
high-yield, high-risk bonds and similar securities in the lower rating
categories of the recognized rating agencies or with securities that are
unrated. While growth of capital is not a Fund objective, the Fund may
purchase securities that offer the possibility of capital appreciation in
addition to income, provided the acquisition of such securities does not
conflict with the Fund's objective of generous income.
The Fund intends to invest at least 65% of its total assets in bonds,
debentures and other income obligations. The Fund's portfolio ordinarily
includes a substantial number of bonds, debentures, and other income
obligations that are rated by S&P or Moody's as below-investment grade, i.e.,
S&P rating below BBB and Moody's rating below Baa.
The Fund may purchase securities with any rating or may purchase unrated
securities, which are not necessarily of lower quality than rated securities,
but may not be as attractive to as many buyers. While the Fund's investment
advisor performs its own credit analyses of the Fund's investments and does
not rely on ratings assigned by rating services, bonds rated below-investment
grade generally involve greater volatility of price and risk or principal and
income than bonds in the higher rating categories and are, on balance,
considered predominantly speculative.
The Fund may invest up to 50% of its assets in securities that are
principally traded in securities markets located outside the United States.
In addition, the Fund may invest in limited partnerships, including
master limited partnerships. The Fund may also invest in participations in
bank loans.
Other Eligible Securities. The Fund may also invest in preferred stock,
including convertible preferred and adjustable rate preferred stocks;
warrants, which may be used to create permissible investments; and common
stock of issuers that are objects of acquisition attempts, are undergoing
reorganization through bankruptcy or otherwise, or are in the process of
refinancing. Investments in common stocks of such issuers are expected to
provide the Fund with the opportunity to receive high-yielding, fixed-income
securities. Investments in common stocks will be limited to those stocks that
the Fund's investment advisor believes will assist the Fund in achieving its
investment objective.
EVERGREEN DIVERSIFIED BOND FUND
The Fund seeks maximum income without undue risk of principal.
The Fund invests at least 65% of its total assets in bonds, which are
debt instruments used by issuers to borrow money from investors. The Fund
invests in debt instruments that are normally characterized by relatively
liberal returns and moderate price fluctuations. Such debt instruments, which
include both secured and unsecured debt obligations, will have a rating of BBB
or higher by S&P, Baa or higher by Moody's, BBB or higher by Fitch, or, if not
rated or rated under a different system, will be of comparable quality to
obligations so rated as determined by another nationally recognized
statistical ratings organization or by the Fund's investment advisor. As a
group, such debt instruments usually possess a fairly high degree of
dependability of interest payments. While the Fund's primary objective is
income, the Fund gives careful consideration to security of principal,
marketability and diversification.
The Fund seeks to maximize return with respect to a portion of its
assets. Such maximum return is ordinarily associated with high-yield, high-
risk bonds and similar securities in the lower rating categories of the
9
<PAGE>
recognized rating agencies or with securities that are unrated (high-yield
bonds). The degree to which the Fund will hold such securities will depend on
various factors, including its investment advisor's economic forecast and its
judgment as to the comparative values offered by high-yield, high-risk bonds
and higher quality issues. The Fund's investments in high-yield, high-risk
bonds will not exceed 35% of its assets.
The Fund may invest up to 50% of its assets in securities that are
principally traded in securities markets located outside of the United States.
Other Eligible Securities. The Fund's investments may include limited
partnerships, including master limited partnerships, participations in bank
loans, fixed and adjustable rate or stripped bonds, including zero-coupon
bonds and PIKs, debentures, notes, equipment trust certificates, U.S.
government securities, and debt securities convertible into or exchangeable
for preferred or common stock. The Fund may invest in preferred stock,
including adjustable rate preferred stock, and warrants, which can be used to
purchase or create otherwise permissible investments. The Fund may continue to
hold preferred or common stock received in connection with convertible or
exchangeable securities and may hold common stock received in connection with
the purchase of a permitted security.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond prices move inversely to interest rates, i.e., as interest
rates decline the values of the bonds increase, and vice versa. The longer the
maturity of a bond, the greater the exposure to market price fluctuations. The
same market factors are reflected in the share price or net asset value of
bond funds which will vary with interest rates. In addition, certain of the
obligations in which each Fund may invest may be variable or floating rate
instruments, which may involve a conditional or unconditional demand feature,
and may include variable amount master demand notes. While these types of
instruments may, to a certain degree, offset the risk to principal associated
with rising interest rates, they would not be expected to appreciate in a
falling interest rate environment.
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of each Fund's
investment advisor, market conditions warrant a temporary defensive investment
strategy.
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 Funds may invest in derivatives only if the expected risks and rewards
are consistent with their investment objectives and policies.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains or losses in the value of the derivative. Derivatives
can also cause a Fund to lose money if the Fund fails to correctly predict the
direction in which the underlying asset or economic factor will move.
Downgrades. If any security invested in by any of the Funds loses its rating
or has its rating reduced after a Fund has purchased it, a Fund is not
required to sell or otherwise dispose of the security, but may consider doing
so.
Repurchase Agreements. The Funds may invest in repurchase agreements. A
repurchase agreement is an agreement by which a Fund purchases a security
(usually U.S. government securities) for cash and obtains a simultaneous
commitment from the seller (usually a bank or broker-dealer) to repurchase the
security at an agreed-upon price and specified future date. The repurchase
price reflects an agreed-upon interest rate for the time period of the
agreement. A 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 a
Fund to sell the security in the open market in the case of a default. In such
a case, a Fund may incur costs in disposing of the security which would
increase Fund expenses. A Fund's investment advisor will monitor the
creditworthiness of the firms with which the Fund enters into repurchase
agreements.
Reverse Repurchase Agreements. Each Fund may enter into reverse repurchase
agreements. A reverse repurchase agreement is an agreement by a Fund to sell a
security and repurchase it at a specified time and
10
<PAGE>
price. A 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. Each 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 values of these securities are subject to market fluctuations
during this period and no income accrues to a 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, a Fund relies on the
other party to consummate the transaction; if the other party fails to do so,
the Fund may be disadvantaged. Each Fund does not intend to purchase when-
issued securities for speculative purposes, but only in furtherance of its
investment objective.
Securities Lending. To generate income and offset expenses, the Funds may lend
securities to broker-dealers and other financial institutions. Loans of
securities by a Fund may not exceed 33 1/3% of the value of the Fund's total
assets. While securities are on loan, the borrower will pay the Fund any
income accruing on the security. Also, the Fund may invest any collateral it
receives in additional securities. Gains or losses in the market value of a
lent security will affect a Fund and its shareholders. When a Fund lends its
securities, it runs the risk that it could not retrieve the securities on a
timely basis, possibly losing the opportunity to sell the securities at a
desirable price. Also, if the borrower files for bankruptcy or becomes
insolvent, a Fund's ability to dispose of the securities may be delayed.
Options and Futures. The Funds may engage in options and futures transactions.
Options and futures transactions are intended to enable a Fund to manage
market, interest rate or exchange rate risk. The Funds do not use these
transactions for speculation or leverage.
The Funds may attempt to hedge all or a portion of their portfolios
through the purchase of both put and call options on their portfolio
securities and listed put options on financial futures contracts for portfolio
securities. EVERGREEN STRATEGIC INCOME FUND and EVERGREEN HIGH YIELD BOND FUND
may also purchase call options on financial futures contracts. The Funds may
also write covered call options on their portfolio securities to attempt to
increase their current income. The Funds will maintain their positions in
securities, option rights, and segregated cash subject to puts and calls until
the options are exercised, closed, or have expired. An option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series.
The Funds may write (i.e., sell) covered call and put options. By writing
a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise
price. By writing a put option, a Fund becomes obligated during the term of
the option to purchase the securities underlying the option at the exercise
price if the option is exercised. The Funds may also write straddles
(combinations of covered puts and calls on the same underlying security). The
Funds may only write "covered" options. This means that so long as a Fund is
obligated as the writer of a call option, it will own the underlying
securities subject to the option or, in the case of call options on U.S.
Treasury bills, a Fund might own substantially similar U.S. Treasury bills. A
Fund will be considered "covered" with respect to a put option it writes if,
so long as it is obligated as the writer of the put option, it deposits and
maintains with its custodian in a segregated account liquid assets having a
value equal to or greater than the exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised.
By writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more
than their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of
11
<PAGE>
the instrument ("going long") at a certain time in the future. Financial
futures contracts call for the delivery of particular debt instruments issued
or guaranteed by the U.S. Treasury or by specified agencies or
instrumentalities of the U.S. government. If a Fund would enter into financial
futures contracts directly to hedge its holdings of fixed income securities,
it would enter into contracts to deliver securities at an undetermined price
(i.e., "go short") to protect itself against the possibility that the prices
of its fixed income securities may decline during a Fund's anticipated holding
period. A Fund would "go long" (agree to purchase securities in the future at
a predetermined price) to hedge against a decline in market interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies, or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy
or sell securities or currencies during a designated month at whatever price
exists at that time. A futures contract on a securities index does not involve
the actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Funds do not make
payment or deliver securities upon entering into a futures contract. Instead,
they put down a margin deposit, which is adjusted to reflect changes in the
value of the contract and which remains in effect until the contract is
terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the
contract will tend to rise when the value of the underlying securities or
currencies declines and to fall when the value of such securities or
currencies increases. Thus, the Funds sell futures contracts in order to
offset a possible decline in the value of their securities or currencies. If a
futures contract is purchased by a Fund, the value of the contract will tend
to rise when the value of the underlying securities or currencies increases
and to fall when the value of such securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for
the purpose of closing out their options positions. The Funds' ability to
enter into closing transactions depends on the development and maintenance of
a liquid secondary market. There is no assurance that a liquid secondary
market will exist for any particular contract or at any particular time. As a
result, there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case
the Funds would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Funds' use of them can result in poorer performance (i.e., the Funds' returns
may be reduced). A Fund's attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk
that the prices of the securities subject to the financial futures contracts
and options on financial futures contracts may not correlate perfectly with
the prices of the securities in the Funds' portfolios. This may cause the
financial futures contract and any related options to react to market changes
differently than the portfolio securities. In addition, each Fund's investment
advisor could be incorrect in its expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities
price movements, and other economic factors. Even if each Fund's investment
advisor correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although each Fund's investment advisor
will consider liquidity before entering into financial futures contracts or
options on financial futures contracts transactions, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
financial futures contract or option on a financial futures contract at any
particular time. The Funds' ability to establish and close out financial
futures contracts and options on financial futures contract positions depends
on this secondary market. If a Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, a Fund may lose money on the
futures contract or option, and the losses to a Fund could be significant.
12
<PAGE>
Zero-Coupon and Stripped Securities. The Funds may invest in zero-coupon and
stripped securities. Zero-coupon securities in which the Funds may invest are
debt obligations which are generally issued at a discount and payable in full
at maturity, and which do not provide for current payments of interest prior
to maturity. Zero-coupon securities usually trade at a deep discount from
their face or par value and are subject to greater market value fluctuations
from changing interest rates than debt obligations of comparable maturities
which make current distributions of interest. As a result, the net asset value
of shares of the Funds may fluctuate over a greater range than shares of other
mutual funds investing in securities making current distributions of interest
and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly by
the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by
their holder, typically a custodian bank or investment banking firm. A number
of securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold
them in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves
are held in book-entry form at the Federal Reserve Bank or, in the case of
bearer securities (i.e., unregistered securities which are owned ostensibly by
the bearer or holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of zero-
coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under
the STRIPS program, the Funds will be able to have their beneficial ownership
of U.S. Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidence
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
Foreign Investments. EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD
BOND FUND and EVERGREEN DIVERSIFIED BOND FUND may invest in foreign
securities, which may involve additional risks. Specifically, they may be
affected by the strength of foreign currencies relative to the U.S. dollar, or
by political or economic developments in foreign countries. Accounting
procedures and government supervision may be less stringent than those
applicable to U.S. companies. There may be less publicly available information
about a foreign company than about a U.S. company. Foreign markets may be less
liquid or more volatile than U.S. markets and may offer less protection to
investors. It may also be more difficult to enforce contractual obligations
abroad than would be the case in the United States because of differences in
the legal systems. Foreign securities may be subject to foreign taxes, which
may reduce yield, and may be less marketable than comparable U.S. securities.
All these factors are considered by each Fund's investment advisor before
making any of these types of investments.
Foreign Currency Transactions. As discussed above, EVERGREEN STRATEGIC INCOME
FUND, EVERGREEN HIGH YIELD BOND FUND and EVERGREEN DIVERSIFIED BOND FUND may
invest in securities of foreign issuers. When a Fund invests in foreign
securities, they usually will be denominated in foreign currencies, and a Fund
temporarily may hold funds in foreign currencies. Thus, the value of Fund
shares may be affected by changes in exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the Funds may enter into forward currency exchange
contracts (agreements to purchase or sell currencies at a specified price and
date). The exchange rate for the transaction (the amount of currency a Fund
will deliver or receive when the contract is completed) is fixed when a Fund
enters into the contract. A Fund usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell.
Each Fund intends
13
<PAGE>
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 a Fund will attempt to
benefit from using forward contracts, the success of its hedging strategy will
depend on the investment advisor's ability to predict accurately the future
exchange rates between foreign currencies and the U.S. dollar. The value of a
Fund's investments denominated in foreign currencies will depend on the
relative strength of those currencies and the U.S. dollar, and a Fund may be
affected favorably or unfavorably by changes in the exchange rates or exchange
control regulations between foreign currencies and the U.S. dollar. Changes in
foreign currency exchange rates also may affect the value of dividends and
interest earned, gains and losses realized on the sale of securities and net
investment income and gains, if any, to be distributed to shareholders by a
Fund. Although the Funds do not currently intend to do so, the Funds may also
purchase and sell options related to foreign currencies. The Funds do not
intend to enter into foreign currency transactions for speculation or
leverage.
Structured Securities. Structured securities represent interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of sovereign debt obligations or foreign government
securities. This type of restructuring involves the deposit with or purchase
by an entity, such as a corporation or trust, of specified instruments (such
as commercial bank loans or Brady Bonds) and the issuance by that entity of
one or more classes of structured securities backed by, or representing
interests in, the underlying instruments. The cash flow on the underlying
instruments may be apportioned among the newly issued structured securities to
create securities with different investment characteristics such as varying
maturities, payment priorities and interest rate provisions, and the extent of
the payments made with respect to structured securities is dependent on the
extent of the cash flow on the underlying instruments. Because structured
securities typically involve no credit enhancement, their credit risk
generally will be equivalent to that of the underlying instruments. Structured
securities of a given class may be either subordinated or unsubordinated to
the right of payment of another class. Subordinated structured securities
typically have higher yields and present greater risks than unsubordinated
structured securities.
Asset-Backed Securities. The Funds may invest in asset-backed securities.
Asset-backed securities are created by the grouping of certain governmental,
government-related and private loans, receivables and other lender assets into
pools. Interests in these pools are sold as individual securities. Payments
from the asset pools may be divided into several different tranches of debt
securities, with some tranches entitled to receive regular installments of
principal and interest, other tranches entitled to receive regular
installments of interest, with principal payable at maturity or upon specified
call dates, and other tranches only entitled to receive payments of principal
and accrued interest at maturity or upon specified call dates. Different
tranches of securities will bear different interest rates, which may be fixed
or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities and mortgage-backed securities are
generally subject to higher prepayment risks than most other types of debt
instruments. Prepayment risks on mortgage securities tend to increase during
periods of declining mortgage interest rates, because many borrowers refinance
their mortgages to take advantage of the more favorable rates. Depending upon
market conditions, the yield that the Funds receive from the reinvestment of
such prepayments, or any scheduled principal payments, may be lower than the
yield on the original mortgage security. As a consequence, mortgage securities
may be a less effective means of "locking in" interest rates than other types
of debt securities having the same stated maturity and may also have less
potential for capital appreciation. For certain types of asset pools, such as
CMOs, prepayments may be allocated to one tranche of securities ahead of other
tranches, in order to reduce the risk of prepayment for the other tranches.
Prepayments may result in a capital loss to the Funds to the extent that
the prepaid mortgage securities were purchased at a market premium over their
stated amount. Conversely, the prepayment of mortgage securities purchased at
a market discount from their stated principal amount will accelerate the
recognition of interest income by the Funds which would be taxed as ordinary
income when distributed to the shareholders. The credit characteristics of
asset-backed securities also differ in a number of respects from those of
traditional debt securities. The credit quality of most asset-backed
securities depends primarily upon the credit quality of the assets underlying
such securities, how well the entity issuing the securities is insulated from
the credit risk of the originator or any other affiliated entities, and the
amount and quality of any credit enhancement to such securities.
Risk Characteristics of High-Yield Bonds. EVERGREEN STRATEGIC INCOME FUND,
EVERGREEN HIGH YIELD BOND FUND and EVERGREEN DIVERSIFIED BOND FUND may invest
in high-yield bonds. While investment in high-yield
14
<PAGE>
bonds provides opportunities to maximize return over time, investors should be
aware of the following risks associated with high-yield bonds:
(1) High-yield bonds are rated below-investment grade, i.e., BB or lower
by S&P or Ba or lower by Moody's. Securities so rated are considered
predominantly speculative with respect to the ability of the issuer to meet
principal and interest payments.
(2) The lower ratings of these securities reflect a greater possibility
that adverse changes in the financial condition of the issuer or in general
economic conditions, or both, or an unanticipated rise in interest rates may
impair the ability of the issuer to make payments of interest and principal,
especially if the issuer is highly leveraged. Such issuer's ability to meet
its debt obligations may also be adversely affected by specific corporate
developments or the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. Also, an economic
downturn or an increase in interest rates may increase the potential for
default by the issuers of these securities.
(3) Their value may be more susceptible to real or perceived adverse
economic, company or industry conditions and publicity than is the case for
higher quality securities.
(4) Their value, like those of other fixed income securities, fluctuates
in response to changes in interest rates, generally rising when interest rates
decline and falling when interest rates rise. For example, if interest rates
increase after a fixed-income security is purchased, the security, if sold
prior to maturity, may return less than its cost. The prices of below-
investment grade bonds, however, are generally less sensitive to interest rate
changes than the prices of higher-rated bonds, but are more sensitive to
adverse or positive economic changes or individual corporate developments.
(5) The secondary market for such securities may be less liquid at
certain times than the secondary market for higher quality debt securities,
which may adversely effect (i) the market price of the security, (ii) a Fund's
ability to dispose of particular issues and (iii) a Fund's ability to obtain
accurate market quotations for purposes of valuing its assets.
(6) Zero-coupon bonds and PIKs involve additional risks. Zero-coupon
bonds and PIKs do not require the periodic payment of interest. PIKs are debt
obligations that provide that the issuer may, at its option, pay interest on
such bonds in cash or in the form of additional debt obligations. Such
investments may experience greater fluctuation in value due to changes in
interest rates than debt obligations that pay interest currently. Even though
these investments do not pay current interest in cash, a Fund is, nonetheless,
required by tax laws to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, a Fund could
be required at times to liquidate investments in order to fulfill its
intention to distribute substantially all of its net income as dividends. A
Fund will not be able to purchase additional income producing securities with
cash used to make such distributions, and its current income ultimately may be
reduced as a result.
The generous income sought by a Fund is ordinarily associated with
securities in the lower rating categories of the recognized rating agencies or
with securities that are unrated. Such securities are generally rated BB or
lower by S&P or Ba or lower by Moody's. The Funds may invest in securities
that are rated as low as D by S&P or C- by Moody's. The Funds may also invest
in unrated securities that, in the investment advisor's judgment, offer
comparable yields and risks as securities that are rated. It is possible for
securities rated D or C-, respectively, to have defaulted on payments of
principal and/or interest at the time of investment. The SAI describes these
rating categories. The Funds intend to invest in D rated debt only in cases
when, in the investment advisor's judgment, there is a distinct prospect of
improvement in the issuer's financial position as a result of the completion
of a reorganization or otherwise.
The investment advisor considers the ratings of S&P and Moody's assigned
to various securities, but does not rely solely on these ratings because (1)
S&P and Moody's assigned ratings are based largely on historical financial
data and may not accurately reflect the current financial outlook of
companies; and (2) there can be large differences among the current financial
conditions of issuers within the same category.
The following tables show the weighted average percentages of the assets
of EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD BOND FUND and
EVERGREEN DIVERSIFIED BOND FUND invested at the end
15
<PAGE>
of each month during the fiscal period ended April 30, 1998 in securities
assigned to the various rating categories and in unrated securities determined
by the investment advisor to be of comparable quality. The rated asset
percentages shown have received equivalent ratings from S&P and Moody's except
where ratings are "split," i.e., different between S&P and Moody's. In such
instances, the higher of the two ratings is shown and the lower rating is no
more than one grade below the higher one. For the purposes of the table, only
the S&P rating system is used. Since the percentages in this table are based
on month-end averages throughout the fiscal period, they do not reflect the
Fund's holdings at any one point in time. The percentages in each category may
be higher or lower on any day than those shown in the table below.
EVERGREEN STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
*UNRATED SECURITIES
OF COMPARABLE
RATED SECURITIES QUALITY AS
AS PERCENTAGE OF PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
------ ---------------- -------------------
<S> <C> <C>
AAA 27.49% 0.00%
AA 8.81% 0.00%
A 2.15% 0.00%
BBB 1.00% 0.00%
BBB split 0.91% 0.00%
BB 6.59% 0.00%
BB split 4.37% 0.00%
B 21.75% 6.41%
B split 5.44% 0.00%
CCC 1.84% 1.98%
D 0.00% 0.00%
Unrated* 8.39%
U.S. governments, cash, equities and
others 11.26%
------
TOTAL 100.00%
======
</TABLE>
EVERGREEN HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
*UNRATED SECURITIES
OF COMPARABLE
RATED SECURITIES QUALITY AS
AS PERCENTAGE OF PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
------ ---------------- -------------------
<S> <C> <C>
AAA 0.00% 0.00%
AA 0.00% 0.00%
A 0.00% 0.00%
BBB 0.00% 0.00%
BBB split 0.42% 0.00%
BB 5.33% 0.00%
BB split 7.56% 0.00%
B 67.61% 4.59%
B split 5.94% 0.00%
CCC 3.75% 1.80%
D 0.00% 0.00%
Unrated* 6.39%
U.S. governments, cash, equities and
others 3.00%
------
TOTAL 100.00%
======
</TABLE>
16
<PAGE>
EVERGREEN DIVERSIFIED BOND FUND
<TABLE>
<CAPTION>
*UNRATED SECURITIES
OF COMPARABLE
RATED SECURITIES QUALITY AS
AS PERCENTAGE OF PERCENTAGE OF
RATING FUND'S ASSETS FUND'S ASSETS
------ ---------------- -------------------
<S> <C> <C>
AAA 24.95% 0.00%
AA 14.14% 0.00%
A 12.69% 0.00%
BBB 12.41% 0.00%
BBB split 2.97% 0.00%
BB 7.35% 0.00%
BB split 3.99% 0.00%
B 12.63% 0.00%
B split 0.37% 0.00%
CCC 0.00% 0.00%
D 0.00% 0.00%
Unrated* 0.00%
U.S. governments, cash, equities and
others 8.52%
------
TOTAL 100.00%
======
</TABLE>
Since the Funds take an aggressive approach to investing, the investment
advisor attempts to maximize the return by controlling risk through
diversification, credit analysis, review of sector and industry trends,
interest rate forecasts and economic analysis. The investment advisor's
analysis of securities focuses on factors such as interest or dividend
coverage, asset values, earning prospects and the quality of management of the
company. In making investment recommendations, the investment advisor also
considers current income, potential for capital appreciation, maturity
structure, quality guidelines, coupon structure, average yield, yield to
maturity and the percentage of zero-coupon bonds, PIKs and non-accruing items
in a Fund's portfolio.
Income and yields on high-yield, high-risk securities, as on all
securities, will fluctuate over time.
Borrowing. Each Fund may borrow from banks in an amount up to 33 1/3% of its
total assets, taken at market value. Each Fund may also borrow an additional
5% of its total assets from banks and others. A Fund may only borrow as a
temporary measure for extraordinary or emergency purposes such as the
redemption of Fund shares. A Fund will not purchase securities while
borrowings are outstanding except to exercise prior commitments and to
exercise subscription rights.
Illiquid Securities. The Funds 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 a Fund to dispose
of illiquid or not readily marketable investments readily or at a reasonable
price could impair a Fund's ability to raise cash for redemptions or other
purposes.
Restricted Securities. The Funds may invest in restricted securities,
including securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 (the "1933 Act"). Generally, Rule 144A establishes a
safe harbor from the registration requirements of the 1933 Act for resale by
large institutional investors of securities not publicly traded in the United
States. Each Fund's investment advisor determines the liquidity of Rule 144A
securities according to guidelines and procedures adopted by the Trust's Board
of Trustees. The Board of Trustees monitors the investment advisors'
application of those guidelines and procedures. Securities eligible for resale
pursuant to Rule 144A, which each Fund's investment advisor has determined to
be liquid or readily marketable, are not subject to the 15% limit on illiquid
securities.
17
<PAGE>
- -------------------------------------------------------------------------------
ORGANIZATION AND SERVICE PROVIDERS
- -------------------------------------------------------------------------------
ORGANIZATION
Fund Structure. Each Fund is an investment pool, which invests shareholders'
money towards a specified goal. Each Fund is a diversified series of an open-
end, investment management company, called Evergreen Fixed Income Trust (the
"Trust"). The Trust is a Delaware business trust organized on September 18,
1997.
Board of Trustees. The Trust is supervised by a Board of Trustees that is
responsible for representing the interests of shareholders. The Trustees meet
periodically throughout the year to oversee the Funds' activities, reviewing,
among other things, the Funds' performance and their contractual arrangements
with various service providers.
Shareholder Rights. All shareholders have equal voting, liquidation and other
rights. Each share is entitled to one vote for each dollar of net asset value
applicable to such share. Shareholders may exchange shares as described under
"Exchanges," but will have no other preference, conversion, exchange or
preemptive rights. When issued and paid for, your shares will be fully paid
and nonassessable. Shares of the Funds are redeemable, transferable and freely
assignable as collateral. The Trust may establish additional classes or series
of shares.
The Funds do not hold annual shareholder meetings; the Funds 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 Funds are prepared to assist
shareholders in communicating with one another for the purpose of convening a
meeting to elect trustees.
SERVICE PROVIDERS
Investment Advisors. The investment advisor to EVERGREEN U.S. GOVERNMENT FUND
is the Capital Management Group of First Union National Bank ("FUNB"), a
subsidiary of First Union Corporation ("First Union"). First Union is located
at 301 South College Street and FUNB is located at 201 South College Street,
Charlotte, North Carolina 28288-0630. First Union and its subsidiaries provide
a broad range of financial services to individuals and businesses throughout
the United States.
The investment advisor to EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH
YIELD BOND FUND and EVERGREEN DIVERSIFIED BOND FUND is Keystone Investment
Management Company ("Keystone"). Keystone has provided investment advisory and
management services to investment companies and private accounts since it was
organized in 1932. Keystone, a subsidiary of FUNB, is located at 200 Berkeley
Street, Boston, Massachusetts 02116-5034.
EVERGREEN U.S. GOVERNMENT FUND pays FUNB an annual fee for its services
equal to 0.50 of 1% of the Fund's average daily net assets.
EVERGREEN STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD BOND FUND and
EVERGREEN DIVERSIFIED BOND FUND pay Keystone a fee for its services at the
annual rate set forth below:
<TABLE>
<CAPTION>
2.0% OF GROSS DIVIDEND
AND INTEREST INCOME
PLUS AGGREGATE NET
ASSET VALUE OF THE
MANAGEMENT FEE SHARES OF THE FUND
-------------- ----------------------
<S> <C>
0.50% of the first............................... $100,000,000; plus
0.45% of the next................................ $100,000,000; plus
0.40% of the next................................ $100,000,000; plus
0.35% of the next................................ $100,000,000; plus
0.30% of the next................................ $100,000,000; plus
0.25% of amounts over............................ $500,000,000.
</TABLE>
The investment advisors' fee is computed as of the close of business each
business day and is payable monthly.
18
<PAGE>
Portfolio Managers. Rollin C. Williams, CFA, is the Portfolio Manager of
EVERGREEN U.S. GOVERNMENT FUND. Mr. Williams has over 28 years of banking and
investment management experience. In addition to managing First Union's
Diversified Bond Group Trust, he is also responsible for the management of
over $2.2 billion in fixed income portfolios. Prior to joining First Union,
Mr. Williams was the head of fixed income investment at Dominion Trust Company
in Roanoke, VA. Mr. Williams has been with First Union since 1993 when
Dominion was acquired by the bank; he started with Dominion Trust Company in
1988. Since joining First Union, Mr. Williams has been a Vice President and
Senior Portfolio Manager.
The Portfolio Manager of EVERGREEN STRATEGIC INCOME FUND and EVERGREEN
HIGH YIELD BOND FUND is Prescott B. Crocker, CFA. Mr. Crocker is a Senior Vice
President, Senior Portfolio Manager and Head of the High Yield Bond Team at
Keystone. Mr. Crocker joined Keystone in 1997 and initially served as the
manager of the domestic high yield bond portion of the Fund's portfolio. From
1993 until he joined Keystone, Mr. Crocker held various positions at Boston
Security Counsellors, including President and Chief Investment Officer, and
was Managing Director and Portfolio Manager at Northstar Investment
Management. Mr. Crocker has 25 years of experience in fixed income investment
management.
The Portfolio Manager of EVERGREEN DIVERSIFIED BOND FUND is Christopher
P. Conkey, CFA. Mr. Conkey has served as Chief Investment Officer of Fixed
Income for the past nine months and as Head of the High Grade Bond Team for
Keystone for the last three years. During the past five years at Keystone, Mr.
Conkey has also served as portfolio manager of several high grade fixed income
funds, several high grade-high yield fixed income funds and several off-shore
closed-end fixed income funds.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to EVERGREEN U.S. GOVERNMENT FUND, subject to the supervision
and control of the Trustees. EIS provides the Fund with facilities, equipment
and personnel. For its services as administrator, EIS is entitled to receive a
fee based on the aggregate daily net assets of all the mutual funds
administered by EIS for which any affiliate of FUNB serves as investment
advisor. The administration fee is calculated in accordance with the following
schedule:
ADMINISTRATION FEE
0.050%on the first $7 billion
0.035%on the next $3 billion
0.030%on the next $5 billion
0.020%on the next $10 billion
0.015%on the next $5 billion
0.010%on assets in excess of $30 billion
EIS also provides facilities, equipment and personnel to EVERGREEN
STRATEGIC INCOME FUND, EVERGREEN HIGH YIELD BOND FUND and EVERGREEN
DIVERSIFIED BOND FUND on behalf of the Funds' investment advisor.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company
("ESC"), 200 Berkeley Street, Boston, Massachusetts 02116-5034 acts as each
Fund's transfer agent and dividend disbursing agent. ESC is a subsidiary of
First Union.
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as each Fund's custodian.
Principal Underwriter. Evergreen Distributor, Inc. ("EDI"), a subsidiary of
The BISYS Group, Inc. located at 125 West 55th Street, New York, New York
10019, is the principal underwriter of each Fund.
19
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PURCHASE AND REDEMPTION OF SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
Class Y shares are offered at net asset value without a front-end sales
charge or a contingent deferred sales load. Class Y shares are only offered to
(1) persons who at or prior to December 31, 1994, owned shares in a mutual
fund advised by Evergreen Asset Management Corp. ("Evergreen Asset"), (2)
certain institutional investors and (3) investment advisory clients of FUNB,
Evergreen Asset, Keystone, Meridian or their affiliates.
Eligible investors may purchase Class Y shares of any of the Funds
through broker-dealers, banks or other financial intermediaries, or directly
through EDI. In addition, you may purchase Class Y shares of any of the Funds
by mailing to that Fund, c/o ESC, P.O. Box 2121, Boston, Massachusetts 02106-
2121, a completed application and a check payable to the Fund. You may also
telephone 1-800-343-2898 to obtain the number of an account to which you can
wire or electronically transfer funds and then send in a completed
application. The minimum initial investment is $1,000, which may be waived in
certain situations. Subsequent investments in any amount may be made by check,
by wiring federal funds, by direct deposit or by an electronic funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. See the application
for more information. Only Class Y shares are offered through this prospectus
(see "General Information--Other Classes of Shares").
How the Funds Value their Shares. The net asset value of each class of shares
of a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. eastern time).
The securities in a Fund are valued at their current market value determined
on the basis of market quotations or, if such quotations are not readily
available, such other methods as the Trustees believe would accurately reflect
fair value. 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.
Additional Purchase Information. As a condition of this offering, if a
purchase is canceled due to nonpayment or because an investor's check does not
clear, the investor will be responsible for any loss a Fund or a Fund's
investment advisor incurs. If such investor is an existing shareholder, a Fund
may redeem shares from an investor's account to reimburse the Fund or its
investment advisor for any loss. In addition, such investors may be prohibited
or restricted from making further purchases in any of the Evergreen funds. The
Funds will not accept third party checks other than those payable directly to
a shareholder whose account has been in existence at least 30 days.
HOW TO REDEEM SHARES
You may "redeem" (i.e., sell) your Class Y shares in a Fund to the Fund
for cash at their net redemption value on any day the Exchange is open, either
directly by writing to the Fund, c/o ESC, or through your financial
intermediary. The amount you will receive is based on the net asset value
adjusted for fractions of a cent next calculated after a Fund receives your
request in proper form. Proceeds generally will be sent to you within seven
days. However, for shares recently purchased by check, a Fund will not send
proceeds until it is reasonably satisfied that the check has been collected
(which may take up to 15 days). Once a redemption request has been telephoned
or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may
charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (eastern time).
Redeeming Shares Directly by Mail or Telephone. You may redeem by mail by
sending a signed letter of instruction or stock power form to the Fund, c/o
ESC (the registrar, transfer agent and dividend-disbursing agent for each
Fund). Stock power forms are available from your financial intermediary, ESC,
and many commercial banks. Additional documentation is required for the sale
of shares by corporations, financial intermediaries,
20
<PAGE>
fiduciaries and surviving joint owners. Signature guarantees are required for
all redemption requests for shares with a value of more than $50,000.
Currently, the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less when the account address of record has been the
same for a minimum period of 30 days. Each Fund and ESC reserve the right to
withdraw this waiver at any time. A signature guarantee must be provided by a
bank or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable
under the Securities Exchange Act of 1934 and ESC's policies.
Shareholders may redeem amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
prospectus between the hours of 8:00 a.m. and 6:00 p.m. (eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
ESC's offices are closed). The Exchange is closed on New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Redemption requests
received after 4:00 p.m. (eastern time) will be processed using the net asset
value determined on the next business day. Such redemption requests must
include the shareholder's account name, as registered with the Fund, and the
account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions. If
you cannot reach a Fund by telephone, you should follow the procedures for
redeeming by mail or through a broker-dealer as set forth herein. The
telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service
must complete the appropriate sections on the application and choose how the
redemption proceeds are to be paid. Redemption proceeds will either (1) be
mailed by check to the shareholder at the address in which the account is
registered or (2) be wired to an account with the same registration as the
shareholder's account in a Fund at a designated commercial bank.
In order to insure that instructions received by ESC are genuine when you
initiate a telephone transaction, you will be asked to verify certain criteria
specific to your account. At the conclusion of the transaction, you will be
given a transaction number confirming your request, and written confirmation
of your transaction will be mailed the next business day. Your telephone
instructions will be recorded. Redemptions by telephone are allowed only if
the address and bank account of record have been the same for a minimum period
of 30 days. Each Fund reserves the right at any time to terminate, suspend, or
change the terms of any redemption method described in this prospectus, except
redemption by mail, and to impose fees.
Except as otherwise noted, the Funds, ESC, and EDI will not assume
responsibility for the authenticity of any instructions received by any of
them from a shareholder in writing, over the Evergreen Express Line (described
below), or by telephone. ESC will employ reasonable procedures to confirm that
instructions received over the Evergreen Express Line or by telephone are
genuine. The Funds, ESC, and EDI will not be liable when following
instructions received over the Evergreen Express Line or by telephone that ESC
reasonably believes are genuine.
Evergreen Express Line. The Evergreen Express Line offers you specific fund
account information and price and yield quotations as well as the ability to
do account transactions, including investments, exchanges and redemptions. You
may access the Evergreen Express Line by dialing toll free 1-800-346-3858 on
any touch-tone telephone, 24 hours a day, seven days a week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists
and the Funds cannot dispose of their investments or fairly determine their
value; or (4) the SEC so orders. The Funds reserve the right to close an
account that through redemption has fallen below $1,000 and has remained so
for 30 days. Shareholders will receive 60 days' written notice to increase the
account value to at least $1,000 before the account is closed. The Funds have
elected to be governed by Rule 18f-1 under the Investment Company Act of 1940
(the "1940 Act") pursuant to which each Fund is obligated to redeem shares
solely in cash, up to the lesser of $250,000 or 1% of a Fund's total net
assets, during any 90-day period for any one shareholder.
EXCHANGE PRIVILEGE
How to Exchange Shares. You may exchange some or all of your Class Y shares
for shares of the same class in other Evergreen funds through your financial
intermediary, by calling or writing to ESC or by using the
21
<PAGE>
Evergreen Express Line as described above. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received. An
exchange which represents an initial investment in another Evergreen fund is
subject to the minimum investment and suitability requirements of each Fund.
Each of the Evergreen funds has different investment objectives and
policies. For more information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at
any time by the Fund upon 60 days' notice to shareholders and is only
available in states in which shares of the fund being acquired may lawfully be
sold.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may
charge you for this service.
Exchanges By Telephone And Mail. Exchange requests received by a Fund after
4:00 p.m. (eastern time) will be processed using the net asset value
determined at the close of the next business day. During periods of drastic
economic or market changes, shareholders may experience difficulty in
effecting telephone exchanges. You should follow the procedures outlined below
for exchanges by mail if you are unable to reach ESC by telephone. If you wish
to use the telephone exchange service you should indicate this on the
application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares
communicated by telephone are genuine. A telephone exchange may be refused by
a Fund or ESC if it is believed advisable to do so. Procedures for exchanging
Fund shares by telephone may be modified or terminated at any time. Written
requests for exchanges should follow the same procedures outlined for written
redemption requests in the section entitled "How to Redeem Shares"; however,
no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, ESC
or call the toll-free number on the front page of this prospectus. Some
services are described in more detail in the application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of a Fund with no minimum
initial investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the
Systematic Withdrawal Plan (the "Withdrawal Plan") by filling out the
appropriate part of the application. Under this Withdrawal Plan, you may
receive (or designate a third party to receive) a monthly or quarterly fixed-
withdrawal payment in a stated amount of at least $75 and may be as much as
1.0% per month or 3.0% per quarter of the total net asset value of the Fund
shares in your account when the Withdrawal Plan was opened. Fund shares will
be redeemed as necessary to meet withdrawal payments. All participants must
elect to have their dividends and capital gain distributions reinvested
automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends
and distributions are automatically reinvested in full and fractional shares
of a Fund at the net asset value per share at the close of business on the
record date, unless otherwise requested by a shareholder in writing. If the
transfer agent does not receive a written request for subsequent dividends
and/or distributions to be paid in cash at least three full business days
prior to a given record date, the dividends and/or distributions to be paid to
a shareholder will be reinvested.
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<PAGE>
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen fund. This results
in more shares being purchased when the selected fund's net asset value is
relatively low and fewer shares being purchased when the fund's net asset
value is relatively high and may result in a lower average cost per share than
a less systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen fund. You should designate on the application (1) the
dollar amount of each monthly or quarterly investment you wish to make, and
(2) the fund in which the investment is to be made. Thereafter, on the first
day of the designated month, an amount equal to the specified monthly or
quarterly investment will automatically be redeemed from your initial account
and invested in shares of the designated fund.
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any Class Y Evergreen fund shares you own automatically
invested to purchase the same class of shares of any other Evergreen fund. You
may select this service on your application and indicate the Evergreen fund(s)
into which distributions are to be invested.
Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Medical
Savings Accounts; Pension and Target Benefit and Money Purchase Plans. For
details, including fees and application forms, call toll free 1-800-247-4075
or write to ESC.
BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment advisor, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase
of shares of such an investment company upon the order of its customer. FUNB
and its affiliates are subject to and in compliance with the aforementioned
laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB or its affiliates being
prevented from continuing to perform the services required under the
investment advisory contract or from acting as agent in connection with the
purchase of shares of the Funds by their customers. If FUNB or its affiliates
were prevented from continuing to provide the services called for under the
investment advisory agreement, it is expected that the Trustees would
identify, and call upon each Fund's shareholders to approve, a new investment
adviser. If this were to occur, it is not anticipated that the shareholders of
any Fund would suffer any adverse financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds intend to declare dividends from net investment income daily
and distribute to their shareholders such dividends monthly. The Funds intend
to declare and distribute all net realized capital gains at least annually.
Shareholders receive Fund distributions in the form of additional shares of
that class of shares upon which the distribution is based or, at the
shareholder's option, in cash. Shareholders of a Fund who have not opted to
receive cash prior to the payable date for any dividend from net investment
income or the record date for any capital gains distribution will have the
number of such shares determined on the basis of the Fund's net asset value
per share computed at the end of that day after adjustment for the
distribution. Net asset value is used in computing the number of shares in
both capital gains and income distribution investments.
Account statements and/or checks, as appropriate, will be mailed within
seven days after a Fund pays a distribution. Unless a Fund receives
instructions to the contrary before the record or payable date, as the case
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<PAGE>
may be, it will assume that a shareholder wishes to receive that distribution
and future capital gains and income distributions in shares. Instructions
continue in effect until changed in writing. If a shareholder has elected to
receive dividends and/or capital gain distributions in cash and the postal or
other delivery service selected by ESC is unable to deliver checks to the
shareholder's address of record, such shareholder's distribution option will
automatically be converted to having all dividend and other distributions
reinvested in additional shares. No interest will accrue on amounts
represented by uncashed distributions or redemption checks.
Each Fund has qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). While so qualified, it is expected that each Fund will not be
required to pay any federal income taxes on that portion of its investment
company taxable income and any net realized capital gains it distributes to
shareholders. The Code imposes a 4% nondeductible excise tax on regulated
investment companies, such as the Funds, to the extent they do not meet
certain distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
Any taxable dividend declared in October, November or December to
shareholders of record in such a month and paid by the following January 31
will be includable in the taxable income of shareholders as if paid on
December 31 of the year in which the dividend was declared.
The Funds may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
U.S. may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to U.S. federal income tax may be entitled, subject to certain rules
and limitations, to claim a federal income tax credit or deduction for foreign
income taxes paid by a Fund. (See the SAI for additional details.) A Fund's
transactions in options, futures and forward contracts may be subject to
special tax rules. These rules can affect the amount, timing and
characteristics of distributions to shareholders.
Each Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the application, or on
a separate form supplied by the Fund's transfer agent, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from
backup withholding.
The Funds intend to distribute their net capital gains as capital gains
dividends. Shareholders should treat such dividends as long-term capital
gains. A Fund will designate capital gains distributions as such by a written
notice mailed to each shareholder no later than 60 days after the close of a
Fund's taxable year. If a shareholder receives a capital gain dividend and
holds his or her shares for six months or less, then any allowable loss on
disposition of such shares will be treated as a long-term capital loss to the
extent of such capital gain dividend.
The foregoing discussion of federal income tax consequences is based on
tax laws and regulations in effect on the date of this prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the SAI. In addition,
you should consult your own tax adviser as to the tax consequences of
investments in the Funds, including the application of state and local taxes
which may be different from federal income tax consequences described above.
GENERAL INFORMATION
Portfolio Turnover. The estimated annual portfolio turnover rate for each Fund
is not expected to exceed 100%. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The
portfolio turnover rate experienced by each Fund directly affects the
transaction costs relating to the purchase and sale of securities which each
Fund bears directly. A high rate of portfolio turnover will increase such
costs. See the SAI for further information regarding the practices of each
Fund affecting portfolio turnover.
Portfolio Transactions. Consistent with the Rules of Conduct of NASD and
subject to seeking best price and execution, a Fund may consider sales of its
shares as a factor in the selection of dealers to enter into portfolio
transactions with the Fund.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by
24
<PAGE>
this prospectus and are only available to (1) persons who at or prior to
December 31, 1994 owned shares in a mutual fund advised by Evergreen Asset,
(2) certain institutional investors and (3) investment advisory clients of
FUNB, Evergreen Asset, Keystone, Meridian Investment Company or their
affiliates. The dividends payable with respect to Class A, Class B and Class C
shares will be less than those payable with respect to Class Y shares due to
the distribution and shareholder servicing-related expenses borne by Class A,
Class B and Class C shares and the fact that such expenses are not borne by
Class Y shares. Investors should telephone (800) 343-2898 to obtain more
information on other classes of shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for each class of shares. Performance data for one or more classes may be
included in any advertisement or sales literature using performance data of a
Fund.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC
for all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment
income reported in a Fund's financial statements. To calculate yield, a Fund
takes the interest and dividend income it earned from its portfolio of
investments (as defined by the SEC formula) for a 30-day period (net of
expenses), divides it by the average number of shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on
a Fund's share price at the end of the 30-day period. This yield does not
reflect gains or losses from selling securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all the
Fund's distributions are reinvested. A cumulative total return reflects a
Fund's performance over a stated period of time. An average annual total
return reflects the hypothetical annually compounded return that would have
produced the same cumulative total return if a Fund's performance had been
constant over the entire period. Because average annual total returns tend to
smooth out variations in a Fund's return, you should recognize that they are
not the same as actual year-by-year results. To illustrate the components of
overall performance, a Fund may separate its cumulative and average annual
total returns into income results and realized and unrealized gain or loss.
Performance may be included in any advertisement or sales literature of a
Fund. These advertisements may quote performance rankings or ratings of a Fund
by financial publications or independent organizations such as Lipper
Analytical Services, Inc. and Morningstar, Inc. or compare a Fund's
performance to various indices. A Fund may also advertise in items of sales
literature an "actual distribution rate" which is computed by dividing the
total ordinary income distributed (which may include the excess of short-term
capital gains over losses) to shareholders for the latest twelve-month period
by the maximum public offering price per share on the last day of the period.
Investors should be aware that past performance may not be indicative of
future results.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering
investment alternatives. The information provided to investors may also
include discussions of other Evergreen funds, products, and services, which
may include: retirement investing; brokerage products and services; the
effects of periodic investment plans and dollar cost averaging; saving for
college; and charitable giving. In addition, the information provided to
investors may quote financial or business publications and periodicals,
including model portfolios or allocations, as they relate to fund management,
investment philosophy, and investment techniques. EDI may also reprint, and
use as advertising and sales literature, articles from Evergreen Events, a
quarterly magazine provided free of charge to Evergreen fund shareholders.
Year 2000 Risks. Like other investment companies, financial and business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by the Funds' investment advisors and
the Funds' other service providers do not properly process and calculate date-
related information and data from and after January 1, 2000. This is commonly
known as the "Year 2000 Problem." The Funds' investment advisors are taking
steps to address the Year 2000 Problem with respect to the computer systems
that they use
25
<PAGE>
and to obtain assurances that comparable steps are being taken by the Funds'
other major service providers. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact on
the Funds.
Additional Information. This prospectus and the SAI, which has been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statement filed by the Trust with the SEC under the 1933
Act, as amended. Copies of the Registration Statement may be obtained at a
reasonable charge from the SEC or may be examined, without charge, at the
offices of the SEC in Washington, D.C.
26
<PAGE>
NOTES
27
<PAGE>
INVESTMENT ADVISORS
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28228-0630
Evergreen U.S. Government Fund
Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034
Evergreen Strategic Income Fund
Evergreen High Yield Bond Fund
Evergreen Diversified Bond Fund
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 02106-
2121
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Distributor, Inc., 125 W. 55th Street, New York, New York 10019
37277_____________________________________________________________541292RV2
<PAGE>
EVERGREEN FIXED INCOME TRUST
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
EVERGREEN FIXED INCOME TRUST
200 Berkeley Street
Boston, Massachusetts 02116
(800) 633-2700
EVERGREEN LONG-TERM BOND FUNDS
STATEMENT OF ADDITIONAL INFORMATION
September 1, 1998
Evergreen U.S. Government Fund ("U.S. Government")
Evergreen Strategic Income Fund ("Strategic")
Evergreen High Yield Bond Fund ("High Yield")
Evergreen Diversified Bond Fund ("Diversified")
(Each a "Fund"; together, the "Funds")
Each Fund is a series of an open-end management
investment company known as Evergreen Fixed
Income Trust (the "Trust").
This Statement of Additional Information ("SAI") pertains to all
classes of shares of the Funds listed above. It is not a prospectus but should
be read in conjunction with a prospectus dated September 1, 1998. The Funds are
offered through two separate prospectuses: one offering Class A, Class B and
Class C shares of each Fund and one offering Class Y shares of each Fund. You
may obtain either of these prospectuses from Evergreen Distributor, Inc.
24488
<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES................................................ ...........3
Fundamental Investment Policies.......................................3
Additional Information on Securities and Investment Practices.........5
MANAGEMENT OF THE TRUST.......................................................12
PRINCIPAL HOLDERS OF FUND SHARES..............................................15
INVESTMENT ADVISORY AND OTHER SERVICES........................................19
Investment Advisors..................................................19
Investment Advisory Agreements.......................................19
Distributor..........................................................20
Distribution Plans and Agreements....................................20
Additional Service Providers ........................................22
BROKERAGE.....................................................................23
Selection of Brokers ..............................................23
Brokerage Commissions................................................23
General Brokerage Policies...........................................23
TRUST ORGANIZATION............................................................23
Form of Organization.................................................23
Description of Shares ...............................................24
Voting Rights........................................................24
Limitation of Trustees' Liability....................................24
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................24
How the Funds Offer Shares to the Public.............................24
Contingent Deferred Sales Charge...................................25
Sales Charge Waivers or Reductions...................................26
Exchanges............................................................28
Calculation of Net Asset Value Per Share ("NAV").....................28
Valuation of Portfolio Securities....................................28
Shareholder Services.................................................29
PRINCIPAL UNDERWRITER.........................................................29
ADDITIONAL TAX INFORMATION....................................................30
Requirements for Qualification as a Regulated Investment Company....30
Taxes on Distributions..............................................30
Taxes on the Sale or Exchange of Fund Shares........................31
Other Tax Considerations............................................33
FINANCIAL INFORMATION.........................................................33
ADDITIONAL INFORMATION........................................................36
APPENDIX A...................................................................A-1
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INVESTMENT POLICIES
FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted the fundamental investment restrictions set forth
below which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in the Investment Company Act of 1940, as amended
(the"1940 Act"). Where necessary, an explanation beneath a fundamental policy
describes a Fund's practices with respect to that policy, as allowed by current
law. If the law governing the a policy changes, the Fund's practices may change
accordingly without a shareholder vote. Unless otherwise stated, all references
to the assets of the Fund are in terms of current market value.
1. Diversification
Each Fund may not make any investment that is inconsistent with its
classification as a diversified investment company under the 1940 Act.
Further Explanation of Diversification Policy:
To remain classified as a diversified investment company under the 1940
Act, each Fund must conform with the following: With respect to 75% of its total
assets, a diversified investment company may not invest more than 5% of its
total assets, determined at market or other fair value at the time of purchase,
in the securities of any one issuer, or invest in more than 10% of the
outstanding voting securities of any one issuer, determined at the time of
purchase. These limitations do not apply to investments in securities issued or
guaranteed by the United States ("U.S.") government or its agencies or
instrumentalities.
2. Concentration
Each Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities that
are issued or guaranteed by the U.S.
government or its agencies or instrumentalities).
Further Explanation of Concentration Policy:
Each Fund may not invest more than 25% of its total assets, taken at
market value, in the securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities).
3. Issuing Senior Securities
Except as permitted under the 1940 Act, each Fund may not issue senior
securities.
4. Borrowing
Each Fund may not borrow money, except to the extent permitted by
applicable law.
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Further Explanation of Borrowing Policy:
Each Fund may borrow from banks in an amount up to 33 1/3% of its total
assets, taken at market value. Each Fund may also borrow up to an additional 5%
of its total assets from banks or others. Each Fund may borrow only as a
temporary measure for extraordinary or emergency purposes such as the redemption
of Fund shares. Each Fund may not purchase securities while borrowings are
outstanding except to exercise prior commitments and to exercise subscription
rights (as defined in the 1940 Act) or enter into reverse repurchase agreements,
in amounts up to 33 1/3 % of its total assets (including the amount borrowed).
Each Fund may obtain such short-term credit as may be necessary for the
clarification of purchases and sales of portfolio securities. Each Fund may
purchase securities on margin and engage in short sales to the extent permitted
by applicable law.
5. Underwriting
Each Fund may not underwrite securities of other issuers, except
insofar as each Fund may be deemed to be an underwriter in connection with the
disposition of its portfolio securities.
6. Real Estate
Each Fund may not purchase or sell real estate, except that, to the
extent permitted by applicable law, each Fund may invest in (a) securities that
are directly or indirectly secured by real estate, or (b) securities issued by
issuers that invest in real estate.
7. Commodities
Each Fund may not purchase or sell commodities or contracts on
commodities, except to the extent that each Fund may engage in financial futures
contracts and related options and currency contracts and related options and may
otherwise do so in accordance with applicable law and without registering as a
commodity pool operator under the Commodity Exchange Act.
8. Lending
Each Fund may not make loans to other persons, except that each Fund
may lend its portfolio securities in accordance with applicable law. The
acquisition of investment securities or other investment instruments shall not
be deemed to be the making of a loan.
Further Explanation of Lending Policy:
To generate income and offset expenses, each Fund may lend portfolio
securities to broker-dealers and or financial institutions in an amount up to 33
1/3% of its total assets, taken at market value. While securities are on loan,
the borrower will pay a Fund any income accruing on the security. Each Fund may
invest any collateral it receives in additional portfolio securities, such as
U.S. Treasury notes, certificates of deposit, other high-grade, short-term
obligations or interest bearing cash equivalents. Gains or losses in the market
value of a security lent will affect a Fund and its shareholders.
When a Fund lends 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. A Fund has the right to call a
loan and obtain the securities lent any time on notice of not more than five
business days.
A Fund may pay reasonable fees in connection with such loans.
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Although voting rights attendant to securities lent pass to the
borrower, a 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. A 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. Each 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.
ADDITIONAL INFORMATION ON SECURITIES AND INVESTMENT PRACTICES
The investment objective of each Fund and a description of the
securities in which each Fund may invest are set forth in the Funds'
prospectuses. The following expands upon the discussion in the prospectuses
regarding certain investments of the Funds.
U.S. Government Securities
Each Fund may invest in securities issued or guaranteed by U.S.
government agencies or instrumentalities.
These securities are backed by (1) the discretionary authority of the
U.S. government to purchase certain obligations of agencies or instrumentalities
or (2) the credit of the agency or instrumentality issuing the obligations.
Some government agencies and instrumentalities may not receive
financial support from the U.S. government. Examples of such agencies are:
(i) Farm Credit System, including the National Bank for Cooper-
atives, Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Securities Issued by the Government National Mortgage Association ("GNMA")
The Funds may invest in securities issued by the GNMA, a corporation
wholly-owned by the U.S. government. GNMA securities or "certificates" represent
ownership in a pool of underlying mortgages. The timely payment of principal and
interest due on these securities is guaranteed.
Unlike conventional bonds, the principal on GNMA certificates is not
paid at maturity but over the life of the security in scheduled monthly
payments. While mortgages pooled in a GNMA certificate may have maturities of up
to 30 years, the certificate itself will have a shorter average maturity and
less principal volatility than a comparable 30-year bond.
The market value and interest yield of GNMA certificates can vary due
not only to market
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fluctuations, but also to early prepayments of mortgages within the pool. Since
prepayment rates vary widely, it is impossible to accurately predict the average
maturity of a GNMA pool. In addition to the guaranteed principal payments, GNMA
certificates may also make unscheduled principal payments resulting from
prepayments on the underlying mortgages.
Although GNMA certificates may offer yields higher than those available
from other types of U.S. government securities, they may be less effective as a
means of locking in attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, prepayments are likely to
increase as the holders of the underlying mortgages seek refinancing. As a
result, the value of a GNMA certificate is not likely to rise as much as the
value of a comparable debt security would in response to same decline. In
addition, these prepayments can cause the price of a GNMA certificate originally
purchased at a premium to decline in price compared to its par value, which may
result in a loss.
Limited Partnerships (Strategic, High Yield and Diversified)
Each Fund may invest in limited and master limited partnerships. A
limited partnership is a partnership consisting of one or more general partners,
jointly and severally responsible as ordinary partners, and by whom the business
is conducted, and one or more limited partners who contribute cash as capital to
the partnership and who generally are not liable for the debts of the
partnership beyond the amounts contributed. Limited partners are not involved in
the day-to-day management of the partnership. They receive income, capital gains
and other tax benefits associated with the partnership project in accordance
with terms established in the partnership agreement. Typical limited
partnerships are in real estate, oil and gas and equipment leasing, but they
also finance movies, research and development, and other projects.
For an organization classified as a partnership under the Internal
Revenue Code of 1986, as amended (the "Code"), each item of income, gain, loss,
deduction, and credit is not taxed at the partnership level but flows through to
the holder of the partnership unit. This allows the partnership to avoid double
taxation and to pass through income to the holder of the partnership unit at
lower individual rates.
A master limited partnership is a publicly traded limited partnership.
The partnership units are registered with the Securities and Exchange Commission
("SEC") and are freely exchanged on a securities exchange or in the
over-the-counter market.
When-Issued, Delayed-Delivery and Forward Commitment Transactions
The Funds may purchase securities on a when-issued or delayed-delivery
basis and may purchase or sell securities on a forward commitment basis.
Settlement of such transactions normally occurs within a month or more after the
purchase or sale commitment is made.
The Funds may purchase securities under such conditions only with the
intention of actually acquiring them, but may enter into a separate agreement to
sell the securities before the settlement date. Since the value of securities
purchased may fluctuate prior to settlement, a Fund may be required to pay more
at settlement than the security is worth. In addition, the purchaser is not
entitled to any of the interest earned prior to settlement.
Upon making a commitment to purchase a security on a when-issued,
delayed-delivery or forward commitment basis, a Fund will hold liquid assets
worth at least the equivalent of the amount due. The liquid assets will be
monitored on a daily basis and adjusted as necessary to
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maintain the necessary value.
Purchases made under such conditions are a form of leveraging and may
involve the risk that yields secured at the time of commitment may be lower than
otherwise available by the time settlement takes place, causing an unrealized
loss to the Fund. In addition, when a Fund engages in such purchases, it relies
on the other party to consummate the sale. If the other party fails to perform
its obligations, the Fund may miss the opportunity to obtain a security at a
favorable price or yield.
Repurchase Agreements
The Funds may enter into repurchase agreements with entities that are
registered as U.S. government securities dealers, including member banks of the
Federal Reserve System having at least $1 billion in assets, primary dealers in
U.S. government securities or other financial institutions believed by the
investment advisor to be creditworthy. In a repurchase agreement, a Fund obtains
a security and simultaneously commits to return the security to the seller at a
set price (including principal and interest) within period of time usually not
exceeding seven days. The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon rate or
maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
A Fund's custodian or a third party will take possession of the
securities subject to repurchase agreements, and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from a Fund, the Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. Each Fund's investment advisor believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Funds will only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker-dealers, which
are deemed by the investment advisor to be creditworthy pursuant to guidelines
established by the Trustees.
Reverse Repurchase Agreements
As described herein, the Funds may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
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Options
The Funds may buy or sell (i.e., write) put and call options on
securities it holds or intends to acquire. The Funds may also buy and sell
options on financial futures contracts. The Funds will use options as a hedge
against decreases or increases in the value of securities it holds or intends to
acquire. The Funds may purchase put and call options for the purpose of
offsetting previously written put and call options of the same series.
The Funds may write only covered options. With regard to a call option,
this means that a Fund will own, for the life of the option, the securities
subject to the call option. Each Fund will cover put options by holding, in a
segregated account, liquid assets having a value equal to or greater than the
price of securities subject to the put option. If a Fund is unable to effect a
closing purchase transaction with respect to the covered options it has sold, it
will not be able to sell the underlying securities or dispose of assets held in
a segregated account until the options expire or are exercised.
Futures Transactions
Each Fund may enter into financial futures contracts and write options
on such contracts. Each Fund intends to enter into such contracts and related
options for hedging purposes. Each Fund will enter into futures on securities or
index-based futures contracts in order to hedge against changes in interest or
exchange rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities at a specified price during a designated
month. A futures contract on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. A Fund does not make payment or
deliver securities upon entering into a futures contract. Instead, it puts down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which continues until the contract is terminated.
Each Fund may sell or purchase futures contracts. When a futures
contract is sold by a Fund, the value of the contract will tend to rise when the
value of the underlying securities declines and to fall when the value of such
securities increases. Thus, each Fund sells futures contracts in order to offset
a possible decline in the value of its securities. If a futures contract is
purchased by a Fund, the value of the contract will tend to rise when the value
of the underlying securities increases and to fall when the value of such
securities declines. Each Fund intends to purchase futures contracts in order to
establish what is believed by the investment advisor to be a favorable price and
rate of return for securities the Fund intends to purchase.
Each Fund may purchase put and call options on futures contracts for
hedging purposes. A put option purchased by a Fund would give it the right to
assume a position as the seller of a futures contract. A call option purchased
by a Fund would give it the right to assume a position as the purchaser of a
futures contract. The purchase of an option on a futures contract requires a
Fund to pay a premium. In exchange for the premium, a Fund becomes entitled to
exercise the benefits, if any, provided by the futures contract, but is not
required to take any action under the contract. If the option cannot be
exercised profitably before it expires, a Fund's loss will be limited to the
amount of the premium and any transaction costs.
Each Fund may enter into closing purchase and sale transactions in
order to terminate a futures contract and may sell put and call options for the
purpose of closing out its options positions. A Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market
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will exist for any particular contract or at any particular time. As a result,
there can be no assurance that a Fund will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If a
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain the margin deposits on the contract and to complete
the contract according to its terms, in which case it would continue to bear
market risk on the transaction.
Although futures and options transactions are intended to enable a Fund
to manage market, interest rate or exchange rate risk, unanticipated changes in
interest rates or market prices could result in poorer performance than if it
had not entered into these transactions. Even if the investment advisor
correctly predicts interest rate movements, a hedge could be unsuccessful if
changes in the value of a Fund's futures position did not correspond to changes
in the value of its investments. This lack of correlation between a Fund's
futures and securities positions may be caused by differences between the
futures and securities markets or by differences between the securities
underlying a Fund's futures position and the securities held by or to be
purchased for a Fund. Each Fund's investment advisor will attempt to minimize
these risks through careful selection and monitoring of the Fund's futures and
options positions.
The Funds do not intend to use futures transactions for speculation or
leverage. Each Fund has the ability to write options on futures, but currently
intends to write such options only to close out options purchased by a Fund.
Each Fund will not change these policies without supplementing the information
in the prospectus and SAI.
The Funds will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, each Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Funds do not pay or
receive money upon the purchase or sale of a futures contract. Rather, each Fund
is required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract initial margin does not involve
the borrowing of funds by a Fund to finance the transactions. Initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to a Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day, a Fund pays or
receives cash, called "variation margin," equal to the daily change in value of
the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by a Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. The Funds are also required to
deposit and maintain margin when it writes call options on futures contracts.
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Foreign Securities (Strategic, High Yield and Diversified)
Each Fund may invest in foreign securities or U.S. securities traded in
foreign markets. Permissible investments may consist of obligations of foreign
branches of U.S. banks and of foreign banks, including European certificates of
deposit, European time deposits, Canadian time deposits and Yankee certificates
of deposit, and investments in Canadian commercial paper, foreign securities and
Europaper. These instruments may subject a Fund to investment risks that differ
in some respects from those related to investments in obligations of U.S.
issuers. Such risks include future adverse political and economic developments;
the possible imposition of withholding taxes on interest or other income; the
possible seizure, nationalization, or expropriation of foreign deposits; the
possible establishment of exchange controls or taxation at the source; greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks.
Foreign Currency Transactions (Strategic, High Yield and Diversified)
As one way of managing exchange rate risk, each Fund may enter into
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). The exchange rate for the transaction (the
amount of currency a Fund will deliver and receive when the contract is
completed) is fixed when a Fund enters into the contract. A Fund usually will
enter into these contracts to stabilize the U.S. dollar value of a security it
has agreed to buy or sell. Each Fund intends to use these contracts to hedge the
U.S. dollar value of a security it already owns, particularly if a Fund expects
a decrease in the value of the currency in which the foreign security is
denominated. Although each Fund will attempt to benefit from using forward
contracts, the success of its hedging strategy will depend on the investment
advisor's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar. The value of a Fund's investments
denominated in foreign currencies will depend on the relative strengths of those
currencies and the U.S. dollar, and a Fund may be affected favorably or
unfavorably by changes in the exchange rates or exchange control regulations
between foreign currencies and the U.S. dollar. Changes in foreign currency
exchange rates also may affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed to shareholders by each Fund. Each Fund may
also purchase and sell options related to foreign currencies in connection with
hedging strategies.
High-Yield Bonds (Strategic, High Yield and Diversified)
Each Fund may invest in high-yield, high-risk bonds. While investment
in high-yield bonds provides opportunities to maximize return over time,
investors should be aware of the following risks associated with high-yield
bonds:
(1) High-yield bonds are rated below investment grade, i.e., BB or
lower by Standard & Poor's Rating Services ("S&P") or Ba or lower by Moody's
Investors Service ("Moody's"). Securities so rated are considered predominantly
speculative with respect to the ability of the issuer to meet principal and
interest payments.
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(2) The lower ratings of these securities reflect a greater possibility
that adverse changes in the financial condition of the issuer or in general
economic conditions, or both, or an unanticipated rise in interest rates may
impair the ability of the issuer to make payments of interest and principal,
especially if the issuer is highly leveraged. Such issuer's ability to meet its
debt obligations may also be adversely affected by specific corporate
developments or the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. Also, an economic
downturn or an increase in interest rates may increase the potential for default
by the issuers of these securities.
(3) Their value may be more susceptible to real or perceived adverse
economic, company or industry conditions and publicity than is the case for
higher quality securities.
(4) Their value, like those of other fixed income securities,
fluctuates in response to changes in interest rates, generally rising when
interest rates decline and falling when interest rates rise. For example, if
interest rates increase after a fixed income security is purchased, the
security, if sold prior to maturity, may return less than its cost. The prices
of below-investment grade bonds, however, are generally less sensitive to
interest rate changes than the prices of higher-rated bonds, but are more
sensitive to adverse or positive economic changes or individual corporate
developments.
(5) The secondary market for such securities may be less liquid at
certain times than the secondary market for higher quality debt securities,
which may adversely effect (1) the market price of the security, (2) the Fund's
ability to dispose of particular issues and (3) the Fund's ability to obtain
accurate market quotations for purposes of valuing its assets.
(6) Zero-coupon bonds and PIKs involve additional special
considerations. For example, zero-coupon bonds pay no interest to holders prior
to maturity of interest. PIKs are debt obligations that provide that the issuer
may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments may experience greater fluctuation
in value due to changes in interest rates than debt obligations that pay
interest currently. Even though these investments do not pay current interest in
cash, the Fund is, nonetheless, required by tax laws to accrue interest income
on such investments and to distribute such amounts at least annually to
shareholders. Thus, the Fund could be required at times to liquidate investments
in order to fulfill its intention to distribute substantially all of its net
income as dividends. The Fund will not be able to purchase additional income
producing securities with cash used to make such distributions, and its current
income ultimately may be reduced as a result.
Each Fund may invest in securities rated as low as D by S&P or C- by
Moody's. Such securities may have defaulted on payments of principal and/or
interest at the time of investment. (Rating categories are described in the
Appendix.) A Fund will invest in debt so rated only when the investment advisor
believes the issuer's financial condition will improve through reorganization or
other measures. Each Fund may also invest in high-yield, high-risk securities
which are unrated or rated under a different system if a Fund's investment
advisor believes they are comparable to high-yield securities in which each Fund
may otherwise invest.
The investment advisor considers the ratings of S&P and Moody's
assigned to various securities, but does not rely solely on these ratings
because (1) S&P and Moody's assigned ratings are based largely on historical
financial data and may not accurately reflect the current financial outlook of
companies; and (2) there can be large differences among the current financial
conditions of issuers within the same category.
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Illiquid and Restricted Securities
Each Fund may not invest more than 15% of its net assets in securities
that are illiquid. A security is illiquid when a Fund cannot dispose of it in
the ordinary course of business within seven days at approximately the value at
which each Fund has the investment on its books.
Each Fund may invest in "restricted" securities, i.e., securities
subject to restrictions on resale under federal securities laws. Rule 144A under
the Securities Act of 1933 ("Rule 144A") allows certain restricted securities to
trade freely among qualified institutional investors. Since Rule 144A securities
may have limited markets, the Board of Trustees will determine whether such
securities should be considered illiquid for the purpose of determining a Fund's
compliance with the limit on illiquid securities indicated above. In determine
the liquidity of Rule 144A securities, the Trustees will consider: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
buyers; (3) dealer undertakings to make a market in the security; and (4) the
nature of the security and the nature of the marketplace trades.
Investment in Other Investment Companies
Each Fund may purchase the shares of other investment companies to the
extent permitted under the 1940 Act. Currently, each Fund may not (1) own more
than 3% of the outstanding voting stock of another investment company, (2)
invest more than 5% of its assets in any single investment company, and (3)
invest more than 10% of its assets in investment companies. However, each Fund
may invest all of its investable assets in securities of a single open-end
management investment company with substantially the same fundamental investment
objectives, policies and limitations as each Fund.
Short Sales
Each Fund may not make short sales of securities or maintain a short
position unless, at all times when a short position is open, it owns an equal
amount of such securities or of securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short. Each Fund may
effect a short sale in connection with an underwriting in which the Fund is a
participant.
<TABLE>
<CAPTION>
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.
Name Position with Trust Principal Occupations for Last Five Years
- ------------------ --------------------- --------------------------------------
<S> <C> <C>
Laurence B. Ashkin Trustee Real estate developer and construction consultant;
(DOB: 2/2/28) and President of Centrum Equities and Centrum
Properties, Inc.
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Name Position with Trust Principal Occupations for Last Five Years
- --------------------- ------------------- -------------------------------------------------------------
Charles A. Austin III Trustee Investment Counselor to Appleton
(DOB: 10/23/34) Partners, Inc.; former Director, Executive
Treasurer, State Street Research
Vice President and Management Company (investment
advice); Director, The Andover
Companies (Insurance); and Trustee,
Arthritis Foundation of New England.
K. Dun Gifford Trustee Trustee, Treasurer and Chairman of
(DOB: 10/12/38) 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 Partner, Roscommon Capital Corp.;
former Chief Executive Officer, Gifford
Gifts of Fine Foods; and former Chair man,
Gifford, Drescher & Associates (environmental
consulting)
James S. Howell Chairman of the Former Chairman of the Distribution Foundation for
(DOB: 8/13/24) Board of Trustees the Carolinas; and former Vice President of Lance Inc.
(food manufacturing).
Leroy Keith, Jr. Trustee Chairman of the Board and Chief Executive Officer,
(DOB: 2/14/39) Carson Products Company; Director of Phoenix Total
Return Fund and Equifax, Inc.; Trustee of Phoenix
Series Fund, Phoenix Multi-Portfolio Fund, and
The Phoenix Big Edge Series Fund; and
former President, Morehouse College.
Gerald M. McDonnell Trustee Sales Representative with Nucor-Yamoto, Inc. (steel
(DOB: 7/14/39) producer).
Thomas L. McVerry Trustee Former Vice President and Director of Rexham
(DOB: 8/2/39) Corporation; and former Director of Carolina
Cooperative Federal Credit Union.
William Walt Pettit Trustee Partner in the law firm of William Walt Pettit, P.A.
(DOB: 8/26/55)
David M. Richardson Trustee Vice Chair and former Executive Vice President, DHR
(DOB: 9/14/41) 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, III MD Trustee Medical Director, U.S. Health Care/Aetna Health
(DOB: 6/2/47) Services; former Managed Health Care Consultant;
and former President, Primary Physician Care.
13
<PAGE>
Name Position with Trust Principal Occupations for Last Five Years
- ------------------------ ------------------------- -----------------------------------------------------------------
Michael S. Scofield Trustee Attorney, Law Offices of Michael S. Scofield.
(DOB: 2/20/43)
Richard J. Shima Trustee Former Chairman, Environmental Warranty, Inc.
(DOB: 8/11/39) (insurance agency); Executive Consultant, Drake
Beam Morin, Inc. (executive outplacement);
Director of Connecticut Natural Gas Corporation,
Hartford Hospital, Old State House Association,
Middlesex Insurance Company and Enhance Financial Services, Inc.;
Chairman, Board of Trustees, Hartford
Graduate Center; Trustee, Greater Hartford YMCA;
former Director, Vice Chairman and Chief
Investment Officer, The Travelers
Corporation; former Trustee,
Kingswood-Oxford School; and former Managing Director and
Consultant, Russell Miller, Inc.
William J. Tomko* President and Senior Vice President and Operations Executive,
(DOB: 8/30/58) Treasurer BISYS Fund Services.
Nimish S. Bhatt* Vice President and Vice President, Tax, BISYS Fund Services; former
(DOB: 6/6/63) Assistant Treasurer Assistant Vice President, Evergreen Asset
Management Corp./First Union National Bank; former
Senior Tax Consulting/Acting Manager, Investment
Companies Group, Price Waterhouse LLP,
New York.
Bryan Haft* Vice President Team Leader, Fund Administration, BISYS Fund
(DOB: 1/23/65) Services.
D'Ray Moore* Secretary Vice President, Client Services, BISYS Fund Services.
(DOB: 3/30/59)
*Address: BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8001
</TABLE>
Trustee Compensation
Listed below is the estimated Trustee compensation for the
twelve-month period ended April 30, 1998.
14
<TABLE>
<CAPTION>
COMPENSATION TABLE
Pension Or
Retirement
Aggregate Benefits Total Compensation
Compensation Accrued As Part Estimated Annual From Registrant And
From Of Fund Benefits Upon Fund Complex Paid To
Name Of Person Registrant Expenses Retirement Directors
<S> <C> <C> <C> <C>
Laurence B. Ashkin $5,624 $0 $0 $69.535
Charles A. Austin $5,808 $0 $0 $50,009(a)
Foster Bam* $4,327 $0 $0 $51,611
K. Dun Gifford $5,450 $0 $0 $47,105
James S. Howell $7,652 $0 $0 $103,376(c)
Robert J. Jeffries* $620 $0 $0 $19,576
Leroy Keith Jr. $5,675 $0 $0 $48,586
Gerald M. McDonnell $7,228 $0 $0 $87,564(f)
Thomas L. McVerry $7,007 $0 $0 $90,660(b)
William Walt Pettit $6,494 $0 $0 $79,468(e)
David M. Richardson $5,755 $0 $0 $48,970
Russell A. Salton, III $6,660 $0 $0 $88,126(d)
Michael S. Scofield $7,120 $0 $0 $90,889(g)
Richard J. Shima $5,957 $0 $0 $65,174
(a) $4,950 of this amount payable in later years as deferred compensation.
(b) $102,325 of this amount payable in later years as deferred compensation.
(c) $84,019 of this amount payable in later years as deferred compensation.
(d) $97,425 of this amount payable in later years as deferred compensation.
(e) $88,750 of this amount payable in later years as deferred compensation.
(f) $97,400 of this amount payable in later years as deferred compensation.
(g) $34,900 of this amount payable in later years as deferred compensation.
* Former Trustee, retired as of December 31, 1997.
</TABLE>
PRINCIPAL HOLDERS OF FUND SHARES
As of the date of this SAI, the officers and Trustees of the Trust
owned as a group less than 1% of the outstanding of any class of each Fund.
Set forth below is information with respect to each person who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of a
Fund's outstanding shares as of August 1, 1998.
U.S. Government - Class A
MLPF&S For the Sole Benefit of Its 8.196%
Customers
Attn: Fund Administration #97H24
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
U.S. Government - Class B
15
<PAGE>
None
U.S. Government - Class C
MLPF&S For the Sole Benefit of Its 26.517%
Customers
Attn: Fund Administration #97H43
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
Patterson & Co 10.406%
C/O Corestates Bank NA
P.O. Box 7829
Philadelphia, PA 19101-7829
FUBS & Co FEBO 5.255%
Local 1804 1 ILA Federal
Credit Union
5080 McLester Street
Elizabeth, NJ 07207
U.S. Government - Class Y
First Union National Bank 36.798%
Trust Accounts
Attn Ginny Batten
11th Fl CMG-151
301 S Tryon St
Charlotte, NC 28288
Wachovia Bank of Georgia 26.371%
Directed TTEE for First Union Corp
Non-Qualified Retirement Plan
U/A DTD 8/31/94 Investment Act
301 N Main St MC-NC 31051
Winston-Salem, NC 27101-3819
First Union National Bank 13.031%
Trust Accounts
Attn Ginny Batten
11th Fl CMG-151
301 S Tryon St
Charlotte, NC 28288
Wachovia Bank of Georgia TTEE 9.839%
First Union Corp Retirement Trust
For Non Employee Directors
10/24/94
301 N Main St MC-NC 31051
Winston-Salem, NC 27101-3819
Patterson & Co 7.456%
PNB Personal Trust Acctg
P.O. Box 7829
Philadelphia, PA 19101-7829
Strategic - Class A
None
16
<PAGE>
Strategic - Class B
MLPF&S For the Sole Benefit of Its 10.910%
Customers
Attn: Fund Administration #97A19
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
Strategic - Class C
MLPF&S For the Sole Benefit of Its 26.013%
Customers
Attn: Fund Administration #97A20
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
Strategic - Class Y
First Union National Bank 50.168%
Cash Account
Attn Trust Operation Fund Group
401 South Tryon St 3rd Fl
Charlotte, NC 28202-1911
First Union National Bank 47.553%
Re-invest Account
Attn Trust Operations Fund Group
401 South Tryon St 3rd Fl
Charlotte, NC 28202-1911
High Yield - Class A
MLPF&S For the Sole Benefit of Its 7.538%
Customers
Attn: Fund Administration #97TW1
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
High Yield - Class B
MLPF&S For the Sole Benefit of Its 24.485%
Customers
Attn: Fund Administration #98296
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
High Yield - Class C
MLPF&S For the Sole Benefit of Its 38.238%
Customers
Attn: Fund Administration #97TW2
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
State Street Bk and Tr Co Cust Ira 12.880%
FBO
Eric J. Falken
P.O. Box 1090
Clinton, WA 98236-1090
17
<PAGE>
Emily V. Maddux Tr 6.439%
FBO Phyllis L Monesmith et al
U/D/T DTD 5/30/90
6785 Old Easton Rd
Pipersville, PA 18947-9762
Susan T Fox TTE 6.194%
Susan T Fox Trust
U/A DTD 11/2/95
10 F Street
San Rafael, CA 94901-2719
High Yield - Class Y
First Union National Bank/EB/INT 73.295%
Reinvest Account
Att Trust Operations Fund Group
401 S Tryon St 3rd Fl CMG 1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT 26.455%
Cash Account
Att Trust Operations Fund Group
401 S Tryon St 3rd Fl CMG 1151
Charlotte, NC 28202-1911
Diversified - Class A
MLPF&S For the Sole Benefit of Its 10.563%
Customers
Attn: Fund Administration #97TU7
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
Diversified - Class B
MLPF&S For the Sole Benefit of Its 19.413%
Customers
Attn: Fund Administration #98295
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
Diversified - Class C
NFSC FEBO # OKA-068993 36.439%
Edwin D Fortini TTEE
Edwin D Fortini Rev Living Tr
U/A 1/6/93
85 Elm St
Stoneham, MA 02180
First Union Brokerage Services 16.405%
Richard B Yules MD And
Lila S Yules JTWROS
A/C 8944-5409
120 S E 5th Ave #223
Boca Raton, FL 33432
18
<PAGE>
Donaldson Lufkin Jenrette 10.952%
Securities Corporation Inc
P.O. Box 2052
Jersey City, NJ 07303-9998
Donaldson Lufkin Jenrette 9.606%
Securities Corporation Inc
P.O. Box 2052
Jersey City, NJ 07303-9998
MLPF&S For the Sole Benefit of Its 8.039%
Customers
Attn: Fund Administration #97TU8
4800 Deer Lake Dr E 2nd Fl
Jacksonville, FL 32246-6484
Donaldson Lufkin Jenrette 7.631%
Securities Corporation Inc
P.O. Box 2052
Jersey City, NJ 07303-9998
Diversified - Class Y
None
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORS
The investment advisor to each Fund is a subsidiary of First Union
Corporation ("First Union"), a bank holding company headquartered at 301 South
College Street, Charlotte, North Carolina 28288-0630. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.
The investment advisor to U.S. Government is the Capital Management
Group of First Union National Bank ("FUNB"), located at 201 South College
Street, Charlotte, North Carolina 28288- 0630. The investment advisor is
entitled to receive from the Fund an annual fee equal to 0.50% of the Fund's
average daily net assets.
The investment advisor to Strategic, High Yield and Diversified is
Keystone Investment Management Company ("Keystone"). The investment advisor is
entitled to receive from each Fund an annual fee equal to 2.0% of each Fund's
gross dividend and interest income plus 0.50% of the aggregate net asset value
of each Fund's shares, as follows: 0.50% of the first million dollars, plus
0.45% of the next million, plus 0.40% of the next million, plus 0.35% of the
next million, plus 0.30% of the next million, plus 0.25% of amounts over five
million dollars, all computed as of the close of business each day and payable
monthly.
INVESTMENT ADVISORY AGREEMENTS
On behalf of each if its Funds, the Trust has entered into an investment
advisory agreement with the investment advisor (the "Advisory Agreements").
Under the Advisory Agreements, and subject to the supervision of the Trust's
19
<PAGE>
Board of Trustees, the investment advisor furnishes to the appropriate Fund
investment advisory, management and administrative services, office facilities,
and equipment in connection with its services for managing the investment and
reinvestment of the Fund's assets. The investment advisor pays for all of the
expenses incurred in connection with the provision of its services. Each Fund
pays for all charges and expenses, other than those specifically referred to
as being borne by the investment advisor, including, but not limited to,
(1) custodian charges and expenses; (2) bookkeeping and auditors' charges and
expenses; (3) transfer agent charges and expenses; (4) fees and expenses of
Independent Trustees of the Trust (Trustees who are not interested persons of
a Fund, as defined in the 1940 Act); (5) brokerage commissions, brokers' fees
and expenses; (6) issue and transfer taxes; (7) costs and expenses under the
Distribution Plan (defined below) (as applicable) (8) taxes and trust fees
payable to governmental agencies; (9) the cost of share certificates; (10) fees
and expenses of the registration and qualification of such Fund and its shares
with the SEC or under state or other securities laws; (11)expenses of preparing,
printing and mailing prospectuses, SAIs, notices, reports and proxy materials
to shareholders of each Fund; (12) expenses of shareholders' and Trustees'
meetings; (13) charges and expenses of legal counsel for each Fund and for the
Independent Trustees of the Trust on matters relating to such Fund; (14) charges
and expenses of filing annual and other reports with the SEC and other
authorities; and (15) all extraordinary charges and expenses of such Fund.
(See also the section entitled "Financial Information.")
Each Advisory Agreement continues in effect for two years from its
effective date and, thereafter, from year to year only if approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of
each Fund's outstanding shares. In either case, the terms of the Advisory
Agreement and continuance thereof must be approved by the vote of a majority of
the Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval. The Advisory Agreements may be terminated, without
penalty, on 60 days' written notice by the Trust's Board of Trustees or by a
vote of a majority of outstanding shares. Each Advisory Agreement will terminate
automatically upon its "assignment" as that term is defined in the 1940 Act.
Transactions Among Advisory Affiliates
The Trust has adopted procedures pursuant to Rule 17a-7 of the 1940 Act
("Rule 17a-7 Procedures"). The Rule 17a-7 Procedures permit a Fund to buy or
sell securities from another investment company for which a subsidiary of First
Union is an investment advisor. The Rule 17a-7 Procedures also allow the Funds
to buy or sell securities from other advisory clients for whom a subsidiary of
First Union is an investment advisor. The Funds may engage in such transaction
if they are equitable to each participant and consistent with each participant's
investment objective.
DISTRIBUTOR
Evergreen Distributor, Inc. (the "Distributor") markets the Funds
through broker-dealers and other financial representatives. Its address is
125 W. 55th Street, New York, NY 10019.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution fees are accrued daily and paid monthly on Class A and
Class B shares and are charged as class expenses, as accrued. The distribution
fees attributable to the Class B shares are designed to permit an investor to
purchase such shares through broker-dealers without the assessment of a
front-end sales charge, while at the same time permitting the Distributor to
compensate broker-dealers in connection with the sale of such shares. In this
regard, the purpose
20
<PAGE>
and function of the combined contingent deferred sales charge and distribution
services fee on the Class B shares are the same as those of the front-end sales
charge and distribution fee with respect to the Class A shares in that in each
case the sales charge and/or distribution fee provide for the financing of the
distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A , Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plans and the purposes for which such expenditures
were made to the Trustees of the Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of the Independent
Trustees are committed to the discretion of such disinterested Trustees then in
office.
Each investment advisor may from time to time from its own funds or
such other resources as may be permitted by rules of the SEC make payments for
distribution services to the Distributor; the latter may in turn pay part or all
of such compensation to brokers or other persons for their distribution
assistance.
Each Plan and Distribution Agreement will continue in effect for
successive 12-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Trust or by vote
of the holders of a majority of the outstanding voting securities of that class
and, in either case, by a majority of the Independent Trustees of the Trust who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to each Fund and holders of Class A, Class B
and Class C shares and (ii) stimulate administrators to render administrative
support services to the Fund and holders of Class A, Class B and Class C shares.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to providing office space, equipment, telephone facilities, and
various personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B and Class C shares; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Fund reasonably requests for its Class A, Class B and Class C shares, as
applicable.
FUNB or its affiliates may finance the payments made by the Distributor
to compensate broker-dealers or other persons for distributing shares of a Fund.
In the event that a Plan or Distribution Agreement is terminated or
not continued with respect to one or more classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that class or classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such class or classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of the Trust or the holders of the Fund's
outstanding voting securities, voting
21
<PAGE>
separately by class, and in either case, by a majority of the Independent
Trustees, cast in person at a meeting called for the purpose of voting on such
approval; and any Plan or Distribution Agreement may not be amended in order to
increase materially the costs that a particular class of shares of a Fund may
bear pursuant to the Plan or Distribution Agreement without the approval of a
majority of the holders of the outstanding voting shares of the class affected.
Any Plan or Distribution Agreement may be terminated (i) by a Fund without
penalty at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by class or by a majority vote of the
Independent Trustees, or (ii) by the Distributor. To terminate any Distribution
Agreement, any party must give the other parties 60 days' written notice; to
terminate a Plan only, the Fund need give no notice to the Distributor. Any
Distribution Agreement will terminate automatically in the event of its
assignment. (See also the section entitled "Financial Information.")
ADDITIONAL SERVICE PROVIDERS
Administrator
Evergreen Investment Services, Inc. ("EIS") serves as administrator to
U.S. Government, 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 from the Fund based on the total assets of all mutual
funds administered by EIS for which any affiliate of FUNB serves as investment
advisor, as follows: 0.050% 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 and 0.010% on assets in excess of $30 billion.
Transfer Agent
Evergreen Service Company ("ESC"), a subsidiary of First Union, is the
Funds' transfer agent. The transfer agent issues and redeems shares, pays
dividends and performs other duties in connection with the maintenance of
shareholder accounts. The transfer agent's address is 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Independent Auditors
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110,
audits the annual financial statements of each Fund.
Custodian
State Street Bank and Trust Company is the Funds' custodian. The bank
keeps custody of each Fund's securities and cash and performs other related
duties. The custodian's address is P.O.
Box 9021, Boston, Massachusetts 02110.
Legal Counsel
Sullivan & Worcester LLP provides legal advice to the Funds. Its address
is 1025 Connecticut Avenue, N.W., Washington, D.C. 20036.
22
<PAGE>
BROKERAGE
Due to regulatory developments affecting the securities exchanges and
brokerage practices, the Board of Trustees may modify or eliminate any of the
following policies.
BROKERAGE COMMISSIONS
Generally, each Fund expects to purchase and sell its equity securities
through brokerage transactions for which commissions are payable. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark-up
or reflect a dealer's mark-down.
Each Fund expects to buy and sell its fixed income securities directly
from the issuer or an underwriter or market maker for the securities. Generally,
each Fund will not pay brokerage commissions for such purchases. When a Fund
buys a security from an underwriter, the purchase price will usually include an
underwriting commission or concession. The purchase price for securities bought
from dealers serving as market makers will similarly include the dealer's mark
up or reflect a dealer's mark down. When a Fund executes transactions in the
over-the-counter market, it will deal with primary market makers unless more
favorable prices are otherwise obtainable.
SELECTION OF BROKERS
When buying and selling portfolio securities, each Advisor seeks
brokers who can provide the most benefit to the Fund or Funds for which a trade
is being made. When selecting a broker, an Advisor primarily will look for the
best price at the lowest commission, but in the context of the broker's:
1. ability to provide the best net financial result to the Fund;
2. efficiency in handling trades;
3. ability to trade large blocks of securities;
4. readiness to handle difficult trades;
5. financial strength and stability; and
6. provision of "research services," defined as (a) reports and
analyses concerning issuers, industries, securities and
economic factors and (b) other information useful in making
investment decisions.
Under each Advisory Agreement, each Fund may pay higher brokerage
commissions to a broker providing it with research services, as defined in item
6, above. Pursuant to Section 28(e) of the Securities Exchange Act of 1934, this
practice is permitted if the commission is reasonable in relation to the
brokerage and research services provided. Research services provided by a broker
to an Advisor do not replace, but supplement, the services an Advisor is
required to deliver to a Fund under the Advisory Agreement. It is impracticable
for an Advisor to allocate the cost, value and specific application of such
research services among its clients because research services intended for one
client may indirectly benefit another.
When selecting a broker for portfolio trades, an Advisor may also
consider the amount of Fund shares a broker has sold, subject to the other
requirements described above.
23
<PAGE>
Lieber & Company, an affiliate of Evergreen Asset, and a member of the
New York and American Stock Exchanges, will, to the extent practicable, effect
substantially all of the portfolio transactions for Evergreen and Micro effected
on those exchanges.
SIMULTANEOUS TRANSACTIONS
Each Advisor makes investment decisions for a Fund independently of
decisions made for its other clients. When a security is suitable for the
investment objective of more than one client, it may be prudent for an Advisor
to engage in a simultaneous transaction, that is, buy or sell the same security
for more than one client. Each Advisor strives for an equitable result in such
transactions by using an allocation formula. The high volume involved in some
simultaneous transactions can result in greater value to the Funds, but the
ideal price or trading volume may not always be achieved for an individual Fund.
In order to take advantage of the availablility of lower purchase prices, the
Funds may occasionally participate in group bidding for the direct purchase from
an issuer of certain securities.
TRUST ORGANIZATION
FORM OF ORGANIZATION
Each Fund is a series of an open-end management investment company,
known as "Evergreen Fixed Income Trust" (the "Trust"). The Trust was formed as a
Delaware business trust on September 18, 1997 pursuant to an Agreement and
Declaration of Trust (the "Declaration of Trust"). A copy of the Declaration of
Trust is on file at the SEC as an exhibit to the Trust's Registration Statement,
of which this SAI is a part. This summary is qualified in its entirety by
reference to the Declaration of Trust.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number
of shares of beneficial interest of series and classes of shares. Each share of
each Fund represents an equal proportionate interest with each other share of
that series and/or class. Upon liquidation, shares are entitled to a pro rata
share of the Trust based on the relative net assets of each series and/or class.
Shareholders have no preemptive or conversion rights. Shares are redeemable and
transferable.
VOTING RIGHTS
Under the terms of the Declaration of Trust, the Trust is not required
to hold annual meetings. At meetings called for the initial election of Trustees
or to consider other matters, each share is entitled to one vote for each dollar
of net asset value applicable to such share. Shares generally vote together as
one class on all matters. Classes of shares of each Fund have equal voting
rights. No amendment may be made to the Declaration of Trust that adversely
affects any class of shares without the approval of a majority of the votes
applicable to the shares of that class. Shares have non-cumulative voting
rights, which means that the holders of more than 50% of the votes applicable to
shares voting for the election of Trustees can elect 100% of the Trustees to be
elected at a meeting and, in such event, the holders of the remaining shares
voting will not be able to elect any Trustees.
24
<PAGE>
After the initial meeting as described above, no further meetings of
shareholders for the purpose of electing Trustees will be held, unless required
by law, unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time, the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration of
Trust protects a Trustee against any liability to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties involved in the conduct of his office.
PURCHASE, REDEMPTION AND PRICING OF SHARES
HOW THE FUNDS OFFER SHARES TO THE PUBLIC
You may buy shares of a Fund through the Distributor, broker-dealers
that have entered into special agreements with the Distributor or certain other
financial institutions. Each Fund offers four classes of shares that differ
primarily with respect to sales charges and distribution fees. Depending upon
the class of shares, you will pay an initial sales charge when you buy a Fund's
shares, a contingent deferred sales charge (a "CDSC") when you redeem a Fund's
shares or no sales charges at all.
Class A Shares
With certain exceptions, when you purchase Class A shares you will pay a
maximum sales charge of 4.75%. (The prospectus contains a complete table of
applicable sales charges and a discussion of sales charge reductions or waivers
that may apply to purchases. See also the section in this SAI entitled
"Financial Information" for an example of the method of computing the offering
price of Class A shares.) If you purchase Class A shares in the amount of $1
million or more, without an initial sales charge, the Funds will charge a CDSC
of 1.00% if you redeem during the month of your purchase and the 12-month period
following the month of your purchase (see "Contingent Deferred Sales Charge"
below).
Class B Shares
The Funds offer Class B shares at net asset value without an initial
sales charge. With certain exceptions, however, the Funds will charge a CDSC on
shares you redeem within 72 months after the month of your purchase, in
accordance with the following schedule:
REDEMPTION TIMING CDSC RATE
Month of purchase and the first twelve-month
period following the month of purchase...................5.00%
Second twelve-month period following the month of purchase........4.00%
Third twelve-month period following the month of purchase.........3.00%
Fourth twelve-month period following the month of purchase........3.00%
Fifth twelve-month period following the month of purchase.........2.00%
Sixth twelve-month period following the month of purchase.........1.00%
Thereafter........................................................0.00%
25
<PAGE>
Class B shares that have been outstanding for seven years after the
month of purchase will automatically convert to Class A shares without
imposition of a front-end sales charge or exchange fee. (Conversion of Class B
shares represented by stock certificates will require the return of the stock
certificate to ESC.)
Class C Shares
Class C shares are available only through broker-dealers who have
entered into special distribution agreements with the Distributor. The Funds
offer Class C shares at net asset value without an initial sales charge. With
certain exceptions, however, the Funds will charge a CDSC of 1.00% on shares you
redeem within 12 months after the month of your purchase. See "Contingent
Deferred Sales Charge" below.
Class Y Shares
No CDSC is imposed on the redemption of Class Y shares. Class Y shares
are not offered to the general public and are available only to (1) persons who
at or prior to December 31, 1994 owned shares in a mutual fund advised by
Evergreen Asset Management Corp. ("Evergreen Asset"), (2) certain institutional
investors and (3) investment advisory clients of FUNB, Evergreen Asset,
Keystone, Meridian Investment Company ("Meridian") or their affiliates. Class Y
shares are offered at net asset value without a front-end or back-end sales
charge and do not bear any Rule 12b-1 distribution expenses.
CONTINGENT DEFERRED SALES CHARGE
The Funds charge a CDSC as reimbursement for certain expenses, such as
commissions or shareholder servicing fees, that it has incurred in connection
with the sale of its shares (see "Distribution Plans and Agreements," above). If
imposed, the Funds deduct the CDSC from the redemption proceeds you would
otherwise receive. The CDSC is a percentage of the lesser of (1) the net asset
value of the shares at the time of redemption or (2) the shareholder's original
net cost for such shares. Upon request for redemption, to keep the CDSC a
shareholder must pay as low as possible, a Fund will first seek to redeem shares
not subject to the CDSC and/or shares held the longest, in that order. The CDSC
on any redemption is, to the extent permitted by NASD, paid to the Distributor
or its predecessor.
SALES CHARGE WAIVERS OR REDUCTIONS
Reducing Class A Front-end Loads
With a larger purchase, there are several ways that you can combine
multiple purchases of Class A shares in Evergreen funds and take advantage of
lower sales charges.
Combined Purchases
You can reduce your sales charge by combining purchases of Class A
shares of multiple Evergreen funds. For example, if you invested $75,000 in each
of two different Evergreen funds, you would pay a sales charge based on a
$150,000 purchase (i.e., 3.75% of the offering price, rather than 4.75%).
26
<PAGE>
Rights of Accumulation
You can reduce your sales charge by adding the value of Class A shares
of Evergreen funds you already own to the amount of your next Class A
investment. For example, if you hold Class A shares valued at $99,999 and
purchase an additional $5,000, the sales charge for the $5,000 purchase would be
at the next lower sales charge of 3.75%, rather than 4.75%.
Letter of Intent
You can, by completing the "Letter of Intent" section of the
application, purchase Class A shares over a 13-month period and receive the same
sales charge as if you had invested all the money at once. All purchases of
Class A shares of an Evergreen fund during the period will qualify as Letter of
Intent purchases.
Waiver of Initial Sales Charges
The Funds may sell their shares at net asset value without an initial
sales charge to:
1. purchasers of shares in the amount of $1 million or more;
2. a corporate or certain other qualified retirement plan or a
non-qualified deferred compensation plan or a Title 1 tax
sheltered annuity or TSA plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan") or
a TSA plan sponsored by a public educational entity having
5,000 or more eligible employees (an "Educational TSA Plan");
3. institutional investors, which may include bank trust
departments and registered investment advisors;
4. investment advisors, consultants or financial planners who
place trades for their own accounts or the accounts of their
clients and who charge such clients a management, consulting,
advisory or other fee;
5. clients of investment advisors or financial planners who place
trades for their own accounts if the accounts are linked to
master accounts of such investment advisors or financial
planners on the books of the broker-dealer through whom shares
are purchased;
6. institutional clients of broker-dealers, including retirement
and deferred compensation plans and the trusts used to fund
these plans, which place trades through an omnibus account
maintained with a Fund by the broker-dealer;
7. employees of FUNB, its affiliates, the Distributor, any
broker-dealer with whom the Distributor has entered into an
agreement to sell shares of the Funds, and members of the
immediate families of such employees;
8. certain Directors, Trustees, officers and employees of the
Evergreen funds, the Distributor or their affiliates and to
the immediate families of such persons; or
9. a bank or trust company in a single account in the name of
such bank or trust company as trustee if the initial
investment in or any Evergreen fund made pursuant
27
<PAGE>
to this waiver is at least $500,000 and any commission paid at
the time of such purchase is not more than 1% of the amount
invested.
With respect to items 8 and 9 above, each Fund will only sell shares to
these parties upon the purchasers' written assurance that the purchase is for
their personal investment purposes only. Such purchasers may not resell the
securities except through redemption by the Fund. The Funds will not charge any
CDSC on redemptions by such purchasers.
Waiver of CDSCs
The Funds do not impose a CDSC when the shares you are redeeming
represent:
1. an increase in the share value above the net cost of such
shares;
2. certain shares for which the Fund did not pay a commission on
issuance, including shares acquired through reinvestment of
dividend income and capital gains distributions;
3. shares that are in the accounts of a shareholder who has died
or become disabled;
4. a lump-sum distribution from a 401(k) plan or other benefit
plan qualified under the Employee Retirement Income Security
Act of 1974 ("ERISA");
5. an automatic withdrawal from the ERISA plan of a shareholder
who is a least 59 1/2 years old;
6. shares in an account that we have closed because the account
has an aggregate net asset value of less than $1,000;
7. an automatic withdrawal under a Systematic Income Plan of up
to 1.0% per month of your initial account balance;
8. a withdrawal consisting of loan proceeds to a retirement plan
participant;
9. a financial hardship withdrawal made by a retirement plan
participant;
10. a withdrawal consisting of returns of excess contributions or
excess deferral amounts made to a retirement plan; or
11. a redemption by an individual participant in a Qualifying Plan
that purchased Class C shares (this waiver is not available in
the event a Qualifying Plan, as a whole, redeems substantially
all of its assets).
EXCHANGES
Investors may exchange shares of a Fund for shares of the same class of
any other Evergreen fund, as described under the section entitled "Exchanges" in
a Fund's prospectus. Before you make an exchange, you should read the prospectus
of the Evergreen fund into which you want to exchange. The Trust's Board of
Trustees reserves the right to discontinue, alter or limit the exchange
privilege at any time.
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<PAGE>
CALCULATION OF NET ASSET VALUE PER SHARE ("NAV")
Each Fund computes its NAV once daily on Monday through Friday, as
described in the prospectus. A Fund will not compute its NAV on the day the
following legal holidays are observed: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The NAV of each Fund is calculated by dividing the value of a Fund's
net assets attributable to that class by all of the shares issued for that
class.
VALUATION OF PORTFOLIO SECURITIES
Current values for a Fund's portfolio securities are determined as
follows:
(1) Securities that are traded on a national securities exchange or the
over-the-counter National Market System ("NMS") are valued on the basis of the
last sales price on the exchange where primarily traded or on the NMS prior to
the time of the valuation, provided that a sale has occurred.
(2) Securities traded on a national securities exchange or in the
over-the-counter market for which there has been no sale and other securities
traded in the over-the-counter market are valued at the mean of the bid and
asked prices at the time of valuation.
(3) Short-term investments maturing in more than 60 days for which
market quotations are readily available, are valued at current market value.
(4) Short-term investments maturing in 60 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 60 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.
(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
his or her dividends and capital gains distributions in cash instead of shares.
However, ESC will automatically convert a shareholder's distribution option so
that the shareholder reinvests all dividends and distributions in additional
shares when it learns that the postal or other delivery service is unable to
deliver checks or transaction confirmations to the shareholder's address of
record. The Funds will hold the returned distribution or redemption proceeds in
a non interest-bearing account in the shareholder's name until the shareholder
updates his or her address. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
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<PAGE>
PRINCIPAL UNDERWRITER
The Distributor is the principal underwriter for the Trust and with
respect to each class of each Fund. The Trust has entered into a Principal
Underwriting Agreement ( "Underwriting Agreement") with the Distributor with
respect to each class of each Fund. The Distributor is a subsidiary of The BISYS
Group, Inc.
The Distributor, as agent, has agreed to use its best efforts to find
purchasers for the shares. The Distributor may retain and employ representatives
to promote distribution of the shares and may obtain orders from broker-dealers,
and others, acting as principals, for sales of shares to them. The Underwriting
Agreement provides that the Distributor will bear the expense of preparing,
printing, and distributing advertising and sales literature and prospectuses
used by it.
All subscriptions and sales of shares by the Distributor are at the
public offering price of the shares, which is determined in accordance with the
provisions of the Trust's Declaration of Trust, By-Laws, current prospectuses
and SAI. All orders are subject to acceptance by the Trust and the Trust
reserves the right, in its sole discretion, to reject any order received. Under
the Underwriting Agreement, the Trust is not liable to anyone for failure to
accept any order.
The Distributor has agreed that it will, in all respects, duly comply
with all state and federal laws applicable to the sale of the shares. The
Distributor has also agreed that it will indemnify and hold harmless the Trust
and each person who has been, is, or may be a Trustee or officer of the Trust
against expenses reasonably incurred by any of them in connection with any
claim, action, suit, or proceeding to which any of them may be a party that
arises out of or is alleged to arise out of any misrepresentation or omission to
state a material fact on the part of the Distributor or any other person for
whose acts the Distributor is responsible or is alleged to be responsible,
unless such misrepresentation or omission was made in reliance upon written
information furnished by the Trust.
The Underwriting Agreement provides that it will remain in effect as
long as its terms and continuance are approved annually (i) by a vote of a
majority of the Trust's Independent Trustees, and (ii) by vote of a majority of
the Trust's Trustees, in each case, cast in person at a meeting called for that
purpose.
The Underwriting Agreement may be terminated, without penalty, on 60
days' written notice by the Board of Trustees or by a vote of a majority of
outstanding shares subject to such agreement. The Underwriting Agreement will
terminate automatically upon its "assignment," as that term is defined in the
1940 Act.
From time to time, if, in the Distributor's judgment, it could benefit
the sales of shares, the Distributor may provide to selected broker-dealers
promotional materials and selling aids, including, but not limited to, personal
computers, related software, and data files.
ADDITIONAL TAX INFORMATION
REQUIREMENTS FOR QUALIFICATION AS A REGULATED INVESTMENT
COMPANY
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RICs")
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<PAGE>
under Subchapter M of the Code. (Such qualification does not involve supervision
of management or investment practices or policies by the Internal Revenue
Service.) In order to qualify as a RIC, a Fund must, among other things,
(i) derive at least 90% of its gross income from dividends, interest, payments
with respect to proceeds from securities loans, gains from the sale or other
disposition of securitie s or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; and (ii) diversify its holdings so
that, at the end of each quarter of its taxable year, (a) at least 50% of the
market value of the Fund's total assets is represented by cash, U.S. government
securities and other securities limited in respect of any one issuer, to an
amount not greater than 5% of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (b) not more than 25% of the
value of its total assets is invested in the securities of any one issuer
(other than U.S. government securities and securities of other RICs). By so
qualifying, a Fund is not subject to federal income tax if it timely dis-
tributes its investment company taxable income and any net realized capital
gains. A 4% nondeductible excise tax will be imposed on a Fund to the extent
it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
TAXES ON DISTRIBUTIONS
Distributions will be taxable to shareholders whether made in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share of a Fund on the
reinvestment date.
To calculate ordinary income for federal income tax purposes,
shareholders must generally include dividends paid by the Fund from its
investment company taxable income (net investment income plus net realized
short-term capital gains, if any). Each Fund anticipates that its dividends will
not qualify for the 70% dividends-received deduction for corporations. Each Fund
will inform shareholders of any amounts that so qualify.
From time to time, the Fund will distribute the excess of its net
long-term capital gains over its short-term capital loss to shareholders. For
federal tax purposes, shareholders must include such distributions when
calculating their long-term capital gains. Distributions of long-term capital
gains are taxable as such to a shareholder, no matter how long the shareholder
has held the shares.
Distributions by a Fund reduce its NAV. A distribution that reduces the
Fund's NAV below a shareholder's cost basis is taxable as described above,
although from an investment standpoint, it is a return of capital. In
particular, if a shareholder buys Fund shares just before the Fund makes a
distribution, when the Fund makes the distribution the shareholder will receive
what is in effect a return of capital. Nevertheless, the shareholder must pay
taxes on the distribution. Therefore, shareholders should carefully consider the
tax consequences of buying Fund shares just before a distribution.
Each shareholder should consult his or her own tax advisor to determine
the state and local tax implications of Fund distributions.
If more than 50% of the value of a Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and a Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount the Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on a Fund's investments.
The shareholder will
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<PAGE>
be entitled, however, to take the amount of such foreign taxes withheld as a
credit against his or her U.S. income tax, or to treat the foreign tax withheld
as an itemized deduction from his or her gross income, if that should be to his
or her advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he or she would have received
if he or she had been the individual owner of foreign securities and had paid
foreign income tax on the income therefrom. As in the case of individuals
receiving income directly from foreign sources, the credit or deduction is
subject to a number of limitations.
TAXES ON THE SALE OR EXCHANGE OF FUND SHARES
Upon a sale or exchange of Fund shares, a shareholder will realize a
taxable gain or loss depending on his or her basis in the shares. A shareholder
must treat such gains or losses as a capital gain or loss if the shareholder
held the shares as capital assets. Capital gain on assets held for more than 12
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 61-day period
beginning 30 days before and ending 30 days after he or she sold or exchanged
the shares. 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.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisors about the applicability of the backup withholding provisions.
OTHER TAX CONSIDERATIONS
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisors regarding specific questions relating to federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax advisor
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
FINANCIAL INFORMATION
Expenses
The tables below show the total dollar amounts paid by each Fund for
services rendered during the fiscal years or periods specified. For more
information on specific expenses, see "Investment Advisory and Other Services,"
"Distribution Plans and Agreements," "Principal
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<PAGE>
Underwriter" and "Purchase, Redemption and Pricing of Shares."
<TABLE>
<CAPTION>
1998 Fund Expenses
Total Underwriting
Class A Class B Class C Underwriting Commissions
Fund Advisory Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees Commissions Retained
======================== =================== ============== ================ ================ ================ ================
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. Government (1) $1,601,407 $81,637 $1,416,250 $47,584 $266,278 $5,752
Strategic (2) $1,406,494 $204,306 $1,158,148 $224,953 $970,715 $39,544
High Yield (3) $2,300,383 $297,165 $2,788,933 $1,649 $272,412 $4,722
- ------------------------ ------------------- -------------- ---------------- ----------------
Diversified (4) $1,847,478 $355,868 $1,934,807 $4 $243,811 $2,432
======================== =================== ============== ================ ================ ================ ================
(1) Year ended 4/30/98
(2) Year ended 4/30/98
(3) Nine months ended 4/30/98 (4) Eight months ended 4/30/98
1997 Fund Expenses
Total Underwriting
Class A Class B Class C Underwriting Commissions
Fund Advisory Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees Commissions Retained
======================== =================== ============== ================ ================ ================ ================
U.S. Government (1) $1,258,319 $39,780 $1,300,696 $5,986 $32,391 $32,391
Strategic (2) $1,017,082 $112,916 $885,405 $215,351 $133,622 $9,140
High Yield (3) $3,259,222 -- $5,686,181* -- $4,909,107 $4,122,547
- ------------------------ ------------------- -------------- ---------------- ----------------
Diversified (4) $2,835,152 -- $5,106,010* -- $612,244 $3,159
======================== =================== ============== ================ ================ ================ ================
(1) Ten months ended 4/30/97 (2) Nine months ended 4/30/97 (3) Year ended
7/31/97 (4) Year ended 8/31/97
*Not multiple class during this period; amount reflects all 12b-1 fees.
1996 Fund Expenses
Total Underwriting
Class A Class B Class C Underwriting Commissions
Fund Advisory Fees 12b-1 Fees 12b-1 Fees 12b-1 Fees Commissions Retained
=================== ========== ======== =============== ================ ================ ================ ================
U.S. Government (1) $1,507,281 $53,238 $1,374,856 $3,646 $159,666 $16,558
Strategic (2) $1,663,669 $181,536 $1,399,711 $390,758 $123,058 $10,574
High Yield (2) $3,788,171 -- $6,747,276* -- $6,747,276 $3,208,491
Diversified (3) $3,481,728 -- $6,610,025* -- $5,596,658 $4,615,371
=================== ================== =============== ================ ================ ================ ================
(1) Year ended 6/30/96 (2) Year ended 7/31/96 (3) Year ended 8/31/96
*Not multiple class during this period; amount reflects all 12b-1 fees.
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33
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Brokerage Commissions Paid
Below are brokerage commissions paid by each Fund for the last three fiscal
years or periods.
Fund 1998 1997 1996
====================== =================== =================== ================
<S> <C> <C> <C>
U.S. Government 0 (6) $6,838(1) 0 (2)
Strategic 0 (6) $2,864(3) $35,599 (4)
High Yield $1,046 (7) $3,488(4) $275,207 (4)
- ---------------------- ------------------- ------------------- ----------------
Diversified 0 (8) 0 (5) 0 (5)
====================== =================== =================== ================
(1) Ten months ended 4/30/97
(2) Year ended 6/30/96
(3) Nine months ended 4/30/97
(4) Year ended 7/31 of each year
(5) Year ended 8/31 of each year
(6) Year ended 4/30/98
(7) Nine months ended 4/30/98
(8) Eight months ended 4/30/98
</TABLE>
PERFORMANCE
Total Return
Total return quotations for a class of shares of a Fund as they may
appear from time to time in advertisements are calculated by finding the average
annual compounded rates of return over one, five and ten year periods, or the
time periods for which such class of shares has been effective, whichever is
relevant, on a hypothetical $1,000 investment that would equate the initial
amount invested in the class to the ending redeemable value. All dividends and
distributions are added to the initial investment, and all recurring fees
charged to all shareholder accounts are deducted. The ending redeemable value
assumes a complete redemption at the end of the relevant periods.
The annual total returns for each Fund (including applicable sales
charges) as of April 30, 1998 are as follows:
Ten Years or
Since Inception
One Year Five Years Inception Date
- ------------------ ----------- ------------ --------- ------------
U.S. Government
Class A 4.56% 4.91% 5.31% 1/11/93
Class B 3.96% 4.91% 5.43% 1/11/93
Class C 7.96% -- 6.94% 9/2/94
Class Y 10.05% -- 5.89% 9/2/93
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<PAGE>
Ten Years or
Since Inception
One Year Five Years Inception Date
- ------------------ ----------- ------------ --------- ------------
Strategic
Class A 7.82% 6.97% 7.95% 4/14/87
Class B 7.47% 7.00% 8.27% 2/1/93
Class C 11.48% 7.28% 8.38% 2/1/93
Class Y 13.46% -- 7.80% 1/13/97
- ------------------ ----------- ------------ --------- ------------
High Yield
Class A -- -- (2.30%)* 1/20/98
Class B 12.02% 7.42% 7.57% 9/11/35
Class C -- -- 1.35%* 1/22/98
Class Y -- -- (0.27%)* 4/14/98
- -------------------------------- ----------- ------------ ---------
Diversified
Class A -- -- 3.94%)* 1/20/98
Class B 7.78% 6.34% 7.61% 9/11/35
Class C -- -- (1.59%)* 4/7/98
Class Y -- -- 0.80%* 2/11/98
================================ =========== ============ =========
* Cumulative total return
Yield
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where a = Dividends and interest earned during the period b = Expenses
accrued for the period (net of reimbursements) c = The average daily
number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
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<PAGE>
Below are each Fund's yields for the 30-day period ended April 30,
1998:
Fund Class A Class B Class C Class Y
========================= ============= ============ ============= ===========
U.S.Government 5.01% 4.51% 4.51% 5.52%
Strategic 6.18% 5.42% 5.42% 6.45%
High Yield 6.83% 6.42% 6.41% --
Diversified 5.92% 5.46% -- 6.46%
========================= ============= ============ ============= ===========
Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. Gains and losses
generally are excluded from the calculation. Income calculated for purposes of
determining a Fund's yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rate of distributions a Fund paid over the same
period, or the net investment income reported n a Fund's financial statements.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in a Fund's investment
portfolio, portfolio maturity, operating expenses and market conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent 12 months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
Financial Statements
The audited financial statements and the Independent Auditor's Reports
thereon are hereby incorporated by reference to the Funds' Annual Report, a copy
of which may be obtained without charge from ESC, P.O. Box 2121, Boston,
Massachusetts 02106-2121.
ADDITIONAL INFORMATION
Except as otherwise stated in its prospectuses or required by law, each
Fund reserves the right to change the terms of the offer stated in its
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<PAGE>
prospectus without shareholder approval, including the right to impose or change
fees for services provided.
No dealer, salesperson or other person is authorized to give any
information or to make any representation not contained in a Fund's
prospectuses, SAI or in supplemental sales literature issued by such Fund or the
Distributor, and no person is entitled to rely on any information or
representation not contained therein.
Each Fund's prospectuses and SAI omit certain information contained in
the Trust's Registration Statement, which you may obtain for a fee from the SEC
in Washington, D.C.
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<PAGE>
APPENDIX A
S&P AND MOODY'S BOND RATINGS
S&P Corporate Bond Ratings
An S&P bond rating is a current assessment of the creditworthiness of
an obligor, including obligors outside the U.S., with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers or lessees. Ratings of foreign obligors do not take into
account currency exchange and related uncertainties. The ratings are based on
current information furnished by the issuer or obtained by S&P from other
sources it considers reliable.
The ratings are based, in varying degrees, on the following
considerations:
a. Likelihood of default and capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
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.
S&P bond ratings are as follows:
a. AAA - Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
b. 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.
c. 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.
d. 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.
22987
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<PAGE>
e. BB, B, CCC, CC and C - Debt rated BB, B, CCC, CC and C is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Moody's Bond Ratings
Moody's ratings are as follows:
1. Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
2. Aa - Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
3. A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
4. Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
5. Ba - Bonds which are rated Ba are judged to have speculative
elements. Their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
6. B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
7. Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
8. Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in defauolt or have other
market shortcomings.
9. C - Bonds which are rated as C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
22987
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<PAGE>
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; or, if not rated, will be
issued by companies which have an outstanding debt issue rated at the time of
purchase Aaa, Aa or A by Moody's, or AAA, AA or A by S&P or Fitch IBCA, Inc., or
will be determined by a Fund's investment advisor to be of comparable quality.
A. S&P Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. The top category is as
follows:
1. A: Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.
2. A-1: This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
B. Moody's Ratings
The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following designation, judged to be investment
grade, to indicate the relative repayment capacity of rated issuers.
1. The rating Prime-1 is the highest commercial paper rating assigned
by Moody's. Issuers rated Prime-1 (or related supporting institutions) are
deemed to have a superior capacity for repayment of short term promissory
obligations. Repayment capacity of Prime-1 issuers is normally evidenced by the
following characteristics:
22987
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<PAGE>
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 as-
sured sources of alternate liquidity.
In assigning ratings to issuers whose commercial paper obligations are
supported by the credit of another entity or entities, Moody's evaluates the
financial strength of the affiliated corporations, commercial banks, insurance
companies, foreign governments or other entities, but only as one factor in the
total rating assessment.
22987
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<PAGE>
EVERGREEN FIXED INCOME TRUST
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Item 24(a). Financial Statements
The financial statements listed below are included in Part A of this
Amendment to the Registration Statement:
Financial Highlights for:
<TABLE>
<S> <C>
EVERGREEN U.S. GOVERNMENT FUND - For the year ended April 30, 1998; for the ten-month period ended April 30, 1997; for the
Class A year ended ended June 30, 1996; for the six-month period ended June 30, 1995; for the
year ended December 31, 1994; and for the period from January 11, 1993 (Commencement of
Class Operations) to December 31, 1993.
EVERGREEN U.S. GOVERNMENT FUND - For the year ended April 30, 1998; for the ten-month period ended April 30, 1997; for the
Class B year ended ended June 30,1996; for the six-month period ended June 30, 1995; for the
year ended December 31, 1994; and for the period from January 11, 1993 (Commencement of
Class Operations) to December 31, 1993.
EVERGREEN U.S. GOVERNMENT FUND - For the year ended April 30, 1998; for the ten-month period ended April 30, 1997; for the
Class C year ended ended June 30, 1996; for the six-month period ended June 30, 1995; and for
the period from September 2, 1994 (Commencement of Class Operations) to December 31, 1994.
EVERGREEN U.S. GOVERNMENT FUND - For the year ended April 30, 1998; for the ten-month period ended April 30, 1997; for the
Class Y year ended ended June 30, 1996; for the six-month period ended June 30, 1995; for the
year ended December 31, 1994; and for the period from September 2, 1993 (Commencement of
Class Operations) to December 31, 1993.
EVERGREEN STRATEGIC INCOME FUND - For the year ended April 30, 1998; for the nine-month period ended April 30, 1997; and for
Class A each of the years in the nine-year period ended July 31, 1996.
EVERGREEN STRATEGIC INCOME FUND - For the year ended April 30, 1998; for the nine-month period ended April 30, 1997; for each
Class B of the years in the three-year period ended July 31, 1996; and for the period from
February 1, 1993 (Commencement of Class Operations) to July 31, 1993.
EVERGREEN STRATEGIC INCOME FUND - For the year ended April 30, 1998; for the nine-month period ended April 30, 1997; for each
Class C of the years in the three-year period ended July 31, 1996; and for the period from
February 1, 1993 (Commencement of Class Operations) to July 31, 1993.
EVERGREEN STRATEGIC INCOME FUND - For the year ended April 30, 1998; and for the period from January 13, 1997 (Commencement
Class Y of Class Operations) to April 30, 1997.
EVERGREEN HIGH YIELD BOND FUND - For the period from January 20, 1998 (Commencement of Class Operations) to April 30, 1998.
Class A
EVERGREEN HIGH YIELD BOND FUND - For the nine-month period ended April 30, 1998; for each of the years in the ten-year period
Class B ended July 31, 1997.
EVERGREEN HIGH YIELD BOND FUND - For the period from January 22, 1998 (Commencement of Class Operations) to April 30, 1998.
Class C
EVERGREEN HIGH YIELD BOND FUND - For the period from April 14, 1998 (Commencement of Class Operations) to April 30, 1998.
Class Y
EVERGREEN DIVERSIFIED BOND FUND - For the period from January 20, 1998 (Commencement of Class Operations) to April 30, 1998.
Class A
EVERGREEN DIVERSIFIED BOND FUND - For the eight-month period ended April 30, 1998; for each of the years in the ten-year
Class B period ended August 31, 1997.
EVERGREEN DIVERSIFIED BOND FUND - For the period from April 7, 1998 (Commencement of Class Operations) to April 30, 1998.
Class C
EVERGREEN DIVERSIFIED BOND FUND - For the period from February 11, 1998 (Commencement of Class Operations) to April 30, 1998.
Class Y
</TABLE>
The financial statements listed below are incorporated by reference
into Part B of this Amendment to the Registration Statement:
Financial Highlights for Evergreen U.S. Government Fund, Evergreen
Strategic Income Fund, Evergreen High Yield Bond Fund and Evergreen Diversified
Bond Fund for the years and periods indicated in Part A:
Schedule of Investments of Evergreen U.S. Government Fund, Evergreen
Strategic Income Fund, Evergreen High Yield Bond Fund and Evergreen
Diversified Bond Fund as of April 30, 1998.
Statement of Assets and Liabilities of Evergreen U.S. Government Fund,
Evergreen Strategic Income Fund, Evergreen High Yield Bond Fund and
Evergreen Diversified Bond Fund as of April 30, 1998.
Statement of Operations of Evergreen U.S. Government Fund and Evergreen
Strategic Income Fund for the year ended April 30, 1998, Evergreen High
Yield Bond Fund for the nine months ended April 30, 1998 and the year ended
July 31, 1997, and Evergreen Diversified Bond Fund for the eight months
ended April 30, 1998 and the year ended August 31, 1997.
Statement of Changes in Net Assets of Evergreen U.S. Government Fund for
the year ended April 30, 1998, the ten months ended April 30, 1997 and the
year ended June 30, 1996, Evergreen Strategic Income Fund for the year
ended April 30, 1998, the nine months ended April 30, 1997 and the year
ended July 31, 1996, Evergreen High Yield Bond Fund for nine months ended
April 30, 1998 and each of the years in the two-year period ended July 31,
1997, and Evergreen Diversified Bond Fund for the eight months ended April
30, 1998 and each of the years in the two-year period ended August 31,
1997.
Combined Notes to Financial Statements of Evergreen U.S. Government Fund,
Evergreen Strategic Income Fund, Evergreen High Yield Bond Fund and
Evergreen Diversified Bond Fund as of April 30, 1998.
Independent Auditors' Report of Evergreen U.S. Government Fund, Evergreen
Strategic Income Fund, Evergreen High Yield Bond Fund and Evergreen
Diversified Bond Fund dated May 29, 1998.
The information required by this item for Evergreen Capital
Preservation and Income Fund, Evergreen Intermediate Term Government Securities
Fund, and Evergreen Short Intermediate Bond Fund is contained in Registration
Statement No. 333-37433/811-07246 filed on December 12, 1997.
The information required by this item for Evergreen Intermediate Term
Bond Fund are contained in Registration Statement No. 333-37433/811-07246 filed
on November 10, 1997.
Item 24(b). Exhibits
Unless otherwise indicated, each of the Exhibits listed below is filed
herewith.
<TABLE>
<CAPTION>
Exhibit
Number Description Location
- ------- ----------- -----------
<S> <C> <C>
1 Declaration of Trust Incorporated by reference to
Registrant's Registration Statement
Filed on October 8, 1997
2 By-laws Incorporated by reference to
Registrant's Registration Statement
Filed on October 8, 1997
3 Not applicable
4 Provisions of instruments defining the rights
of holders of the securities being registered
are contained in the Declaration of Trust
Articles II, III.(6)(c), VI.(3), IV.(8), V, VI,
VII, VIII and By-laws Articles II, III and VIII
included as part of Exhibits 1 and 2 of this
Registration Statement
5(a) Investment Advisory and Management
Agreement between the Registrant and First
Union National Bank
5(b) Investment Advisory and Management
Agreement between the Registrant and Keystone
Investment Management Company
6(a) Class A and Class C Principal Underwriting
Agreement between the Registrant and Evergreen
Distributor, Inc.
6(b) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Investment
Services, Inc. (B-1)
6(c) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc. (B-2)
6(d) Class B Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc. (Evergreen/KCF)
6(e) Class Y Principal Underwriting Agreement
between the Registrant and Evergreen Distributor,
Inc.
6(f) Specimen copy of Dealer Agreement used by Incorporated by reference to
Evergreen Distributor, Inc. Registrant's Pre-Effective Amendment No. 1
Filed on November 10, 1997
7 Form of Deferred Compensation Plan Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1
Filed on November 10, 1997
8 Custodian Agreement between the Registrant
and State Street Bank and Trust Company
9(a) Administration Agreement between Evergreen
Investment Services, Inc. and the Registrant
9(b) Transfer Agent Agreement between the
Registrant and Evergreen Service Company
10 Opinion and Consent of Sullivan & Worcester LLP Incorporated by reference to
Registrant's Post-Effective Amendment No. 1
Filed on December 12, 1997
11 Consent of KPMG Peat Marwick LLP
12 Not applicable
13 Not applicable
15(a) 12b-1 Distribution Plan for Class A
15(b) 12b-1 Distribution Plan for Class B
(KAF B-1)
15(c) 12b-1 Distribution Plan for Class B
(KAF B-2)
15(d) 12b-1 Distribution Plan for Class B
(KCF/Evergreen)
15(e) 12b-1 Distribution Plan for Class C
16 Performance Calculations
17 FDS
18 Multiple Class Plan Incorporated by reference to
Registrant's Pre-Effective Amendment No. 1
Filed on November 10, 1997
19 Powers of Attorney
</TABLE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities (as of July 31, 1998)
Evergreen U.S. Government Fund
Class A 1,867
Class B 5,272
Class C 216
Class Y 83
Evergreen Strategic Income Fund
Class A 11,272
Class B 6,425
Class C 896
Class Y 8
Evergreen Diversified Bond Fund
Class A 24,923
Class B 4,351
Class C 9
Class Y 1
Evergreen High Yield Bond Fund
Class A 28,109
Class B 4,144
Class C 30
Class Y 3
Item 27. Indemnification.
Provisions for the indemnification of the Registrant's Trustees and
officers are contained the Registrant's Declaration of Trust.
Provisions for the indemnification of the Registrant's Investment Advisor
are contained in their respective Investment Advisory and Management Agreements.
Provisions for the indemnification of Evergreen Distributor, Inc., the
Registrant's principal underwriter, are contained in each Principal Underwriting
Agreement between Evergreen Distributor, Inc. and the Registrant.
Item 28. Business or Other Connections of Investment Adviser.
The Directors and principal executive officers of First Union National Bank
are:
Edward E. Crutchfield, Jr. Chairman and Chief Executive Officer,
First Union Corporation; Chief Executive
Officer and Chairman, First Union National
Bank
Anthony P. Terracciano President, First Union Corporation; President
First Union National Bank
John R. Georgius Vice Chairman, First Union Corporation;
Vice Chairman, First Union National Bank
Marion A. Cowell, Jr. Executive Vice President, Secretary &
General Counsel, First Union Corporation;
Secretary and Executive Vice President,
First Union National Bank
Robert T. Atwood Executive Vice President and Chief Financial
Officer, First Union Corporation; Chief
Financial Officer and Executive Vice
President
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.
801-8327) of Keystone Investment Management Company.
Item 29. Principal Underwriters.
The Directors and principal executive officers of Evergreen Distributor,
Inc. are:
Lynn C. Mangum Director, Chairman and Chief Executive
Officer
Robert J. McMullan Director, Executive Vice President and
Treasurer
J. David Huber President
Kevin J. Dell Vice President, General Counsel and Secretary
All of the above persons are located at the following address: Evergreen
Distributor, Inc., 125 West 55th Street, New York, New York 10019.
Evergreen Distributor, Inc. acts as principal underwriter for each
registered investment company or series thereof that is a part of the Evergreen
"fund complex" as such term is defined in Item 22(a) of Schedule 14A under the
Securities Exchange Act of 1934.
Item 30. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Evergreen Investment Services, Inc., Evergreen Service Company and Keystone
Investment Management Company, all located at 200 Berkeley Street, Boston,
Massachusetts 02110
First Union National Bank, One First Union Center, 301 S. College Street,
Charlotte, North Carolina 28288
Iron Mountain, 3431 Sharp Slot Road, Swansea, Massachusetts 02777
State Street Bank and Trust Company, 2 Heritage Drive, North Quincy,
Massachusetts 02171
Item 31. Management Services.
Not Applicable
Item 32. Undertakings.
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Columbus, and State of Ohio, on the 31st day of
August, 1998.
EVERGREEN FIXED INCOME TRUST
By: /s/ William J. Tomko
-----------------------------
Name: William J. Tomko
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 31st day of August, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/William J. Tomko /s/ Laurence B. Ashkin /s/ Charles A. Austin, III
- ------------------------- ----------------------------- --------------------------------
William J. Tomko Laurence B. Ashkin* Charles A. Austin III*
President amd Treasurer (Principal Trustee Trustee
Financial and Accounting Officer)
/s/ K. Dun Gifford /s/ James S. Howell /s/ William Walt Pettit
- ---------------------------- ---------------------------- --------------------------------
K. Dun Gifford* James S. Howell* William Walt Pettit*
Trustee Trustee Trustee
/s/Gerald M. McDonnell /s/ Thomas L. McVerry /s/ Michael S. Scofield
- ------------------------------- ----------------------------- --------------------------------
Gerald M. McDonell* Thomas L. McVerry* Michael S. Scofield*
Trustee Trustee Trustee
/s/ David M. Richardson /s/ Russell A. Salton, III MD
- ------------------------------ -------------------------------
David M. Richardson* Russell A. Salton, III MD*
Trustee Trustee
/s/ Richard J. Shima
- ------------------------------
Richard J. Shima*
Trustee
</TABLE>
*By: /s/ Maureen E. Towle
- -------------------------------
Maureen E. Towle
Attorney-in-Fact
*Maureen E. Towle, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named individuals pursuant to powers of
attorney duly executed by such persons.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
5(a) Investment Advisory and Management Agreement
5(b) Investment Advisory and Management Agreement
6(a) Principal Underwriting Agreement - Class A and C Shares
6(b) Principal Underwriting Agreement - Class B Shares
6(c) Principal Underwriting Agreement - Class Y Shares
8 Custodian Agreement
9(a) Administrative Services Agreement
11 Consent of KPMG Peat Marwick LLP
15(a) 12b-1 Distribution Plan for Class A
15(b) 12b-1 Distribution Plan for Class B-1
15(c) 12b-1 Distribution Plan for Class B-2
15(d) 12b-1 Distribution Plan for Class B
15(e) 12b-1 Distribution Plan for Class C
16 Fund Performance
17 Financial Data Schedules
19 Powers of Attorney
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
FIXED INCOME TRUST, a Delaware business trust (the "Trust") and FIRST UNION
NATIONAL BANK, a national banking association (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the Securities
1
<PAGE>
Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or other accounts
over which the Adviser or an affiliate of the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker-dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction if, but only if,
the Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer viewed in terms of that particular transaction or in terms of all
of the accounts over which investment discretion is so exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
(i) all fees and expenses involved in registering and
maintaining registrations of the
2
<PAGE>
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;
(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
3
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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 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
4
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1940 Act). Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postage prepaid, to the other party at the main office
of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN FIXED INCOME TRUST
By: /s/ John J. Pileggi
------------------------------
Name: John J. Pileggi
Title: President
FIRST UNION NATIONAL BANK
By: /s/ T. Hal Clarke
-------------------------------
Name:T. Hal Clarke
Title: Senior Vice President
5
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Schedule 1
Evergreen Intermediate-Term Government Securities Fund
Evergreen U.S. Government Fund
Evergreen Short-Intermediate Bond Fund
6
<PAGE>
Schedule 2
As compensation for the Adviser's services to the Fund during the
period of this Agreement, each Fund will pay to the Adviser a fee at the annual
rate of:
I. Evergreen Intermediate-Term Government Securities Fund
- --------------------------------------------------------------------------------
0.60% of Daily Net Assets of the Fund
II. Evergreen U.S. Government Fund\
Evergreen Short-Intermediate Bond Fund
- --------------------------------------------------------------------------------
0.50 of 1% of Daily Net Assets of the Fund
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
AGREEMENT made the 18th day of September 1997, by and between EVERGREEN
FIXED INCOME TRUST, a Delaware business trust (the "Trust") and KEYSTONE
INVESTMENT MANAGEMENT COMPANY, a Delaware corporation (the "Adviser").
WHEREAS, the Trust and the Adviser wish to enter into an Agreement
setting forth the terms on which the Adviser will perform certain services for
the Trust, its series of shares as listed on Schedule 1 to this Agreement and
each series of shares subsequently issued by the Trust (each singly a "Fund" or
collectively the "Funds").
THEREFORE, in consideration of the promises and the mutual agreements
hereinafter contained, the Trust and the Adviser agree as follows:
1. (a) The Trust hereby employs the Adviser to manage and administer
the operation of the Trust and each of its Funds, to supervise the provision of
the services to the Trust and each of its Funds by others, and to manage the
investment and reinvestment of the assets of each Fund of the Trust in
conformity with such Fund's investment objectives and restrictions as may be set
forth from time to time in the Fund's then current prospectus and statement of
additional information, if any, and other governing documents, all subject to
the supervision of the Board of Trustees of the Trust, for the period and on the
terms set forth in this Agreement. The Adviser hereby accepts such employment
and agrees during such period, at its own expense, to render the services and to
assume the obligations set forth herein, for the compensation provided herein.
The Adviser shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Trust in any way or otherwise be deemed an
agent of the Trust.
(b) In the event that the Trust establishes one or more Funds, in
addition to the Funds listed on Schedule 1, for which it wishes the Adviser to
perform services hereunder, it shall notify the Adviser in writing. If the
Adviser is willing to render such services, it shall notify the Trust in writing
and such Fund shall become a Fund hereunder and the compensation payable to the
Adviser by the new Fund will be as agreed in writing at the time.
2. The Adviser shall place all orders for the purchase and sale of
portfolio securities for the account of each Fund with broker-dealers selected
by the Adviser. In executing portfolio transactions and selecting
broker-dealers, the Adviser will use its best efforts to seek best execution on
behalf of each Fund. In assessing the best execution available for any
transaction, the Adviser shall consider all factors it deems relevant, including
the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker-dealer, and the
reasonableness of the commission, if any (all for the specific transaction and
on a continuing basis). In evaluating the best execution available, and in
selecting the broker-dealer to execute a particular transaction, the Adviser may
also consider the brokerage and research services (as those terms are used in
Section 28(e) of the Securities
1
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Exchange Act of 1934 (the "1934 Act")) provided to a Fund and/or other accounts
over which the Adviser or an affiliate of the Adviser exercises investment
discretion. The Adviser is authorized to pay a broker-dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction if, but only if,
the Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer viewed in terms of that particular transaction or in terms of all
of the accounts over which investment discretion is so exercised.
3. The Adviser, at its own expense, shall furnish to the Trust office
space in the offices of the Adviser or in such other place as may be agreed upon
by the parties from time to time, all necessary office facilities, equipment and
personnel in connection with its services hereunder, and shall arrange, if
desired by the Trust, for members of the Adviser's organization to serve without
salaries from the Trust as officers or, as may be agreed from time to time, as
agents of the Trust. The Adviser assumes and shall pay or reimburse the Trust
for:
(a) the compensation (if any) of the Trustees of the Trust who are
affiliated with the Adviser or with its affiliates, or with any adviser retained
by the Adviser, and of all officers of the Trust as such; and
(b) all expenses of the Adviser incurred in connection with its
services hereunder.
The Trust assumes and shall pay all other expenses of the Trust and its
Funds, including, without limitation:
(a) all charges and expenses of any custodian or depository appointed
by the Trust for the safekeeping of the cash, securities and other property of
any of its Funds;
(b) all charges and expenses for bookkeeping and auditors;
(c) all charges and expenses of any transfer agents and registrars
appointed by the Trust;
(d) all fees of all Trustees of the Trust who are not affiliated with
the Adviser or any of its affiliates, or with any adviser retained by the
Adviser;
(e) all brokers' fees, expenses, and commissions and issue and transfer
taxes chargeable to a Fund in connection with transactions involving securities
and other property to which the Fund is a party;
(f) all costs and expenses of distribution of shares of its Funds
incurred pursuant to Plans of Distribution adopted under Rule 12b-1 under the
Investment Company Act of 1940 ("1940 Act");
(g) all taxes and trust fees payable by the Trust or its Funds to
Federal, state, or other governmental agencies;
(h) all costs of certificates representing shares of the Trust or its
Funds;
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(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
3
<PAGE>
"Commission") and registering or qualifying the Funds' shares under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses, and statements of additional
information for filing with the Commission and other authorities;
(j) expenses of preparing, printing, and mailing prospectuses and
statements of additional information to shareholders of each Fund of the Trust;
(k) all expenses of shareholders' and Trustees' meetings and of
preparing, printing, and mailing notices, reports, and proxy materials to
shareholders of the Funds;
(l) all charges and expenses of legal counsel for the Trust and its
Funds and for Trustees of the Trust in connection with legal matters relating to
the Trust and its Funds, including, without limitation, legal services rendered
in connection with the Trust and its Funds' existence, trust, and financial
structure and relations with its shareholders, registrations and qualifications
of securities under Federal, state, and other laws, issues of securities,
expenses which the Trust and its Funds have herein assumed, whether customary or
not, and extraordinary matters, including, without limitation, any litigation
involving the Trust and its Funds, its Trustees, officers, employees, or agents;
(m) all charges and expenses of filing annual and other reports with
the Commission and other authorities; and
(n) all extraordinary expenses and charges of the Trust and its Funds.
In the event that the Adviser provides any of these services or pays
any of these expenses, the Trust and any affected Fund will promptly reimburse
the Adviser therefor.
The services of the Adviser to the Trust and its Funds hereunder are
not to be deemed exclusive, and the Adviser shall be free to render similar
services to others.
4. As compensation for the Adviser's services to the Trust with respect
to each Fund during the period of this Agreement, the Trust will pay to the
Adviser a fee at the annual rate set forth on Schedule 2 for such Fund.
The Adviser's fee is computed as of the close of business on each
business day.
A pro rata portion of the Trust's fee with respect to a Fund shall be
payable in arrears at the end of each day or calendar month as the Adviser may
from time to time specify to the Trust. If and when this Agreement terminates,
any compensation payable hereunder for the period ending with the date of such
termination shall be payable upon such termination.
Amounts payable hereunder shall be promptly paid when due.
5. The Adviser may enter into an agreement to retain, at its own
expense, a firm or firms ("SubAdviser") to provide the Trust with respect to all
or any of its Funds all of the services to be provided by the Adviser hereunder,
if such agreement is approved as required by law. Such agreement may delegate to
such SubAdviser all of Adviser's rights, obligations, and duties hereunder.
4
<PAGE>
6. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Trust or any of its Funds in connection
with the performance of this Agreement, except a loss resulting from the
Adviser's willful misfeasance, bad faith, gross negligence, or from reckless
disregard by it of its obligations and duties under this Agreement. Any person,
even though also an officer, Director, partner, employee, or agent of the
Adviser, who may be or become an officer, Trustee, employee, or agent of the
Trust, shall be deemed, when rendering services to the Trust or any of its Funds
or acting on any business of the Trust or any of its Funds (other than services
or business in connection with the Adviser's duties hereunder), to be rendering
such services to or acting solely for the Trust or any of its Funds and not as
an officer, Director, partner, employee, or agent or one under the control or
direction of the Adviser even though paid by it.
7. The Trust shall cause the books and accounts of each of its Funds to
be audited at least once each year by a reputable independent public accountant
or organization of public accountant or organization of public accountants who
shall render a report to the Trust.
8. Subject to and in accordance with the Declaration of Trust of the
Trust, the governing documents of the Adviser and the governing documents of any
SubAdviser, it is understood that Trustees, Directors, officers, agents and
shareholders of the Trust or any Adviser are or may be interested in the Adviser
(or any successor thereof) as Directors and officers of the Adviser or its
affiliates, as stockholders of First Union Corporation or otherwise; that
Directors, officers and agents of the Adviser and its affiliates or stockholders
of First Union Corporation are or may be interested in the Trust or any Adviser
as Trustees, Directors, officers, shareholders or otherwise; that the Adviser
(or any such successor) is or may be interested in the Trust or any SubAdviser
as shareholder, or otherwise; and that the effect of any such adverse interests
shall be governed by the Declaration of Trust of the Trust, governing documents
of the Adviser and governing documents of any SubAdviser.
9. This Agreement shall continue in effect for two years from the date
set forth above and after such date (a) such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Trust, and (b) such
renewal has been approved by the vote of the majority of Trustees of the Trust
who are not interested persons, as that term is defined in the 1940 Act, of the
Adviser or of the Trust, cast in person at a meeting called for the purpose of
voting on such approval.
10. On sixty days' written notice to the Adviser, this Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the Trust or by vote of the holders of a majority of the outstanding
voting securities of any Fund with respect to that Fund; and on sixty days'
written notice to the Trust, this Agreement may be terminated at any time
without the payment of any penalty by the Adviser with respect to a Fund. This
Agreement shall automatically terminate upon its assignment (as that term is
5
<PAGE>
defined in the 1940 Act). Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postage prepaid, to the other party
at the main office of such party.
11. This Agreement may be amended at any time by an instrument in
writing executed by both parties hereto or their respective successors, provided
that with regard to amendments of substance such execution by the Trust shall
have been first approved by the vote of the holders of a majority of the
outstanding voting securities of the affected Funds and by the vote of a
majority of Trustees of the Trust who are not interested persons (as that term
is defined in the 1940 Act) of the Adviser, any predecessor of the Adviser, or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval. A "majority of the outstanding voting securities" of the Trust or
the affected Funds shall have, for all purposes of this Agreement, the meaning
provided therefor in the 1940 Act.
12. Any compensation payable to the Adviser hereunder for any period
other than a full year shall be proportionately adjusted.
13. The provisions of this Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
EVERGREEN FIXED INCOME TRUST
By: /s/ John J. Pileggi
-------------------------------
Name: John J. Pileggi
Title: President
KEYSTONE INVESTMENT MANAGEMENT COMPANY
By: /s/ Albert H. Elfner, III
-------------------------------
Name: Albert H. Elfner, III
Title: Chief Executive Officer
6
<PAGE>
Schedule 1
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Keystone High Income Bond Fund (B-4)
(To be redesignated Evergreen High Yield Bond Fund January 12, 1998)
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
7
<PAGE>
Schedule 2
As compensation for the Adviser's services to the Fund during the
period of this Agreement, each Fund will pay to the Adviser a fee at the annual
rate of:
I. Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Keystone High Income Bond Fund (B-4)
(To be redesignated Evergreen High Yield Bond Fund January 12, 1998)
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
- --------------------------------------------------------------------------------
Aggregate Net Asset Value
Management Fee Of the Shares of the Fund
2.0 % of gross dividend and interest income plus
0.50% of the first $100,000,000, plus
0.45% of the next $100,000,000, plus
0.40% of the next $100,000,000, plus
0.35% of the next $100,000,000, plus
0.30% of the next $100,000,000, plus
0.25% of amounts over $500,000,000.
computed as of the close of business on each business day.
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN FIXED INCOME TRUST
CLASS A AND C SHARES
AGREEMENT made this 18th day of September, 1997 by and between
Evergreen Fixed Income Trust on behalf of its series listed on Exhibit A
attached hereto and made a part hereof (such Trust and series referred to herein
as "Fund" individually or "Funds" collectively) and Evergreen Distributor, Inc.,
a Delaware corporation ("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the Class A and Class C shares of beneficial interest of the Fund
("Shares") as an independent contractor upon the terms and conditions
hereinafter set forth. Except as the Fund may from time to time agree, Principal
Underwriter will act as agent for the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers
for the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such broker,
dealer or other person shall have any authority to act as agent for the Fund;
such dealer, broker or other person shall act only as principal in the sale of
Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares; provided that Principal
Underwriter also shall have the right to sell Shares at net asset value, if such
sale is permissible under and consistent with applicable statutes, rules,
regulations and orders. All orders shall be subject to acceptance by the Fund,
and the Fund reserves the right in its sole discretion to reject any order
received. The Fund shall not be liable to anyone for failure to accept any
order.
4. On all sales of Shares, the Fund shall receive the current net asset
value, and Principal Underwriter shall be entitled to receive fees for sales of
Class A and C Shares as set forth on Exhibit B attached hereto and made a part
hereof.
5. The payment provisions of this Agreement shall be applicable to the
extent necessary to enable the Fund to comply with the obligation of the Fund to
pay Principal Underwriter in accordance with this Agreement in respect of Class
C Shares and shall remain in effect so long as any payments are required to be
made by the Fund pursuant to the irrevocable payment instruction under the
Master Sale Agreement between Principal Underwriter and Mutual Fund Funding
1994-1 dated as of December 6, 1996 (the "Master Sale Agreement").
1
<PAGE>
6. Payment to the Fund for Shares shall be in New York or Boston
Clearing House
2
<PAGE>
funds received by Principal Underwriter within (3) business days after notice of
acceptance of the purchase order and the amount of the applicable public
offering price has been given to the purchaser. If such payment is not received
within such 3-day period, the Fund reserves the right, without further notice,
forthwith to cancel its acceptance of any such order. The Fund shall pay such
issue taxes as may be required by law in connection with the issue of the
Shares.
7. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information will be supplied by the Fund to Principal Underwriter in
reasonable quantities upon request.
8. Principal Underwriter agrees to comply with the Business Conduct
Rules of the National Association of Securities Dealers, Inc.
9. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
10. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal
3
<PAGE>
Underwriter, its officers and Directors or any controlling person would
otherwise be subject to liability by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason
of the reckless disregard of its obligations and duties under this
Agreement.
11. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
12. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund and the direct expenses of the issue of
Shares.
13. To the extent required by the Fund's 12b-1 Plans, Principal
Underwriter shall provide to the Board of Trustees of the Fund in connection
with such 12b-1 Plans, not less than quarterly, a written report of the amounts
expended pursuant to such 12b-1 Plans and the purposes for which such
expenditures were made.
14. This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force for two years
unless sooner terminated or continued as provided below. This Agreement shall
continue in effect after such term if its
4
<PAGE>
continuance is specifically approved by a majority of the Trustees of the Fund
and a majority of the 12b-1 Trustees referred to in the 12b-1 Plans of the Fund
("Rule 12b-1 Trustees") at least annually in accordance with the 1940 Act and
the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of any Rule 12b-1 Trustees or by a vote of a
majority of the Fund's outstanding Shares on not more than sixty (60) days
written notice to any other party to the Agreement; and shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
15. This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts. All sales hereunder are to be made, and title
shall pass, in Boston, Massachusetts.
16. The Fund is a series of a Delaware business trust established under
a Declaration of Trust, as it may be amended from time to time. The obligations
of the Fund are not personally binding upon, nor shall recourse be had against,
the private property of any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN FIXED INCOME TRUST
By: /s/ John J. Pileggi
-------------------------------
Name: John J. Pileggi
EVERGREEN DISTRIBUTOR, INC.
By: /s/ William J. Tomko
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Name: William J. Tomko
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EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Evergreen High Income Bond Fund (B-4)*
(To be redesignated Evergreen High Yield Bond Fund
January 12, 1998)
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate-Term Bond Fund
Evergreen Intermediate-term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
* Class A Shares and Class C Shares authorized but not issued
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EXHIBIT B
TO
PRINCIPAL UNDERWRITING AGREEMENT
DATED
SEPTEMBER 18, 1997
Schedule of Payments
Class A Shares Up to 0.25% annually of the average daily net asset
value of Class A shares of a Fund
A sales charge, the difference between the current
offering price of Shares, as set forth in the current
prospectus for each Fund, and the net asset value,
less any reallowance that is payable in accordance
with the sales charge schedule in effect at any given
time with respect to the Shares
Class C Shares Up to 1.00% annually of the average daily net asset
value of Class C shares of a Fund, consisting of
12b-1 fees at the annual rate of 0.75% of the average
daily net asset value of a Fund and service fees of
0.25% of the average daily net asset value of a Fund
F:\DC\CEF\SALEM006\AGREEMEN\EVFIA&C.AGR:1/19/98
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
EVERGREEN FIXED INCOME TRUST
AGREEMENT made this 18th day of September 1997 by and between Evergreen
Fixed Income Trust, a Delaware business trust , on behalf of its series listed
on Exhibit A attached hereto (such Trust and series referred to herein as "Fund"
individually, or "Funds" collectively), and Evergreen Investment Services, Inc.,
a Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the "Fund"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act"). Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-1 shares of beneficial interest of the Fund ("B-1
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Fund may from time to time
agree, the Principal Underwriter will act as agent for the Fund and not as
principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-1 Shares and to promote distribution of the B-1 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-1 Shares to them.
No such broker, dealer or other person shall have any authority to act as agent
for the Fund; such broker, dealer or other person shall act only as principal in
the sale of B-1 Shares.
3. Sales of B-1 Shares by the Principal Underwriter shall be at the public
offering price determined in the manner set forth in the prospectus and/or
statement of additional information of the Fund current at the time of the
Fund's acceptance of the order for B-1 Shares. All orders shall be subject to
acceptance by the Fund and the Fund reserves the right in its sole discretion to
reject any order received. The Fund shall not be liable to anyone for failure to
accept any order.
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4. On all sales of B-1 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-1 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
the Principal Underwriter by other classes of Shares of the Fund to the extent
required in order to comply with Section 14 hereof, and shall pay over to the
Principal Underwriter contingent deferred sales charges ("CDSCs") (as defined in
Section 14 hereof) as set forth in the Fund's current prospectus and statement
of additional information, and as required by Section 14 hereof. The Principal
Underwriter shall also receive payments consisting of shareholder service fees
("Service Fees") at the rate of .25% per annum of the average daily net asset
value of the Class B-1 Shares. The Principal Underwriter may allow all or a part
of said Distribution Fees and CDSCs received by it (not paid to others as
hereinafter provided) to such brokers, dealers or other persons as the Principal
Underwriter may determine.
5. Payment to the Fund for B-1 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such period, the Fund reserves the right, without
further notice, forthwith to cancel its acceptance of any such order. The Fund
shall pay such issue taxes as may be required by law in connection with the
issue of the B-1 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-1 Shares any representations concerning the B-1
Shares except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed information approved
by the Fund as information supplemental to such prospectus and statement of
additional information. Copies of the then current prospectus and statement of
additional information and any such printed supplemental information will be
supplied by the Fund to the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the Conduct Rules of the
National Association of Securities Dealers, Inc. (formerly Rules of Fair
Practice) (as defined in the Purchase and Sale Agreement, dated as of May 31,
1995 (the "Purchase Agreement"), between the Principal Underwriter, Citibank,
N.A. and Citicorp North America, Inc., as agent (the "Business Conduct Rules")).
8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-1 Shares at values and in the manner
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determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a. any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement, prospectus or statement of
additional information (including amendments and supplements thereto) or
b. any omission or alleged omission to state a material fact required to be
stated in the Fund's registration statement, prospectus or statement of
additional information necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance and in conformity with
information furnished to the Fund by the Principal Underwriter for use in the
Fund's registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall the Fund
indemnify the Principal Underwriter or its controlling person as to any amounts
incurred for any liability arising out of or based upon any action for which the
Principal Underwriter, its officers and Directors or any controlling person
would otherwise be subject to liability by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement. 10. The
Principal Underwriter agrees to indemnify and hold harmless the Fund, its
officers and Trustees and each person, if any, who controls the Fund within the
meaning of Section 15 of the 1933 Act against any loss, claims, damages,
liabilities and expenses (including the cost of any legal fees incurred in
connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which (a) may be based upon any wrongful act by the Principal Underwriter
or any of its employees or representatives, or (b) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the Fund's
registration statement, prospectus or statement of additional information
(including amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or necessary to
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make the statements therein not misleading, if such statement or omission was
made in reliance upon information furnished or confirmed in writing to the Fund
by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-1 Shares for sale under the so-called "blue
sky" laws of any state or for registering B-1 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-1 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-1 Shares for sale under
the so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to holders of B-1 Shares, and the direct expenses of the issue of
B-1 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees or Directors (together herein called the "Directors") of
the Fund in connection with sales of B-1 Shares not less than quarterly a
written report of the amounts received from the Fund therefor and the purposes
for which such expenditures by the Fund were made.
13. The term of this Agreement shall begin on the date hereof and, unless
sooner terminated or continued as provided below, shall expire after one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-1 of the Fund or by a majority of the Directors of the Fund and a
majority of the Directors who are not parties to this Agreement or "interested
persons," as defined in the 1940 Act, of any such party and who have no direct
or indirect financial interest in the operation of the Fund's Rule 12b-1 plan
for Class B-1 Shares or in any agreements related to the plan at least annually
in accordance with the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Directors of the Fund, or a majority of
such Directors who are not parties to this Agreement or "interested persons," as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-1
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-1 on not more than sixty days written
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notice to any other party to the agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act), which shall not
include assignment of the Principal Underwriter's Allocable Portion of
Distribution Fees (as hereinafter defined) and its Allocable Portion of CDSCs
(as hereinafter defined) provided for hereunder and/or rights related to such
Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of Shares while the Fund is required to do so pursuant to the Principal
Underwriting Agreement, of even date herewith, in respect of Class B-1 Shares,
and shall remain in effect so long as any payments are required to be made by
the Fund pursuant to the irrevocable payment instruction (as defined in the
Purchase Agreement (the "Irrevocable Payment Instruction")).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Business Conduct Rules as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall be equal to the portion of the Asset
Based Sales Charge allocable to Distributor Shares (as defined in Schedule I
hereto) in accordance with Schedule I hereto. The Fund agrees to cause its
transfer agent to maintain the records and arrange for the payments on behalf of
the Fund at the times and in the amounts and to the accounts required by
Schedule I hereto, as the same may be amended from time to time. It is
acknowledged and agreed that by virtue of the operation of Schedule I hereto,
the Principal Underwriter's Allocable Portion of Distribution Fees paid by the
Fund in respect of Shares, may, to the extent provided in Schedule I hereto,
take into account Distribution Fees payable by the Fund in respect of other
existing and future classes and/or sub-classes of shares of the Fund which would
be treated as "Shares" under Schedule I hereto. The Fund will limit amounts paid
to any subsequent principal underwriters of Shares to the portion of the Asset
Based Sales Charge paid in respect of Shares which is allocable to
Post-distributor Shares (as defined in Schedule I hereto) in accordance with
Schedule I hereto. The Fund's payments to the Principal Underwriter in
consideration of its services in connection with the sale of B-1 Shares shall be
the Distribution Fees attributable to B-1 Shares which are Distributor Shares
(as defined in Schedule I hereto), and all other amounts constituting the
Principal Underwriter's Allocable Portion of Distribution Fees shall be the
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Distribution Fees related to the sale of other Shares which are Distributor
Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current prospectus and/or statement of additional information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter the Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall be equal to the portion thereof allocable to Distributor Shares (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution
Fees and the right to payment over to it of its Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby, notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and payment of
such Distribution Fees. The obligation and the method of computing such payment
shall not be changed or terminated except to the extent required by any change
in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules, in each case enacted or promulgated after June 1, 1995,
or in connection with a Complete Termination (as hereinafter defined). For the
purposes of this Section 14.5, "Complete Termination" means a termination of the
Fund's Rule 12b-1 plan for B-1 Shares involving the cessation of payments of the
Distribution Fees, and the cessation of payments of distribution fees pursuant
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to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of-Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-1 Shares which are Distributor Shares pursuant to Schedule I
hereto shall have been redeemed or converted or (ii) June 1, 2005. For purposes
of this Section 14.5, the term B-Class-of-Shares means each of the B-1 Class of
Shares of the Fund, the B-2 Class of Shares of the Fund and each other class of
shares of the Fund hereafter issued which would be treated as Shares under
Schedule I hereto or which has substantially similar economic characteristics to
the B-1 or B-2 Classes of Shares taking into account the total sales charge,
CDSC or other similar charges borne directly or indirectly by the holder of the
shares of such class. The parties agree that the existing C Class of Shares of
the Fund does not have substantially similar economic characteristics to the B-1
or B-2 Classes of Shares taking into account the total sales charge, CDSC or
other similar charges borne directly or indirectly by the holder of such shares.
For purposes of clarity the parties to this agreement hereby state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing B-1 or B-2 Classes of Shares taking
into account the total sale charge, CDSC or other similar charges borne directly
or indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
14.6 The Principal Underwriter may assign any part of its Allocable
Portions and obligations of the Fund related thereto (but not the Principal
Underwriter's obligations to the Fund provided for in this Agreement) to any
person (an "Assignee"), and any such assignment shall be effective as to the
Fund upon written notice to the Fund by the Principal Underwriter. In connection
therewith the Fund shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Principal Underwriter in the Irrevocable Payment Instruction, as the same may be
amended from time to time with the consent of the Fund, and the Fund shall be
without liability to any person if it pays such amounts when and as so directed,
except for underpayments of amounts actually due, without any amount payable as
consequential or other damages due to such underpayment and without interest
except to the extent that delay in payment of Distribution Fees and CDSCs
results in an increase in the maximum Sales Charge allowable under the Business
Conduct Rules, which increases daily at a rate of prime plus one percent per
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annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-1 Shares, except as provided in
the Fund's prospectus or statement of additional information, without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-1 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
15. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts. All sales hereunder are to be made, and title to
the Shares shall pass, in Boston, Massachusetts.
16. The Fund is a series of a Delaware business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against, the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN FIXED INCOME TRUST
By: /s/ John J. Pileggi
--------------------------------
Name: John J.Pileggi
Title: President
EVERGREEN INVESTMENT SERVICES, INC.
By: /s/ Gordon Forrester
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Name: Gordon Forrester
Title: Chief Administrative Officer
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SCHEDULE I
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-1 SHARES
OF
EVERGREEN FIXED INCOME TRUST
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts (in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of May 31, 1995 and the successor Agreement
dated December 11, 1996 between the Instant Fund and the Distributor.
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"Asset Based Sales Charge" shall have the meaning set forth in Section
26(b)(8)(C) of the Rules of Fair Practice it being understood that for purposes
of this Exhibit I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and the New York Stock
Exchange are not authorized or required to close in New York City.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued prior to December 11, 1996 under circumstances where a CDSC would be
payable upon the redemption of such Share if such CDSC is not waived or shall
have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Evergreen Investment Distributors Company, its
successors and assigns.
"Distributor's Account" shall mean the account of the Distributor, account
no. 9903-584-2, ABA No. 011 0000 28, entitled "General Account" maintained with
State Street Bank & Trust Company or such other account as the Distributor may
designate in a notice to the Transfer Agent.
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"Distributor Inception Date" shall mean, in respect of any Fund, the date
identified as the date Shares of such Fund are first sold by the Distributor.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Inception
Date for such Fund and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
issued prior to December 11, 1996 other than a Commission Share, including,
without limitation: (i) Shares issued in connection with the automatic
reinvestment of Capital Gain Dividends or Other Dividends by such Fund, (ii)
Special Free Shares issued by such Fund and (iii) Shares (or portion thereof)
issued by such Fund in connection with an exchange whereby a Free Share (or
portion thereof) of another Fund is redeemed and the Net Asset Value of such
redeemed Free Share (or portion thereof) is invested in such Shares (or portion
thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Schedule II to the
Irrevocable Payment Instruction, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean Evergreen Fixed Income Trust.
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
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"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be the Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
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<PAGE>
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
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<PAGE>
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Program Agent" shall mean Citicorp North America, Inc., as Program Agent
under the Purchase Agreement, and its successors and assigns in such capacity.
"Purchase Agreement" shall mean that certain Purchase and Sale Agreement
dated as of May 31, 1995, among Keystone Investment Distributors Company, as
Seller, Citibank, N.A., as Purchaser, and Citicorp North America, Inc., as
Program Agent.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Schedule II to the Irrevocable Payment Instruction opposite
the name of such Fund, as the same may be amended from time to time by notice
from the Distributor and the Program Agent to the Fund and the Transfer Agent;
provided, that such term shall include, after the Distributor Last Sale Cut-off
Date, a share of a new class of shares of such Fund: (i) with respect to each
record owner of Shares which is not treated in the records of each Transfer
Agent and Sub-transfer Agent for such Fund as an entirely separate and distinct
class of shares from the classes of shares specified Schedule II to the
Irrevocable Payment Instruction or (ii) the shares of which class may be
exchanged for shares of another Fund of the classes of shares specified on
Schedule II to the Irrevocable Payment Instruction of any class existing on or
prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on which can
be reinvested in shares of the classes specified on Schedule II to the
Irrevocable Payment Instruction under the automatic dividend reinvestment
options; or (iv) which is otherwise treated as though it were of the same class
as the class of shares specified on Schedule II to the Irrevocable Payment
Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
"Sub-shareholder Account" shall have the meaning set forth in clause
(B)(1) hereof.
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<PAGE>
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND
AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) Shareholder Accounts and Sub-shareholder Accounts. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) Commission Shares. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub- shareholder Account by the Month of Original
Purchase; provided, that until the Sub- transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
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<PAGE>
(3) Free Shares. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain daily records for each Sub-shareholder Account in
the manner described in the immediately preceding paragraph for Shareholder
Accounts(other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post-distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the
Distributor Last Sale Cut-off Date for such Fund shall be
identified as Distributor Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date
for such Fund shall be identified as Distributor Shares in a
number computed as follows:
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<PAGE>
A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of
business in the last day of the immediately preceding
calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cut-off Date
for such Fund shall be identified as Post-distributor Shares
in a number computed as follows:
(A X (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the
close of business in the last day of the immediately
preceding calendar month (or portion thereof)
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<PAGE>
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a Class
A Share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Distributor Shares in a number computed as follows:
A X (B/C)
Where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a class
A share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Post-distributor Shares in a number computed as follows:
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<PAGE>
A X (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(4) Appreciation Amount and Cost Accumulation Amount. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
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<PAGE>
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account; provided, that until the Sub- transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) NASD Cap. On the date the distribution fees paid in respect of any
class of Shares equals the maximum amount thereon under the Rules of Fair
Practice, in respect of such class, all outstanding Shares of such class of such
Fund shall be converted into Class A shares of such Fund and will be deemed to
have been redeemed for their Net Asset Value for purposes of this Schedule I.
(6) Identification of Redeemed Shares. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
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<PAGE>
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(7) Identification of Exchanged Shares. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the Redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post-distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post- distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
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<PAGE>
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(8) Identification of Converted Shares. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCS AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
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(1) Receivables Constituting CDSCs: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub- shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) Receivables Constituting Asset Based Sales Charges:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A X (B/C)
where:
A. = Total amount of Asset Based Sales Charge
accrued in respect of such Shareholder
Account (other than an Omnibus Account) on
such day.
B. = Number of Distributor Shares reflected in
such Shareholder Account (other than an
Omnibus Account) on the close of business
on such day
C. = Total number of Distributor Shares and
Post-Distributor Shares reflected in such
Shareholder Account (other than an Omnibus
Account) and outstanding as of the close of
business on such day.
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<PAGE>
The Portion of the Asset Based Sales Charges of such Fund accruing in
respect of such Shareholder Account for such day allocated to Post-distributor
Shares will be obtained using the same formula but substituting for "B" the
number of Post-distributor Shares, as the case may be, reflected in such
Shareholder Account and outstanding on the close of business on such day. The
foregoing allocation formula may be adjusted from time to time by notice to the
Fund and the transfer agent for the Fund from the Seller and the Program Agent
pursuant to Section 8.18 of the Purchase Agreement.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
such Sub- shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub- shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to
Distributor Shares shall be computed as follows:
A X ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
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<PAGE>
B = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as of
the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as of
the close of business on the last day of such calendar
month (or portion thereof), times Net Asset Value per
Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per
Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of such calendar month (or portion
thereof), times Net Asset Value per Share as of such
time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed s follows:
A X ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
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<PAGE>
B = Shares of such Fund in the ML Omnibus Account and
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of such
calendar month (or portion thereof), times Net Asset
Value per Share as of such time
D = Total number of Shares of such Fund in the ML Omnibus
Account and outstanding as of the close of business on
the last day of the immediately preceding calendar
month (or portion thereof), times Net Asset Value per
Share as of such time.
E = Total number of Shares of such Fund in the ML Omnibus
Account outstanding as of the close of business on the
last day of such calendar month, times Net Asset Value
per Share as of such time.
(3) Payments on behalf of each Fund.
On the close of business on each day the Transfer Agent shall cause payment
to be made of the amount of the Asset Based Sales Charge and CDSCs accruing on
such day in respect of the Shares of such Fund owned of record by Shareholder
Accounts (other than Omnibus Accounts) by two separate wire transfers, directly
from accounts of such Fund as follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to Distributor
Shares in accordance with the preceding rules shall be paid to the Distributor's
Account, unless the Distributor otherwise instructs the Fund in any irrevocable
payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
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<PAGE>
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall be paid to the
Distributor's Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in any
irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant Fund.
F:\CEF\SALEM006\AGREEMEN\EVFIB2.AGR:1/27/98
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen Strategic Income Fund
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
PRINCIPAL UNDERWRITING AGREEMENT
FOR CLASS B-2 SHARES
OF
EVERGREEN FIXED INCOME TRUST
AGREEMENT made this 18th day of September, 1997 by and between Evergreen
Fixed Income Trust, a Delaware business trust, on behalf of its series listed on
Exhibit A attached hereto (such Trust and series referred to herein as "Fund"
individually or "Funds" collectively), and Evergreen Distributor, Inc., a
Delaware corporation (the "Principal Underwriter").
The Fund, individually and/or on behalf of its series, if any, referred to
above in the title of this Agreement, to which series, if any, this Agreement
shall relate, as applicable (the "Fund'"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act'"), Accordingly, it is hereby mutually agreed
as follows:
1. The Fund hereby appoints the Principal Underwriter a principal
underwriter of the Class B-2 shares of beneficial interest of the Fund ("B-2
Shares") as an independent contractor upon the terms and conditions hereinafter
set forth. The general term "Shares" as used herein has the same meaning as is
provided therefor in Schedule I hereto. Except as the Principal Underwriter and
the Fund may from time to time agree, the Principal Underwriter will act as
agent for the Fund and not as principal.
2. The Principal Underwriter will use its best efforts to find purchasers
for the B-2 Shares and to promote distribution of the B-2 Shares and may obtain
orders from brokers, dealers or other persons for sales of B-2 Shares to them.
No such dealer, broker or other person shall have any authority to act as agent
for the Fund; such dealer, broker or other person shall act only as principal in
the sale of B-2 Shares.
3. Sales of B-2 Shares by Principal Underwriter shall be at the public
offering price determined in the manner set forth in the Prospectus and/or
Statement of Additional Information of the Fund current at the time of the
Fund's acceptance of the order for B-2 Shares. All orders shall be subject to
acceptance by the Fund and the Fund reserves the right in its sole discretion to
reject any order received. The Fund shall not be liable to anyone for failure to
accept any order.
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4. On all sales of B-2 Shares the Fund shall receive the current net asset
value. The Fund shall pay the Principal Underwriter Distribution Fees (as
defined in Section 14 hereof), as commissions for the sale of B-2 Shares and
other Shares, which shall be paid in conjunction with distribution fees paid to
Evergreen Investment Services Company, Inc. ("EKISC") by other classes of Shares
of the Fund to the extent required in order to comply with Section 14 hereof,
and shall pay over to the Principal Underwriter CDSCs (as defined in Section 14
hereof) as set forth in the Fund's current Prospectus and Statement of
Additional Information, and as required by Section 14 hereof. The Principal
Underwriter shall also receive payments consisting of shareholder service fees
("Service Fees") at the rate of .25% per annum of the average daily net asset
value of the Class B-2 Shares. The Principal Underwriter may allow all or a part
of said Distribution Fees and CDSCs received by it (not paid to others as
hereinafter provided) to such brokers, dealers or other persons as Principal
Underwriter may determine.
5. Payment to the Fund for B-2 Shares shall be in New York or Boston
Clearing House funds received by the Principal Underwriter within three Business
Days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such period, the Fund reserves the right, without
further notice, forthwith to cancel its acceptance of any such order. The Fund
shall pay such issue taxes as may be required by law in connection with the
issue of the B-2 Shares.
6. The Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the B-2 Shares any representations concerning the B-2
Shares except those contained in the then current Prospectus and/or Statement of
Additional Information covering the Shares and in printed information approved
by the Fund as information supplemental to such Prospectus and Statement of
Additional Information. Copies of the then current Prospectus and Statement of
Additional Information and any such printed supplemental information will be
supplied by the Fund to the Principal Underwriter in reasonable quantities upon
request.
7. The Principal Underwriter agrees to comply with the National Association
of Securities Dealers, Inc. ("NASD") Business Conduct Rule 2830 (d) (2) (the
"Business Conduct Rules") or any successor rule (which succeeds the Rules of
Fair Practice of the NASD defined in the Purchase and Sale Agreement, dated as
of May 31, 1995 (the "Citibank Purchase Agreement"), between Evergreen Keystone
Investment Services Company (formerly Keystone Investment Distributors Company),
Citibank, N.A. and Citicorp North America, Inc., as agent).
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8. The Fund appoints the Principal Underwriter as its agent to accept
orders for redemptions and repurchases of B-2 Shares at values and in the manner
determined in accordance with the then current Prospectus and/or Statement of
Additional Information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Trustees and each person, if any, who controls the
Principal Underwriter within the meaning of Section 15 of the Securities Act of
1933 ("1933 Act"), against any losses, claims, damages, liabilities and expenses
(including the cost of any legal fees incurred in connection therewith) which
the Principal Underwriter, its officers, Trustees or any such controlling person
may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon:
a. any untrue statement or alleged untrue statement of a material fact
contained in the Fund's registration statement, Prospectus or Statement of
Additional Information (including amendments and supplements thereto); or
b. any omission or alleged omission to state a material fact required to be
stated in the Fund's registration statement, Prospectus or Statement of
Additional Information necessary to make the statements therein not misleading,
provided, however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or
alleged untrue statement or omission made in reliance and in conformity with
information furnished to the Fund by the Principal Underwriter for use in the
Fund's registration statement, Prospectus or Statement of Additional
Information, such indemnification is not applicable. In no case shall the Fund
indemnify the Principal Underwriter or its controlling person as to any amounts
incurred for any liability arising out of or based upon any action for which the
Principal Underwriter, its officers and Trustees or any controlling person would
otherwise be subject to liability by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers and Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Trustees or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
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<PAGE>
(a) may be based upon any wrongful act by the Principal Underwriter or any
of its employees or representatives, or
(b) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement, Prospectus or
Statement of Additional Information (including amendments and supplements
thereto), or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
if such statement or omission was made in reliance upon information furnished or
confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and things
as shall from time to time be reasonably requested by the Principal Underwriter
for the purpose of qualifying the B-2 Shares for sale under the so-called "blue
sky'" laws of any state or for registering B-2 Shares under the 1933 Act or the
Fund under the Investment Company Act of 1940 ("1940 Act"). The Principal
Underwriter shall bear the expenses of preparing, printing and distributing
advertising, sales literature, prospectuses, and statements of additional
information. The Fund shall bear the expense of registering B-2 Shares under the
1933 Act and the Fund under the 1940 Act, qualifying B-2 Shares for sale under
the so called "blue sky" laws of any state, the preparation and printing of
Prospectuses, Statements of Additional Information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of Prospectuses and Statements of Additional
Information to holders of B-2 Shares, and the direct expenses of the issue of
B-2 Shares.
12. The Principal Underwriter shall, at the request of the Fund, provide to
the Board of Trustees of the Fund in connection with sales of B-2 Shares not
less than quarterly a written report of the amounts received from the Fund
therefor and the purpose for which such expenditures by the Fund were made.
13. The term of this Agreement shall begin on the date hereof and, unless
sooner terminated or continued as provided below, shall expire after one year.
This Agreement shall continue in effect after such term if its continuance is
specifically approved by a majority of the outstanding voting securities of
Class B-2 of the Fund or by a majority of the Trustees of the Fund and a
majority of the Trustees who are not parties to this Agreement or "interested
persons", as defined in the 1940 Act, of any such party and who have no direct
or indirect financial interest in the operation of the Fund's Rule 12b-l plan
for Class B-2 Shares or in any agreements related to the plan at least annually
in accordance with the 1940 Act and the rules and regulations thereunder.
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<PAGE>
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees of the Fund, or a majority of
such Trustees who are not parties to this Agreement or "interested persons", as
defined in the 1940 Act, of any such party and who have no direct or indirect
financial interest in the operation of the Fund's Rule 12b-1 plan for Class B-2
Shares or in any agreement related to the plan or by a vote of a majority of the
outstanding voting securities of Class B-2 on not more than sixty days written
notice to any other party to the Agreement; and shall terminate automatically in
the event of its assignment (as defined in the 1940 Act), which shall not
include assignment of the Principal Underwriter's Allocable Portion of
Distribution Fees (as hereinafter defined) and Allocable Portion of CDSCs
provided for hereunder and/or rights related to such Allocable Portions.
14. The provisions of this Section 14 shall be applicable to the extent
necessary to enable the Fund to comply with the obligation of the Fund to pay
the Principal Underwriter its Allocable Portion of Distribution Fees paid in
respect of B-2 Shares and also permit the Fund to pay, pursuant to the Principal
Underwriting Agreement dated as of December 11, 1996, between the Fund and EKISC
in respect of Class B-2 Shares, the Allocable Portion of Distribution Fees due
EKISC in respect of B-2 Shares and, pursuant to the Principal Underwriting
Agreement dated as of December 11, 1996 between the Fund and EKISC in respect of
Class B-1 Shares, the Allocable Portion of Distribution Fees due EKISC in
respect of B-1 Shares (together the "EKISC Underwriting Agreements"), and shall
remain in effect so long as any payments are required to be made by the Fund
pursuant to the irrevocable payment instructions pursuant to the Citibank
Purchase Agreement and the Master Sale Agreement between the Principal
Underwriter and Mutual Fund Funding 1994-1 dated as of December 6, 1996 (the
"Master Sale Agreement") (the "Irrevocable Payment Instructions")).
14.1 The Fund shall pay to the Principal Underwriter the Principal
Underwriter's Allocable Portion (as hereinafter defined) of a fee (the
"Distribution Fee") at the rate of .75% per annum of the average daily net asset
value of the Shares, subject to the limitation on the maximum aggregate amount
of such fees under the Business Conduct Rules as applicable to such Distribution
Fee on the date hereof.
14.2 The Principal Underwriter's Allocable Portion of Distribution Fees
paid by the Fund in respect of Shares shall mean the portion of the Asset Based
Sales Charge allocable to Distributor Shares (as defined in Schedule I hereto to
this Agreement) in accordance with Schedule I hereto. The Fund agrees to cause
its transfer agent (the "Transfer Agent") to maintain the records and arrange
for the payments on behalf of the Fund at the times and in the amounts and to
the accounts required by Schedule I hereto, as the same may be amended from time
to time. It is acknowledged and agreed that by virtue of the operation of
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Schedule I hereto the Principal Underwriter's Allocable Portion of Distribution
Fees paid by the Fund in respect of Shares, may, to the extent provided in
Schedule I hereto, take into account Distribution Fees payable by the Fund in
respect of other existing and future classes and/or subclasses of shares of the
Fund which would be treated as "Shares" under Schedule I hereto. The Fund will
limit amounts paid to any subsequent principal underwriters of Shares to the
portion of the Asset Based Sales Charge paid in respect of Shares which is
allocable to Post-distributor Shares (as defined in Schedule I hereto) in
accordance with Schedule I hereto. The Fund's payments to the Principal
Underwriter in consideration of its services in connection with the sale of B-2
Shares shall be the Distribution Fees attributable to B-2 Shares which are
Distributor Shares (as defined in Schedule I hereto) and all other amounts
constituting the Principal Underwriter's Allocable Portion of Distribution Fees
shall be the Distribution Fees related to the sale of other Shares which are
Distributor Shares (as defined in Schedule I hereto).
The Fund shall cause its transfer agent and sub-transfer agents to withhold
from redemption proceeds payable to holders of Shares on redemption thereof the
contingent deferred sales charges payable upon redemption thereof as set forth
in the then current Prospectus and/or Statement of Additional Information of the
Fund ("CDSCs") and to pay over to the Principal Underwriter the Principal
Underwriter's Allocable Portion of said CDSCs paid in respect of Shares which
shall mean the portion thereof allocable to Distributor Shares (as defined in
Schedule I hereto) in accordance with Schedule I hereto.
14.3 The Principal Underwriter shall be considered to have completely
earned the right to the payment of its Allocable Portion of the Distribution Fee
and the right to payment over to it of its Allocable Portion of the CDSC in
respect of Shares as provided for hereby upon the completion of the sale of each
Commission Share (as defined in Schedule I hereto) taken into account as a
Distributor Share in computing the Principal Underwriter's Allocable Portion in
accordance with Schedule I hereto.
14.4 Except as provided in Section 14.5 hereof in respect of Distribution
Fees only, the Fund's obligation to pay the Principal Underwriter the
Distribution Fees and to pay over to the Principal Underwriter CDSCs provided
for hereby shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever (it being understood
that nothing in this sentence shall be deemed a waiver by the Fund of its right
separately to pursue any claims it may have against the Principal Underwriter
and enforce such claims against any assets (other than the Principal
Underwriter's right to its Allocable Portion of the Distribution Fees and CDSCs
(the "Collection Rights") of the Principal Underwriter).
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14.5 Notwithstanding anything in this Agreement to the contrary, the Fund
shall pay to the Principal Underwriter its Allocable Portion of Distribution
Fees provided for hereby notwithstanding its termination as Principal
Underwriter for the Shares or any termination of this Agreement and such payment
of such Distribution Fees, and that obligation and the method of computing such
payment, shall not be changed or terminated except to the extent required by any
change in applicable law, including, without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules, in each case enacted or promulgated after December 1,
1996, or in connection with a Complete Termination (as hereinafter defined). For
the purposes of this Section 14.5, "Complete Termination" means a termination of
the Fund's Rule 12b-l plan for B-2 Shares involving the cessation of payments of
the Distribution Fees, and the cessation of payments of distribution fees
pursuant to every other Rule 12b-1 plan of the Fund for every existing or future
B-Class-of-Shares (as hereinafter defined) and the Fund's discontinuance of the
offering of every existing or future B-Class-of Shares, which conditions shall
be deemed satisfied when they are first complied with hereafter and so long
thereafter as they are complied with prior to the date upon which all of the B-2
Shares which are Distributor Shares pursuant to Schedule I hereto shall have
been redeemed or converted. For purposes of this Section 14.5, the term
B-Class-of-Shares means each of the B-1 Class of Shares of the Fund, the B-2
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as Shares under Schedule I hereto or which has
substantially similar economic characteristics to the B-1 or B-2 Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of the shares of such class. The
parties agree that the existing C Class of Shares of the Fund does not have
substantially similar economic characteristics to the B-1 or B-2 Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of such shares. For purposes of
clarity the parties to this agreement hereby state that they intend that a new
installment load class of shares which may be authorized by amendments to Rule
6(c)-10 under the 1940 Act will be considered to be a B-Class-of-Shares if it
has economic characteristics substantially similar to the economic
characteristics of the existing B-1 or B-2 Classes of Shares taking into account
the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares.
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14.6 The Principal Underwriter may assign, sell or otherwise transfer any
part of its Allocable Portions and obligations of the Fund related thereto (but
not the Principal Underwriter's obligations to the Fund provided for in this
Agreement, provided, however, the Principal Underwriter may delegate and
sub-contract certain functions to other broker-dealers so long as it remains
employed by the Fund) to any person (an "Assignee") and any such assignment
shall be effective as to the Fund upon written notice to the Fund by the
Principal Underwriter. In connection therewith the Fund shall pay all or any
amounts in respect of its Allocable Portions directly to the Assignee thereof as
directed in a writing by the Principal Underwriter in the Irrevocable Payment
Instruction, as the same may be amended from time to time with the consent of
the Fund, and the Fund shall be without liability to any person if it pays such
amounts when and as so directed, except for underpayments of amounts actually
due, without any amount payable as consequential or other damages due to such
underpayment and without interest except to the extent that delay in payment of
Distribution Fees and CDSCs results in an increase in the maximum Sales Charge
allowable under the Business Conduct Rules, which increases daily at a rate of
prime plus one percent per annum.
14.7 The Fund will not, to the extent it may otherwise be empowered to do
so, change or waive any CDSC with respect to B-2 Shares, except as provided in
the Fund's Prospectus or Statement of Additional Information without the
Principal Underwriter's or Assignee's consent, as applicable. Notwithstanding
anything to the contrary in this Agreement or any termination of this Agreement
or the Principal Underwriter as principal underwriter for the Shares of the
Fund, the Principal Underwriter shall be entitled to be paid its Allocable
Portion of the CDSCs whether or not the Fund's Rule 12b-1 plan for B-2 Shares is
terminated and whether or not any such termination is a Complete Termination, as
defined above.
14.8 Notwithstanding anything contained herein in this Agreement to the
contrary, the Fund shall comply with its obligations under the EKISC
Underwriting Agreements and the attached Schedule I and any replacement
Agreement, provided that such replacement agreement does not increase the
Allocable Portion currently payable to EKISC, to pay to EKISC its Allocable
Portion (as defined in the EKISC Underwriting Agreement) of the Distribution
Fees (as defined in the EKISC Underwriting Agreement) in respect of Class B-2
Shares as required therein and to comply with its obligations under the
Irrevocable Payment Instructions (as defined in the Citibank Purchase Agreement,
as defined therein).
15. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts. All sales hereunder are to be made, and title to
the Shares shall pass, in Boston, Massachusetts.
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16. The Fund is a series of a Delaware business trust established under a
Declaration of Trust, as it may be amended from time to time. The obligations of
the Fund are not personally binding upon, nor shall recourse be had against the
private property of any of the Trustees, shareholders, officers, employees or
agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN FIXED INCOME TRUST EVERGREEN DISTRIBUTOR, INC.
By:/s/ John J. Pileggi By: /s/ J. David Huber
--------------------------- -----------------------------
Name: John J. Pileggi Name: J. David Huber
Title: President Title: President
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EXHIBIT A
TO PRINCIPAL UNDERWRITING AGREEMENT
DATED SEPTEMBER 18, 1997
BETWEEN EVERGREEN FIXED INCOME TRUST AND
EVERGREEN DISTRIBUTOR, INC.
Evergreen Fixed Income Trust (the "Fund") and Evergreen Distributor, Inc.
("EDI") agree that the Collection Rights of EDI, as such term is defined in the
Principal Underwriting Agreement dated as of September 18, 1997 between the Fund
and EDI (the "Agreement"), paid by the Fund pursuant to the Agreement with
respect to Distributor Shares, as that term is defined in Schedule I to the
Agreement, sold on or after December 1, 1996 will be utilized by EDI as follows:
(a) to the extent that the total amount of Collection Rights received by
EDI with respect to Distributor Shares of all Funds, as that term is defined in
Schedule I, does not exceed 4.25% (except that in the case of Evergreen Capital
Preservation and Income Fund, the amount shall be 3%) of the aggregate net asset
value at the time of sale of the Distributor Shares sold on or after December 1,
1996, plus any interest and other fees, costs and expenses that may be paid in
accordance with the financing of commissions paid to selling brokers regarding
such Distributor Shares of such Funds (the "Brokers Commission and Expenses"),
the entire amount of the Collection Rights with respect to such Distributor
Shares may only be used by the Principal Underwriter for payment of the Brokers
Commission and Expenses and may not be used for any other purpose.
(b) to the extent that there is no longer any unrecovered Brokers
Commission and Expenses with respect to the Distributor Shares sold on or after
December 1, 1996 (including shares purchased in connection with the reinvestment
of dividends on such Distributor Shares as determined in accordance with
Schedule I ) as provided in (a), above, the Fund will pay the Principal
Underwriter a fee in an amount up to the remaining Collection Rights
attributable to such Shares to compensate Evergreen Investment Services, Inc.,
as marketing services agent for the Principal Underwriter (the "Marketing
Services Agent").
The foregoing calculations shall be the responsibility of the Transfer
Agent and Administrator and not the responsibility of the Principal Underwriter.
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SCHEDULE I
TO
PRINCIPAL UNDERWRITING AGREEMENT
RELATING TO CLASS B-2 SHARES
OF
EVERGREEN FIXED INCOME TRUST
TRANSFER AGENT PROCEDURES FOR DIFFERENTIATING
AMONG DISTRIBUTOR SHARES AND POST-DISTRIBUTOR SHARES
Amounts in respect of Asset Based Sales Charges (as hereinafter defined)
and CDSCs (as hereinafter defined) in respect of Shares (as hereinafter defined)
of each Fund (as hereinafter defined) shall be allocated between Distributor
Shares (as hereinafter defined) and Post-distributor Shares (as hereinafter
defined) of such Fund in accordance with the rules set forth in clauses (B) and
(C). Clause (B) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account (as hereinafter defined)
in maintaining records relating to Distributor Shares and Post-distributor
Shares. Clause (C) sets forth the rules to be followed by the Transfer Agent for
each Fund and the record owner of each Omnibus Account in determining what
portion of the Asset Based Sales Charge (as hereinafter defined) payable in
respect of each class of Shares of such Fund and what portion of the CDSC (as
hereinafter defined) payable by the holders of Shares of such Fund is
attributable to Distributor Shares and Post-distributor Shares, respectively.
Notwithstanding anything herein to the contrary, no amounts relating to the
EKISC Allocable Portion (as defined in the EKISC Underwriting Agreements) shall
be allocated hereunder and no Shares attributable to EKISC pursuant to the EKISC
Underwriting Agreements shall constitute Distributor Shares or Post-distributor
Shares or otherwise be allocated to any person or entity except as contemplated
by the EKISC Underwriting Agreements and the Irrevocable Payment Instructions.
(A) DEFINITIONS:
Generally, for purposes of this Schedule I, defined terms shall be used
with the meaning assigned to them in the Agreement, except that for purposes of
the following rules the following definitions are also applicable:
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"Agreement" shall mean the Principal Underwriting Agreement for Class B-2
Shares of the Instant Fund dated as of September 18, 1997 between the Instant
Fund and the Distributor.
"Asset Based Sales Charge" shall have the meaning set forth in National
Association of Securities Dealers, Inc. ("NASD") Business Conduct Rule 2830 (d)
(2) or any successor rule (the "Business Conduct Rules) it being understood that
for purposes of this Schedule I such term does not include the Service Fee.
"Business Day" shall mean any day on which the banks and The New York Stock
Exchange are not authorized or required to close in New York City or the State
of North Carolina.
"Capital Gain Dividend" shall mean, in respect of any Share of any Fund, a
Dividend in respect of such Share which is designated by such Fund as being a
"capital gain dividend" as such term is defined in Section 852 of the Internal
Revenue Code of 1986, as amended.
"CDSC" shall mean with respect to any Fund, the contingent deferred sales
charge payable, either directly or by withholding from the proceeds of the
redemption of the Shares of such Fund, by the shareholders of such Fund on any
redemption of Shares of such Fund in accordance with the Prospectus relating to
such Fund.
"Commission Share" shall mean, in respect of any Fund, a Share of such Fund
issued under circumstances where a CDSC would be payable upon the redemption of
such Share if such CDSC is not waived or shall have not otherwise expired.
"Date of Original Purchase" shall mean, in respect of any Commission Share
of any Fund, the date on which such Commission Share was first issued by such
Fund; provided, that if such Share is a Commission Share and such Fund issued
the Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Date
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the date on which the Commission Share (or portion thereof) of the
other Fund was first issued by such other Fund (unless such Commission Share (or
portion thereof) was also issued by such other Fund in a Free Exchange, in which
case this proviso shall apply to that Free Exchange and this application shall
be repeated until one reaches a Commission Share (or portion thereof) which was
issued by a Fund other than in a Free Exchange).
"Distributor" shall mean Evergreen Distributor, Inc., its successors and
assigns.
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"Distributor's Account" shall mean the account designated in the
Irrevocable Payment Instructions of the Distributor.
"Distributor Inception Date" shall mean, in respect of any Fund and solely
for the purpose of making the calculations contained herein, December 1, 1996.
"Distributor Last Sale Cut-off Date" shall mean, in respect of any Fund,
the date identified as the last sale of a Commission Share during the period the
Distributor served as principal underwriter under the Agreement.
"Distributor Shares" shall mean, in respect of any Fund, all Shares of such
Fund the Month of Original Purchase of which occurs on or after the Distributor
Inception Date and on or prior to the Distributor Last Sale Cut-off Date in
respect of such Fund.
"Dividend" shall mean, in respect of any Share of any Fund, any dividend or
other distribution by such Fund in respect of such Share.
"Free Exchange" shall mean any exchange of a Commission Share (or portion
thereof) of one Fund (the "Redeeming Fund") for a Share (or portion thereof) of
another Fund (the "Issuing Fund"), under any arrangement which defers the
exchanging Shareholder's obligation to pay the CDSC in respect of the Commission
Share (or portion thereof) of the Redeeming Fund so exchanged until the later
redemption of the Share (or portion thereof) of the Issuing Fund received in
such exchange.
"Free Share" shall mean, in respect of any Fund, each Share of such Fund
other than a Commission Share, including, without limitation: (i) Shares issued
in connection with the automatic reinvestment of Capital Gain Dividends or Other
Dividends by such Fund; (ii) Special Free Shares issued by such Fund; and (iii)
Shares (or portion thereof) issued by such Fund in connection with an exchange
whereby a Free Share (or portion thereof) of another Fund is redeemed and the
Net Asset Value of such redeemed Free Share (or portion thereof) is invested in
such Shares (or portion thereof) of such Fund.
"Fund" shall mean each of the regulated investment companies or series or
portfolios of regulated investment companies identified in Exhibit J to the
Master Sale Agreement, as the same may be amended from time to time in
accordance with the terms thereof.
"Instant Fund" shall mean Evergreen Fixed Income Trust.
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<PAGE>
"ML Omnibus Account" shall mean, in respect of any Fund, the Omnibus
Account maintained by Merrill Lynch, Pierce, Fenner & Smith as subtransfer
agent.
"Month of Original Purchase" shall mean, in respect of any Share of any
Fund, the calendar month in which such Share was first issued by such Fund;
provided, that if such Share is a Commission Share and such Fund issued the
Commission Share (or portion thereof) in question in connection with a Free
Exchange for a Commission Share (or portion thereof) of another Fund, the Month
of Original Purchase for the Commission Share (or portion thereof) in question
shall be the calendar month in which the Commission Share (or portion thereof)
of the other Fund was first issued by such other Fund (unless such Commission
Share (or portion thereof) was also issued by such other Fund in a Free
Exchange, in which case this proviso shall apply to that Free Exchange and this
application shall be repeated until one reaches a Commission Share (or portion
thereof) which was issued by a Fund other than in a Free Exchange); provided,
further, that if such Share is a Free Share and such Fund issued such Free Share
in connection with the automatic reinvestment of dividends in respect of other
Shares of such Fund, the Month of Original Purchase of such Free Share shall be
deemed to be The Month of Original Purchase of the Share in respect of which
such dividend was paid; provided, further, that if such Share is a Free Share
and such Fund issued such Free Share in connection with an exchange whereby a
Free Share (or portion thereof) of another Fund is redeemed and the Net Asset
Value of such redeemed Free Share (or portion thereof) is invested in a Free
Share (or portion thereof) of such Fund, the Month of Original Issue of such
Free Share shall be the Month of Original Issue of the Free Share of such other
Fund so redeemed (unless such Free Share of such other Fund was also issued by
such other Fund in such an exchange, in which case this proviso shall apply to
that exchange and this application shall be repeated until one reaches a Free
Share which was issued by a Fund other than in such an exchange); and provided,
finally, that for purposes of this Schedule I each of the following periods
shall be treated as one calendar month for purposes of applying the rules of
this Schedule I to any Fund: (i) the period of time from and including the
Distributor Inception Date for such Fund to and including the last day of the
calendar month in which such Distributor Inception Date occurs; (ii) the period
of time commencing with the first day of the calendar month in which the
Distributor Last Sale Cutoff Date in respect of such Fund occurs to and
including such Distributor Last Sale Cutoff Date; and (iii) the period of time
commencing on the day immediately following the Distributor Last Sale Cutoff
Date in respect of such Fund to and including the last day of the calendar month
in which such Distributor Last Sale Cut-off Date occurs.
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<PAGE>
"Omnibus Account" shall mean any Shareholder Account the record owner of
which is a registered broker-dealer which has agreed with the Transfer Agent to
provide sub-transfer agent functions relating to each Sub-shareholder Account
within such Shareholder Account as contemplated by this Schedule I in respect of
each of the Funds.
"Omnibus Asset Based Sales Charge Settlement Date" shall mean, in respect
of each Omnibus Account, the Business Day next following the twentieth day of
each calendar month for the calendar month immediately preceding such date so
long as the record owner is able to allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund as contemplated by this Schedule I no
more frequently than monthly; provided, that at such time as the record owner of
such Omnibus Account is able to provide information sufficient to allocate the
Asset Based Sales Charge accruing in respect of such Shares of such Fund owned
of record by such Omnibus Account as contemplated by this Schedule I on a weekly
or daily basis, the Omnibus Asset Based Sales Charge Settlement Date shall be a
weekly date as in the case of the Omnibus CDSC Settlement Date or a daily date
as in the case of Asset Based Sales Charges accruing in respect of Shareholder
Accounts other than Omnibus Accounts, as the case may be.
"Omnibus CDSC Settlement Date" shall mean, in respect of each Omnibus
Account, the third Business Day of each calendar week for the calendar week
immediately preceding such date so long as the record owner of such Omnibus
Account is able to allocate the CDSCs accruing in respect of any Shares of any
Fund as contemplated by this Schedule I for no more frequently than weekly;
provided, that at such time as the record owner of such Shares of such Fund
owned of record by such Omnibus Account is able to provide information
sufficient to allocate the CDSCs accruing in respect of such Omnibus Account as
contemplated by this Schedule I on a daily basis, the Omnibus CDSC Settlement
Date for such Omnibus Account shall be a daily date as in the case of CDSCs
accruing in respect of Shareholder Accounts other than Omnibus Accounts.
"Original Purchase Amount" shall mean, in respect of any Commission Share
of any Fund, the amount paid (i.e., the Net Asset Value thereof on such date),
on the Date of Original Purchase in respect of such Commission Share, by such
Shareholder Account or Sub-shareholder Account for such Commission Share;
provided, that if such Fund issued the Commission Share (or portion thereof) in
question in connection with a Free Exchange for a Commission Share (or portion
thereof) of another Fund, the Original Purchase Amount for the Commission Share
(or portion thereof) in question shall be the Original Purchase Amount in
respect of such Commission Share (or portion thereof) of such other Fund (unless
such Commission Share (or portion thereof) was also issued by such other Fund in
a Free Exchange, in which case this proviso shall apply to that Free Exchange
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<PAGE>
and this application shall be repeated until one reaches a Commission Share (or
portion thereof) which was issued by a Fund other than in a Free Exchange).
"Other Dividend" shall mean in respect of any Share, any Dividend paid in
respect of such Share other than a Capital Gain Dividend.
"Post-distributor Shares" shall mean, in respect of any Fund, all Shares of
such Fund the Month of Original Purchase of which occurs after the Distributor
Last Sale Cut-off Date for such Fund.
"Buyer" shall mean Mutual Fund Funding, as Buyer under the Master Sale
Agreement, and its successors and assigns in such capacity.
"Master Sale Agreement" shall mean that certain Master Sale Agreement dated
as of December 6, 1996 between Evergreen Keystone Distributor, Inc., as Seller,
and Mutual Fund Funding, as Buyer.
"Share" shall mean in respect of any Fund any share of the classes of
shares specified in Exhibit G to the Master Sale Agreement under the designation
"Keystone America Funds", as the same may be amended from time to time by notice
from the Distributor and the Buyer to the Fund and the Transfer Agent; provided,
that such term shall include, after the Distributor Last Sale Cut-off Date, a
share of a new class of shares of such Fund: (i) with respect to each record
owner of Shares which is not treated in the records of each Transfer Agent and
Sub-transfer Agent for such Fund as an entirely separate and distinct class of
shares from the classes of shares specified Exhibit G to the Master Sale
Agreement or (ii) the shares of which class may be exchanged for shares of
another Fund of the classes of shares specified in Exhibit G to the Master Sale
Agreement under the designation "Keystone America Funds" of any class existing
on or prior to the Distributor Last Sale Cut-off Date; or (iii) dividends on
which can be reinvested in shares of the classes specified on Exhibit G to the
Master Sale Agreement under the automatic dividend reinvestment options; or (iv)
which is otherwise treated as though it were of the same class as the class of
shares specified on Schedule II to the Irrevocable Payment Instruction.
"Shareholder Account" shall have the meaning set forth in clause (B)(l)
hereof.
"Special Free Share" shall mean, in respect of any Fund, a Share (other
than a Commission Share) issued by such Fund other than in connection with the
automatic reinvestment of Dividends and other than in connection with an
exchange whereby a Free Share (or portion thereof) of another Fund is redeemed
and the Net Asset Value of such redeemed Share (or portion thereof) is invested
in a Share (or portion thereof) of such Fund.
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"Sub-shareholder Account" shall have the meaning set forth in clause (B)(1)
hereof.
"Sub-transfer Agent" shall mean, in respect of each Omnibus Account, the
record owner thereof.
(B) RECORDS TO BE MAINTAINED BY THE TRANSFER AGENT FOR EACH FUND AND THE
RECORD OWNER OF EACH OMNIBUS ACCOUNT:
The Transfer Agent shall maintain Shareholder Accounts, and shall cause
each record owner of each Omnibus Account to maintain Sub-shareholder Accounts,
each in accordance with the following rules:
(1) Shareholder Accounts and Sub-shareholder Accounts. The Transfer Agent
shall maintain a separate account (a "Shareholder Account") for each record
owner of Shares of each Fund. Each Shareholder Account (other than Omnibus
Accounts) will represent a record owner of Shares of such Fund, the records of
which will be kept in accordance with this Schedule I. In the case of an Omnibus
Account, the Transfer Agent shall require that the record owner of the Omnibus
Account maintain a separate account (a "Sub-shareholder Account") for each
record owner of Shares which are reflected in the Omnibus Account, the records
of which will be kept in accordance with this Schedule I. Each such Shareholder
Account and Sub-shareholder Account shall relate solely to Shares of such Fund
and shall not relate to any other class of shares of such Fund.
(2) Commission Shares. For each Shareholder Account (other than an Omnibus
Account), the Transfer Agent shall maintain daily records of each Commission
Share of such Fund which records shall identify each Commission Share of such
Fund reflected in such Shareholder Account by the Month of Original Purchase of
such Commission Share.
For each Omnibus Account, the Transfer Agent shall require that the
Sub-transfer Agent in respect thereof maintain daily records of such
Sub-shareholder Account which records shall identify each Commission Share of
such Fund reflected in such Sub-shareholder Account by the Month of Original
Purchase; provided, that until the Sub-transfer Agent in respect of the ML
Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain daily records of
Sub-shareholder Accounts which identify each Commission Share of such Fund
reflected in such Sub-shareholder Account by the Date of Original Purchase. Each
such Commission Share shall be identified as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such
Commission Share (or in the case of a Sub-shareholder Account within the ML
Omnibus Account, based upon the Date of Original Purchase).
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<PAGE>
(3) Free Shares. The Transfer Agent shall maintain daily records of each
Shareholder Account (other than an Omnibus Account) in respect of any Fund so as
to identify each Free Share (including each Special Free Share) reflected in
such Shareholder Account by the Month of Original Purchase of such Free Share.
In addition, the Transfer Agent shall require that each Shareholder Account
(other than an Omnibus Account) have in effect separate elections relating to
reinvestment of Capital Gain Dividends and relating to reinvestment of Other
Dividends in respect of any Fund. Either such Shareholder Account shall have
elected to reinvest all Capital Gain Dividends or such Shareholder Account shall
have elected to have all Capital Gain Dividends distributed. Similarly, either
such Shareholder Account shall have elected to reinvest all Other Dividends or
such Shareholder Account shall have elected to have all Other Dividends
distributed.
The Transfer Agent shall require that the Sub-transfer Agent in respect
of each Omnibus Account maintain daily records for each Sub-shareholder Account
in the manner described in the immediately preceding paragraph for Shareholder
Accounts (other than Omnibus Accounts); provided, that until the Sub-transfer
Agent in respect of the ML Omnibus Account develops the data processing
capability to conform to the foregoing requirements, such Sub-transfer Agent
shall not be obligated to conform to the foregoing requirements. Each
Sub-shareholder Account shall also have in effect Dividend reinvestment
elections as described in the immediately preceding paragraph.
The Transfer Agent and each Sub-transfer Agent in respect of an Omnibus
Account shall identify each Free Share as either a Distributor Share or a
Post-distributor Share based upon the Month of Original Purchase of such Free
Share; provided, that until the Sub-transfer Agent in respect of the ML Omnibus
Account develops the data processing capability to conform to the foregoing
requirements, the Transfer Agent shall require such Sub-transfer Agent to
identify each Free Share of a given Fund in the ML Omnibus Account as a
Distributor Share, or Post- distributor Share, as follows:
(a) Free Shares of such Fund which are outstanding on the
Distributor Last Sale Cutoff Date for such Fund shall be
identified as Distributor Shares.
(b) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a Free Share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cutoff Date
for such Fund shall be identified as Distributor Shares in a
number computed as follows:
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<PAGE>
A * (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Distributor Shares and outstanding as of the close of
business in the last day of the immediately preceding
calendar month (or portion thereof)
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(c) Free Shares of such Fund which are issued (whether or not in
connection with an exchange for a free share of another Fund)
to the ML Omnibus Account during any calendar month (or
portion thereof) after the Distributor Last Sale Cutoff Date
for such Fund shall be identified as Post-distributor Shares
in a number computed as follows:
(A * (B/C)
where:
A = Free Shares of such Fund issued to the ML Omnibus
Account during such calendar month (or portion
thereof)
B = Number of Commission Shares and Free Shares of such
Fund in the ML Omnibus Account identified as
Post-distributor Shares and outstanding as of the
close of business in the last day of the immediately
preceding calendar month (or portion thereof)
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<PAGE>
C = Total number of Commission Shares and Free Shares
of such Fund in the ML Omnibus Account and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof).
(d) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a Class
A Share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cut-off Date for such Fund shall be identified as
Distributor Shares in a number computed as follows:
A * (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month.
(e) Free Shares of such Fund which are redeemed (whether or not in
connection with an exchange for Free Shares of another Fund or
in connection with the conversion of such Shares into a class
A share of such Fund) from the ML Omnibus Account in any
calendar month (or portion thereof) after the Distributor Last
Sale Cutoff Date for such Fund shall be identified as
Post-distributor Shares in a number computed as follows:
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<PAGE>
A * (B/C)
where:
A = Free Shares of such Fund which are redeemed
(whether or not in connection with an exchange for
Free Shares of another Fund or in connection with the
conversion of such Shares into a class A share of
such Fund) from the ML Omnibus Account during such
calendar month (or portion thereof)
B = Free Shares of such Fund in the ML Omnibus Account
identified as Post-distributor Shares and outstanding
as of the close of business on the last day of the
immediately preceding calendar month.
C = Total number of Free Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last to day of the immediately
preceding calendar month.
(4) Appreciation Amount and Cost Accumulation Amount. The Transfer Agent
shall maintain on a daily basis in respect of each Shareholder Account (other
than Omnibus Accounts) a Cost Accumulation Amount representing the total of the
Original Purchase Amounts paid by such Shareholder Account for all Commission
Shares reflected in such Shareholder Account as of the close of business on each
day. In addition, the Transfer Agent shall maintain on a daily basis in respect
of each Shareholder Account (other than Omnibus Accounts) sufficient records to
enable it to compute, as of the date of any actual or deemed redemption or Free
Exchange of a Commission Share reflected in such Shareholder Account an amount
(such amount an "Appreciation Amount") equal to the excess, if any, of the Net
Asset Value as of the close of business on such day of the Commission Shares
reflected in such Shareholder Account minus the Cost Accumulation Amount as of
the close of business on such day. In the event that a Commission Share (or
portion thereof) reflected in a Shareholder Account is redeemed or under these
rules is deemed to have been redeemed (whether in a Free Exchange or otherwise),
the Appreciation Amount for such Shareholder Account shall be reduced, to the
extent thereof, by the Net Asset Value of the Commission Share (or portion
thereof) redeemed, and if the Net Asset Value of the Commission Share (or
portion thereof) being redeemed equals or exceeds the Appreciation Amount, the
Cost Accumulation Amount will be reduced to the extent thereof, by such excess.
If the Appreciation Amount for such Shareholder Account immediately prior to any
redemption of a Commission Share (or portion thereof) is equal to or greater
than the Net Asset Value of such Commission Share (or portion thereof) deemed to
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<PAGE>
have been tendered for redemption, no CDSCs will be payable in respect of such
Commission Share (or portion thereof).
The Transfer Agent shall require that the Sub-transfer Agent in respect of
each Omnibus Account maintain on a daily basis in respect of each
Sub-shareholder Account reflected in such Omnibus Account a Cost Accumulation
Amount and sufficient records to enable it to compute, as of the date of any
actual or deemed redemption or Free Exchange of a Commission Share reflected in
such Sub-shareholder Account an Appreciation Amount in accordance with the
preceding paragraph and to apply the same to determine whether a CDSC is payable
(as though such Sub-shareholder Account were a Shareholder Account other than an
Omnibus Account); provided, that until the Sub-transfer Agent in respect of the
ML Omnibus Account develops the data processing capability to conform to the
foregoing requirements, such Sub-transfer Agent shall maintain for each
Sub-shareholder Account a separate Cost Accumulation Amount and a separate
Appreciation Amount for each Date of Original Purchase of any Commission Share
which shall be applied as set forth in the preceding paragraph as if each Date
of Original Purchase were a separate Month of Original Purchase.
(5) Identification of Redeemed Shares. If a Shareholder Account (other than
an Omnibus Account) tenders a Share of a Fund for redemption (other than in
connection with an exchange of such Share for a Share of another Fund or in
connection with the conversion of such Share pursuant to a Conversion Feature),
such tendered Share will be deemed to be a Free Share if there are any Free
Shares reflected in such Shareholder Account immediately prior to such tender.
If there is more than one Free Share reflected in such Shareholder Account
immediately prior to such tender, such tendered Share will be deemed to be the
Free Share with the earliest Month of Original Purchase. If there are no Free
Shares reflected in such Shareholder Account immediately prior to such tender,
such tendered Share will be deemed to be the Commission Share with the earliest
Month of Original Purchase reflected in such Shareholder Account.
If a Sub-shareholder Account reflected in an Omnibus Account tenders a
Share for redemption (other than in connection with an Exchange of such Share
for a Share of another Fund or in connection with the conversion of such Share
pursuant to a Conversion Feature), the Transfer Agent shall require that the
record owner of each Omnibus Account supply the Transfer Agent sufficient
records to enable the Transfer Agent to apply the rules of the preceding
paragraph to such Sub-shareholder Account (as though such Sub-shareholder
Account were a Shareholder Account other than an Omnibus Account); provided,
that until the Sub-transfer Agent in respect of the ML Omnibus Account develops
the data processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
regarding Free Shares (and the Transfer Agent shall account for such Free Shares
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<PAGE>
as provided in (3) above) but shall apply the foregoing rules to each Commission
Share with respect to the Date of Original Purchase of any Commission Share as
though each such Date were a separate Month of Original Purchase.
(6) Identification of Exchanged Shares. When a Shareholder Account (other
than an Omnibus Account) tenders Shares of one Fund (the "Redeeming Fund") for
redemption where the proceeds of such redemption are to be automatically
reinvested in shares of another Fund (the "Issuing Fund") to effect an exchange
(whether or not pursuant to a Free Exchange) into Shares of the Issuing Fund:
(1) such Shareholder Account will be deemed to have tendered Shares (or portions
thereof) of the Redeeming Fund with each Month of Original Purchase represented
by Shares of the redeeming Fund reflected in such Shareholder Account
immediately prior to such tender in the same proportion that the number of
Shares of the redeeming Fund with such Month of Original Purchase reflected in
such Shareholder immediately prior to such tender bore to the total number of
Shares of the Redeeming Fund reflected in such Shareholder Account immediately
prior to such tender, and on that basis the tendered Shares of the Redeeming
Fund will be identified as Distributor Shares or Post-distributor Shares; (2)
such Shareholder Account will be deemed to have tendered Commission Shares (or
portions thereof) and Free Shares (or portions thereof) of the Redeeming Fund of
each category (i.e., Distributor Shares or Post- distributor Shares) in the same
proportion that the number of Commission Shares or Free Shares (as the case may
be) of the Redeeming Fund in such category reflected in such Shareholder Account
bore to the total number of Shares of the Redeeming Fund in such category
reflected in such Shareholder Account immediately prior to such tender, (3) the
Shares (or portions thereof) of the Issuing Fund issued in connection with such
exchange will be deemed to have the same Months of Original Purchase as the
Shares (or portions thereof) of the Redeeming Fund so tendered and will be
categorized as Distributor Shares and Post-distributor Shares accordingly, and
(4) the Shares (or portions thereof) of each Category of the Issuing Fund issued
in connection with such exchange will be deemed to be Commission Shares and Free
Shares in the same proportion that the Shares of such Category of the Redeeming
Fund were Commission Shares and Free Shares.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account); provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall not be required to conform to the foregoing rules
relating to Free Shares (and the Sub-transfer Agent shall account for such Free
Shares as provided in (3) above) and shall apply a first-in-first-out procedure
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<PAGE>
(based upon the Date of Original Purchase) to determine which Commission Shares
(or portions thereof) of a Redeeming Fund were redeemed in connection with an
exchange.
(7) Identification of Converted Shares. The Transfer Agent records
maintained for each Shareholder Account (other than an Omnibus Account) will
treat each Commission Share of a Fund as though it were redeemed at its Net
Asset Value on the date such Commission Share converts into a Class A share of
such Fund in accordance with an applicable Conversion Feature applied with
reference to its Month of Original Purchase and will treat each Free Share of
such Fund with a given Month of Original Purchase as though it were redeemed at
its Net Asset Value when it is simultaneously converted to a Class A share at
the time the Commission Shares of such Fund with such Month of Original Purchase
are so converted.
The Transfer Agent shall require that each record owner of an Omnibus
Account maintain records relating to each Sub-shareholder Account in such
Omnibus Account sufficient to apply the foregoing rules to each such
Sub-shareholder Account (as though such Sub-shareholder Account were a
Shareholder Account other than an Omnibus Account) ; provided, that until the
Sub-transfer Agent in respect of the ML Omnibus Account develops the data
processing capability to conform to the foregoing requirements, such
Sub-transfer Agent shall apply the foregoing rules to Commission Shares with
reference to the Date of Original Issue of each Commission Share (as though each
such date were a separate Month of Original Issue) and shall not be required to
apply the foregoing rules to Free Shares (and the Sub-transfer Agent shall
account for such Free Shares as provided in (3) above).
(C) ALLOCATIONS OF ASSET BASED SALE CHARGES AND CDSCs AMONG DISTRIBUTOR
SHARES AND POST-DISTRIBUTOR SHARES:
The Transfer Agent shall use the following rules to allocate the amounts of
Asset Based Sales Charges and CDSCs payable by each Fund in respect of Shares
between Distributor Shares and Post-distributor Shares:
(1) Receivables Constituting CDSCs: CDSCs will be treated as relating to
Distributor Shares or Post-distributor Shares depending upon the Month of
Original Purchase of the Commission Share the redemption of which gives rise to
the payment of a CDSC by a Shareholder Account.
The Transfer Agent shall cause each Sub-transfer Agent to apply the
foregoing rule to each Sub-shareholder Account based on the records maintained
by such Sub-transfer Agent; provided, that until the Sub-transfer Agent in
respect of the ML Omnibus Account develops the data processing capability to
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<PAGE>
conform to the foregoing requirements, such Sub-transfer Agent shall apply the
foregoing rules to each Sub-shareholder Account with respect to the Date of
Original Purchase of any Commission Share as though each such date were a
separate Month of Original Purchase.
(2) Receivables Constituting Asset Based Sales Charges:
The Asset Based Sales Charges accruing in respect of each Shareholder
Account (other than an Omnibus Account) shall be allocated to each Share
reflected in such Shareholder Account as of the close of business on such day on
an equal per share basis. For example, the Asset Based Sales Charges
attributable to Distributor Shares on any day shall be computed and allocated as
follows:
A * (B/C)
where:
A = Total amount of Asset Based Sales Charge accrued in respect
of such Shareholder Account (other than an Omnibus Account) on
such day.
B = Number of Distributor Shares reflected in such Shareholder
Account (other than an Omnibus Account) on the close of
business on such day
C = Total number of Distributor Shares and Post-distributor
Shares reflected in such Shareholder Account (other than an
Omnibus Account) and outstanding as of the close of business
on such day.
The Portion of the Asset Based Sales Charges of such Fund accruing in
respect of such Shareholder Account for such day allocated to Post-distributor
Shares will be obtained using the same formula but substituting for "B" the
number of Post-distributor Shares, as the case may be, reflected in such
Shareholder Account and outstanding on the close of business on such day. The
foregoing allocation formula may be adjusted from time to time by notice to the
Fund and the transfer agent for the Fund from the Seller and the Buyer.
The Transfer Agent shall, based on the records maintained by the record
owner of such Omnibus Account, allocate the Asset Based Sales Charge accruing in
respect of each Omnibus Account on each day among all Sub-shareholder Accounts
reflected in such Omnibus Account on an equal per share basis based upon the
total number of Distributor Shares and Post-distributor Shares reflected in each
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<PAGE>
such Sub-shareholder Account as of the close of business on such day. In
addition, the Transfer Agent shall apply the foregoing rules to each
Sub-shareholder Account (as though it were a Shareholder Account other than an
Omnibus Account), based on the records maintained by the record owner, to
allocate the Asset Based Sales Charge so allocated to any Sub-shareholder
Account among the Distributor Shares and Post-distributor Shares reflected in
each such Sub-shareholder Account in accordance with the rules set forth in the
preceding paragraph; provided, that until the Sub-transfer Agent in respect of
the ML Omnibus Account develops the data processing capacity to apply the rules
of this Schedule I as applicable to Sub-shareholder Accounts other than ML
Omnibus Accounts, the Transfer Agent shall allocate the Asset Based Sales Charge
accruing in respect of Shares of any Fund in the ML Omnibus Account during any
calendar month (or portion thereof) among Distributor Shares and
Post-distributor Shares as follows:
(a) The portion of such Asset Based Sales Charge allocable to
Distributor Shares shall be computed as follows:
A * ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
B = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as
of the close of business on the last day of the
immediately preceding calendar month (or portion
thereof), times Net Asset Value per Share as of such
time
C = Shares of such Fund in the ML Omnibus Account and
identified as Distributor Shares and outstanding as
of the close of business on the last day of such
calendar month (or portion thereof), times Net Asset
Value per Share as of such time
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<PAGE>
D = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month (or portion thereof), times Net Asset
Value per Share as of such time.
E = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of such calendar month (or
portion thereof), times Net Asset Value per Share as
of such time.
(b) The portion of such Asset Based Sales Charge allocable to
Post-distributor Shares shall be computed as follows:
A * ((B + C)/2) ((D + E)/2)
where:
A = Total amount of Asset Based Sales Charge accrued
during such calendar month (or portion thereof) in
respect of Shares of such Fund in the ML Omnibus
Account
B = Shares of such Fund in the ML Omnibus Account and
identified as Post- distributor Shares and
outstanding as of the close of business on the last
day of the immediately preceding calendar month (or
portion thereof), times Net Asset Value per Share as
of such time
C = Shares of such Fund in the ML Omnibus Account and
identified as Post- distributor Shares and
outstanding as of the close of business on the last
day of such calendar month (or portion thereof),
times Net Asset Value per Share as of such time
D = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of the immediately preceding
calendar month (or portion thereof), times Net Asset
Value per Share as of such time.
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<PAGE>
E = Total number of Shares of such Fund in the ML
Omnibus Account and outstanding as of the close of
business on the last day of such calendar month (or
portion thereof), times Net Asset Value per Share as
of such time.
(3) Payments on behalf of each Fund.
On the close of business on each day, or to the extent the parties agree
less frequently, the Transfer Agent shall cause payment to be made of the amount
of the Asset Based Sales Charge and CDSCs accruing on such day in respect of the
Shares of such Fund owned of record by Shareholder Accounts (other than Omnibus
Accounts) by two separate wire transfers, directly from accounts of such Fund as
follows:
1. The Asset Based Sales Charge and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to Distributor
Shares in accordance with the preceding rules shall be paid to the Distributor's
Account, unless the Distributor otherwise instructs the Fund in any irrevocable
payment instruction; and
2. The Asset Based Sales Charges and CDSCs accruing in respect of
Shareholder Accounts other than Omnibus Accounts and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
On each Omnibus CDSC Settlement Date, the Transfer Agent for each Fund
shall cause the applicable Sub-transfer Agent to cause payment to be made of the
amount of the CDSCs accruing during the period to which such Omnibus CDSC
Settlement Date relates in respect of the Shares of such Fund owned of record by
each Omnibus Account by two separate wire transfers directly from the account of
such Fund maintained by such Transfer Agent, as follows:
1. The CDSCs accruing in respect of such Omnibus Account and allocable to
Distributor Shares in accordance with the preceding rules shall he paid to the
Distributor's Account, unless the Distributor otherwise instructs the Fund in
any irrevocable payment instruction; and
2. The CDSCs accruing in respect of such Omnibus Account and allocable to
Post-distributor Shares in accordance with the preceding rules shall be paid in
accordance with direction received from any future distributor of Shares of the
Instant Fund.
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<PAGE>
On each Omnibus Asset Based Sales Charge Settlement Date the Transfer Agent
for each Fund shall cause payment to be made of the amount of the Asset Based
Sales Charge accruing for the period to which such Omnibus Asset Based Sales
Charge Settlement Date relates in respect of the Shares of such Fund owned of
record by each Omnibus Account by two separate wire transfers directly from
accounts of such Fund as follows:
1. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Distributor Shares shall be paid to the Distributor's
Collection Account, unless the Distributor otherwise instructs the Fund in any
irrevocable payment instruction; and
2. The Asset Based Sales Charge accruing in respect of such Omnibus Account
and allocable to Post-Distributor Shares shall be paid in accordance with
direction received from any future distributor of Shares of the Instant Fund.
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen Strategic Income Fund
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
F:\CEF\SALEM006\AGREEMEN\EVFIB2.AGR:1/27/98
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN FIXED INCOME TRUST
CLASS B SHARES
AGREEMENT, made as of the 18th day of September, 1997, by and between
Evergreen Fixed Income Trust (the "Trust") and Evergreen Distributor, Inc.
("EDI")
WHEREAS, The Trust, has adopted one or more Plans of Distribution with
respect to certain Classes of shares of its separate investment series (each a
"Plan", or collectively the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") which Plans authorize the Trust
on behalf of the Funds to enter into agreements regarding the distribution of
such Classes of shares (the "Shares") of the separate investment series of the
Trust (the "Funds") set forth on Exhibit A; and
WHEREAS, the Trust has agreed that Evergreen Distributor, Inc. (the
"Distributor"), a Delaware corporation, shall act as the distributor of the
Shares; and
WHEREAS, the Distributor agrees to act as distributor of the Shares for the
period of this Distribution Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the agreements hereinafter contained,
it is agreed as follows:
1. SERVICES AS DISTRIBUTOR.
1.1. The Distributor agrees to use appropriate efforts to promote each Fund
and to solicit orders for the purchase of Shares and will undertake such
advertising and promotion as it believes reasonable in connection with such
solicitation. The services to be performed hereunder by the Distributor are
described in more detail in Section 7 hereof. In the event that the Trust
establishes additional investment series with respect to which it desires to
retain the Distributor to act as distributor for Class B shares hereunder, it
shall promptly notify the Distributor in writing. If the Distributor is willing
to render such services it shall notify the Trust in writing whereupon such
portfolio shall become a Fund and its Class B shares shall become Shares
hereunder.
1.2. All activities by the Distributor and its agents and employees as the
distributor of Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission") or any securities association registered under the Securities
Exchange Act of 1934, as amended.
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<PAGE>
1.3 In selling the Shares, the Distributor shall use its best efforts in
all respects duly to conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the Distributor, any selected
dealer or any other person is authorized by the Trust to give any information or
to make any representations, other than those contained in the Trust's
registration statement (the "Registration Statement") or related Fund prospectus
and statement of additional information ("Prospectus and Statement of Additional
Information") and any sales literature specifically approved by the Trust.
1.4 The Distributor shall adopt and follow procedures, as approved by the
officers of the Trust, for the confirmation of sales to investors and selected
dealers, the collection of amounts payable by investors and selected dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time exist.
1.5. The Distributor will transmit any orders received by it for purchase
or redemption of Shares to the transfer agent and custodian for the applicable
Fund.
1.6. Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind, the
Trust's officers may decline to accept any orders for, or make any sales of
Shares until such time as those officers deem it advisable to accept such orders
and to make such sales.
1.7. The Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others. The
Distributor shall offer and sell Shares only to such selected dealers as are
members, in good standing, of the NASD.
1.8 The Distributor agrees to adopt compliance standards, in a form
satisfactory to the Trust, governing the operation of the multiple class
distribution system under which Shares are offered.
2. DUTIES OF THE TRUST.
2.1. The Trust agrees at its own expense to execute any and all documents
and to furnish, at its own expense, any and all information and otherwise to
take all actions that may be reasonably necessary in connection with the
qualification of Shares for sale in such states as the Trust and the Distributor
may designate.
2.2. The Trust shall furnish from time to time, for use in connection with
the sale of Shares such information with respect to the Funds and the Shares as
the Distributor may reasonably request; and the Trust warrants that any such
information shall be true and correct. Upon request, the Trust shall also
provide or cause to be provided to the Distributor: (a) unaudited
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<PAGE>
semi-annual statements of each Fund's books and accounts, (b) quarterly earnings
statements of each Fund, (c) a monthly itemized list of the securities in each
Fund, (d) monthly balance sheets as soon as practicable after the end of each
month, and (e) from time to time such additional. information regarding each
Fund's financial condition as the Distributor may reasonably request.
3. REPRESENTATIONS OF THE TRUST.
3.1. The Trust represents to the Distributor that it is registered under
the 1940 Act and that the Shares of each of the Funds have been registered under
the Securities Act of 1933, as amended (the "Securities Act"). The Trust will
file such amendments to its Registration Statement as may be required and will
use its best efforts to ensure that such Registration Statement remains
accurate.
4. INDEMNIFICATION.
4.1 The Trust shall indemnify and hold harmless the Distributor, its
Officers and Directors, and each person, if any, who controls the Distributor
within the meaning of Section 15 of the Securities Act against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith), which the
Distributor or such Officer and Director or controlling person may incur under
the Securities Act or under common law or otherwise, arising out of or based
upon any untrue statement, or alleged untrue statement, of a material fact
contained in the Registration Statement, as from time to time amended or
supplemented, any prospectus or annual or interim report to shareholders of the
Trust, or arising out of or based upon any omission, or alleged omission, to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Distributor, provided, however, that
in no case (i) is the indemnification of the Trust in favor of the Distributor,
its Officer and Directors, or any such controlling persons to be deemed to
protect such Distributor, any Officer or Director thereof, or any such
controlling persons thereof against any liability to the Trust of each Fund or
any securities holders thereof to which the Distributor any Officer or Director
thereof, or any such controlling persons would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of the reckless disregard of their obligations and duties
under this Agreement; or (ii) is the Trust to be liable under its indemnity
agreement contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or such
controlling person, as the case maybe, shall have notified the Trust in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Trust of any such claim shall not relieve it
from any liability which it may have to the person
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<PAGE>
against whom such action it brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Trust will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Trust elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Trust elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust shall promptly notify the Distributor of the commencement of any
litigation or proceeding against it or any of its officers or directors in
connection with the issuance or sale of any of the shares.
4.2 The Distributor shall indemnify and hold harmless the Trust and each of
its directors and officers and each person, if any, who controls the Trust
against any loss, liability, claim, damage or expense described in the foregoing
indemnity contained in paragraph 4.1, but only with respect to statements or
omissions made in reliance upon , and in conformity with, information furnished
to the Trust in writing by or on behalf of the Distributor for uses in
connection with the Registration Statement, as from time to time amended, or the
annual or interim reports to shareholders. In case any action shall be brought
against the Trust or any persons so indemnified, in respect of which indemnity
may be sought against the Distributor, the Distributor shall have rights and
duties given to the Trust, and the Trust and each person so indemnified shall
have the rights and duties given to the Distributor by the provisions of
paragraph 4.1.
5. OFFERING OF SHARES.
5.1. None of the Shares shall be offered by either the Distributor or the
Trust under any of the provisions of this Agreement, and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust, if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus and statement of
additional information as required by Section 10(b)(2) of the Securities Act, as
amended, is not on file with the Commission; provided, however, that nothing
contained in this paragraph 5.1 shall in any way restrict or have any
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus of each Fund
or the Trust's prospectus or Declaration of Trust.
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<PAGE>
6. AMENDMENTS TO REGISTRATION STATEMENT AND OTHER MATERIAL EVENTS.
6.1. The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor: (a) of any
request or action taken by the Commission which is material to the Distributor's
obligations hereunder or (b) any material fact of which the Trust becomes aware
which affects the Distributor's obligations hereunder.
For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission.
7. COMPENSATION OF DISTRIBUTOR.
7.1 (a) On all sales of Shares of the Fund shall receive the current net
asset value. The Trust in respect of each Fund shall pay to the Distributor the
Distributor's Allocable Portion (as defined below) of a fee (the "Distribution
Fee") in respect of the Shares of each such Fund at the rate of .75% per annum
of the average daily net asset value of the Shares of such Fund, subject to the
limitation on the maximum amount of such fees under the Business Conduct Rules
as applicable to such Distribution Fee on the date hereof, as compensation to
the Distributor for its services in connection with the offer and sale of Shares
and shall also pay to the Distributor contingent deferred sales charges ("CDSC")
as set forth in the Fund's current Prospectus and Statement of Additional
Information, and as required by this Agreement. The Distributor shall also
receive payments consisting of shareholder service fees ("Service Fees") at the
rate of .25% per annum of the average daily net asset value of the Shares. The
Distributor may allow all or a part of said Distribution Fee and CDSCs received
by it (and not paid to others as hereinafter provided) to such brokers, dealers
or other persons as Distributor may determine. The Distributor may also pay
Service Fees to brokers, dealers or other persons providing services to
shareholders.
(b) The provisions of this Section 7.1 shall be applicable to the extent
necessary to enable the Trust to comply with its obligations in respect of each
Fund to pay Distributor its Allocable Portion (as hereinafter described) of the
Distribution Fee paid in respect of Shares of such Fund, and shall remain in
effect with respect to the Shares so long as any payments are required to be
made by the Trust with respect to the Shares of a Fund pursuant to the
irrevocable payment instructions as defined in the Purchase and Sale Agreement
dated as of May 31, 1995 (as amended and supplemented, the "Purchase Agreement")
among the Distributor, Evergreen Keystone Investment Services, Inc., Citibank,
N.A. and Citicorp North America, Inc. and the Amended and Restated Master Sale
Agreement between the Distributor and Mutual Fund Funding 1994-1 dated as of May
5, 1997, as amended and supplemented from time to time (the "Master Sale
Agreement") (the "Irrevocable Payment Instructions").
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<PAGE>
(c) As promptly as possible after the first Business Day (as defined in the
Prospectus) following the twentieth day of each month, the Trust shall pay to
the Distributor the Distributor's Allocable Portion of the Distribution Fee, any
CDSCs and any Service Fees that may be due in respect of each Fund.
(d) The Distributor's Allocable Portion of the Distribution Fee paid by the
Trust in respect of Shares of a Fund shall mean the portion of the Asset Based
Sales Charge allocable to Distributor Shares of such Fund (as defined in
Schedule I to this Agreement) in accordance with Schedule I hereto. The Trust
agrees to cause its transfer agent to maintain the records and arrange for the
payments on behalf of the trust in respect of each Fund at the times and in the
amounts and to the accounts required by Schedule I hereto, as the same may be
amended from time to time. It is acknowledged and agreed that by virtue of the
operation of Schedule I hereto the Distributor's Allocable Portion of the
Distribution Fee paid by the Trust in respect of Shares of each Fund, may, to
the extent provided in Schedule I hereto, take into account the Distribution Fee
payable by such Fund in respect of other existing and future classes and/or
sub-classes of shares of such Fund which would be treated as "Shares: under
Schedule I hereto. The trust will limit amounts paid to any subsequent principal
underwriters of Shares of a Fund to the portion of the Asset Based Sales Charge
paid in respect of Shares attributable to such Shares which are Post-Distributor
Shares (as defined in Schedule I hereto) in accordance with Schedule I hereto.
The Trust shall cause the transfer agent and sub-transfer agents for each
Fund to withhold from redemption proceeds payable to holders of Shares of such
Fund on redemption thereof the CDSCs payable upon redemption thereof as set
forth in the then current Prospectus and/or Statement of Additional Information
of such Fund and to pay to the Distributor the Distributor's Allocable Portion
of such CDSCs paid in respect of Class B Shares of such Fund which shall be
equal to the portion thereof allocable to Distributor Shares of such Fund (as
defined in Schedule I hereto) in accordance with Schedule I hereto.
(e) The Distributor shall be considered to have completely earned the right
to the payment of its Allocable Portion of the Distribution Fee and the right to
payment over to it of its Allocable Portion of the CDSC in respect of Shares of
a Fund as provided for hereby upon the completion of the sales of each
Commission Share of such Fund (as defined in Schedule I hereto) taken into
account as a Distributor Share in computing the Distributor's Allocable Portion
in accordance with Schedule I hereto.
(f) Except as provided in Section 7(g) below in respect of the Distribution
Fee only, the Trust's obligation to pay the Distributor the Distribution Fee in
respect of a Fund and to pay over to the Distributor CDSCs provided for hereby
shall be absolute and unconditional and shall not be subject to dispute, offset,
counterclaim or any defense whatsoever (it being understood that nothing in this
sentence shall be deemed a waiver by the trust of its right separately to pursue
any claims it may have against the Distributor with respect to a Fund and
enforce such claims against any assets (other than the Distributor's right to
its Allocable
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<PAGE>
Portion of the Distribution Fee and CDSCs (the "Collection Rights")) of the
Distributor.
(g) Notwithstanding anything in this Agreement to the contrary, the Trust
in respect of each Fund shall pay to the Distributor its Allocable Portion of
the Distribution Fee provided for hereby notwithstanding its termination as
Distributor for the Shares of such Fund or any termination of this Agreement and
such payment of such Distribution fee, and that obligation and the method of
computing such payment, shall not be changed or terminated except to the extent
required by any change in applicable law, including, without limitation, the
1940 Act, the Rules promulgated thereunder by the Securities and Exchange
Commission and the Business Conduct Ruled, in each case enacted or promulgated
after May 1, 1997, or in connection with a Complete Termination (as hereinafter
defined). For the purposes of this Section 7, "Complete Termination" means in
respect of a Fund a termination of such Fund's Rule 12b-1 plan for Class B
Shares involving the cessation of payments of the Distribution Fee, and the
cessation of payments of Distribution Fee pursuant to every other Rule 12b-1
plan of such Fund for every existing or future B-Class-of-Shares (as hereinafter
defined) and the Fund's discontinuance of the offering of every existing or
future B-Class-of-Shares, which conditions shall be deemed satisfied when they
are first complied with hereafter and so long thereafter as they are complied
with prior to the date upon which all of the Shares which are Distributor Shares
pursuant to Schedule I hereto shall have been redeemed or converted. For
purposes of this Section 7, the term B-Class-of-Shares means the Shares of each
Fund and each other class of shares of such Fund hereafter issued which would be
treated as Shares under Schedule I hereto or which has substantially similar
economic characteristics to the B Class of Shares taking into account the total
sales charge, CDSC or other similar charges borne directly or indirectly by the
holder of the shares of such class. The parties agree that the existing C Class
of Shares of any Fund does not have substantially similar economic
characteristics to the B-Class-of-Shares taking into account the total sales
charges, CDSCs or other similar charges borne directly or indirectly by the
holder of such shares. For purposes of clarity the parties to the Agreement
hereby state that they intend that a new installment load class of shares which
may be authorized by amendment to Rule 6(c)-10 under the 1940 Act will be
considered to be a B-class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing Class B
Shares taking into account the total sale charge, CDCSs or other similar charges
borne directly or indirectly by the holder of such charges and will not be
considered to be a B-Class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing Class C
shares of the Fund taking into account the total sales charge, CDSCs or other
similar charges home directly or indirectly by the holder of such shares.
(h) The Distributor may assign, sell or otherwise transfer any part of its
Allocable Portions of the Distribution Fees and CDSCs and obligations of the
Trust with respect to a Fund related thereto (but not the Distributor's
obligations to the Trust with respect to such Fund provided for in this
Agreement) to any person (an "assignee") and any such assignment shall be
effective upon written notice to the Trust by the Distributor. In connection
therewith the Trust shall pay all or any amounts in respect of its Allocable
Portions directly to the Assignee thereof as directed in a writing by the
Distributor in the Irrevocable Payment
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<PAGE>
Instructions, as the same may be amended from time to time with the consent of
the Trust, and the trust shall be without liability to any person of it pays
such amounts when and as so directed, except for underpayments of amounts
actually due without any amount payable as consequential or other damages due to
such underpayment and without interest except to the extent that delay in
payment of Distribution Fee and CDSCs results in an increase in the maximum
amount allowable under the NASD Business Conduct Rules, which increases daily at
a rate of prime plus one percent per annum.
Each Fund will not, to the extent it may otherwise be empowered to do so,
change or waive any CDSC with respect to Class B Shares, except as provided in
the Fund's Prospectus or Statement of Additional Information without the
Distributor's or Assignee's consent, as applicable. Notwithstanding anything to
the contrary in this Agreement or any termination of this Agreement or the
Distributor as principal underwriter for the Shares of the Funds, the
Distributor shall be entitled to be paid its Allocable Portion of the CDSCs
whether or not a Fund's Rule 12b- 1 plan for B Shares is terminated and whether
or not any such termination is a Complete Termination, as defined above.
(i) Under this Agreement, the Distributor shall: (i) make payments to
securities dealers and others engaged in the sale of Shares; (ii) make payments
of principal and interest in connection with the financing of commission
payments made by the Distributor in connection with the sale of Shares (iii)
incur the expense of obtaining such support services, telephone facilities and
shareholder services as may reasonably be required in connection with its duties
hereunder; (iv) formulate and implement marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising; (v) prepare, print and
distribute sales literature; (vi) prepare, print and distribute Prospectuses of
the Funds and reports for recipients other than existing shareholders of the
Funds; and (vii) provide to the Trust such information, analyses and opinions
with respect to marketing and promotional activities as the Trust may, from time
to time, reasonably request.
(j) The Distributor shall prepare and deliver reports to the Treasurer of
the Trust on a regular, at least monthly, basis, showing the distribution
expenditures incurred by the Distributor in connection with its services
rendered pursuant to this Agreement and the Plan and the purposes therefor, as
well as any supplemental reports as the Trustees, from time to time, may
reasonably request.
(k) The Distributor may retain the difference between the current offering
price of Shares, as set forth in the current prospectus for each Fund, and net
asset value, less any reallowance that is payable in accordance with the sales
charge schedule in effect at any given time with respect to the Shares.
(l) The Distributor may retain any CDSCs payable with respect to the
redemption of any Shares, provided however, that any CDSCs received by the
Distributor shall first be applied by the Distributor or its Assignee to any
outstanding amounts payable or which may in the
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future be payable by the Distributor or its Assignee under financing
arrangements entered into in connection with the payment of commissions on the
sale of Shares.
8. CONFIDENTIALITY, NON-EXCLUSIVE AGENCY.
8.1. The Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and other
information relative to the Funds and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and to obtain approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
8.2. Nothing contained in this Agreement shall prevent the Distributor, or
any affiliated person of the Distributor, from performing services similar to
those to be performed hereunder for any other person, firm, or corporation or
for its or their own accounts or for the accounts of others.
9. TERM.
9.1. This Agreement shall continue for two years from the date of
commencement of operations and thereafter for successive annual periods,
provided such continuance is specifically approved at least annually by (i) a
vote of the majority of the Trustees of the Trust and (ii) a vote of the
majority of those Trustees of the Trust who are not interested persons of the
Trust and who have no direct or indirect financial interest in the operation of
the Plan, in this Agreement or any agreement related to the Plan (the
"Independent Trustees") by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable at any time,
with respect to the Trust, without penalty, (a) on not less than 60 days'
written notice by vote of a majority of the Independent Trustees, or by vote of
the holders of a majority of the outstanding voting securities of the Trust, or
(b) upon not less than 60 days' written notice by the Distributor. This
Agreement may remain in effect with respect to a Fund even if it has been
terminated in accordance with this paragraph with respect to one or more other
Funds of the Trust. This Agreement will also terminate automatically in the
event of its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons," and "assignment" shall
have the same meaning as such terms have in the 1940 Act.)
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<PAGE>
10. MISCELLANEOUS.
10.1. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. All sales hereunder are to be made, and title to the Shares shall
pass, in Boston, Massachusetts.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their constructions or effect.
10.3 The obligations of the Trust hereunder are not personally binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust and only the Trust's
property shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below.
EVERGREEN FIXED INCOME TRUST
By:/s/ John J. Pileggi
-------------------------
Name: John J. Pileggi
Title: President
EVERGREEN DISTRIBUTOR, INC.
By: /s/ J. David Huber
-----------------------------
Name: J. David Huber
Title: President
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Evergreen High Income Bond Fund (B-4)
(To be redesignated Evergreen High Yield Bond Fund
January 12, 1998)
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate-Term Bond Fund
Evergreen Intermediate-term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
PRINCIPAL UNDERWRITING AGREEMENT
EVERGREEN FIXED INCOME TRUST
CLASS Y SHARES
AGREEMENT made this 18th day of September, 1997 by and between
Evergreen Fixed Income Trust on behalf of its series listed on Exhibit A
attached hereto (such Trust and series referred to herein as "Fund" individually
or "Funds" collectively) and Evergreen Distributor, Inc., a Delaware corporation
("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the Class Y shares of beneficial interest of the Fund ("Shares")
as an independent contractor upon the terms and conditions hereinafter set
forth. Except as the Fund may from time to time agree, Principal Underwriter
will act as agent for the Fund and not as principal.
2. Principal Underwriter will use its best efforts to find purchasers
for the Shares, to promote distribution of the Shares and may obtain orders from
brokers, dealers or other persons for sales of Shares to them. No such brokers,
dealers or other persons shall have any authority to act as agent for the Fund;
such brokers, dealers or other persons shall act only as principal in the sale
of Shares.
3. Sales of Shares by Principal Underwriter shall be at the applicable
public offering price determined in the manner set forth in the prospectus
and/or statement of additional information of the Fund current at the time of
the Fund's acceptance of the order for Shares. Principal Underwriter shall have
the right to sell Shares at net asset value, if such sale is permissible under
and consistent with applicable statutes, rules, regulations and orders. All
orders shall be subject to acceptance by the Fund, and the Fund reserves the
right, in its sole discretion, to reject any order received. The Fund shall not
be liable to anyone for failure to accept any order.
4. On all sales of Shares, the Fund shall receive the current net asset
value.
5. Payment to the Fund for Shares shall be in New York or Boston
Clearing House funds received by Principal Underwriter within three (3) business
days after notice of acceptance of the purchase order and the amount of the
applicable public offering price has been given to the purchaser. If such
payment is not received within such three-day period, the Fund reserves the
right, without further notice, forthwith to cancel its acceptance of any such
order. The Fund shall pay such issue taxes as may be required by law in
connection with the issuance of the Shares.
6. Principal Underwriter shall not make in connection with any sale or
solicitation of a sale of the Shares any representations concerning the Shares
except those contained in the then current prospectus and/or statement of
additional information covering the Shares and in printed
1
<PAGE>
information approved by the Fund as information supplemental to such prospectus
and statement of additional information. Copies of the then current prospectus
and statement of additional information and any such printed supplemental
information will be supplied by the Fund to Principal Underwriter in reasonable
quantities upon request.
7. Principal Underwriter agrees to comply with the Business Conduct
Rules of the National Association of Securities Dealers, Inc.
8. The Fund appoints Principal Underwriter as its agent to accept
orders for redemptions and repurchases of Shares at values and in the manner
determined in accordance with the then current prospectus and/or statement of
additional information of the Fund.
9. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal Underwriter, its officers and
Directors or any controlling person would otherwise be subject to
liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
10. The Principal Underwriter agrees to indemnify and hold harmless the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost
2
<PAGE>
of any legal fees incurred in connection therewith) which the Fund, its
officers, Trustees or any such controlling person may incur under the 1933 Act,
under any other statute, at common law or otherwise arising out of the
acquisition of any Shares by any person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
11. The Fund agrees to execute such papers and to do such acts and
things as shall from time to time be reasonably requested by Principal
Underwriter for the purpose of qualifying the Shares for sale under the
so-called "blue sky" laws of any state or for registering Shares under the 1933
Act or the Fund under the Investment Company Act of 1940 ("1940 Act"). Principal
Underwriter shall bear the expense of preparing, printing and distributing
advertising, sales literature, prospectuses and statements of additional
information. The Fund shall bear the expense of registering Shares under the
1933 Act and the Fund under the 1940 Act, qualifying Shares for sale under the
so-called "blue sky" laws of any state, the preparation and printing of
prospectuses, statements of additional information and reports required to be
filed with the Securities and Exchange Commission and other authorities, the
preparation, printing and mailing of prospectuses and statements of additional
information to shareholders of the Fund, and the direct expenses of the issuance
of Shares.
12. This Agreement shall become effective as of the date of the
commencement of operations of the Fund and shall remain in force for two years
unless sooner terminated or continued as provided below. This Agreement shall
continue in effect after such term if its continuance is specifically approved
by a majority of the Trustees of the Fund at least annually in accordance with
the 1940 Act and the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Trustees or by a vote of a majority of the
Fund's outstanding Shares on not more than sixty (60) days written notice to any
other party to the Agreement; and shall terminate automatically in the event of
its assignment (as defined in the 1940 Act).
13. This Agreement shall be construed in accordance with the laws of
The Commonwealth of Massachusetts. All sales hereunder are to be made, and title
to the Shares shall pass, in Boston, Massachusetts.
3
<PAGE>
14. The Fund is a series of a Delaware business trust established under
a Declaration of Trust, as it may be amended from time to time. The obligations
of the Fund are not personally binding upon, nor shall recourse be had against,
the private property of any of the Trustees, shareholders, officers, employees
or agents of the Fund, but only the property of the Fund shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, as of the day and year first written above.
EVERGREEN FIXED INCOME TRUST
By: /s/ John J. Pileggi
-------------------------
Name: John J. Pileggi
EVERGREEN DISTRIBUTOR, INC.
By: /s/ William J. Tomko
--------------------------
Name: William J. Tomko
F:\DC\CEF\SALEM006\AGREEMEN\EVFIY.AGR:1/19/98
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Evergreen High Income Bond Fund (B-4)*
(To be redesignated Evergreen High Yield Bond Fund
January 12, 1998)
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund*
Evergreen Intermediate-Term Bond Fund
Evergreen Intermediate-term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
*authorized but not issued
CUSTODIAN AGREEMENT
This Agreement between EVERGREEN FIXED INCOME TRUST, a business trust
organized and existing under the laws of Delaware with its principal place of
business at 200 Berkeley Street, Boston, Massachusetts 02116 (the "FUND"), and
STATE STREET BANK and TRUST COMPANY, a Massachusetts trust company with its
principal place of business at 225 Franklin Street, Boston, Massachusetts 02110
(the "CUSTODIAN"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund intends that this Agreement be applicable to the
series set forth on Schedule C hereto (such series together with all other
series subsequently established by the Fund and made subject to this Agreement
in accordance with Section 18, be referred to herein as the "PORTFOLIO(S)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("DOMESTIC SECURITIES") and securities it desires to be held outside the United
States ("FOREIGN SECURITIES") pursuant to the provisions of the Fund's
Declaration of Trust. The Fund on behalf of the Portfolio(s) agrees to deliver
to the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios ("SHARES") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "PROPER INSTRUCTIONS" (as such term is defined in
Section 6 hereof), the Custodian shall on behalf of the applicable Portfolio(s)
from time to time employ one or more sub-custodians located in the United
States, but only in accordance with an applicable vote by the Board of Trustees
of the Fund (the "BOARD OF TRUSTEES") on behalf of the applicable Portfolio(s),
and provided that the Custodian shall have no more or less responsibility or
liability to the Fund on
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<PAGE>
account of any actions or omissions of any sub-custodian so employed than any
such sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedules A and B hereto but only in accordance with
the applicable provisions of Sections 3 and 4.
SECTION 2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
SECTION 2.1 HOLDING SECURITIES. The Custodian shall hold and physically
segregate for the account of each Portfolio all non-cash property, to be held by
it in the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to Section
2.8 in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury (each, a
"U.S. SECURITIES SYSTEM") and (b) commercial paper of an issuer for which State
Street Bank and Trust Company acts as issuing and paying agent ("DIRECT PAPER")
which is deposited and/or maintained in the Direct Paper System of the Custodian
(the "DIRECT PAPER SYSTEM") pursuant to Section 2.9.
SECTION 2.2 DELIVERY OF SECURITIES. The Custodian shall release and
deliver domestic securities owned by a Portfolio held by the Custodian or in a
U.S. Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("DIRECT PAPER SYSTEM ACCOUNT") only upon
receipt of Proper Instructions on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a U.S. Securities
System, in accordance with the provisions of Section 2.8
hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee
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<PAGE>
name of any agent appointed pursuant to Section 2.7 or into
the name or nominee name of any sub-custodian appointed
pursuant to Section 1; or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units; PROVIDED that, in
any such case, the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, BUT ONLY against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's account in the book-entry system
authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowing by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, BUT ONLY
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "EXCHANGE ACT") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national
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<PAGE>
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "TRANSFER AGENT") for delivery to such Transfer
Agent or to the holders of Shares in connection with
distributions in kind, as may be described from time to time
in the currently effective prospectus and statement of
additional information of the Fund related to the Portfolio
(the "PROSPECTUS"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper trust purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of
the applicable Portfolio, a copy of a resolution of the Board
of Trustees or of the Executive Committee thereof signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary thereof (a "CERTIFIED RESOLUTION"),
specifying the securities of the Portfolio to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
SECTION 2.3 REGISTRATION OF SECURITIES. Domestic securities held by the
Custodian (other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, UNLESS the Fund has authorized in writing the appointment of a
nominee to be used in common with other registered investment companies having
the same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.7 or in the name or nominee name of
any sub-custodian appointed pursuant to Section 1. All securities accepted by
the Custodian on behalf of the Portfolio under the terms of this Agreement shall
be in "street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers.
SECTION 2.4 BANK ACCOUNTS. The Custodian shall open and maintain a
separate bank account or accounts in the United States in the name of each
Portfolio of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Agreement, and shall hold in such
4
<PAGE>
account or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by the
Portfolio in a bank account established and used in accordance with Rule 17f-3
under the Investment Company Act of 1940, as amended (the "1940 ACT"). Funds
held by the Custodian for a Portfolio may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem necessary or desirable;
PROVIDED, however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act and that each such bank or trust company
and the funds to be deposited with each such bank or trust company shall on
behalf of each applicable Portfolio be approved by vote of a majority of the
Board of Trustees. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only in that
capacity.
SECTION 2.5 COLLECTION OF INCOME. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other payments
with respect to registered domestic securities held hereunder to which each
Portfolio shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer domestic securities if, on the date of payment
by the issuer, such securities are held by the Custodian or its agent thereof
and shall credit such income, as collected, to such Portfolio's custodian
account. Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due each Portfolio on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the responsibility of
the Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or data as may
be necessary to assist the Fund in arranging for the timely delivery to the
Custodian of the income to which the Portfolio is properly entitled.
SECTION 2.6 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the 1940 Act
to act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
U.S. Securities System, in accordance with the conditions set
forth in Section 2.8 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.9; (d) in the case of
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<PAGE>
repurchase agreements entered into between the Fund on behalf
of the Portfolio and the Custodian, or another bank, or a
broker-dealer which is a member of NASD, (i) against delivery
of the securities either in certificate form or through an
entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the
receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of
the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation
from a broker and/or the applicable bank pursuant to Proper
Instructions from the Fund as defined herein;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued as set forth
in Section 5 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the Fund whether or not such expenses are to be in
whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares declared pursuant
to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper trust purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of
the Portfolio, a copy of a Certified Resolution specifying the
amount of such payment, setting forth the purpose for which
such payment is to be made, declaring such purpose to be a
proper trust purpose, and naming the person or persons to whom
such payment is to be made.
SECTION 2.7 APPOINTMENT OF AGENTS. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act to act as a
custodian, as its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; PROVIDED, however, that the
appointment of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
SECTION 2.8 DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS. The
Custodian may deposit and/or maintain securities owned by a Portfolio in a
clearing agency registered with the United States Securities and Exchange
Commission (the "SEC") under Section 17A of the Exchange Act , which acts as a
securities depository, or in the book-entry system authorized by the U.S.
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Department of the Treasury and certain federal agencies, collectively referred
to herein as "U.S. SECURITIES SYSTEM" in accordance with applicable Federal
Reserve Board and SEC rules and regulations, if any, and subject to the
following provisions:
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are
represented in an account of the Custodian in the U.S.
Securities System (the "U.S. SECURITIES SYSTEM ACCOUNT") which
account shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the
account of the Portfolio upon (i) receipt of advice from the
U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for
the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that payment for such securities
has been transferred to the U.S. Securities System Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Portfolio. Copies of all advices from the U.S.
Securities System of transfers of securities for the account
of the Portfolio shall identify the Portfolio, be maintained
for the Portfolio by the Custodian and be provided to the Fund
at its request. Upon request, the Custodian shall furnish the
Fund on behalf of the Portfolio confirmation of each transfer
to or from the account of the Portfolio in the form of a
written advice or notice and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the U.S. Securities
System for the account of the Portfolio;
4) The Custodian shall provide the Fund with any report obtained
by the Custodian on the U.S. Securities System's accounting
system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities
System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Section 15 hereof;
6) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall be liable to the Fund for the benefit of
the Portfolio for any loss or damage to the Portfolio
resulting from use of the U.S. Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any
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<PAGE>
of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may
have against the U.S. Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the rights
of the Custodian with respect to any claim against the U.S.
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Portfolio has not been made whole for any such
loss or damage.
SECTION 2.9 FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM.
The Custodian may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper System Account, which account shall not
include any assets of the Custodian other than assets held as
a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the
Portfolio with any report on its system of internal accounting
control as the Fund may reasonably request from time to time.
SECTION 2.10 SEGREGATED ACCOUNT. The Custodian shall upon receipt
of Proper Instructions on behalf of each applicable Portfolio establish and
maintain a segregated account or
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accounts for and on behalf of each such Portfolio, into which account or
accounts may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.8 hereof, (i) in
accordance with the provisions of any agreement among the Fund on behalf of the
Portfolio, the Custodian and a broker-dealer registered under the Exchange Act
and a member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract market),
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio, (ii) for purposes
of segregating cash or government securities in connection with options
purchased, sold or written by the Portfolio or commodity futures contracts or
options thereon purchased or sold by the Portfolio, (iii) for the purposes of
compliance by the Portfolio with the procedures required by Investment Company
Act Release No. 10666, or any subsequent release or releases of the SEC relating
to the maintenance of segregated accounts by registered investment companies and
(iv) for other proper trust purposes, BUT ONLY, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a copy of a Certified Resolution setting forth the purpose
or purposes of such segregated account and declaring such purpose(s) to be a
proper trust purpose.
SECTION 2.11 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian
shall execute ownership and other certificates and affidavits for all federal
and state tax purposes in connection with receipt of income or other payments
with respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
SECTION 2.12 PROXIES. The Custodian shall, with respect to the domestic
securities held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting materials
and all notices relating to such securities.
SECTION 2.13 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. Subject
to the provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund for each Portfolio all written information (including, without limitation,
pendency of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the securities being held for the Portfolio. With respect to tender
or exchange offers, the Custodian shall transmit promptly to the Portfolio all
written information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with respect
to any tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
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SECTION 3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER OF THE PORTFOLIOS
SECTION 3.1. DEFINITIONS. The following capitalized terms shall have
the indicated meanings:
"COUNTRY RISK" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including financial institutions such as any Mandatory Securities Depositories
operating in the country); prevailing or developing custody and settlement
practices; and laws and regulations applicable to the safekeeping and recovery
of Foreign Assets held in custody in that country.
"ELIGIBLE FOREIGN CUSTODIAN" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"FOREIGN ASSETS" means any of the Portfolios' investments (including foreign
currencies) for which the primary market is outside the United States and such
cash and cash equivalents as are reasonably necessary to effect the Portfolios'
transactions in such investments.
"FOREIGN CUSTODY MANAGER" has the meaning set forth in section (a)(2) of Rule
17f-5.
"MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund, on the Portfolios' behalf, determines to place Foreign Assets in a country
outside the United States (i) because required by law or regulation; (ii)
because securities cannot be withdrawn from such foreign securities depository
or clearing agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing agency is not
consistent with prevailing or developing custodial or market practices.
SECTION 3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by the Board of Trustees, hereby delegates to
the Custodian with respect to the Portfolios, subject to Section (b) of Rule
17f-5, the responsibilities set forth in this Section 3 with respect to Foreign
Assets of the Portfolios held outside the United States, and the Custodian
hereby accepts such delegation, as Foreign Custody Manager with respect to the
Portfolios.
SECTION 3.3. COUNTRIES COVERED. The Foreign Custody Manager shall be
responsible for performing the delegated responsibilities defined below only
with respect to the countries and custody arrangements for each such country
listed on Schedule A of this Contract, which may be
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amended from time to time by the Foreign Custody Manager. The Foreign Custody
Manager shall list on Schedule A the Eligible Foreign Custodians selected by the
Foreign Custody Manager to maintain the assets of the Portfolios. Mandatory
Securities Depositories are listed on Schedule B to this Contract, which may be
amended from time to time by the Foreign Custody Manager. The Foreign Custody
Manager will provide amended versions of Schedules A and B in accordance with
Section 3.7 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions
to open an account or to place or maintain Foreign Assets in a country listed on
Schedule A, and the fulfillment by the Fund on behalf of the Portfolios of the
applicable account opening requirements for the country, the Foreign Custody
Manager shall be deemed to have been delegated by the Board of Trustees on
behalf of the Portfolios responsibility as Foreign Custody Manager with respect
to that country and to have accepted such delegation. Following the receipt of
Proper Instructions directing the Foreign Custody Manager to close the account
of a Portfolio with the Eligible Foreign Custodian selected by the Foreign
Custody Manager in a designated country, the delegation by the Board of Trustees
on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that
country shall be deemed to have been withdrawn and the Custodian shall
immediately cease to be the Foreign Custody Manager of the Portfolios with
respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated
responsibilities with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties agree in
writing) after receipt of any such notice by the Fund, the Custodian shall have
no further responsibility as Foreign Custody Manager to the Fund with respect to
the country as to which the Custodian's acceptance of delegation is withdrawn.
SECTION 3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the
provisions of this Section 3, the Portfolios' Foreign Custody Manager may place
and maintain the Foreign Assets in the care of the Eligible Foreign Custodian
selected by the Foreign Custody Manager in each country listed on Schedule A, as
amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager
to place or maintain Foreign Assets with an Eligible Foreign Custodian, the
Foreign Custody Manager shall determine that the Foreign Assets will be subject
to reasonable care, based on the standards applicable to custodians in the
country in which the Foreign Assets will be held by that Eligible Foreign
Custodian, after considering all factors relevant to the safekeeping of such
assets, including, without limitation:
(i) the Eligible Foreign Custodian's practices, procedures, and
internal controls, including, but not limited to, the physical
protections available for certificated
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securities (if applicable), its methods of keeping custodial
records, and its securitY and data protection practices;
(ii) whether the Eligible Foreign Custodian has the financial
strength to provide reasonable care for Foreign Assets;
(iii) the Eligible Foreign Custodian's general reputation and
standing and, in the case of a foreign securities depository
or clearing agency which is not a Mandatory Securities
Depository, the foreign securities depository's or clearing
agency's operating history and the number of participants in
the foreign securities depository or clearing agency; and
(iv) whether the Fund will have jurisdiction over and be able to
enforce judgments against the Eligible Foreign Custodian, such
as by virtue of the existence of any offices of the Eligible
Foreign Custodian in the United States or the Eligible Foreign
Custodian's consent to service of process in the United
States.
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody
Manager shall determine that the contract (or the rules or established practices
or procedures in the case of an Eligible Foreign Custodian that is a foreign
securities depository or clearing agency) governing the foreign custody
arrangements with each Eligible Foreign Custodian selected by the Foreign
Custody Manager will provide reasonable care for the Foreign Assets held by that
Eligible Foreign Custodian based on the standards applicable to custodians in
the particular country.
Each such contract shall include provisions that provide:
(i) for indemnification or insurance arrangements (or any
combination of the foregoing) such that each Portfolio will be
adequately protected against the risk of loss of the Foreign
Assets held in accordance with such contract;
(ii) that the Foreign Assets will not be subject to any right,
security interest, or lien or claim of any kind in favor of
the Eligible Foreign Custodian or its creditors except a claim
of payment for their safe custody or administration or, in the
case of cash deposits, liens or rights in favor of creditors
of the Eligible Foreign Custodian arising under bankruptcy,
insolvency, or similar laws;
(iii) that beneficial ownership of the Foreign Assets will be freely
transferable without the payment of money or value other than
for safe custody or administration;
(iv) that adequate records will be maintained identifying the
Foreign Assets as belonging to the applicable Portfolio or as
being held by a third party for the benefit of such Portfolio;
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(v) that the independent public accountants for each Portfolio
will be given access to those records or confirmation of the
contents of those records; and
(vi) that the Fund will receive periodic reports with respect to
the safekeeping of the Foreign Assets, including, but not
limited to, notification of any transfer of the Foreign Assets
to or from a Portfolio's account or a third party account
containing the Foreign Assets held for the benefit of the
Portfolio,
or, in lieu of any or all of the provisions set forth in (i) through (vi) above,
such other provisions that the Foreign Custody Manager determines will provide,
in their entirety, the same or greater level of care and protection for the
Foreign Assets as the provisions set forth in (i) through (vi) above, in their
entirety.
3.4.3. MONITORING. In each case in which the Foreign Custody Manager
maintains Foreign Assets with an Eligible Foreign Custodian selected by the
Foreign Custody Manager, the Foreign Custody Manager shall establish a system to
monitor (i) the appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (ii) the contract governing the custody
arrangements established by the Foreign Custody Manager with the Eligible
Foreign Custodian. In the event the Foreign Custody Manager determines that the
custody arrangements with an Eligible Foreign Custodian it has selected are no
longer appropriate, the Foreign Custody Manager shall notify the Board of
Trustees in accordance with Section 3.7 hereunder.
SECTION 3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For
purposes of this Section 3, the Board of Trustees shall be deemed to have
considered and determined to accept such Country Risk as is incurred by placing
and maintaining the Foreign Assets in each country for which the Custodian is
serving as Foreign Custody Manager of the Portfolios. The Fund, on behalf of the
Portfolios, and the Custodian each expressly acknowledge that the Foreign
Custody Manager shall not be delegated any responsibilities under this Section 3
with respect to Mandatory Securities Depositories.
SECTION 3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF THE
PORTFOLIOS. In performing the responsibilities delegated to it, the Foreign
Custody Manager agrees to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would exercise.
SECTION 3.7. REPORTING REQUIREMENTS. The Foreign Custody Manager shall
report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian
and the placement of such Foreign Assets with another Eligible Foreign Custodian
by providing to the Board of Trustees amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager shall make written reports
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notifying the Board of Trustees of any other material change in the foreign
custody arrangements of the Portfolios described in this Article 3 after the
occurrence of the material change.
SECTION 3.8. REPRESENTATIONS WITH RESPECT TO RULE 17F-5. The Foreign
Custody Manager represents to the Fund that it is a U.S. Bank as defined in
section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the
Board of Trustees has determined that it is reasonable for the Board of Trustees
to rely on the Custodian to perform the responsibilities delegated pursuant to
this Agreement to the Custodian as the Foreign Custody Manager of the
Portfolios.
SECTION 3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN
CUSTODY MANAGER. The Board of Trustees' delegation to the Custodian as Foreign
Custody Manager of the Portfolios shall be effective as of the date of execution
of this Agreement and shall remain in effect until terminated at any time,
without penalty, by written notice from the terminating party to the
non-terminating party. Termination will become effective thirty (30) days after
receipt by the non-terminating party of such notice. The provisions of Section
3.3 hereof shall govern the delegation to and termination of the Custodian as
Foreign Custody Manager of the Portfolios with respect to designated countries.
SECTION 4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS
HELD OUTSIDE OF THE UNITED STATES
SECTION 4.1 DEFINITIONS. Capitalized terms in this Section 4 shall
-----------
have the following meanings:
"FOREIGN SECURITIES SYSTEM" means either a clearing agency or a securities
depository listed on Schedule A hereto or a Mandatory Securities Depository
listed on Schedule B hereto.
"FOREIGN SUB-CUSTODIAN" means a foreign banking institution serving as an
Eligible Foreign Custodian.
SECTION 4.2. HOLDING SECURITIES. The Custodian shall identify on its
books as belonging to the Portfolios the foreign securities held by each Foreign
Sub-Custodian or Foreign Securities System. The Custodian may hold foreign
securities for all of its customers, including the Portfolios, with any Foreign
Sub-Custodian in an account that is identified as belonging to the Custodian for
the benefit of its customers, PROVIDED HOWEVER, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii) the Custodian shall require that securities so held by the
Foreign Sub-Custodian be held separately from any assets of such Foreign
Sub-Custodian or of other customers of such Foreign Sub-Custodian.
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SECTION 4.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be
maintained in a Foreign Securities System in a designated country only through
arrangements implemented by the Foreign Sub-Custodian in such country pursuant
to the terms of this Agreement.
SECTION 4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN SECURITIES. The Custodian or a Foreign
Sub-Custodian shall release and deliver foreign securities of the Portfolios
held by such Foreign Sub-Custodian, or in a Foreign Securities System account,
only upon receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following cases:
(i) upon the sale of such foreign securities for the Portfolios in
accordance with reasonable market practice in the country
where such foreign securities are held or traded, including,
without limitation: (A) delivery against expectation of
receiving later payment; or (B) in the case of a sale effected
through a Foreign Securities System in accordance with the
rules governing the operation of the Foreign Securities
System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolios;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian or such
Foreign Sub-Custodian) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with market
custom; PROVIDED that in any such case the Foreign
Sub-Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving payment for such securities except as may arise from
the Foreign Sub-Custodian's own negligence or willful
misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of
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such securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(ix) or delivery as security in connection with any borrowing by
the Portfolios requiring a pledge of assets by the Portfolios;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper trust purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions, a copy of a Certified
Resolution specifying the foreign securities to be delivered,
setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom delivery of such
securities shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed appropriate by
the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of
a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, by (A)
delivering money to the seller thereof or to a dealer therefor
(or an agent for such seller or dealer) against expectation of
receiving later delivery of such foreign securities; or (B) in
the case of a purchase effected through a Foreign Securities
System, in accordance with the rules governing the operation
of such Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio,
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Agreement, legal fees, accounting fees, and other
operating expenses;
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(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other proper trust purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions, a copy of a Certified
Resolution specifying the amount of such payment, setting
forth the purpose for which such payment is to be made,
declaring such purpose to be a proper trust purpose, and
naming the person or persons to whom such payment is to be
made.
4.4.3. MARKET CONDITIONS. Notwithstanding any provision of this
Agreement to the contrary, settlement and payment for Foreign Assets received
for the account of the Portfolios and delivery of Foreign Assets maintained for
the account of the Portfolios may be effected in accordance with the customary
established securities trading or processing practices and procedures in the
country or market in which the transaction occurs, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) with the expectation of
receiving later payment for such Foreign Assets from such purchaser or dealer.
SECTION 4.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities
maintained in the custody of a Foreign Custodian (other than bearer securities)
shall be registered in the name of the applicable Portfolio or in the name of
the Custodian or in the name of any Foreign Sub-Custodian or in the name of any
nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to
hold any such nominee harmless from any liability as a holder of record of such
foreign securities. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of a Portfolio under the terms of this
Agreement unless the form of such securities and the manner in which they are
delivered are in accordance with reasonable market practice.
SECTION 4.6. BANK ACCOUNTS. A bank account or bank accounts opened and
maintained outside the United States on behalf of a Portfolio with a Foreign
Sub-Custodian shall be subject only to draft or order by the Custodian or such
Foreign Sub-Custodian, acting pursuant to the terms of this Agreement to hold
cash received by or from or for the account of the Portfolio.
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SECTION 4.7. COLLECTION OF INCOME. The Custodian shall use reasonable
endeavors to collect all income and other payments in due course with respect to
the Foreign Assets held hereunder to which the Portfolios shall be entitled and
shall credit such income, as collected, to the applicable Portfolio. In the
event that extraordinary measures are required to collect such income, the Fund
and the Custodian shall consult as to such measures and as to the compensation
and expenses of the Custodian relating to such measures.
SECTION 4.8. PROXIES. The Custodian will generally with respect to the
foreign securities held under this Section 4 use its reasonable endeavors to
facilitate the exercise of voting and other shareholder proxy rights, subject
always to the laws, regulations and practical constraints that may exist in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
SECTION 4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The
Custodian shall transmit promptly to the Fund written information (including,
without limitation, pendency of calls and maturities of foreign securities and
expirations of rights in connection therewith) received by the Custodian via the
Foreign Sub-Custodians from issuers of the foreign securities being held for the
account of the Portfolios. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Fund written information so received by
the Custodian from issuers of the foreign securities whose tender or exchange is
sought or from the party (or its agents) making the tender or exchange offer.
The Custodian shall not be liable for any untimely exercise of any tender,
exchange or other right or power in connection with foreign securities or other
property of the Portfolios at any time held by it unless (i) the Custodian or
the respective Foreign Sub-Custodian is in actual possession of such foreign
securities or property and (ii) the Custodian receives Proper Instructions with
regard to the exercise of any such right or power, and both (i) and (ii) occur
at least three (3) business days prior to the date on which such right or power
is to be exercised.
SECTION 4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN
SECURITIES SYSTEMS. Each agreement pursuant to which the Custodian employs as a
Foreign Sub-Custodian shall, to the extent possible, require the Foreign
Sub-Custodian to exercise reasonable care in the performance of its duties and,
to the extent possible, to indemnify, and hold harmless, the Custodian from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the Foreign Sub-Custodian's performance of such obligations. At
the Fund's election, the Portfolios shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a Foreign
Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Portfolios have not been made
whole for any such loss, damage, cost, expense, liability or claim.
SECTION 4.11. TAX LAW. The Custodian shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund, the
Portfolios or the Custodian as custodian of
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the Portfolios by the tax law of the United States or of any state or political
subdivision thereof. It shall be the responsibility of the Fund to notify the
Custodian of the obligations imposed on the Fund with respect to the Portfolios
or the Custodian as custodian of the Portfolios by the tax law of countries
other than those mentioned in the above sentence, including responsibility for
withholding and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of the
Custodian with regard to such tax law shall be to use reasonable efforts to
assist the Fund with respect to any claim for exemption or refund under the tax
law of countries for which the Fund has provided such information.
SECTION 4.12. CONFLICT. If the Custodian is delegated the
responsibilities of Foreign Custody Manager pursuant to the terms of Section 3
hereof, in the event of any conflict between the provisions of Sections 3 and 4
hereof, the provisions of Section 3 shall prevail.
SECTION 5. PAYMENTS FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares thereof issued or sold from time to
time by the Fund. The Custodian will provide timely notification to the Fund on
behalf of each such Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Fund's Declaration of Trust and any applicable votes of the
Board of Trustees pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial bank designated
by the redeeming shareholders. In connection with the redemption or repurchase
of Shares, the Custodian shall honor checks drawn on the Custodian by a holder
of Shares, which checks have been furnished by the Fund to the holder of Shares,
when presented to the Custodian in accordance with such procedures and controls
as are mutually agreed upon from time to time between the Fund and the
Custodian.
SECTION 6. PROPER INSTRUCTIONS
Proper Instructions as used throughout this Agreement means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person
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<PAGE>
authorized to give such instructions with respect to the transaction involved.
The Fund shall cause all oral instructions to be confirmed in writing. Upon
receipt of a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Trustees accompanied by a detailed description of
procedures approved by the Board of Trustees, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Trustees and the Custodian are satisfied that
such procedures afford adequate safeguards for the Portfolios' assets. For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three - party agreement which requires
a segregated asset account in accordance with Section 2.10.
SECTION 7. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Agreement, PROVIDED that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Trustees.
SECTION 8. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a Certified Resolution as conclusive
evidence (a) of the authority of any person to act in accordance with such
resolution or (b) of any determination or of any action by the Board of Trustees
pursuant to the Fund's Declaration of Trust as described in such resolution, and
such resolution may be considered as in full force and effect until receipt by
the Custodian of written notice to the contrary.
20
<PAGE>
SECTION 9. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND
CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of each Portfolio and/or compute the net asset value per Share of the
outstanding Shares or, if directed in writing to do so by the Fund on behalf of
the Portfolio, shall itself keep such books of account and/or compute such net
asset value per Share. If so directed, the Custodian shall also calculate daily
the net income of the Portfolio as described in the Prospectus and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per Share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Prospectus.
SECTION 10. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Agreement in
such manner as will meet the obligations of the Fund under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the SEC. The Custodian shall, at the Fund's request, supply the Fund with a
tabulation of securities owned by each Portfolio and held by the Custodian and
shall, when requested to do so by the Fund and for such compensation as shall be
agreed upon between the Fund and the Custodian, include certificate numbers in
such tabulations.
SECTION 11. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A, and Form N-SAR or other annual reports to the SEC and with respect to
any other requirements thereof.
SECTION 12. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
21
<PAGE>
options on futures contracts, including securities deposited and/or maintained
in a U.S. Securities System or a Foreign Securities System (collectively
referred to herein as the "SECURITIES SYSTEMS"), relating to the services
provided by the Custodian under this Agreement; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
SECTION 13. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
SECTION 14. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Agreement,
but shall be kept indemnified by and shall be without liability to the Fund for
any action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. The Custodian shall be
without liability to the Fund and the Portfolios for any loss, liability, claim
or expense resulting from or caused by anything which is (A) part of Country
Risk (as defined in Section 3 hereof), including without limitation
nationalization, expropriation, currency restrictions, or acts of war,
revolution, riots or terrorism, or (B) part of the "prevailing country risk" of
the Portfolios, as such term is used in SEC Release Nos. IC-22658; IS-1080 (May
12, 1997) or as such term or other similar terms are now or in the future
interpreted by the SEC or by the staff of the Division of Investment Management
thereof.
Except as may arise from the Custodian's own negligence or willful
misconduct or the negligence or willful misconduct of a sub-custodian or agent,
the Custodian shall be without liability to the Fund for any loss, liability,
claim or expense resulting from or caused by (i) events or circumstances beyond
the reasonable control of the Custodian or any sub-custodian or Securities
System or any agent or nominee of any of the foregoing, including, without
limitation, the interruption, suspension or restriction of trading on or the
closure of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications disruptions, work
stoppages, natural disasters, or other similar events or acts; (ii) errors by
the Fund or
22
<PAGE>
the Investment Advisor in their instructions to the Custodian provided such
instructions have been in accordance with this Agreement; (iii) the insolvency
of or acts or omissions by a Securities System; (iv) any delay or failure of any
broker, agent or intermediary, central bank or other commercially prevalent
payment or clearing system to deliver to the Custodian's sub-custodian or agent
securities purchased or in the remittance or payment made in connection with
securities sold; (v) any delay or failure of any company, corporation, or other
body in charge of registering or transferring securities in the name of the
Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to transfer such
securities including non-receipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due to
any disorder in market infrastructure with respect to any particular security or
Securities System; and (vii) changes to any existing, or any provision of any
future, law or regulation or order of the United States of America, or any state
thereof, or any other country, or political subdivision thereof or of any court
of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a Foreign
Sub-Custodian (as defined in Section 4 hereof) to the same extent as set forth
with respect to sub-custodians generally in this Agreement.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable Portfolio shall
be security therefor and should the Fund fail to repay the Custodian promptly,
the Custodian shall be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
SECTION 15. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of
23
<PAGE>
the parties hereto and may be terminated by either party by an instrument in
writing delivered or mailed, postage prepaid to the other party, such
termination to take effect not sooner than sixty (60) days after the date of
such delivery or mailing; PROVIDED, however that the Custodian shall not with
respect to a Portfolio act under Section 2.8 hereof in the absence of receipt of
an initial certificate of the Secretary or an Assistant Secretary that the Board
of Trustees has approved the initial use of a particular Securities System by
such Portfolio, as required by Rule 17f-4 under the 1940 Act and that the
Custodian shall not with respect to a Portfolio act under Section 2.9 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the initial use of
the Direct Paper System by such Portfolio; PROVIDED FURTHER, however, that the
Fund shall not amend or terminate this Agreement in contravention of any
applicable federal or state regulations, or any provision of the Fund's
Declaration of Trust, and further provided, that the Fund on behalf of one or
more of the Portfolios may at any time by action of its Board of Trustees (i)
substitute another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this Agreement
in the event of the appointment of a conservator or receiver for the Custodian
by the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Agreement, the Fund on behalf of each
applicable Portfolio shall pay to the Custodian such compensation as may be due
as of the date of such termination and shall likewise reimburse the Custodian
for its costs, expenses and disbursements.
SECTION 16. SUCCESSOR CUSTODIAN
If a successor custodian for one or more Portfolios shall be appointed
by the Board of Trustees, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities of each applicable Portfolio then held by it
hereunder and shall transfer to an account of the successor custodian all of the
securities of each such Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a Certified Resolution, deliver at the office of
the Custodian and transfer such securities, funds and other properties in
accordance with such resolution.
In the event that no written order designating a successor custodian or
Certified Resolution shall have been delivered to the Custodian on or before the
date when such termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, doing business in Boston, Massachusetts, or New York, New York, of
its own selection, having an aggregate capital, surplus, and undivided profits,
as shown by its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Custodian on behalf of each
applicable Portfolio and all instruments held by the Custodian relative thereto
and all other property held by it under this Agreement on behalf of each
applicable Portfolio, and to transfer to an account of such successor custodian
all of the securities of each such
24
<PAGE>
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the Certified Resolution to appoint a successor
custodian, the Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement relating to the duties
and obligations of the Custodian shall remain in full force and effect.
SECTION 17. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Agreement, the Custodian and
the Fund on behalf of each of the Portfolios, may from time to time agree on
such provisions interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, PROVIDED that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Fund's Declaration of
Trust. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
SECTION 18. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to those set forth on Schedule C with respect to which it desires to
have the Custodian render services as custodian under the terms hereof, it shall
so notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
SECTION 19. MASSACHUSETTS LAW TO APPLY
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
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<PAGE>
SECTION 20. PRIOR AGREEMENTS
This AGREEMENT supersedes and terminates, as of the date hereof, all
prior Agreements between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
SECTION 21. NOTICES
Any notice, instruction or other instrument required to be given
hereunder may be delivered in person to the offices of the parties as set forth
herein during normal business hours or delivered prepaid registered mail or by
telex, cable or telecopy to the parties at the following addresses or such other
addresses as may be notified by any party from time to time.
To the Fund: EVERGREEN FIXED INCOME TRUST
c/o First Union Corporation - Legal Division
200 Berkeley Street
Boston, Massachusetts 02116-5034
Attention: Terrence J. Cullen, Esq.
Telephone: 617-210-3200
Telecopy: 617-210-3468
To the Custodian: STATE STREET BANK AND TRUST COMPANY
One Heritage Drive, 3rd Floor South
North Quincy, Massachusetts 02171
Attention: Ronald F. Mauriello
Telephone: 617-985-1891
Telecopy: 617-537-5203
Such notice, instruction or other instrument shall be deemed to have
been served in the case of a registered letter at the expiration of five
business days after posting, in the case of cable twenty-four hours after
dispatch and, in the case of telex, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have been received at the
next time after delivery when normal business hours commence and in the case of
cable, telex or telecopy on the business day after the receipt thereof. Evidence
that the notice was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
SECTION 22. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other
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<PAGE>
similar process. The parties hereto all/each agree that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.
SECTION 23. SHAREHOLDER COMMUNICATIONS ELECTION
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [ ] The Custodian is not authorized to release the Fund's
name, address, and share positions.
27
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of September 18, 1997.
EVERGREEN FIXED INCOME TRUST FUND SIGNATURE ATTESTED TO BY:
By: /s/ John J. Pileggi By: /s/ George O. Martinez
------------------------- ---------------------------
Name: John J. Pileggi Name: George O. Martinez
Title: President Title: Secretary
STATE STREET BANK AND TRUST COMPANY SIGNATURE ATTESTED TO BY:
By: /s/ Ronald E. Logue By: /s/ Glenn Ciotti
------------------------ ---------------------------
Name: Ronald E. Logue Name: Glenn Ciotti
Title: Executive Vice President Title: VP and Assoc. Counsel
28
<PAGE>
STATE STREET SCHEDULE A
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
Country Subcustodian Non-Mandatory
Depositories
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der oesterreichischen --
Sparkasen AG
Bahrain The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale Bank --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. --
People's Republic The Hongkong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
Croatia Privredana banka Zagreb d.d --
Cyprus Barclays Bank PLC --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka A.S.
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Ltd. --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A Bank of Greece
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
India Deutsche Bank AG; --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Trust and Merchant Bank --
Japan The Daiwa Bank, Limited; Japan Securities
The Fuji Bank, Limited Depository
Center;
Jordan The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking --
Corporation Limited
Latvia Hansabank --
Lebanon The British Bank of the Middle East Custodian and
(as delegate of the Hongkong and Clearing Center
Shanghai Banking Corporation Limited) of Financial
Instruments
for Lebanon
(MIDCLEAR)
S.A.L.;
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa -
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman The British Bank of the Middle East --
(as delegate of the Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank Poland S.A. --
Portugal Banco Comercial Portugues --
Romania ING Bank, N.V. --
Russia Credit Suisse First Boston, Zurich --
via Credit Suisse First Boston
Limited, Moscow
Singapore The Development Bank --
of Singapore Ltd.
Slovak Republic Ceskoslovenska Obchodna -
Banka A.S.
Slovenia Banka Creditanstalt d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Barclays Bank of Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland Union Bank of Switzerland --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad & Tobago Republic Bank Ltd. --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
United Kingdom State Street Bank and Trust --
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
Euroclear (The Euroclear System)
Cedel (Cedel Bank, societe anonyme)
INTERSETTLE (for EASDAQ Securities)
<PAGE>
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
Country Mandatory Depositories
Argentina -Caja de Valores S.A.;
-CRYL
Australia -Austraclear Limited;
-Reserve Bank Information and
Transfer System
Austria -Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium -Caisse Interprofessionnelle de Depots et
de Virements de Titres S.A.;
-Banque Nationale de Belgique
Brazil - Camara de Liquidacao de Sao Paulo, (Calispa);
-Bolsa de Valores de Rio de Janeiro
- All SSB clients presently use Calispa
-Central de Custodia e de Liquidacao Financeira
de Titulos
-Banco Central do Brasil,
Systema Especial de Liquidacao e
Custodia
Bulgaria - Central Depository AD
Canada -The Canadian Depository
for Securities Limited; West Canada
Depository Trust Company [depositories linked]
People's Republic -Shanghai Securities Central Clearing and
of China Registration Corporation;
-Shenzhen Securities Central Clearing Co., Ltd.
Croatia Ministry of Finance
Czech Republic --Stredisko cennych papiru;
-Czech National Bank
Denmark -Vaerdipapircentralen - The Danish
Securities Center
Egypt -Misr Company for Clearing, Settlement,
and Central Depository
Estonia - Eesti Vaartpaberite Keskdepositooruim
Finland -The Finnish Central Securities
Depository
France -Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres;
-Banque de France,
Saturne System
Germany -The Deutscher Kassenverein AG
Greece -The Central Securities Depository
(Apothetirion Titlon A.E.);
Hong Kong -The Central Clearing and
Settlement System;
-The Central Money Markets Unit
Hungary -The Central Depository and Clearing
House (Budapest) Ltd.
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
India The National Securities Depository Limited
Indonesia -Bank of Indonesia
Ireland -The Central Bank of Ireland,
The Gilt Settlement Office
Israel -The Clearing House of the
Tel Aviv Stock Exchange;
-Bank of Israel
Italy -Monte Titoli S.p.A.;
-Banca d'Italia
Japan -Bank of Japan Net System
Republic of Korea -Korea Securities Depository Corporation
Latvia - The Latvian Central Depository
Lebanon -The Central Bank of Lebanon
Lithuania - The Central Securities Depository of Lithuania
Malaysia -Malaysian Central Depository Sdn.
Bhd.;
-Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
Systems
Mauritius -The Central Depository & Settlement
Co. Ltd.
Mexico -S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores);
The Netherlands -Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. ("NECIGEF");
New Zealand -New Zealand Central Securities
Depository Limited
Norway -Verdipapirsentralen - The Norwegian
Registry of Securities
Oman -Muscat Securities Market
Peru -Caja de Valores y Liquidaciones
(CAVALI, S.A.)
Philippines -The Philippines Central Depository Inc.
-The Book-Entry-System of Bangko
Sentral ng Pilipinas;
-The Registry of Scripless Securities of the
Bureau of the Treasury
Poland -The National Depository of Securities
(Krajowy Depozyt Papierow Wartos'ciowych);
-National Bank of Poland
Portugal -Central de Valores Mobiliarios
Romania -National Securities Clearing, Settlement and
Depository Co.;
-Bucharest Stock Exchange;
-National Bank of Romania
Singapore -The Central Depository (Pvt.)
Limited;
-Monetary Authority of Singapore
Slovak Republic -Stredisko Cennych Papierov;
-National Bank of Slovakia
Slovenia - Klirinsko Depotna Bruzba
South Africa -The Central Depository Limited
Spain -Servicio de Compensacion y
Liquidacion de Valores, S.A.;
-Banco de Espana,
Anotaciones en Cuenta
Sri Lanka -Central Depository System
(Pvt) Limited
Sweden -Vardepapperscentralen VPC AB -
The Swedish Central Securities Depository
Switzerland -Schweizerische Effekten - Giro AG;
Taiwan - R.O.C. -The Taiwan Securities Central
Depository Company, Ltd.
Thailand -Thailand Securities Depository
Company Limited
Tunisia -STICODEVAM;
-Central Bank of Tunisia;
-Tunisian Treasury
Turkey -Takas ve Saklama Bankasi A.S.;
-Central Bank of Turkey
United Kingdom -The Bank of England,
The Central Gilts Office;
The Central Moneymarkets Office
Uruguay -Central Bank of Uruguay
Zambia -Lusaka Central Depository
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
<PAGE>
SCHEDULE C
Pursuant to the custodian agreement between Evergreen Fixed Income Trust
(the"Fund") and State Street Bank and Trust Company dated September 18, 1997
(the "Agreement"), as of January 12, 1998, the Fund had made the following
Portfolios (as such term is defined in the Agreement) subject to the Agreement:
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Evergreen High Yield Bond Fund
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate Term Government Securities fund
Evergreen Short-Intermediate Bond Fund
<PAGE>
DATA ACCESS SERVICES ADDENDUM TO CUSTODIAN AGREEMENT
Addendum to the Custodian Agreement between EVERGREEN FIXED INCOME
TRUST (the "Customer") and State Street Bank and Trust Company ("State Street").
PREAMBLE
WHEREAS, State Street has been appointed as custodian of certain assets
of the Customer pursuant to a certain Custodian Agreement (the "Custodian
Agreement") dated as of September 18, 1997;
WHEREAS, State Street has developed and utilizes proprietary accounting
and other systems, including State Street's proprietary Multicurrency HORIZONSM
Accounting System, in its role as custodian of the Customer, and maintains
certain Customer-related data ("Customer Data") in databases under the control
and ownership of State Street (the "Data Access Services"); and
WHEREAS, State Street makes available to the Customer certain Data
Access Services solely for the benefit of the Customer, and intends to provide
additional services, consistent with the terms and conditions of this Addendum.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the parties
agree as follows:
1. SYSTEM AND DATA ACCESS SERVICES
a. SYSTEM. Subject to the terms and conditions of this Addendum, State
Street hereby agrees to provide the Customer with access to State Street's
Multicurrency HORIZONSM Accounting System and the other information systems
(collectively, the "System") as described in Attachment A, on a remote basis for
the purpose of obtaining reports and information, solely on computer hardware,
system software and telecommunication links as listed in Attachment B (the
"Designated Configuration") of the Customer, or certain third parties approved
by State Street that serve as investment advisors or investment managers of the
Customer (the "Investment Advisor"), and solely with respect to the Customer or
on any designated substitute or back-up equipment configuration with State
Street's written consent, such consent not to be unreasonably withheld.
b. DATA ACCESS SERVICES. State Street agrees to make available to the
Customer the Data Access Services subject to the terms and conditions of this
Addendum and data access operating standards and procedures as may be issued by
State Street from time to time. The ability of the Customer to originate
electronic instructions to State Street on behalf of the Customer in order to
(i) effect the transfer or movement of cash or securities held under custody by
State Street or (ii) transmit accounting or other information (such transactions
are referred to herein as "Client Originated Electronic Financial
Instructions"), and (iii) access data for the purpose of reporting and analysis,
shall be deemed to be Data Access Services for purposes of this Addendum.
c. ADDITIONAL SERVICES. State Street may from time to time agree to
make available to the Customer additional Systems that are not described in the
attachments to this Addendum. In the absence of any other written agreement
concerning such additional systems, the term "System" shall include, and this
Addendum shall govern, the Customer's access to and use of any additional System
made available by State Street and/or accessed by the Customer.
2. NO USE OF THIRD PARTY SYSTEMS-LEVEL SOFTWARE
State Street and the Customer acknowledge that in connection with the
Data Access Services provided under this Addendum, the Customer will have
access, through the Data Access Services, to Customer Data and to functions of
State Street's proprietary systems; provided, however that in no event will the
Customer have direct access to any third party systems-level software that
retrieves data for, stores data from, or otherwise supports the System.
3. LIMITATION ON SCOPE OF USE
a. DESIGNATED EQUIPMENT; DESIGNATED LOCATION. The System and the Data
Access Services shall be used and accessed solely on and through the Designated
Configuration at the offices of the Customer or the Investment Advisor located
in Boston, Massachusetts ("Designated Location").
b. DESIGNATED CONFIGURATION; TRAINED PERSONNEL. State Street shall be
responsible for supplying, installing and maintaining the Designated
Configuration at the Designated Location. State Street and the Customer agree
that each will engage or retain the services of trained personnel to enable both
parties to perform their respective obligations under this Addendum. State
Street agrees to use commercially reasonable efforts to maintain the System so
that it remains serviceable, provided, however, that State Street does not
guarantee or assure uninterrupted remote access use of the System.
c. SCOPE OF USE. The Customer will use the System and the Data Access
Services only for the processing of securities transactions, the keeping of
books of account for the Customer and accessing data for purposes of reporting
and analysis. The Customer shall not, and shall cause its employees and agents
not to (i) permit any third party to use the System or the Data Access Services,
(ii) sell, rent, license or otherwise use the System or the Data Access Services
in the operation of a service bureau or for any purpose other than as expressly
authorized under this Addendum, (iii) use the System or the Data Access Services
for any fund, trust or other investment vehicle without the prior written
consent of State Street, (iv) allow access to the System or the Data Access
Services through terminals or any other computer or telecommunications
facilities located outside the Designated Locations, (v) allow or cause any
information (other than portfolio holdings, valuations of portfolio holdings,
and other information reasonably necessary for the management or distribution of
the assets of the Customer) transmitted from State Street's databases, including
data from third party sources, available through use of the System or the Data
Access Services to be redistributed or retransmitted to another computer,
terminal or other device for other than use for or on behalf of the Customer or
(vi) modify the System in any way, including without limitation, developing any
software for or attaching any devices or computer programs to any equipment,
system, software or database which forms a part of or is resident on the
Designated Configuration.
d. OTHER LOCATIONS. Except in the event of an emergency or of a planned
System shutdown, the Customer's access to services performed by the System or to
Data Access Services at the Designated Location may be transferred to a
different location only upon the prior written consent of State Street. In the
event of an emergency or System shutdown, the Customer may use any back-up site
included in the Designated Configuration or any other back-up site agreed to by
State Street, which agreement will not be unreasonably withheld. The Customer
may secure from State Street the right to access the System or the Data Access
Services through computer and telecommunications facilities or devices complying
with the Designated Configuration at additional locations only upon the prior
written consent of State Street and on terms to be mutually agreed upon by the
parties.
e. TITLE. Title and all ownership and proprietary rights to the System,
including any enhancements or modifications thereto, whether or not made by
State Street, are and shall remain with State Street.
f. NO MODIFICATION. Without the prior written consent of State Street,
the Customer shall not modify, enhance or otherwise create derivative works
based upon the System, nor shall the Customer reverse engineer, decompile or
otherwise attempt to secure the source code for all or any part of the System.
g. SECURITY PROCEDURES. The Customer shall comply with data access
operating standards and procedures and with user identification or other
password control requirements and other security procedures as may be issued
from time to time by State Street for use of the System on a remote basis and to
access the Data Access Services. The Customer shall have access only to the
Customer Data and authorized transactions agreed upon from time to time by State
Street and, upon notice from State Street, the Customer shall discontinue remote
use of the System and access to Data Access Services for any security reasons
cited by State Street; provided, that, in such event, State Street shall, for a
period not less than 180 days (or such other shorter period specified by the
Customer) after such discontinuance, assume responsibility to provide accounting
services under the terms of the Custodian Agreement.
h. INSPECTIONS. State Street shall have the right to inspect the use of
the System and the Data Access Services by the Customer and the Investment
Advisor to ensure compliance with this Addendum. The on-site inspections shall
be upon prior written notice to the Customer and the Investment Advisor and at
reasonably convenient times and frequencies so as not to result in an
unreasonable disruption of the Customer's or the Investment Advisor's business.
4. PROPRIETARY INFORMATION
a. PROPRIETARY INFORMATION. The Customer acknowledges and State Street
represents that the System and the databases, computer programs, screen formats,
report formats, interactive design techniques, documentation and other
information made available to the Customer by State Street as part of the Data
Access Services and through the use of the System constitute copyrighted, trade
secret, or other proprietary information of substantial value to State Street.
Any and all such information provided by State Street to the Customer shall be
deemed proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Customer agrees that it will hold such
Proprietary Information in the strictest confidence and secure and protect it in
a manner consistent with its own procedures for the protection of its own
confidential information and to take appropriate action by instruction or
agreement with its employees who are permitted access to the Proprietary
Information to satisfy its obligations hereunder. The Customer further
acknowledges that State Street shall not be required to provide the Investment
Advisor with access to the System unless it has first received from the
Investment Advisor an undertaking with respect to State Street's Proprietary
Information in the form of Attachment C to this Addendum. The Customer shall use
all commercially reasonable efforts to assist State Street in identifying and
preventing any unauthorized use, copying or disclosure of the Proprietary
Information or any portions thereof or any of the logic, formats or designs
contained therein.
b. COOPERATION. Without limitation of the foregoing, the Customer shall
advise State Street immediately in the event the Customer learns or has reason
to believe that any person to whom the Customer has given access to the
Proprietary Information, or any portion thereof, has violated or intends to
violate the terms of this Addendum, and the Customer will, at its expense,
co-operate with State Street in seeking injunctive or other equitable relief in
the name of the Customer or State Street against any such person.
c. INJUNCTIVE RELIEF.The Customer acknowledges that the disclosure of
any Proprietary Information, or of any information which at law or equity ought
to remain confidential, will immediately give rise to continuing irreparable
injury to State Street inadequately compensable in damages at law. In addition,
State Street shall be entitled to obtain immediate injunctive relief against the
breach or threatened breach of any of the foregoing undertakings, in addition to
any other legal remedies which may be available.
d. SURVIVAL.The provisions of this Section 4 shall survive the
termination of this Addendum.
5. LIMITATION ON LIABILITY
a. LIMITATION ON AMOUNT AND TIME FOR BRINGING ACTION. The Customer
agrees that any liability of State Street to the Customer or any third party
arising out of State Street's provision of Data Access Services or the System
under this Addendum shall be limited to the amount paid by the Customer for the
preceding 24 months for such services. In no event shall State Street be liable
to the Customer or any other party for any special, indirect, punitive or
consequential damages even if advised of the possibility of such damages. No
action, regardless of form, arising out of this Addendum may be brought by the
Customer more than two years after the Customer has knowledge that the cause of
action has arisen.
b. LIMITED WARRANTIES. NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY STATE STREET.
c. THIRD-PARTY DATA. Organizations from which State Street may obtain
certain data included in the System or the Data Access Services are solely
responsible for the contents of such data, and State Street shall have no
liability for claims arising out of the contents of such third-party data,
including, but not limited to, the accuracy thereof.
d. REGULATORY REQUIREMENTS. As between State Street and the Customer,
the Customer shall be solely responsible for the accuracy of any accounting
statements or reports produced using the Data Access Services and the System and
the conformity thereof with any requirements of law.
e. FORCE MAJEURE. Neither party shall be liable for any costs or
damages due to delay or nonperformance under this Addendum arising out of any
cause or event beyond such party's control, including without limitation,
cessation of services hereunder or any damages resulting therefrom to the other
party, or the Customer as a result of work stoppage, power or other mechanical
failure, computer virus, natural disaster, governmental action, or communication
disruption.
6. INDEMNIFICATION
The Customer agrees to indemnify and hold State Street harmless from any loss,
damage or expense including reasonable attorney's fees, (a "loss") suffered by
State Street arising from (i) the negligence or willful misconduct in the use by
the Customer of the Data Access Services or the System, including any loss
incurred by State Street resulting from a security breach at the Designated
Location or committed by the Customer's employees or agents or the Investment
Advisor and (ii) any loss resulting from incorrect Client Originated Electronic
Financial Instructions. State Street shall be entitled to rely on the validity
and authenticity of Client Originated Electronic Financial Instructions without
undertaking any further inquiry as long as such instruction is undertaken in
conformity with security procedures established by State Street from time to
time.
7. FEES
Fees and charges for the use of the System and the Data Access Services and
related payment terms shall be as set forth in the Custody Fee Schedule in
effect from time to time between the parties (the "Fee Schedule"). Any tariffs,
duties or taxes imposed or levied by any government or governmental agency by
reason of the transactions contemplated by this Addendum, including, without
limitation, federal, state and local taxes, use, value added and personal
property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street) shall be borne by the Customer. Any
claimed exemption from such tariffs, duties or taxes shall be supported by
proper documentary evidence delivered to State Street.
8. TRAINING, IMPLEMENTATION AND CONVERSION
a. TRAINING. State Street agrees to provide training, at a designated
State Street training facility or at the Designated Location, to the Customer's
personnel in connection with the use of the System on the Designated
Configuration. The Customer agrees that it will set aside, during regular
business hours or at other times agreed upon by both parties, sufficient time to
enable all operators of the System and the Data Access Services, designated by
the Customer, to receive the training offered by State Street pursuant to this
Addendum.
b. INSTALLATION AND CONVERSION. State Street shall be responsible for
the technical installation and conversion ("Installation and Conversion") of the
Designated Configuration. The Customer shall have the following responsibilities
in connection with Installation and Conversion of the System:
(i) The Customer shall be solely responsible for the
timely acquisition and maintenance of the hardware
and software that attach to the Designated
Configuration in order to use the Data Access
Services at the Designated Location.
(ii) State Street and the Customer each agree that they
will assign qualified personnel to actively
participate during the Installation and Conversion
phase of the System implementation to enable both
parties to perform their respective obligations under
this Addendum.
9. SUPPORT
During the term of this Addendum, State Street agrees to provide the
support services set out in Attachment D to this Addendum.
10. TERM OF ADDENDUM
a. TERM OF ADDENDUM. This Addendum shall become effective on the date
of its execution by State Street and shall remain in full force and effect until
terminated as herein provided.
b. TERMINATION OF ADDENDUM. Either party may terminate this Addendum
(i) for any reason by giving the other party at least one-hundred and eighty
days' prior written notice in the case of notice of termination by State Street
to the Customer or thirty days' notice in the case of notice from the Customer
to State Street of termination; or (ii) immediately for failure of the other
party to comply with any material term and condition of the Addendum by giving
the other party written notice of termination. In the event the Customer shall
cease doing business, shall become subject to proceedings under the bankruptcy
laws (other than a petition for reorganization or similar proceeding) or shall
be adjudicated bankrupt, this Addendum and the rights granted hereunder shall,
at the option of State Street, immediately terminate with notice to the
Customer. This Addendum shall in any event terminate as to any Customer within
90 days after the termination of the Custodian Agreement applicable to such
Customer.
c. TERMINATION OF THE RIGHT TO USE. Upon termination of this Addendum
for any reason, any right to use the System and access to the Data Access
Services shall terminate and the Customer shall immediately cease use of the
System and the Data Access Services. Immediately upon termination of this
Addendum for any reason, the Customer shall return to State Street all copies of
documentation and other Proprietary Information in its possession; provided,
however, that in the event that either party terminates this Addendum or the
Custodian Agreement for any reason other than the Customer's breach, State
Street shall provide the Data Access Services for a period of time and at a
price to be agreed upon by the parties.
11. MISCELLANEOUS
a. ASSIGNMENT; SUCCESSORS. This Addendum and the rights and obligations
of the Customer and State Street hereunder shall not be assigned by either party
without the prior written consent of the other party, except that State Street
may assign this Addendum to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by, or under common control with
State Street.
b. YEAR 2000. State Street will take all steps necessary to ensure that
its products (and those of its third-party suppliers) reflect the available
state of the art technology to offer products that are Year 2000 compliant,
including, but not limited to, century recognition of dates, calculations that
correctly compute same century and multi century formulas and date values, and
interface values that reflect the date issues arising between now and the next
one-hundred years. If any changes are required, State Street will make the
changes to its products at no cost to Customer and in a commercially reasonable
time frame and will require third-party suppliers to do likewise.
c. SURVIVAL. All provisions regarding indemnification, warranty,
liability and limits thereon, and confidentiality and/or protection of
proprietary rights and trade secrets shall survive the termination of this
Addendum.
d. ENTIRE AGREEMENT. This Addendum and the attachments hereto
constitute the entire understanding of the parties hereto with respect to the
Data Access Services and the use of the System and supersedes any and all prior
or contemporaneous representations or agreements, whether oral or written,
between the parties as such may relate to the Data Access Services or the
System, and cannot be modified or altered except in a writing duly executed by
the parties. This Addendum is not intended to supersede or modify the duties and
liabilities of the parties hereto under the Custodian Agreement or any other
agreement between the parties hereto except to the extent that any such
agreement specifically refers to the Data Access Services or the System. No
single waiver of any right hereunder shall be deemed to be a continuing waiver.
e. SEVERABILITY. If any provision or provisions of this Addendum shall
be held to be invalid, unlawful, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
f. GOVERNING LAW. This Addendum shall be interpreted and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
regard to the conflict of laws provisions thereof.
<PAGE>
ATTACHMENT A
Multicurrency HORIZONSM Accounting System
SYSTEM PRODUCT DESCRIPTION
I. The Multicurrency HORIZONSM Accounting System is designed to provide
lot level portfolio and general ledger accounting for SEC and ERISA
type requirements and includes the following services: 1) recording of
general ledger entries; 2) calculation of daily income and expense; 3)
reconciliation of daily activity with the trial balance, and 4)
appropriate automated feeding mechanisms to (i) domestic and
international settlement systems, (ii) daily, weekly and monthly
evaluation services, (iii) portfolio performance and analytic services,
(iv) customer's internal computing systems and (v) various State Street
provided information services products.
II. GlobalQuestR is designed to provide customer access to the following
information maintained on The Multicurrency HORIZONSM Accounting
System: 1) cash transactions and balances; 2) purchases and sales; 3)
income receivables; 4) tax refund receivables; 5) daily priced
positions; 6) open trades; 7) settlement status; 8) foreign exchange
transactions; 9)
trade history, and 10) daily, weekly and monthly evaluation services.
III. SAFIRESM. SaFiReSM is designed to provide the customer with the ability
to prepare its own financial reports by permitting the customer to
access customer information maintained on the Multicurrency HORIZONR
Accounting System, to organize such information in a flexible reporting
format and to have such reports printed on the customer's desktop or by
its printing provider.
<PAGE>
ATTACHMENT B
DESIGNATED CONFIGURATION
<PAGE>
ATTACHMENT C
UNDERTAKING
The undersigned understands that in the course of its employment as
Investment Advisor to EVERGREEN SELECT EQUITY TRUST (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZONSM Accounting System and other information systems
(collectively, the "System").
The undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation and other information made available to the
undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade secret,
or other proprietary information of substantial value to State Street. Any and
all such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder.
The undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
First Union National Bank
By: _________________________
Title: _________________________
Date: _________________________
<PAGE>
ATTACHMENT C-1
UNDERTAKING
The undersigned understands that in the course of its employment as
Independent Auditor to EVERGREEN SELECT EQUITY TRUST (the "Customer") it will
have access to State Street Bank and Trust Company's ("State Street")
Multicurrency HORIZON Accounting System and other information systems
(collectively, the "System").
The undersigned acknowledges that the System and the databases,
computer programs, screen formats, report formats, interactive design
techniques, documentation, and other information made available to the
Undersigned by State Street as part of the Data Access Services provided to the
Customer and through the use of the System constitute copyrighted, trade secret,
or other proprietary information of substantial value to State Street. Any and
all such information provided by State Street to the Undersigned shall be deemed
proprietary and confidential information of State Street (hereinafter
"Proprietary Information"). The Undersigned agrees that it will hold such
Proprietary Information in confidence and secure and protect it in a manner
consistent with its own procedures for the protection of its own confidential
information and to take appropriate action by instruction or agreement with its
employees who are permitted access to the Proprietary Information to satisfy its
obligations hereunder.
The Undersigned will not attempt to intercept data, gain access to data
in transmission, or attempt entry into any system or files for which it is not
authorized. It will not intentionally adversely affect the integrity of the
System through the introduction of unauthorized code or data, or through
unauthorized deletion.
Upon notice by State Street for any reason, any right to use the System
and access to the Data Access Services shall terminate and the Undersigned shall
immediately cease use of the System and the Data Access Services. Immediately
upon notice by State Street for any reason, the Undersigned shall return to
State Street all copies of documentation and other Proprietary Information in
its possession.
*[Name of Independent Auditor]
By:
Title:
Date:
<PAGE>
ATTACHMENT D
SUPPORT
During the term of this Addendum, State Street agrees to provide the
following on-going support services:
a. TELEPHONE SUPPORT. The Customer Designated Persons may contact State
Street's Multicurrency HORIZONSM Help Desk and Customer Assistance Center
between the hours of 8 a.m. and 6 p.m. (Eastern time) on all business days for
the purpose of obtaining answers to questions about the use of the System, or to
report apparent problems with the System. From time to time, the Customer shall
provide to State Street a list of persons, not to exceed five in number, who
shall be permitted to contact State Street for assistance (such persons being
referred to as "the Customer Designated Persons").
b. TECHNICAL SUPPORT. State Street will provide technical support to
assist the Customer in using the System and the Data Access Services. The total
amount of technical support provided by State Street shall not exceed 10
resource days per year. State Street shall provide such additional technical
support as is expressly set forth in the fee schedule in effect from time to
time between the parties (the "Fee Schedule"). Technical support, including
during installation and testing, is subject to the fees and other terms set
forth in the Fee Schedule.
c. MAINTENANCE SUPPORT. State Street shall use commercially reasonable
efforts to correct system functions that do not work according to the System
Product Description as set forth on Attachment A in priority order in the next
scheduled delivery release or otherwise as soon as is practicable.
d. SYSTEM ENHANCEMENTS. State Street will provide to the Customer any
enhancements to the System developed by State Street and made a part of the
System; provided that, sixty (60) days prior to installing any such enhancement,
State Street shall notify the Customer and shall offer the Customer reasonable
training on the enhancement. Charges for system enhancements shall be as
provided in the Fee Schedule. State Street retains the right to charge for
related systems or products that may be developed and separately made available
for use other than through the System.
e. CUSTOM MODIFICATIONS. In the event the Customer desires custom
modifications in connection with its use of the System, the Customer shall make
a written request to State Street providing specifications for the desired
modification. Any custom modifications may be undertaken by State Street in its
sole discretion in accordance with the Fee Schedule.
f. LIMITATION ON SUPPORT. State Street shall have no obligation to
support the Customer's use of the System: (i) for use on any computer equipment
or telecommunication facilities which does not conform to the Designated
Configuration or (ii) in the event the Customer has modified the System in
breach of this Addendum.
ADMINISTRATIVE SERVICES AGREEMENT
EVERGREEN FIXED INCOME TRUST
This Administrative Services Agreement is made as of this 18th day of
September, 1997 between Evergreen Fixed Income Trust, a Delaware business trust
(herein called the "Trust"), and Evergreen Investment Services, Inc., a Delaware
corporation (herein called "EIS").
W I T N E S S E T H:
WHEREAS, the Trust is a Delaware business trust consisting of one or
more portfolios which operates as an open-end management investment company and
is so registered under the Investment Company Act of 1940; and
WHEREAS, the Trust desires to retain EIS as its Administrator to
provide it with administrative services, and EIS is willing to render such
services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR. The Trust hereby appoints EIS as
administrator of the Trust and each of its portfolios listed on SCHEDULE A
attached hereto on the terms and conditions set forth in this Agreement; and EIS
hereby accepts such appointment and agrees to perform the services and duties
set forth in Section 2 of this Agreement in consideration of the compensation
provided for in Section 4 hereof.
2. SERVICES AND DUTIES. As Administrator, and subject to the
supervision and control of the Trustees of the Trust, EIS will hereafter provide
facilities, equipment and personnel to carry out the following administrative
services for operation of the business and affairs of the Trust and each of its
portfolios:
(a) prepare, file and maintain the Trust's governing documents,
including the Declaration of Trust (which has previously been
prepared and filed), the By-laws, minutes of meetings of
Trustees and shareholders, and proxy statements for meetings
of shareholders;
(b) prepare and file with the Securities and Exchange Commission
and the appropriate state securities authorities the
registration statements for the Trust and the Trust's shares
and all amendments thereto, reports to regulatory authorities
and shareholders, prospectuses, proxy statements, and such
other documents as may be necessary or convenient to enable
the Trust to make a continuous offering of its shares;
24145
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<PAGE>
(c) prepare, negotiate and administer contracts on behalf of the
Trust with, among others, the Trust's distributor, custodian
and transfer agent;
(d) supervise the Trust's fund accounting agent in the maintenance
of the Trust's general ledger and in the preparation of the
Trust's financial statements, including oversight of expense
accruals and payments and the determination of the net asset
value of the Trust's assets and of the Trust's shares, and of
the declaration and payment of dividends and other
distributions to shareholders;
(e) calculate performance data of the Trust for dissemination to
information services covering the investment company industry;
(f) prepare and file the Trust's tax returns;
(g) examine and review the operations of the Trust's custodian and
transfer agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) prepare various shareholder reports;
(j) assist with the design, development and operation of new
portfolios of the Trust;
(k) coordinate shareholder meetings;
(l) provide general compliance services; and
(m) advise the Trust and its Trustees on matters concerning the
Trust and its affairs.
The foregoing, along with any additional services that EIS shall agree
in writing to perform for the Trust hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any duties,
functions, or services to be performed for the Trust by the Trust's investment
adviser, distributor, custodian or transfer agent pursuant to their agreements
with the Trust.
3. EXPENSES. EIS shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide the Administrative Services to the Trust. The Trust shall
be responsible for all other expenses incurred by EIS on behalf of the Trust,
including without limitation postage and courier expenses, printing expenses,
registration fees, filing fees, fees of outside counsel and independent
auditors, insurance premiums, fees payable to Trustees who are not EIS
employees, and trade association dues.
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4. COMPENSATION. For the Administrative Services provided, the Trust
hereby agrees to pay and EIS hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee, calculated daily and
payable monthly, at an annual rate determined in accordance with the table
below.
Aggregate Daily Net Assets of Funds
Administered by EIS for Which Any
Affiliate of First Union National Bank
Administrative Fee Serves as Investment Adviser
------------------ --------------------------------------
.050% on the first $7 billion
.035% on the next $3 billion
.030% on the next $5 billion
.020% on the next $10 billion
.015% on the next $5 billion
.010% on assets in excess of $30 billion
Each portfolio of the Trust shall pay a portion of the administrative fee equal
to the rate determined above times that portfolio's average annual daily net
assets.
5. RESPONSIBILITY OF ADMINISTRATOR. EIS shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. EIS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Any person, even though also an officer,
director, partner, employee or agent of EIS, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with the duties of EIS hereunder) to be
rendering such services to or acting solely for the Trust and not as an officer,
director, partner, employee or agent or one under the control or direction of
EIS even though paid by EIS.
6. DURATION AND TERMINATION.
(a) This Agreement shall continue in effect from year to year
thereafter, provided it is
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approved, at least annually, by a vote of a majority of
Trustees of the Trust including a majority of the
disinterested Trustees.
(b) This Agreement may be terminated at any time, without
payment of any penalty, on sixty (60) day's prior written
notice by a vote of a majority of the Trust's Trustees or
by EIS.
7. AMENDMENT. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. NOTICES. Notices of any kind to be given to the Trust hereunder by
EIS shall be in writing and shall be duly given if delivered to the Trust and to
its investment adviser at the following address: First Union National Bank, One
First Union Center, Charlotte, North Carolina 28288. Notices of any kind to be
given to EIS hereunder by the Trust shall be in writing and shall be duly given
if delivered to EIS at 200 Berkeley Street, Boston, Massachusetts 02116.
Attention: Chief Administrative Officer.
9. LIMITATION OF LIABILITY. EIS is hereby expressly put on notice of
the limitation of liability as set forth in the Declaration of Trust and agrees
that the obligations pursuant to this Agreement of a particular portfolio and of
the Trust with respect to that particular portfolio be limited solely to the
assets of that particular portfolio, and EIS shall not seek satisfaction of any
such obligation from the assets of any other portfolio, the shareholders of any
portfolio, the Trustees, officers, employees or agents of the Trust, or any of
them.
10. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section 5
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by
Delaware law; provided, however, that nothing herein shall be construed in a
manner inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Administrative
Services Agreement to be executed by their officers designated below as of the
day and year first above written.
EVERGREEN FIXED INCOME TRUST
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ATTEST:/s/ Carol Churns By:/s/ John J. Pileggi
---------------------- -------------------------
Name: John J. Pileggi
Title: President
EVERGREEN INVESTMENT SERVICES, INC.
ATTEST:_______________________ By:/s/ Gordon Forrester
-------------------------
Name: Gordon Forrester
Title: Chief Administrative Officer
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SCHEDULE A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen U.S. Government Fund
Short/Intermediate-Term Bond Funds
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
MASTER TRANSFER AND RECORDKEEPING AGREEMENT
AGREEMENT made as of the 18th day of September, 1997 by and between
each of the parties listed on Exhibit A which is attached hereto and made a part
hereof (each a "Fund" or "Funds"), each for itself and not jointly, each having
its principal place of business at 200 Berkeley Street, Boston, Massachusetts
02116, and Evergreen Service Company ("ESC"), having its principal place of
business at 200 Berkeley Street, Boston, Massachusetts 02116.
W I T N E S S E T H T H A T
WHEREAS, each Fund desires ESC to perform certain services for the
Fund, and ESC is willing to perform such services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, each party, for itself and not jointly, agrees as follows:
1. ADDITIONAL PARTIES - Any other registered investment company for
which Keystone Investment Management Company (KIMCO), Evergreen Asset Management
Corp. ("Evergreen Asset"), First Union National Bank or one of its affiliates
serves as investment adviser, trustee or manager may become a Fund party to this
Agreement, for itself and not jointly, by giving written notice to ESC that it
has elected to become a Fund party hereto, to which election ESC has given its
written consent.
2. SERVICES - ESC shall perform for each Fund the services set forth on
Exhibit B which is attached hereto and made a part hereof. ESC shall also
perform for each Fund, without additional charge, any services which it
customarily performs in the ordinary course of business without additional
charge for the investment companies for which ESC acts as transfer agent,
dividend disbursing agent, or shareholder servicing and recordkeeping agent.
ESC shall perform such other services in addition to those set forth on
Exhibit B hereto as a Fund shall request in writing. Any of the services to be
performed hereunder, and the manner in which such services are to be performed,
shall be changed only pursuant to a written agreement signed by the parties
hereto.
ESC will undertake no activity which, in its judgment, will adversely
effect the performance of its obligations to a Fund under this Agreement.
3. FEES - Each Fund shall pay ESC for the services to be performed
pursuant to this Agreement in accordance with and in the manner set forth with
respect to such Fund on Exhibit C attached hereto and made a part hereof.
4. EFFECTIVE DATE - This Agreement shall become effective as of the
date set forth above and shall become effective as to each Fund which gives
written notice to ESC
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pursuant to Paragraph 1 hereof that it elects to become a party hereto as of the
date of such notice.
5. TERM - This Agreement shall be in effect until terminated in
accordance with Section 17 hereof.
6. USE OF ESC'S NAME - The Funds will not use ESC's name in any sales
literature or other material in a manner not approved by ESC in writing before
such use, unless a similar use was previously approved. Notwithstanding the
foregoing, ESC hereby consents to all uses of ESC's name which merely refer in
accurate terms to ESC's appointments hereunder or which are required by the
Securities and Exchange Commission or a state securities commission, and
provided, further, that in no case will such approval be unreasonably withheld
or delayed.
7. STANDARD OF CARE - ESC shall at all times use its best efforts and
act in good faith and in a non-negligent manner in performing all services
pursuant to this Agreement.
8. UNCONTROLLABLE EVENTS - ESC shall not be liable for damage, loss of
data, delays or errors occurring by reason of circumstances beyond its control,
including, but not limited to, acts of civil or military authority, national
emergencies, fire, flood or catastrophe, acts of God, insurrection, war, riots,
or failure of transportation, communication or power supply. However, ESC shall
keep in a separate and safe place additional copies of all records required to
be maintained pursuant to this Agreement or additional tapes or discs necessary
to reproduce all such records. Furthermore, at all times during this Agreement,
ESC shall maintain an arrangement whereby ESC will have a backup computer
facility available for its use in providing the services required hereunder in
the event circumstances beyond ESC's control result in ESC not being able to
process the necessary work at its principal computer facility. ESC shall, from
time to time, upon request from any Fund provide written evidence and details of
its arrangement for obtaining the use of such a backup computer facility. ESC
shall use reasonable care to minimize the likelihood of all damage, loss of
data, delays and errors resulting from an uncontrollable event. Should such
damage, loss of data, delays or errors occur, ESC shall use its best efforts to
mitigate the effects of such occurrence. Representatives of each Fund shall be
entitled to inspect the ESC premises and operating capabilities within
reasonable business hours and upon reasonable notice to ESC.
9. INDEMNIFICATION - Each Fund shall indemnify and hold ESC, its
employees and agents harmless against any losses, claims, damages, judgments,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from (1) transactions which occurred prior to the date ESC began
serving as Transfer Agent to the Fund; (2) action taken or permitted by ESC in
good faith with due care and without negligence in reliance upon instructions
received from such Fund in accordance with Section 10 hereof or with respect to
a Fund upon the opinion of counsel for the Fund, as to anything arising in
connection with its performance under this Agreement; or (3) any act done or
suffered by ESC with respect to a Fund in good faith with due care and without
negligence in connection with its performance under this Agreement in reliance
upon any instruction, order, stock certificate or other instrument reasonably
believed by it to be
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genuine and to bear the genuine signature of any person or persons authorized to
sign, countersign, or execute same, and which complies with all applicable
requirements of the Fund's current prospectus(es) and statement of additional
information, this Agreement and instructions and other governing documents
provided to ESC by the Fund. For purposes of this indemnification, it is
specifically agreed that if any instruction received by ESC in accordance with
Section 10 hereof differs from the requirements set forth in the Fund's current
prospectus(es) or statement of additional information then, with regard to that
difference, the instruction, order, stock certificate or other instrument relied
upon by ESC, ESC need only comply with such instruction (and not the current
prospectus(es) or statement of additional information).
In the event that ESC requests any Fund to indemnify or hold it
harmless hereunder, ESC shall use its best efforts to inform the Fund of the
relevant facts concerning the matter in question. ESC shall use reasonable care
to identify and promptly notify a Fund concerning any matter which ESC believes
may result in a claim for indemnification against such Fund, and shall notify
the Fund within seven days of notice to ESC of the filing of any suit or other
legal action or the institution by a government agency of any administrative
action or investigation against ESC which involves its duties under this
Agreement. Each Fund shall have the election of defending ESC against any claim
with respect to such Fund which may be the subject of indemnification or holding
it harmless hereunder. In the event a Fund so elects, it will so notify ESC.
Thereupon the Fund shall take over defense of the claim, and, if so requested by
a Fund, ESC shall incur no further legal or other expenses related thereto for
which it shall be entitled to indemnity or holding harmless hereunder; provided,
however, that nothing herein shall prevent ESC from retaining counsel to defend
any claim at ESC's own expense.
Except with the prior written consent of a Fund, ESC shall in no event
confess any claim or make any compromise in any matter in which such Fund will
be asked to indemnify or hold ESC harmless hereunder. ESC shall be without
liability to a Fund with respect to anything done or omitted to be done in
accordance with the terms of this Agreement or instructions properly received
pursuant hereto if done in good faith and without negligence or willful or
wanton misconduct. In no event shall ESC be liable for consequential damages,
lost profits, or other special damages, even if ESC has been informed of the
possibility of such damage or loss by the Fund or by third parties.
Notwithstanding the foregoing, ESC shall be liable to each Fund for
any damage or losses suffered by such Fund as a result of a delay or negligence
on the part of ESC in processing a purchase or liquidation transaction or in
making payment to a shareholder of such Fund; it being agreed that, without in
any way limiting ESC's liability for other transactions hereunder, that such
damages shall not be deemed to be consequential or special.
10. INSTRUCTIONS - ESC shall comply with all instructions issued by a
Fund in the form prescribed below which are permitted or required under Exhibit
B attached hereto. Whenever ESC takes action hereunder pursuant to instructions
from a Fund, ESC shall be entitled to rely upon such instructions only when such
instructions are signed by the President or Treasurer of
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the Fund or by an individual designated in writing by the President or Treasurer
as a person authorized to give instructions hereunder. A Fund may waive the
requirement that all instructions be in writing, if such waiver defines the
occurrences not requiring written instruction, indicates the persons authorized
to give such non-written instructions, and is signed by one of the persons
pursuant to the immediately preceding sentence of this Section 10. In the event
ESC obtains a Fund's written waiver, it may rely on non-written instructions
received pursuant thereto.
11. CONFIDENTIALITY - ESC agrees to treat as confidential all records
and other information relative to a Fund and the Fund's shareholders. ESC, on
behalf of itself and its employees, agrees to keep confidential all such
information, except, after prior notification to and approval by a Fund (which
approval shall not be unreasonably withheld and may not be withheld where ESC
may be exposed to civil or criminal contempt proceedings) when requested to
divulge such information by duly constituted authorities or when requested by a
shareholder of a Fund seeking information about his own or an appropriately
related account.
12. REPORTS - ESC will furnish to each Fund and to properly authorized
auditors, examiners, investment companies, dealers, salesmen, insurance
companies, transfer agents, registrars, investors, and others designated by each
Fund in writing, such reports at such times as are prescribed for each service
in Exhibit B.
13. RIGHT OF OWNERSHIP - ESC agrees that all records and other data
received, computed, developed, used and/or stored pursuant to this Agreement are
the exclusive property of each respective Fund and that all such records and
other data will be furnished without additional charge to a Fund in available
machine readable data form immediately upon termination of this Agreement with
respect to such Fund for any reason whatsoever. Furthermore, upon a Fund's
request at any time or times while this Agreement is in effect, ESC shall
deliver to such Fund, at the Fund's expense, any or all of the data and records
held by ESC pursuant to this Agreement, in the form as requested by the Fund. On
the effective date of termination of this Agreement with respect to a Fund or,
if later, on the date a Fund ceases to use ESC's services, ESC will promptly
return to the Fund any and all records and other data belonging to the Fund free
of any claim or retention of rights by ESC.
14. REDEMPTION OF SHARES - The parties hereto agree that ESC shall
process liquidations, redemptions or repurchases of shares of each Fund, as the
agent for such Fund, in the manner described in the then current prospectus(es)
and statement of additional information for the Fund. Notwithstanding the
foregoing, ESC shall be liable for any losses, damages, claims or expenses
resulting from ESC's failure to obtain the appropriate signature guarantee with
regard to any redemption or transfer processed by ESC even if the current
prospectus(es) or statement of additional information authorizes ESC to waive
the requirement of a signature guarantee unless ESC is authorized in writing by
an appropriate party to waive such a requirement.
15. SUBCONTRACTING - Each Fund may require that ESC, or ESC may, with
the prior written consent of such Fund, subcontract with one or more of its
affiliated or other persons to
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perform all or part of its obligations hereunder, provided, however, that,
notwithstanding any such subcontract, ESC shall be fully responsible to each
Fund hereunder.
16. ASSIGNMENT - This Agreement and the rights and duties hereunder
shall not be assignable by ESC or any of the Fund parties hereto except by the
specific written consent of the other party.
17. TERMINATION - This Agreement may be terminated with respect to a
Fund on such date on which ESC has given such Fund not less than 180 days prior
written notice or on which such Fund has given ESC not less than 90 days prior
written notice. Upon such termination, ESC will use its best efforts to
cooperate and assist in accomplishing a timely, efficient and accurate
conversion to the person or firm which will provide the services described
hereunder. This Agreement may be terminated by any Fund without the payment of
any penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination; provided, however, that for the
purpose of this Section 17 any amount due under Section 3 of this Agreement
which is undisputed is not considered a penalty, forfeiture, compulsory buyout
amount or performance of any other obligation which could deter termination.
This Agreement may be terminated with respect to a Fund after written
notice to ESC by the Fund if there is a material breach or violation of this
Agreement or if ESC fails to perform any of its obligations under this Agreement
and the failure continues for more than 30 days after the Fund gives notice of
the failure to ESC or bankruptcy or insolvency proceedings of any nature are
instituted by or against ESC.
18. INSURANCE - ESC shall maintain throughout the term of this
Agreement a fidelity bond(s) in an amount in excess of the minimum amount
required to be obtained by the Funds which are parties hereto pursuant to Rule
17g-1 under the Investment Company Act of 1940 (the "1940 Act") covering the
acts of its officers, employees or agents in performing any and all of the
services required to be performed hereunder. ESC agrees to promptly notify each
Fund in writing of any material amendment or cancellation of such bond(s). ESC
shall at such times as the Fund may request, but at least once each year, notify
each Fund of any claims made pursuant to such bond(s).
19. AMENDMENT - This Agreement may be amended at any time by an
instrument in writing executed by both ESC and any Fund which is a party hereto,
or each of their respective successors, provided that any such amendment will
conform to the requirements set forth in the 1940 Act and the rules and
regulations thereunder.
20. NOTICE - Any notice shall be sufficiently given when sent by
registered or certified mail to any party at the address of such party set forth
above or at such other address as such party may from time to time specify in
writing to the other party.
21. SECTION HEADINGS - Section headings are included for convenience
only and are not
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to be used to construe or interpret this Agreement.
22. INTERPRETIVE PROVISIONS - In connection with the operation of this
Agreement, ESC and one or more of the Funds may agree with respect to such Funds
and ESC from time to time on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their combined opinion be consistent
with the general tenor of this Agreement. Furthermore, ESC and such Fund(s) may
agree to add to, delete from or change the services set forth with respect to
such Fund(s) in Exhibit B of the Agreement. Each such interpretive or additional
provision, and each addition, deletion or change is to be signed by all parties
affected and annexed hereto, and no such provision, addition, deletion or change
shall contravene any applicable federal or state law or regulation and no such
provision, addition, deletion or change shall be deemed to be an amendment of
any provision of this Agreement with the exception of Exhibit B hereto.
23. GOVERNING LAW - This Agreement shall be governed by and its
provisions shall be construed in accordance with the laws of The Commonwealth of
Massachusetts.
24. DELAWARE BUSINESS TRUST - Each of the Funds listed on Exhibit A
attached hereto is a Delaware business trust established under a Declaration of
Trust. The obligations of such Funds are not personally binding upon, nor shall
recourse be had against the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Funds, but only the property
of such Funds shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
EVERGREEN SERVICE COMPANY
By: /s/ Edward J. Falvey
------------------------
Edward J. Falvey
President
Evergreen Select Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select Limited Duration Fund Evergreen Select Fixed Income
Fund Evergreen Select Income Plus Fund Evergreen Select Intermediate
Tax Exempt Bond Fund Evergreen Select Core Bond Fund Evergreen Select
Intermediate Bond Fund Evergreen Select Adjustable Rate Fund
Evergreen Select Equity Trust, a Delaware Business Trust consisting of the
following series:
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Evergreen Select Strategic Value Fund Evergreen Select Large Cap Blend
Fund Evergreen Select Strategic Growth Fund Evergreen Select Social
Principles Fund Evergreen Select Equity Income Fund Evergreen Select
Small Company Value Fund Evergreen Select Common Stock Fund Evergreen
Select Small Cap Growth Fund Evergreen Select Balanced Fund Evergreen
Select Diversified Value Fund
Evergreen Select Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select 100% Treasury Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Municipal Trust, a Delaware Business Trust consisting of the
following series:
Evergreen California Tax Free Fund Evergreen Connecticut Municipal Bond
Fund Evergreen Florida High Income Municipal Bond Fund Evergreen
Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund Evergreen New York Tax Free
Fund Evergreen North Carolina Municipal Bond Fund Evergreen
Pennsylvania Tax Free Fund Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund Evergreen High Grade Tax Free
Fund Evergreen Short-Intermediate Municipal Fund Evergreen Tax Free
Fund
Evergreen Equity Trust, a Delaware Business Trust consisting of the following
series:
Evergreen Aggressive Growth Fund Evergreen Fund Evergreen Micro Cap
Fund Evergreen Omega Fund Evergreen Small Company Growth Fund Keystone
Strategic Growth Fund (K-2) Evergreen American Retirement Fund
Evergreen Foundation Fund Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund Evergreen Fund for Total Return Evergreen
Growth & Income Fund Evergreen Income & Growth Fund Evergreen Small Cap
Equity Income Fund Evergreen Value Fund Evergreen Utility Fund Keystone
Growth and Income Fund (S-1)
Evergreen Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Keystone High Income Bond Fund (B-4)
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
Evergreen International Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Emerging Markets Growth Fund Evergreen Global Leaders Fund
Evergreen Global Opportunities Fund Evergreen International Equity Fund
Evergreen Latin America Fund Evergreen Natural Resources Fund Keystone
Precious Metals Holdings Keystone International Fund
Evergreen Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Money Market Fund
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Treasury Money Market Fund
By: /s/ John Pileggi
------------------------------------
John Pileggi
President and Treasurer of each
Delaware Business Trust listed above
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EXHIBIT A
Evergreen Select Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select Limited Duration Fund Evergreen Select Fixed Income
Fund Evergreen Select Income Plus Fund Evergreen Select Intermediate
Tax Exempt Bond Fund Evergreen Select Core Bond Fund Evergreen Select
Intermediate Bond Fund Evergreen Select Adjustable Rate Fund
Evergreen Select Equity Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select Strategic Value Fund Evergreen Select Large Cap Blend
Fund Evergreen Select Strategic Growth Fund Evergreen Select Social
Principles Fund Evergreen Select Equity Income Fund Evergreen Select
Small Company Value Fund Evergreen Select Common Stock Fund Evergreen
Select Small Cap Growth Fund Evergreen Select Balanced Fund Evergreen
Select Diversified Value Fund
Evergreen Select Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Select 100% Treasury Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Municipal Trust, a Delaware Business Trust consisting of the following
series:
Evergreen California Tax Free Fund Evergreen Connecticut Municipal Bond
Fund Evergreen Florida High Income Municipal Bond Fund Evergreen
Florida Municipal Bond Fund Evergreen Georgia Municipal Bond Fund
Evergreen Massachusetts Tax Free Fund Evergreen Missouri Tax Free Fund
Evergreen New Jersey Tax Free Income Fund Evergreen New York Tax Free
Fund Evergreen North Carolina Municipal Bond Fund Evergreen
Pennsylvania Tax Free Fund Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund Evergreen High Grade Tax Free
Fund Evergreen Short-Intermediate Municipal Fund Evergreen Tax Free
Fund
Evergreen Equity Trust, a Delaware Business Trust consisting of the following
series:
Evergreen Aggressive Growth Fund Evergreen Fund Evergreen Micro Cap
Fund Evergreen Omega Fund Evergreen Small Company Growth Fund Keystone
Strategic Growth Fund (K-2) Evergreen American Retirement Fund
Evergreen Foundation Fund Evergreen Tax Strategic Foundation Fund
Evergreen Balanced Fund Evergreen Fund for Total Return Evergreen
Growth & Income Fund Evergreen Income & Growth Fund Evergreen Small Cap
Equity Income Fund Evergreen Value Fund Evergreen Utility Fund Keystone
Growth and Income Fund (S-1)
Evergreen Fixed Income Trust, a Delaware Business Trust consisting of the
following series:
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Keystone High Income Bond Fund (B-4)
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
Evergreen International Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Emerging Markets Growth Fund
Evergreen Global Leaders Fund
Evergreen Global Opportunities Fund
Evergreen International Equity Fund
Evergreen Latin America Fund
Evergreen Natural Resources Fund
Keystone Precious Metals Holdings
Keystone International Fund
Evergreen Money Market Trust, a Delaware Business Trust consisting of the
following series:
Evergreen Money Market Fund
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Treasury Money Market Fund
A-1
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EXHIBIT B
The services provided for in this Agreement shall be performed by ESC,
or any agent appointed by ESC pursuant to Section 15 of this Agreement, under
the name of Evergreen Service Company (ESC) and this name or any similar name or
logo will not be used by ESC or its agents for any purposes other than those
related to this Agreement or to any other agreement which ESC may enter into
with any of the Fund (s) or with companies affiliated with the Fund (s).
The offices of ESC shall be open to perform the services pursuant to
this Agreement on all days when the Fund is open to transact business.
ESC will perform all services normally provided to investment companies
such as the Fund(s), and the quality of such services shall be equal to or
better than that provided to the other investment companies serviced by ESC.
With respect to each Fund, by way of illustration, but not limitation, these
services will include:
1. Establishing, maintaining, safeguarding and reporting on
shareholder account information and account histories,
(including registration, name and address recorded in
generally accepted form, dealer, representative, branch, and
territory information, mailing address, distribution address,
various codes and specific information relating to (if
applicable); withdrawal plans, letters of intent, systematic
investing, insured redemptions plans, account groupings for
rights of accumulation discount processing, and for account
group reporting for plan accounts and other accounts grouped
for master sub-account reporting.)
2. Recording and controlling shares outstanding in certificate
("issued") and non-certificate ("unissued") form.
3. Maintaining a record for each certificate issued to include
certificate number, account number, issued date, number of
shares, canceled date or stop date, where appropriate.
4. Reconciling the number of outstanding shares of each Fund on a
daily basis with the Fund and the Fund's custodian, promptly
correcting any differences noted.
5. Establishing and maintaining a trade file on behalf of each
Fund based on trade information furnished to the transfer
agent by the Fund or its distributors.
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6. Accepting and processing direct cash investments however
received and investing such investments promptly in
shareholder accounts.
7. Passing upon the adequacy of documents properly endorsed and
guaranteed submitted by or on behalf of a shareholder to
transfer ownership or redeem shares.
8. Transferring ownership of shares upon the books of each Fund.
9. Redeeming shares and preparing and mailing redemption checks
or wire proceeds as instructed.
10. Preparing and promptly mailing account statements to the
shareholder or such other authorized address and, when
appropriate, as instructed by a Fund, to the dealer or dealer
branch, whenever transaction activity effecting share balances
are posted to a Fund account that is of the type that should
receive such statement.
11. Checking surrendered certificates for stop transfer
instructions.
12. Canceling certificates surrendered.
13. Issuing certificates as replacements for those canceled, or as
an original issue of additional shares or upon the reduction
of an equal number of unissued shares.
14. Maintaining and updating a stop transfer file, promptly
placing stop transfer codes upon notification of possible
loss, destruction or disappearance of a certificate. Upon
receipt of proper documentation obtaining necessary insurance
forms and issuing replacement certificates.
15. Balancing outstanding shares of record with the custodian
prior to each distribution and calculating and paying or
reinvesting distributions to shareholders of record and to
open trade receivables and free stock.
16. Processing exchanges of shares of one Fund or Portfolio for
another, calculating proper sales charges and collecting fees
as required.
17. Processing withdrawal plan liquidations according to plan
instructions.
18. Reporting to each Fund and its custodian daily the capital
stock activities and dollar amounts of transactions.
19. Promptly answering inquiries from shareholders, dealers, Fund
personnel, and others as requested in accordance with the
terms of this Agreement as to account
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matters, referring policy or investment matters to the Fund.
20. Mailing reports and special mailings, as directed by a Fund,
to all shareholders or selected holders or dealers.
21. Providing services with regard to the annual or special
meetings of a Fund, including preparation and timely mailing
of proxy material to shareholders of record and others as
directed by the Fund, and receiving, examining and recording
all properly executed proxies and performing such follow-up as
required by the Fund.
22. Providing periodic listings and tallies of shareholder votes
and certifying the final tally.
23. Providing an inspector of elections at the annual or any
special meetings of a Fund.
24. Maintaining tax information for each account, deducting
amounts where required and furnishing to a Fund, its
shareholders, dealers and, when appropriate, regulatory
bodies, the necessary tax information, all in compliance with
the various applicable laws.
25. Maintaining records of account and distribution information
for checks and confirmations returned as undeliverable by the
Post Office.
26. Maintaining records and reporting sales information for Blue
Sky reporting purposes.
27. Calculating and processing Fund mergers or stock dividends, as
directed by a Fund.
28. Maintaining all Fund records as outlined in the record and
tape retention schedule delivered by a Fund.
29. Reconciling all investment, distribution and redemption
accounts.
30. Providing for the replacement of uncashed distribution or
redemption checks.
31. Maintaining and safeguarding an inventory of unissued blank
stock certificates, checks and other Fund records.
32. Making available to a Fund and its distributors at their
locations devices which will provide immediate electronic
access to computerized records maintained for a Fund.
23146
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<PAGE>
33. Providing space and such technical expertise as may be
required to enable a Fund and its properly authorized
auditors, examiners and others designated by the Fund in
writing to properly understand and examine all books, records,
computer files, microfilm and other items maintained pursuant
to this Agreement, and to assist as required in such
examination.
34. Assigning a single account number to each shareholder
regardless of the number of Funds or Portfolios owned for
which Keystone Investment Management Company, Evergreen Asset
Management Corp., First Union National Bank or one of its
affiliates is the trustee, investment adviser or manager
(except as instructed otherwise.)
35. Mailing prospectuses to existing accounts on receipt of the
first direct investment transaction after a new prospectus has
been issued by a Fund.
36. Mailing cash election notices when required prior to capital
gains distributions.
37. Maintaining information, performing the necessary research and
producing reports required to comply with all applicable state
escheat or abandoned property laws.
With respect to each Fund, the Transfer Agent will produce reports as requested
by a Fund including, but not limited to, the following:
Shareholder Account Confirmation As required
Redemption Checks When redemption is made
Certificates When requested
Withdrawal plan payment checks On payment cycle
Distribution checks As required
Name and address labels
(per account registration) As requested
Proxy When required
1099 Annually
23146
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<PAGE>
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
Daily and (monthly) share proof Daily
Daily master control Daily
Blue Sky exception Daily
Blue Sky master list Monthly and whenever a new
permit is issued by a state
Blue Sky sales report Cycle as designated in
advance by distributor
Check register Daily
Account information reports When requested
(Monthly) Cumulative Monthly
transaction
New account list Monthly
Shareholder master list When requested
Sales by State Monthly
Activities statistics Monthly
Distribution journals As required
Proxy tallies and vote listings When requested
Withdrawal plan account check Monthly
reconciliation
Dividend account check As required
reconciliation
23146
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<PAGE>
EXHIBIT C
TRANSFER AGENT FEE SCHEDULE
CHARGES TO FUNDS
GROUP 1 - MONTHLY DIVIDEND FUNDS
Per open account per year $26.50
Per closed account per year 9.00
Per new account 10.00
GROUP 2 - QUARTERLY DIVIDEND FUNDS
Per open account per year $25.50
Per closed account per year 9.00
Per new account 10.00
GROUP 3 - SEMI-ANNUAL AND ANNUAL DIVIDEND FUNDS
Per open account per year $24.50
Per closed account per year 9.00
Per new account 10.00
GROUP 4 - MONEY MARKET FUNDS
Per open account per year $26.50
Per closed account per year 9.00
Per new account 10.00
CHARGES TO SHAREHOLDERS
GROUP 5 - ERISA*
Per IRA participant per year $10.00 with a maximum of $20.00**
Per Keogh participant per year $10.00 with a maximum of $20.00
Per TSA per year $10.00 with a maximum of $20.00
*These fees are not borne by the Funds, but are direct shareholder charges.
**Fee waived for participants with assets in excess of $25,000. Funds that have
"seed" capital only will not be charged until the Fund has public shareholders.
23146
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<PAGE>
This Fee Schedule is exclusive of out-of-pocket reimbursable expenses.
Out-of-pocket expenses include but are not limited to the following:
Stationery and supplies
Checks
Express Delivery
Postage
Printing of forms
Telephone
Photocopies and Microfilm
C-2
23146
<PAGE>
EVERGREEN VARIABLE ANNUITY TRUST
200 Berkeley Street
Boston, Massachusetts 02116
March 9, 1998
Evergreen Service Company
200 Berkeley Street
Boston, Massachusetts 02116
To Whom It May Concern:
Pursuant to Paragraph 1 of the Master Transfer and Recordkeeping Agreement dated
September 18, 1997 between Evergreen Service Company and various Funds (the
"Agreement"), as defined in the Agreement, this is to notify Evergreen Service
Company that the Evergreen Variable Annuity Trust, on behalf of each of its
series listed on Exhibit A attached hereto, hereby elects to become a Fund party
to such Agreement.
EVERGREEN VARIABLE ANNUITY TRUST
on behalf of each of its Series
listed on Exhibit A
By: /s/ William J. Tomko
----------------------------
William J. Tomko
President
Accepted and Agreed:
EVERGREEN SERVICE COMPANY
By: /s/ Edward J. Falvey
------------------------
Name: Edward J. Falvey
Title: President
Dated: March 9, 1998
23666
<PAGE>
EXHIBIT A
EVERGREEN VARIABLE ANNUITY TRUST
SERIES
Evergreen VA Fund Evergreen VA Growth and Income Fund Evergreen VA Foundation
Fund Evergreen VA Global Leaders Fund Evergreen VA Strategic Income Fund
Evergreen VA Aggressive Growth Fund Evergreen VA Small Cap Equity Income Fund
(Each Series for itself and not jointly)
Dated: March 9, 1998
CONSENT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Evergreen Fixed Income Trust:
We consent to the use of our report, dated May 29, 1998, for Evergreen U.S.
Government Fund, Evergreen Strategic Income Fund, Evergreen High Yield Bond Fund
and Evergreen Diversified Bond Fund incorporated herein by reference and to the
references to our firm under the captions "FINANCIAL HIGHLIGHTS" in the
prospectuses and "Independent Auditors" in the statement of additional
information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
August 31, 1998
DISTRIBUTION PLAN OF CLASS A SHARES
THE EVERGREEN FIXED INCOME TRUST
SECTION 1. The Evergreen Fixed Income Trust (the "Trust") individually
and/or on behalf of its series (each a "Fund") referred to in Exhibit A to this
Rule 12b-1 Plan of Distribution (the "Plan") may act as the distributor of
securities which are issued in respect of the Fund's Class A shares ("Shares"),
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
according to the terms of this Plan.
SECTION 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of 0.75% of the average daily net asset value of Class A shares
("Shares") of the Fund. Such amounts may be expended to finance activity which
is principally intended to result in the sale of Shares including, without
limitation, expenditures consisting of payments to a principal underwriter of
the Fund ("Principal Underwriter") or others in order (i) to make payments to
the Principal Underwriter or others of sales commissions, other fees or other
compensation for services provided or to be provided, to enable payments to be
made by the Principal Underwriter or others for any activity primarily intended
to result in the sale of Shares, to pay interest expenses associated with
payments in connection with the sale of Shares and to pay any expenses of
financing permitted by this clause (i); (ii) to enable the Principal Underwriter
or others to receive, pay or to have paid to others who have sold Shares, or who
provide services to holders of Shares, a service fee, maintenance or other fee
in respect of such services, at such intervals as the Principal Underwriter or
such others may determine, in respect of Shares previously sold and remaining
outstanding during the period in respect of which such fee is or has been paid;
and/or (iii) to compensate the Principal Underwriter or others for efforts
(including without limitation any financing of payments under (i) and (ii) for
the sale of shares) in respect of sales of Shares since inception of the Plan or
any predecessor plan. Appropriate adjustments shall be made to the payments made
pursuant to this Section 2 to the extent necessary to ensure that no payment is
made by the Trust on behalf of any Fund with respect to the Class in excess of
the applicable limit imposed on asset based, front end and deferred sales
charges under subsection (d) of Rule 2830 of the Business Conduct Rules of the
National Association of Securities Dealers Regulation, Inc. (The "NASDR"). In
addition, to the extent any amounts paid hereunder fall within the definition of
an "asset based sales charge" under said NASDR Rule such payments shall be
limited to 0.75 of 1% of the aggregate net asset value of the Shares on an
annual basis and, to the extent that any such payments are made in respect of
"shareholder services" as that term is defined in the NASDR Rule, such payments
shall be limited to .25 of 1% of the aggregate net asset value of the Shares on
an annual basis and shall only be made in respect of shareholder services
rendered during the period in which such amounts are accrued.
SECTION 3. This Plan shall not take effect until it has been approved
together with any related agreements by votes of a majority of both (a) the
Board of Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or any
agreements of the Fund or any other person related to this Plan ("Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
23867
<PAGE>
SECTION 4. Unless sooner terminated pursuant to Section 6, this Plan
shall continue in effect for a period of one year from the date it takes effect
and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3.
SECTION 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of each Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees and the Board
shall review at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
SECTION 6. This Plan may be terminated at any time with respect to any
Fund by vote of a majority of the Rule 12b-1 Trustees or by vote of a majority
of such Fund's outstanding Shares.
SECTION 7. Any agreement of the Fund related to this Plan shall be in
writing and shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of such Fund's
outstanding Shares on not more than sixty days written notice
to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
SECTION 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of each Fund's outstanding Shares, and no material amendment to this Plan
shall be made unless approved in the manner provided for in Section 3 hereof.
::ODMA\SOFTSOL\311\LEGAL\23867\0:2/6/98
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Evergreen High Income Bond Fund (B-4)*
(To be redesignated Evergreen High Yield Bond Fund
January 12, 1998)
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund*
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
* Class A Shares and Class C Shares authorized but not issued
DISTRIBUTION PLAN FOR CLASS B-1 SHARES
EVERGREEN FIXED INCOME TRUST
Section 1. The Evergreen Fixed Income Trust (the "Trust"),
individually and/or on behalf of its series, (each a "Fund"), referred to in
Exhibit A to this 12b-1 Plan of Distribution (the "Plan"), may act as the
distributor of certain securities of which it is the issuer pursuant to Rule
12b-1 under the Investment Company Act of 1940 (the "1940 Act") according to the
terms of this Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of up to 1.00% of the average daily net asset value of the Fund
attributable to the Fund's Class B-1 shares (the "Shares"). Such amounts may be
expended to finance any activity that is principally intended to result in the
sale of Shares, including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund or others as sales commissions
or other compensation for services provided or to be provided ("Distribution
Fees") or as reimbursement for expenses that are incurred or accrued at any time
during which this Plan or any predecessor plan is in effect, together with
interest on any such amounts, at rates approved by the Rule 12b-1 Trustees (as
defined below) in the manner referred to below, all whether or not this Plan or
any predecessor plan has been otherwise terminated, if such payment of such
expenditures is for services theretofore provided or for reimbursement of
expenses theretofore incurred or accrued prior to termination of this Plan or
any predecessor plan in other respects and if such payment is or has been so
approved by such Rule 12b-1 Trustees, or agreed to on behalf of the Fund with
such approval, all subject to such specific implementation as such 12b-1
Trustees may approve; provided that, at the time any such payment is made,
whether or not this Plan or any predecessor plan has been otherwise terminated,
the making of such payment will not cause the limitation upon such payments set
forth in the preceding sentence to be exceeded. Without limiting the generality
of the foregoing, the Trust on behalf of each Fund may pay to, or on the order
of, any person who has served from time to time as principal underwriter (a
"Principal Underwriter") amounts for distribution services pursuant to a
principal underwriting agreement or otherwise. No principal underwriting
agreement or other agreement shall be an agreement related to this Plan, as
referred to in Rule 12b-1 of the Securities and Exchange Commission, unless it
specifically states that it is such a related agreement. Any such principal
underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B-1 Shares and/or
other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
23862
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<PAGE>
such B-Class-of-Shares of the Fund and may, but need not, also provide: (i) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taking into account in determining its
Allocable Portion; (ii) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below); (iii)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the 1940 Act, the Rules promulgated thereunder by the Securities and
Exchange Commission and the Business Conduct Rules of the National Association
of Securities Dealers, Inc., in each case enacted or promulgated after June
1995, or in connection with a "Complete Termination" (as hereinafter defined);
(iv) that the Trust on behalf of any Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (v) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate the Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (vi) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Trust on behalf of any Fund shall pay
to the assignee such portion of the Principal Underwriter's Allocable Portion of
the Distribution Fees and CDSCs so assigned. For purposes of such principal
underwriting agreement, the term Allocable Portion of Distribution Fees as
applied to any Principal Underwriter may mean the portion of the Distribution
Fee allocable to Distributor Shares in accordance with the "Allocation Schedule"
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term Allocable Portion of
CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs
allocable to Distributor Shares in accordance with the Allocation Schedule
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term "Complete
Termination" may mean a termination of this Plan involving
23862
-2-
<PAGE>
the cessation of payments of the Distribution Fees thereunder, the cessation of
payments of distribution fees pursuant to every other Rule 12b-1 plan of the
Fund for every existing or future B-Class-of-Shares and the cessation of the
offering by the Fund of existing or future B-Class-of-Shares, which conditions
shall be deemed to be satisfied when they are first complied with and so long
thereafter as they are complied with prior to the earlier of (i) the date upon
which all of the B-1 Shares which are Distributor Shares pursuant to the
Allocation Schedule shall have been redeemed or converted or (ii) a specified
date, after either of which times such conditions need no longer be complied
with. For purposes of such principal underwriting agreement, the term
"B-Class-of-Shares" may mean each of the B-1 Class of Shares of a Fund, the B-2
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as "Shares" under such Allocation Schedule or
which has economic characteristics substantially similar to those of the B-1 or
B-2 Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of the shares of such
classes. The parties may agree that the existing C Class of Shares of the Fund
does not have substantially similar economic characteristics to the B-1 or B-2
Classes of Shares taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of such shares. For
purposes of clarity the parties to such principal underwriting agreement may
state that they intend that a new installment load class of shares which may be
authorized by amendments to Rule 6(c)-10 under the 1940 Act will not be
considered to be a B-Class-of-Shares if it has economic characteristics
substantially similar to the economic characteristics of the existing C Class of
Shares of the Fund taking into account the total sales charge, CDSC or other
similar charges borne directly or indirectly by the holder of such shares. For
purposes of such principal underwriting agreement, "Allocation Schedule" may
mean a schedule which shall be approved by Trustees (as defined below) in
connection with their required approval of such principal underwriting agreement
as assigning to each principal Underwriter of Shares the portion of the total
Distribution Fees payable by the Trust on behalf of each Fund under such
principal underwriting agreement which has been earned by such Principal
Underwriter to the extent necessary so that the continued payments thereof if
such Principal Underwriter ceases to serve in that capacity does not penalize
the Fund by requiring the Trust on behalf of such Fund to pay for services that
have not been earned.
Section 3. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements, by
votes of both (a) a majority of the Board of Trustees of the Trust and (b) a
majority of those Trustees of the Trust who are not "interested persons" of the
Trust (as said term is defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of
23862
-3-
<PAGE>
this Plan or any agreements of the Fund or any other person related to this Plan
(the "Rule 12b-1 Trustees"), cast in person at a meeting called for the purpose
of voting on this Plan or such agreements.
Section 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long a such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of any Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees, and the Board
shall review, at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
Section 6. This Plan may be terminated as to any Fund, in whole or in
part, at any time by vote of a majority of the Rule 12b-1 Trustees or by vote of
a majority of the outstanding Shares of such Fund, with the effects provided for
in Section 2, as applicable.
Section 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of
a majority of the outstanding Shares of the Fund on not more than sixty days
written notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event of
its assignment.
Section 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined by the 1940
Act) of the outstanding Shares of each Fund, and no material amendment to this
Plan shall be made unless approved in the manner provided for in Section 3
hereof.
23862
-4-
::ODMA\SOFTSOL\311\LEGAL\23862\0:2/2/98
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen Strategic Income Fund
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
DISTRIBUTION PLAN FOR CLASS B-2 SHARES
EVERGREEN FIXED INCOME TRUST
Section 1. The Evergreen Fixed Income Trust (the "Trust"), individually
and/or on behalf of its series (each a "Fund"), referred to in Exhibit A to this
12b-1 Plan of Distribution (the "Plan"), may act as the distributor of certain
securities of which it is the issuer pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "1940 Act") according to the terms of this Plan.
Section 2. The Trust on behalf of each Trust on behalf of each Fund may
expend daily amounts at an annual rate of up to 1.00% of the average daily net
asset value of the Fund attributable to the Fund's Class B-2 shares (the
"Shares"). Such amounts may be expended to finance any activity that is
principally intended to result in the sale of Shares, including, without
limitation, expenditures consisting of payments to a principal underwriter of
the Fund or others as sales commissions or other compensation for services
provided or to be provided ("Distribution Fees") or as reimbursement for
expenses that are incurred or accrued at any time during which this Plan or any
predecessor plan is in effect, together with interest on any such amounts, at
rates approved by the Rule 12b-1 Trustees (as defined below) in the manner
referred to below, all whether or not this Plan or any predecessor plan has been
otherwise terminated, if such payment of such expenditures is for services
theretofore provided or for reimbursement of expenses theretofore incurred or
accrued prior to termination of this Plan or any predecessor plan in other
respects and if such payment is or has been so approved by such Rule 12b-1
Trustees, or agreed to on behalf of the Fund with such approval, all subject to
such specific implementation as such 12b-1 Trustees may approve; provided that,
at the time any such payment is made, whether or not this Plan or any
predecessor plan has been otherwise terminated, the making of such payment will
not cause the limitation upon such payments set forth in the preceding sentence
to be exceeded. Without limiting the generality of the foregoing, the Trust on
behalf of each Fund may pay to, or on the order of, any person who has served
from time to time as principal underwriter (a "Principal Underwriter") amounts
for distribution services pursuant to a principal underwriting agreement or
otherwise. No principal underwriting agreement or other agreement shall be an
agreement related to this Plan, as referred to in Rule 12b-1 of the Securities
and Exchange Commission, unless it specifically states that it is such a related
agreement. Any such principal underwriting agreement may, but need not, provide
that such Principal Underwriter may be paid for distribution services to Class
B-2 Shares and/or other specified classes of shares of the Fund (together the
"B-Class-of-Shares"), a fee which may be designated a Distribution Fee and may
be paid at a rate per annum up to .75% of the average daily net asset value of
such B-Class-of-Shares of the Fund and may, but need not, also provide: (i) that
a Principal Underwriter will be deemed to have fully earned its "Allocable
Portion" of the Distribution Fee upon the sale of the Commission Shares (as
defined in the Allocation Schedule) taking into account in determining its
Allocable Portion; (ii) that the Fund's obligation to pay such Principal
Underwriter its Allocable Portion of the Distribution Fees shall be absolute and
23866
-1-
<PAGE>
unconditional and shall not be subject to dispute, offset, counterclaim or any
defense whatsoever (it being understood that such provision is not a waiver of
the Fund's right to pursue such Principal Underwriter and enforce such claims
against the assets of such Principal Underwriter other than its right to its
Allocable Portion of the Distribution Fees and CDSCs (as defined below); (iii)
that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fees shall not be changed or terminated except to
the extent required by any change in applicable law, including without
limitation, the 1940 Act, the Rules promulgated thereunder by the Securities and
Exchange Commission and the Business Conduct Rules of the National Association
of Securities Dealers, Inc., in each case enacted or promulgated after June
1995, or in connection with a "Complete Termination" (as hereinafter defined);
(iv) that the Trust on behalf of any Fund will not waive or change any
contingent deferred sales charge ("CDSC") in respect of the Distributor's
Allocable Portion thereof, except as provided in the Fund's prospectus or
statement of additional information without the consent of the Principal
Underwriter or any assignee of such Principal Underwriter's rights to its
Allocable Portion; (v) that the termination of the Principal Underwriter, the
principal underwriting agreement or this Plan will not terminate the Principal
Underwriter's rights to its Allocable Portion of the CDSCs; and (vi) that any
Principal Underwriter may assign its rights to its Allocable Portion of the
Distribution Fees and CDSCs (but not such Principal Underwriter's obligations to
the Fund under its principal underwriting agreement) to raise funds to make
expenditures described in Section 2 above and in connection therewith, and upon
receipt of notice of such assignment, the Trust on behalf of any Fund shall pay
to the assignee such portion of the Principal Underwriter's Allocable Portion of
the Distribution Fees and CDSCs so assigned. For purposes of such principal
underwriting agreement, the term Allocable Portion of Distribution Fees as
applied to any Principal Underwriter may mean the portion of the Distribution
Fee allocable to Distributor Shares in accordance with the "Allocation Schedule"
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term Allocable Portion of
CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs
allocable to Distributor Shares in accordance with the Allocation Schedule
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term "Complete
Termination" may mean a termination of this Plan involving the cessation of
payments of the Distribution Fees thereunder, the cessation of payments of
distribution fees pursuant to every other Rule 12b-1 plan of the Fund for every
existing or future B-Class-of-Shares and the cessation of the offering by the
Fund of existing or future B-Class-of-Shares, which conditions shall be deemed
to be satisfied when they are first complied with and so long thereafter as they
are complied with prior to the earlier of (i) the date upon which all of the B-2
Shares which are Distributor Shares pursuant to the Allocation Schedule shall
have been redeemed or converted or (ii) a specified date, after either of which
times such conditions need no longer be complied with. For purposes of such
principal underwriting agreement, the term "B-Class-of- Shares" may mean each of
the B-1 Class of Shares of a Fund, the B-2 Class of Shares of the Fund and each
other class of shares of the Fund hereafter issued which would be treated as
"Shares" under such Allocation Schedule or which has economic characteristics
substantially similar to those of the B-1 or B-2 Classes of Shares
23866
-2-
<PAGE>
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of the shares of such classes. The parties
may agree that the existing C Class of Shares of the Fund does not have
substantially similar economic characteristics to the B-1 or B-2 Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of such shares. For purposes of
clarity the parties to such principal underwriting agreement may state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of Shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Trustees (as defined below) in connection with their
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fees
payable by the Trust on behalf of each Fund under such principal underwriting
agreement which has been earned by such Principal Underwriter to the extent
necessary so that the continued payments thereof if such Principal Underwriter
ceases to serve in that capacity does not penalize the Fund by requiring the
Trust on behalf of such Fund to pay for services that have not been earned.
Section 3. This Plan, and the specific implementation of expenditures
provided for under this Plan, shall not take effect until this Plan, and such
implementation, have been approved, together with any related agreements, by
votes of both (a) a majority of the Board of Trustees (the "Trustees") of the
Trust and (b) a majority of those Trustees of the Trust who are not "interested
persons" of the Trust (as said term is defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or any
agreements of the Fund or any other person related to this Plan (the "Rule 12b-1
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements.
Section 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long a such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof, except that, if terminated except for payments
provided to be made after termination of other aspects of this Plan, such
payments may be made pursuant to approvals made, and or agreements approved, as
provided above.
Section 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of any Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees, and the Board
shall review, at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
Section 6. This Plan may be terminated as to any Fund, in whole or in
part, at any time by vote of a majority of the Rule 12b-1 Trustees or by vote of
a majority of the outstanding Share of such Fund, with the effects provided for
in Section 2, as applicable.
23866
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<PAGE>
Section 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of
a majority of the outstanding Shares of the Fund on not more than sixty days
written notice to any other party to the agreement; and
(b) That such agreement shall terminate automatically in the event of
its assignment.
Section 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of the outstanding Shares of each Fund, and no material amendment to this
Plan shall be made unless approved in the manner provided for in Section 3
hereof.
::ODMA\SOFTSOL\311\LEGAL\23866\0:2/2/98
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen Strategic Income Fund
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund*
Evergreen Intermediate Term Bond Fund
DISTRIBUTION PLAN OF CLASS B SHARES
EVERGREEN FIXED INCOME TRUST
Section 1. The Evergreen Fixed Income Trust (the "Trust"), individually
and/or on behalf of its series (each a "Fund") referred to in Exhibit A to this
12b-1 Distribution Plan (the "Plan") may act as the distributor of certain
securities of which it is the issuer, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act") according to the terms of this
Plan.
Section 2. The Trust on behalf of each Fund may expend daily amounts at an
annual rate of 1.00% of the average daily net asset value of its Class B shares
("Shares") to finance any activity which is principally intended to result in
the sale of Shares including, without limitation, expenditures consisting of
payments to a principal underwriter of the Fund ("Principal Underwriter") or
others in order: (i) to enable payments to be made by the Principal Underwriter
or others for any activity primarily intended to result in the sale of Shares,
including, without limitation,
(a) compensation to public relations consultants or other persons assisting in,
or providing services in connection with, the distribution of Shares, (b)
advertising, (c) printing and mailing of prospectuses and reports for
distribution to persons other than existing shareholders, (d) preparation and
distribution of advertising material and sales literature, (e) commission
payments, and principal and interest expenses associated with the financing of
commission payments, made by the Principal Underwriter in connection with the
sale of Shares and (f) conducting public relations efforts such as seminars;
(ii) to enable the Principal Underwriter or others to receive, pay or to have
paid to others who have sold Shares, or who provide services to holders of
Shares, a maintenance or other fee in respect of services provided to holders of
Shares, at such intervals as the Principal Underwriter or such others may
determine, in respect of Shares previously sold and remaining outstanding during
the period in respect of which such fee is or has been paid; and/or (iii) to
compensate the Principal Underwriter or such others for their efforts in respect
of sales of Shares since inception of the Plan or any predecessor plan.
Appropriate adjustments shall be made to the payments made pursuant to this
Section 2 to the extent necessary to ensure that no payment is made on behalf of
any Fund with respect to Class B Shares in excess of any limit imposed on asset
based, front end and deferred sales charges under any rule or regulations
adopted by the National Association of Securities Dealers, Inc. (the "NASD
Rules"). In addition, to the extent any amounts paid hereunder fall within the
definition of an "asset based sales charge" under said NASD Rules such payments
shall be limited to .75 of 1% of the aggregate net asset value of the Shares on
an annual basis and, to the extent that any such payments are made in respect of
23868
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<PAGE>
"shareholder services" as that term is defined in the NASD Rules, such payments
shall be limited to .25 of 1% of the aggregate net asset value of the Shares on
an annual basis and shall only be made in respect of shareholder services
rendered during the period in which such amounts are accrued.
Section 3. This Plan shall not take effect with respect to any Fund until
it has been approved by votes of a majority of (a) the Trustees of the Trust,
and (b) those Trustees of the Trust who are not "interested persons" (as defined
in the 1940 Act) and who have no direct or indirect financial interest
in the operation of this Plan or any agreements of the Trust related hereto or
any other person related to this Plan ("Disinterested Trustees"), cast in person
at a meeting called for the purpose of voting on this Plan. In addition, any
agreement related to this Plan and entered into by the Trust on behalf of the
Fund in connection therewith shall not take effect until it has been approved by
votes of a majority of (a) the Board of Trustees of the Trust, and (c) the
Disinterested Trustees of the Trust.
Section 4. Unless sooner terminated pursuant to Section 6, this Plan shall
continue in effect for a period of one year from the date it takes effect and
thereafter shall continue in effect for additional periods that shall not exceed
one year so long as such continuance is specifically approved by votes of a
majority of both (a) the Board of Trustees of the Trust and (b) the
Disinterested Trustees of the Trust, cast in person at a meeting called for the
purpose of voting on this Plan, provided that payments for services theretofore
provided or for reimbursement of expenses theretofore incurred or accrued prior
to termination of this Plan in accordance with Section 2 may be continued by the
Fund to the extent provided for in Section 6, below, as applicable.
Section 5. Any person authorized to direct the disposition of monies paid
or payable pursuant to this Plan or any related agreement shall provide to the
Trust's Board and the Board shall review at least quarterly a written report of
the amounts so expended and the purposes for which such expenditures were made.
Section 6. Payments with respect to services provided by the Principal
Underwriter or others pursuant to Section 2, above, shall be authorized
hereunder, whether or not this Plan has been otherwise terminated, if such
payments are for services theretofore provided or for reimbursement of expenses
theretofore incurred or accrued prior to termination of this Plan in other
respects and if such payment is or has been so approved by the Board, including
the Disinterested Trustees, or agreed to on behalf of the Fund with such
approval, all subject to such specific implementation as the Board,
including the Disinterested Trustees, may approve; provided that, at the time
any such payment
23868
-2-
<PAGE>
is made, whether or not this Plan has been otherwise terminated, the making of
such payment will not cause the limitation upon such payments set forth in
Section 2 to be exceeded. Without limiting the generality of the foregoing, the
Trust on behalf of any Fund may pay to, or on the order of, any person who has
served from time to time as Principal Underwriter amounts for distribution
services pursuant to a principal underwriting agreement or otherwise. Any such
principal underwriting agreement may, but need not, provide that such Principal
Underwriter may be paid for distribution services to Class B Shares and/or other
specified classes of shares of any Fund (together the "B-Class-of-Shares"), a
fee which may be designated a Distribution Fee and may be paid at a rate per
annum up to .75 % of the average daily net asset value of such B-Class-of-Shares
of the Fund and may, but need not, also provide: (i) that a Principal
Underwriter will be deemed to have fully earned its "Allocable Portion" of the
Distribution Fee upon the sale of the Commission Shares (as defined in the
Allocation Schedule) taken into account in determining its Allocable Portion;
(ii) that the Fund's obligation to pay such Principal Underwriter its Allocable
Portion of the Distribution Fee shall be absolute and unconditional and shall
not be subject to dispute, offset, counterclaim or any defense whatsoever (it
being understood that such provision is not a waiver of the Fund's right to
pursue such Principal Underwriter and enforce such claims against the assets of
such Principal Underwriter other than its right to its Allocable Portion of the
Distribution Fee and CDSCs (as defined below); (iii) that the Fund's obligation
to pay such Principal Underwriter its Allocable Portion of the Distribution Fee
shall not be changed or terminated except to the extent required by any change
in applicable law, including without limitation, the 1940 Act, the Rules
promulgated thereunder by the Securities and Exchange Commission and the
Business Conduct Rules of the National Association of Securities Dealers, Inc.,
in each case enacted or promulgated after May 5, 1997, or in connection with a
"Complete Termination" (as hereinafter defined); (iv) that the Trust on behalf
of any Fund will not waive or change any contingent deferred sales charge
("CDSC") in respect of the Distributor's Allocable Portion thereof, except as
provided in the Fund's prospectus or statement of additional
information without the consent of the Principal Underwriter or any assignee of
such Principal Underwriter's rights to its Allocable Portion; (v) that the
termination of the Principal Underwriter, the principal underwriting agreement
or this Plan will not terminate such Principal Underwriter's rights to its
Allocable Portion of the CDSCs; and (vi) that any Principal Underwriter may
assign its rights to its Allocable Portion of the Distribution Fee and CDSCs
(but not such Principal Underwriter's obligations to the Fund under its
principal underwriting agreement) to raise funds to make expenditures described
in Section 2 above and in connection therewith, and upon receipt of notice of
such assignment, the Trust on behalf of any Fund shall pay to the assignee such
portion of the Principal Underwriter's Allocable Portion of the Distribution Fee
and CDSCs so assigned. For purposes of such principal underwriting agreement,
the term Allocable Portion of Distribution Fee
23868
-3-
<PAGE>
as applied to any Principal Underwriter may mean the portion of the Distribution
Fee allocable to Distributor Shares in accordance with the "Allocation Schedule"
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term Allocable Portion of
CDSCs as applied to any Principal Underwriter may mean the portion of the CDSCs
allocable to Distributor Shares in accordance with the Allocation Schedule
attached to such Principal Underwriter's principal underwriting agreement. For
purposes of such principal underwriting agreement, the term "Complete
Termination" may mean a termination of this Plan involving the cessation of
payments of the Distribution Fee thereunder, the cessation of payments of
distribution fees pursuant to every other Rule 12b-1 plan of the Fund for every
existing or future B-Class-of-Shares and the cessation of the offering by the
Fund of existing or future B-Class-of-Shares, which conditions shall be deemed
to be satisfied when they are first complied with and so long thereafter as they
are complied with prior to the earlier of (i) the date upon which all of the B
Shares which are Distributor Shares pursuant to the Allocation Schedule shall
have been redeemed or converted or (ii) a specified date, after either of which
times such conditions need no longer be complied with. For purposes of such
principal underwriting agreement, the term "B-Class-of-Shares" may mean the B
Class of Shares of the Fund and each other class of shares of the Fund hereafter
issued which would be treated as "Shares" under such Allocation Schedule or
which has economic characteristics substantially similar to those of the B Class
of Shares taking into account the total sales charge, CDSC or other similar
charges borne directly or indirectly by the holder of the shares of such
classes.
The parties may agree that the existing C Class of Shares of the Fund does
not have substantially similar economic characteristics to the B Classes of
Shares taking into account the total sales charge, CDSC or other similar charges
borne directly or indirectly by the holder of such shares. For purposes of
clarity the parties to such principal underwriting agreement may state that they
intend that a new installment load class of shares which may be authorized by
amendments to Rule 6(c)-10 under the 1940 Act will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of Shares taking into
account the total sales charge, CDSC or other similar charges borne directly or
indirectly by the holder of such shares and will not be considered to be a
B-Class-of-Shares if it has economic characteristics substantially similar to
the economic characteristics of the existing C Class of shares of the Fund
taking into account the total sales charge, CDSC or other similar charges borne
directly or indirectly by the holder of such shares. For purposes of such
principal underwriting agreement, "Allocation Schedule" may mean a schedule
which shall be approved by Trustees (as defined below) in connection with their
23868
-4-
<PAGE>
required approval of such principal underwriting agreement as assigning to each
Principal Underwriter of Shares the portion of the total Distribution Fee
payable by the Trust on behalf of each Fund under such principal underwriting
agreement which has been earned by such Principal Underwriter to the extent
necessary so that the continued payments thereof if such Principal Underwriter
ceases
23868
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<PAGE>
to serve in that capacity does not penalize the Fund by requiring the Trust on
behalf of such Fund to pay for services that have not been earned.
Section 7. This Plan may be terminated at any time with respect to any Fund
by vote of a majority of the Disinterested Trustees, or by vote of a majority of
the Shares of such Fund, provided that payments for services theretofore
provided or for reimbursement of expenses theretofore incurred or accrued prior
to termination of this Plan in accordance with Section 2 may be continued by the
Fund to the extent provided for in Section 6, above, as applicable.
Section 8. Any agreement of the Trust, with respect to any Fund, related to
this Plan shall be in writing and shall provide:
A. That such agreement may be terminated with respect to any Fund at any
time without payment of any penalty, by vote of a majority of the Disinterested
Trustees or by a vote of a majority of the outstanding Shares of such Fund on
not more than sixty days written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 9. This Plan may not be amended to increase materially the amount
of distribution expenses provided for in Section 2 with respect to a Fund unless
such amendment is approved by a vote of at least a majority (as defined in the
1940 Act) of the outstanding Shares of such Fund, and no material amendment to
this Plan shall be made unless approved by votes of a majority of (a) the Board
of Trustees of the Trust, and (c) the Disinterested Trustees of the Trust, cast
in person at a meeting called for the purpose of voting on such amendment.
::ODMA\SOFTSOL\311\LEGAL\23868\0:1/29/98
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Evergreen High Income Bond Fund (B-4)
(To be redesignated Evergreen High Yield Bond Fund
January 12, 1998)
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
DISTRIBUTION PLAN OF CLASS C SHARES
EVERGREEN FIXED INCOME TRUST
SECTION 1. The Evergreen Fixed Income Trust (the "Trust") individually
and/or on behalf of its series (the "Fund") referred to in Exhibit A to this
Rule 12b-1 Plan of Distribution (the "Plan") may act as the distributor of
securities which are issued in respect of the Fund's Class C shares ("Shares"),
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
according to the terms of this Plan.
SECTION 2. The Trust on behalf of each Fund may expend daily amounts at
an annual rate of 1.00% of the average daily net asset value of the Shares. Such
amounts may be expended to finance activity which is principally intended to
result in the sale of Shares including, without limitation, expenditures
consisting of payments to a principal underwriter of the Fund ("Principal
Underwriter") or others in order (i) to make payments to the Principal
Underwriter or others of sales commissions, other fees or other compensation for
services provided or to be provided, to enable payments to be made by the
Principal Underwriter or others for any activity primarily intended to result in
the sale of Shares, to pay interest expenses associated with payments in
connection with the sale of Shares and to pay any expenses of financing
permitted by this clause (i); (ii) to enable the Principal Underwriter or others
to receive, pay or to have paid to others who have sold Shares, or who provide
services to holders of Shares, a service fee, maintenance or other fee in
respect of such services, at such intervals as the Principal Underwriter or such
others may determine, in respect of Shares previously sold and remaining
outstanding during the period in respect of which such fee is or has been paid;
and/or (iii) to compensate the Principal Underwriter or others for efforts
(including without limitation any financing of payments under (i) and (ii) for
the sale of shares) in respect of sales of Shares since inception of the Plan or
any predecessor plan. Appropriate adjustments shall be made to the payments made
pursuant to this Section 2 to the extent necessary to ensure that no payment is
made by the Trust on behalf of any Fund with respect to the Class in excess of
the applicable limit imposed on asset based, front end and deferred sales
charges under subsection (d) of Rule 2830 of the Business Conduct Rules of the
National Association of Securities Dealers Regulation, Inc. (The "NASDR"). In
addition, to the extent any amounts paid hereunder fall within the definition of
an "asset based sales charge" under said NASDR Rule, such payments shall be
limited to 0.75 of 1% of the aggregate net asset value of the Shares on an
annual basis and, to the extent that any such payments are made in respect of
"shareholder services" as that term is defined in the NASDR Rule, such payments
shall be limited to .25 of 1% of the aggregate net asset value of the Shares on
an annual basis and shall only be made in respect of shareholder services
rendered during the period in which such amounts are accrued.
SECTION 3. This Plan shall not take effect until it has been approved
together with any related agreements by votes of a majority of both (a) the
Board of Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as said term is defined
23869
-1-
<PAGE>
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of this Plan or any agreements of the Fund or any other person related
to this Plan (the "Rule 12b-1 Trustees"), cast in person at a meeting called for
the purpose of voting on this Plan or such agreements.
SECTION 4. Unless sooner terminated pursuant to Section 6 hereof, this
Plan shall continue in effect for a period of one year from the date it takes
effect and thereafter shall continue in effect so long as such continuance is
specifically approved at least annually in the manner provided for approval of
this Plan in Section 3 hereof.
SECTION 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust on behalf of each Fund pursuant to this Plan or any
related agreement shall provide to the Trust's Board of Trustees and the Board
shall review at least quarterly a written report of the amounts so expended and
the purposes for which such expenditures were made.
SECTION 6. This Plan may be terminated with respect to any Fund at any
time by vote of a majority of the Rule 12b-1 Trustees or by vote of a majority
of such Fund's outstanding Shares.
SECTION 7. Any agreement of the Fund related to this Plan shall be in
writing, and shall provide as follows:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Rule
12b-1 Trustees or by a vote of a majority of such Fund's
outstanding Shares on not more than sixty days written notice
to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of
its assignment.
SECTION 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the 1940
Act) of each Fund's outstanding Shares, and no material amendment to this Plan
shall be made unless approved in the manner provided for in Section 3 hereof.
::ODMA\SOFTSOL\311\LEGAL\23869\0:2/6/98
<PAGE>
EXHIBIT A
EVERGREEN FIXED INCOME TRUST
Long-Term Bond Funds
Evergreen U.S. Government Fund
Evergreen Strategic Income Fund
Evergreen Diversified Bond Fund
Evergreen High Income Bond Fund (B-4)*
(To be redesignated Evergreen High Yield Bond Fund
January 12, 1998)
Short/Intermediate-Term Bond Fund
Evergreen Capital Preservation and Income Fund
Evergreen Intermediate Term Bond Fund
Evergreen Intermediate-Term Government Securities Fund
Evergreen Short-Intermediate Bond Fund
* Class A Shares and Class C Shares authorized but not issued
Evergreen High Yield Bond Fund - Class A
<TABLE>
<CAPTION>
$1,000 952.5 $952.50
A A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 1,025.70 0.00% 952.5 -4.75% -4.75%
31-Mar-98 1 MO 1,025.51 0.02% 0.02% 952.68 -4.73% -4.73%
31-Jan-98 QTR 1,007.59 1.80% 1.80% 969.63 -3.04% -3.04%
31-Dec-97 YTD
30-Apr-97 1
30-Apr-95 3
30-Apr-93 5
30-Apr-88 10
21-Jan-88 INCEPT. 1,000.00 2.57% 9.70% 976.98 -2.30% -8.15%
INCEPTION FACTOR: 0.274 0.274
</TABLE>
Evergreen High Yield Bond Fund - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIT. B AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 168,320.09 0.00% 50 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO 168,392.03 -0.04% -0.04% 49.671 999.57 993.42 -5.01% -5.01%
31-Jan-98 QTR 165,607.28 1.64% 1.64% 49.89 1,016.38 997.80 -3.35% -3.35%
31-Dec-97 YTD 161,280.46 4.36% 4% 50 1,043.65 1,017.98 -0.64% -0.64%
30-Apr-97 1 143,834.13 17.02% 17% 50 1,170.24 1,086.33 12.02% 12.02%
30-Apr-95 3 124,242.55 35.48% 11% 30 1,354.77 1,041.38 32.48% 9.83%
30-Apr-93 5 116,165.78 44.90% 8% 18.528 1,448.96 926.38 43.04% 7.42%
30-Apr-88 10 81,138.47 107.45% 8% 2,074.48 660.35 107.45% 7.57%
11-Sep-35 INCEPT. 1,000.00 16732.01% 8.52% 0 168,320.09 500.00 16732.01% 8.52%
INCEPTION FACTOR: 62.6795 2.6795
</TABLE>
Evergreen High Yield Bond Fund - Class C
<TABLE>
<CAPTION>
1000 $1,000
C C NAV LEVEL VALUE OF VALUE OF C
TIME ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIT C AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 1,023.47 0.00% 10 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO 1,023.92 -0.04% -0.04% 9.93 999.56 993.42 -1.04% -1.04%
31-Jan-98 QTR 1,007.20 1.62% 1.62% 9.98 1,016.16 997.8 0.62% 0.62%
31-Dec-97 YTD
30-Apr-97 1
30-Apr-95 3
30-Apr-93 5
30-Apr-88 10
21-Jan-88 INCEPT. 1,000.00 2.35% 8.84% 10 1,023.47 1,002.21 1.35% 5.01%
INCEPTION FACTOR: 0.274 0.274
</TABLE>
Evergreen High Yield Bond Fund - Class Y
<TABLE>
<CAPTION>
$1,000
Y Y NAV
TIME ACCOUNT Y AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL
<S> <C> <C> <C> <C>
30-Apr-98 BLANK 997.35 0.00%
31-Mar-98 1 MO
31-Jan-98 QTR
31-Dec-97 YTD
30-Apr-97 1
30-Apr-95 3
30-Apr-93 5
30-Apr-88 10
14-Apr-98 INCEPT. 1,000.00 -0.27% -5.54%
INCEPTION FACTOR: 0.0466 0.0466
</TABLE>
Evergreen Diversified Bond Fund - Class A
<TABLE>
<CAPTION>
$1,000 952.5 $952.50
A A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
330-Apr-98 BLANK 1,008.50 0.00% 952.5 -4.75% -4.75%
31-Mar-98 1 MO 1,005.05 0.34% 0.34% 955.78 -4.42% -4.42%
31-Jan-98 QTR 999.93 0.86% 0.86% 960.66 -3.93% -3.93%
31-Dec-97 YTD
30-Apr-97 1
30-Apr-95 3
30-Apr-93 5
30-Apr-88 10
20-Jan-98 INCEPT. 1,000.00 0.85% 3.11% 960.6 -3.94% -13.52%
INCEPTION FACTOR: 0.2767 0.2767
</TABLE>
Evergreen Diversified Bond Fund - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INI B AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 69,120.20 0.00% 50 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO 68,925.62 0.28% 0.28% 49.906 1,002.82 998.12 -4.71% -4.71%
31-Jan-98 QTR 68,656.71 0.68% 0.68% 49.626 1,006.75 992.52 -4.29% -4.29%
31-Dec-97 YTD 67,818.95 1.92% 1.92% 50 1,019.19 1,000.00 -3.08% -3.08%
30-Apr-97 1 61,285.72 12.78% 12.78% 50 1,127.84 1,064.17 7.78% 7.78%
30-Apr-95 3 53,270.31 29.75% 9.07% 30 1,297.54 1,057.81 26.75% 8.22%
30-Apr-93 5 50,112.39 37.93% 6.64% 19.32 1,379.30 966.02 36.00% 6.34%
30-Apr-88 10 33,184.79 108.29% 7.61% 2,082.89 886.41 108.29% 7.61%
11-Sep-35 INCEPT. 1,000.00 6812.02% 6.99% 0 69,120.20 578.91 6812.02% 6.99%
INCEPTION FACTOR: 62.6795 62.6795
</TABLE>
Evergreen Diversified Bond Fund - Class C
<TABLE>
<CAPTION>
1000 $1,000
C C NAV LEVEL VALUE OF VALUE OF C
TIME ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIT C AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 993.99 0.00% 10 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO
31-Jan-98 QTR
31-Dec-97 YTD
30-Apr-97 1
30-Apr-95 3
30-Apr-93 5
30-Apr-88 10
8-Apr-98 INCEPT. 1,000.00 -0.60% -9.13% 9.91 993.99 991.28 -1.59% -22.49%
INCEPTION FACTOR: 0.063 0.063
</TABLE>
Evergreen Diversified Bond Fund - Class Y
<TABLE>
<CAPTION>
$1,000
Y Y NAV
TIME ACCOUNT Y AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL
<S> <C> <C> <C> <C>
30-Apr-98 BLANK 1,008.02 0.00%
31-Mar-98 1 MO 1,004.36 0.36% 0.36%
31-Jan-98 QTR
31-Dec-97 YTD
30-Apr-97 1
30-Apr-95 3
30-Apr-93 5
30-Apr-88 10
11-Feb-88 INCEPT. 1,000.00 0.80% 3.76%
INCEPTION FACTOR: 0.2164 0.2164
</TABLE>
Evergreen Strategic Income Fund - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 2,317.48 0.00% 952.5 -4.75% -4.75%
31-Mar-98 1 MO 2,311.39 0.26% 0.26% 955.01 -4.50% -4.50%
31-Jan-98 QTR 2,274.22 1.90% 1.90% 970.62 -2.94% -2.94%
31-Dec-97 YTD 2,243.23 3.31% 3.31% 984.03 -1.60% -1.60%
30-Apr-97 1 2,047.33 13.20% 13.20% 1,078.18 7.82% 7.82%
30-Apr-95 3 1,700.97 36.25% 10.86% 1,297.73 29.77% 9.08%
30-Apr-93 5 1,575.91 47.06% 8.02% 1,400.72 40.07% 6.97%
30-Apr-88 10 1,027.60 125.52% 8.47% 2,148.11 114.81% 7.95%
14-Apr-87 INCEPT. 1,000.00 131.75% 7.90% 2,207.40 120.74% 7.43%
INCEPTION FACTOR: 11.0548
</TABLE>
Evergreen Strategic Income Fund - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIT B AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 1,527.18 0.00% 50 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO 1,521.99 0.34% 0.34% 49.931 1,003.41 998.62 -4.65% -4.65%
31-Jan-98 QTR 1,499.35 1.86% 1.86% 50 1,018.56 1,004.16 -3.14% -3.14%
31-Dec-97 YTD 1,479.94 3.19% 3.19% 50 1,031.92 1,012.57 -1.81% -1.81%
30-Apr-97 1 1,357.86 12.47% 12.47% 50 1,124.69 1,058.39 7.47% 7.47%
30-Apr-95 3 1,145.09 33.37% 10.07% 30 1,333.68 1,080.48 30.37% 9.24%
30-Apr-93 5 1,073.84 42.22% 7.30% 19.568 1,422.16 978.41 40.26% 7.00%
30-Apr-88 10
1-Feb-93 INCEPT. 1,000.00 52.72% 8.41% 10 1,527.18 1,025.46 51.72% 8.27%
INCEPTION FACTOR: 5.2466
</TABLE>
Evergreen Strategic Income Fund - Class C
<TABLE>
<CAPTION>
$1,000
C C NAV LEVEL VALUE OF VALUE OF C
ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIT C AVERAGE
YEARS VALUE CLASS ANNNUAL COMP IiNVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 1,525.62 0.00% 10 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO 1,520.44 0.34% 0.34% 9.99 1,003.41 998.62 -0.66% -0.66%
31-Jan-98 QTR 1,497.81 1.86% 1.86% 10 1,018.57 1,004.16 0.86% 0.86%
31-Dec-97 YTD 1,478.40 3.19% 3.19% 10 1,031.94 1,012.59 2.19% 2.19%
30-Apr-97 1 1,356.35 12.48% 12.48% 10 1,124.80 1,058.48 11.48% 11.48%
30-Apr-95 3 1,143.57 33.41% 10.08% 1,334.09 1,080.60 33.41% 10.08%
30-Apr-93 5 1,073.87 42.07% 7.28% 1,420.68 977.06 42.07% 7.28%
30-Apr-88 10
1-Feb-93 INCEPT. 1,000.00 52.56% 8.38% 0 1,525.62 1,024.05 52.56% 8.38%
INCEPTION FACTOR: 5.2466
</TABLE>
Evergreen Strategic Income Fund - Class Y
<TABLE>
<CAPTION>
Y
ACCOUNT Y AVERAGE
YEARS VALUE CLASS ANNNUAL
<S> <C> <C> <C> <C>
30-Apr-98 BLANK 1,102.09 0.00%
31-Mar-98 1 MO 1,097.48 0.42% 0.42%
31-Jan-98 QTR 1,079.27 2.11% 2.11%
31-Dec-97 YTD 1,064.13 3.57% 3.57%
30-Apr-97 1 971.3 13.46% 13.46%
30-Apr-95 3
30-Apr-93 5
30-Apr-88 10
13-Jan-97 INCEPT. 1,000.00 10.21% 7.80%
INCEPTION FACTOR: 1.2949
</TABLE>
Evergreen U.S. Government Fund - Class A
<TABLE>
<CAPTION>
$952.50
A NAV A A
TIME ACCOUNT A AVERAGE A/C VALUE A AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL W/LOAD CLASS ANNNUAL
<S> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 1,381.14 0.00% 952.5 -4.75% -4.75%
31-Mar-98 1 MO 1,374.17 0.51% 0.51% 957.34 -4.27% -4.27%
31-Jan-98 QTR 1,371.78 0.68% 0.68% 959 -4.10% -4.10%
31-Dec-97 YTD 1,356.34 1.83% 1.83% 969.92 -3.01% -3.01%
30-Apr-97 1 1,258.13 9.78% 9.78% 1,045.63 4.56% 4.56%
30-Apr-95 3 1,101.03 25.44% 7.85% 1,194.83 19.48% 6.11%
30-Apr-93 5 1,035.12 33.43% 5.94% 1,270.91 27.09% 4.91%
30-Apr-88 10
12-Jan-93 INCEPT. 1,000.00 38.11% 6.28% 1,315.54 31.55% 5.31%
INCEPTION FACTOR: 5.3014
</TABLE>
Evergreen U.S. Government Fund - Class B
<TABLE>
<CAPTION>
$1,000
B B NAV LEVEL VALUE OF VALUE OF B
TIME ACCOUNT B AVERAGE LOAD CLASS B CLASS B INIT B AVERAGE
YEARS PERIOD VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 1,332.97 0.00% 50 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO 1,327.05 0.45% 0.45% 50 1,004.46 1,000.00 -4.55% -4.55%
31-Jan-98 QTR 1,326.31 0.50% 0.50% 49.59 1,005.02 991.8 -4.46% -4.46%
31-Dec-97 YTD 1,312.22 1.58% 1.58% 49.897 1,015.81 997.94 -3.41% -3.41%
30-Apr-97 1 1,223.32 8.96% 8.96% 50 1,089.63 1,030.88 3.96% 3.96%
30-Apr-95 3 1,086.69 22.66% 7.05% 30 1,226.63 1,031.98 19.66% 6.17%
30-Apr-93 5 1,033.57 28.97% 5.22% 19.093 1,289.68 954.64 27.06% 4.91%
30-Apr-88 10
12-Jan-93 INCEPT. 1,000.00 33.30% 5.57% 9.68 1,332.97 968 32.33% 5.43%
INCEPTION FACTOR: 5.3014
</TABLE>
Evergreen U.S. Government Fund - Class C
<TABLE>
<CAPTION>
$1,000
C C NAV LEVEL VALUE OF VALUE OF C
ACCOUNT C AVERAGE LOAD CLASS C CLASS C INIT C AVERAGE
YEARS VALUE CLASS ANNNUAL COMP INVESTMENT INVESTMENT CUMULATIVE ANNUAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-Apr-98 BLANK 1,278.44 0.00% 10 1,000.00 1,000.00 0.00%
31-Mar-98 1 MO 1,272.77 0.45% 0.45% 10 1,004.46 1,000.00 -0.55% -0.55%
31-Jan-98 QTR 1,272.07 0.50% 0.50% 9.92 1,005.02 991.8 -0.49% -0.49%
31-Dec-97 YTD 1,258.54 1.58% 1.58% 9.98 1,015.81 997.94 0.58% 0.58%
30-Apr-97 1 1,173.29 8.96% 8.96% 10 1,089.62 1,030.88 7.96% 7.96%
30-Apr-95 3 1,042.25 22.66% 7.05% 1,226.62 1,031.98 22.66% 7.05%
30-Apr-93 5
30-Apr-88 10
2-Seo-94 INCEPT. 1,000.00 27.84% 6.94% 0 1,278.44 1,030.88 27.84% 6.94%
INCEPTION FACTOR: 3.6629
</TABLE>
Evergreen U.S. Government Fund - Class Y
<TABLE>
<CAPTION>
Y
ACCOUNT Y AVERAGE
YEARS VALUE CLASS ANNNUAL
<S> <C> <C> <C> <C>
30-Apr-98 BLANK 1,305.93 0.00%
31-Mar-98 1 MO 1,299.07 0.53% 0.53%
31-Jan-98 QTR 1,296.29 0.74% 0.74%
31-Dec-97 YTD 1,281.43 1.91% 1.91%
30-Apr-97 1 1,186.66 10.05% 10.05%
30-Apr-95 3 1,033.36 26.38% 8.12%
30-Apr-93 5
30-Apr-88 10
2-Sep-93 INCEPT. 1,000.00 30.59% 5.89%
INCEPTION FACTOR: 4.663
</TABLE>
Evergreen Strategic Income Fund CLASS A
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 1191911
TOTAL EXPENSES FOR PERIOD 195240.4
30 DAY YTM 0.058882 AVERAGE SHARES OUTSTANDING 27159254
LAST PRICE DURING PERIOD 7.57
<TABLE>
<CAPTION>
PRICE ST VARIABLE PIK INCOME LONG TERM MORTAGE Gain/LOSS TOTAL DIV ADJUSTED
DATE INCOME INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35885
1 35886 761.81 66740 67501.81 58.78248 39679.24
2 35887 759.45 66681.34 67440.79 58.79395 39651.11
3 35888 837.83 66292.65 67130.48 58.74214 39433.88
4 35889 837.83 66292.65 67130.48 58.74214 39433.88
5 35890 837.83 66292.65 67130.48 58.74214 39433.88
6 35891 1026.82 66200.88 67227.7 58.7595 39502.66
7 35892 213.19 67378.01 67591.2 58.73796 39701.69
8 35893 69.75 67824.21 67893.96 58.68814 39845.7
9 35894 222.94 67487.78 67710.72 58.68874 39738.57
10 35895 222.94 67487.78 67710.72 58.68874 39738.57
11 35896 222.94 67487.78 67710.72 58.68874 39738.57
12 35897 222.94 67487.78 67710.72 58.68874 39738.57
13 35898 190.93 67476.79 67667.72 58.63659 39678.04
14 35899 652.43 67877.8 68530.23 58.57162 40139.27
15 35900 1405.05 67233.43 68638.48 58.54687 40185.68
16 35901 901.33 67092.07 67993.4 58.90697 40052.85
17 35902 887.37 67137.12 68024.49 58.87713 40050.87
18 35903 887.37 67137.12 68024.49 58.87713 40050.87
19 35904 887.37 67137.12 68024.49 58.87713 40050.87
20 35905 1153.51 66465.84 67619.35 58.83673 39785.02
21 35906 747.66 67210.85 67958.51 58.79855 39958.62
22 35907 279.09 67885.28 68164.37 58.72556 40029.91
23 35908 3.31 68116.51 68119.82 58.78034 40041.06
24 35909 0 68082.24 68082.24 58.81875 40045.12
25 35910 0 68082.24 68082.24 58.81875 40045.12
26 35911 0 68082.24 68082.24 58.81875 40045.12
27 35912 0 68712.32 68712.32 58.86107 40444.81
28 35913 0 68736.91 68736.91 58.83871 40443.91
29 35914 304.7 67191.72 67496.42 58.81296 39696.64
30 35915 0 68004.53 -7793.15 60211.38 59.01106 35531.37
14536.39 0 2021316 0 0 -7793.15 2028059 1763.158 1191911
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
6457.65 27467175 7.59 39679.24 6457.65 27467175
6454.18 27478707 7.6 79330.35 12911.83 54945882
5857.92 327448830 7.62 118764.2 18769.75 82394712
5857.92 327448830 7.62 158198.1 24627.68 1.1E+08
5857.92 327448830 7.62 197632 30485.6 1.37E+08
8068.14 27426589 7.61 237134.7 38553.74 1.65E+08
6419.31 27391301 7.61 276836.3 44973.05 1.92E+08
6416.4 27347476 7.61 316682 51389.45 2.19E+08
5779.30 327329670 7.61 356420.6 57168.75 2.47E+08
5779.30 327329670 7.61 396159.2 62948.06 2.74E+08
5779.30 327329670 7.61 435897.8 68727.36 3.01E+08
5779.30 327329670 7.61 475636.3 74506.66 3.29E+08
8936.46 27289004 7.59 515314.4 83443.12 3.56E+08
6363.52 27235240 7.61 555453.6 89806.64 3.83E+08
6384.6 27195517 7.62 595639.3 96191.24 4.1E+08
6416.43 27151000 7.61 635692.2 102607.7 4.38E+08
5827.01 27135180 7.61 675743 108434.7 4.65E+08
5827.01 27135180 7.61 715793.9 114261.7 4.92E+08
5827.01 27135180 7.61 755844.8 120088.7 5.19E+08
8034.79 27042232 7.6 795629.8 128123.5 5.46E+08
6736.14 26996499 7.6 835588.4 134859.6 5.73E+08
6722.81 26911813 7.6 875618.3 141582.4 6E+08
6719.88 26871945 7.59 915659.4 148302.3 6.27E+08
6157.49 326886145 7.6 955704.5 154459.8 6.54E+08
6157.49 326886145 7.6 995749.6 160617.3 6.81E+08
6157.49 326886145 7.6 1035795 166774.8 7.08E+08
8400.29 26869766 7.55 1076240 175175.1 7.34E+08
6681.92 26816196 7.55 1116683 181857 7.61E+08
6687.35 26785327 7.55 1156380 188544.4 7.88E+08
6696.03 26772691 7.57 1191911 195240.4 8.15E+08
195240.4 27159254
<PAGE>
Evergreen Strategic Income Fund CLASS B
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 691747.3
TOTAL EXPENSES FOR PERIOD 183739.5
30 DAY YTM 0.054198 AVERAGE SHARES OUTSTANDING 15688578
LAST PRICE DURING PERIOD 7.25
<TABLE>
<CAPTION>
PRICE ST VARIABLE PIK INCOME LONG TERM MORTAGE AMORT GAIN/LOSS TOTAL DIV ADJUSTED
DATE INCOME INCOME INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 761.81 0 66740 0 0 0 67501.81 33.77782 22800.64
2 35887 759.45 0 66681.34 0 0 0 67440.79 33.77851 22780.49
3 35888 837.83 0 66292.65 0 0 0 67130.48 33.82108 22704.25
4 35889 837.83 0 66292.65 0 0 0 67130.48 33.82108 22704.25
5 35890 837.83 0 66292.65 0 0 0 67130.48 33.82108 22704.25
6 35891 1026.82 0 66200.88 0 0 0 67227.7 33.84253 22751.56
7 35892 213.19 0 67378.01 0 0 0 67591.2 33.85804 22885.05
8 35893 69.75 0 67824.21 0 0 0 67893.96 33.89268 23011.08
9 35894 222.94 0 67487.78 0 0 0 67710.72 33.89523 22950.7
10 35895 222.94 0 67487.78 0 0 0 67710.72 33.89523 22950.7
11 35896 222.94 0 67487.78 0 0 0 67710.72 33.89523 22950.7
12 35897 222.94 0 67487.78 0 0 0 67710.72 33.89523 22950.7
13 35898 190.93 0 67476.79 0 0 0 67667.72 33.94233 22968
14 35899 652.43 0 67877.8 0 0 0 68530.23 33.99498 23296.84
15 35900 1405.05 0 67233.43 0 0 0 68638.48 34.01583 23347.95
16 35901 901.33 0 67092.07 0 0 0 67993.4 34.23905 23280.29
17 35902 887.37 0 67137.12 0 0 0 68024.49 34.25681 23303.02
18 35903 887.37 0 67137.12 0 0 0 68024.49 34.25681 23303.02
19 35904 887.37 0 67137.12 0 0 0 68024.49 34.25681 23303.02
20 35905 1153.51 0 66465.84 0 0 0 67619.35 34.31471 23203.38
21 35906 747.66 0 67210.85 0 0 0 67958.51 34.34824 23342.55
22 35907 279.09 0 67885.28 0 0 0 68164.37 34.40752 23453.67
23 35908 3.31 0 68116.51 0 0 0 68119.82 34.33808 23391.04
24 35909 0 0 68082.24 0 0 0 68082.24 34.3717 23401.02
25 35910 0 0 68082.24 0 0 0 68082.24 34.3717 23401.02
26 35911 0 0 68082.24 0 0 0 68082.24 34.3717 23401.02
27 35912 0 0 68712.32 0 0 0 68712.32 34.33425 23591.86
28 35913 0 0 68736.91 0 0 0 68736.91 34.3691 23624.26
29 35914 304.7 0 67191.72 0 0 0 67496.42 34.39092 23212.64
30 35915 0 0 68004.53 0 0 -7793.15 60211.38 34.50902 20778.36
14536.39 0 2021316 0 0 -7793.15 2028059 1023.283 691747.3
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
6054.9 15710258 7.27 22800.64 6054.9 15710258
6061.58 15714115 7.27 45581.13 12116.48 31424374
5725.337 15730685 7.29 68285.38 17841.82 47155058
5725.337 15730685 7.29 90989.63 23567.15 62885743
5725.337 15730685 7.29 113693.9 29292.49 78616428
7007.15 15723289 7.29 136445.4 36299.64 94339717
6057.28 15715981 7.28 159330.5 42356.92 1.1E+08
6066.6 15720257 7.28 182341.6 48423.52 1.26E+08
5696.43 15711026 7.28 205292.3 54119.95 1.41E+08
5696.43 15711026 7.28 228243 59816.38 1.57E+08
5696.43 15711026 7.28 251193.7 65512.81 1.73E+08
5696.43 15711026 7.28 274144.4 71209.24 1.89E+08
7528.11 15723426 7.26 297112.4 78737.35 2.04E+08
6038.63 15734196 7.28 320409.2 84775.98 2.2E+08
6062.9 15727554 7.29 343757.2 90838.88 2.36E+08
6084.79 15708205 7.29 367037.5 96923.67 2.52E+08
5744.21 15715155 7.28 390340.5 102667.9 2.67E+08
5744.21 15715155 7.28 413643.5 108412.1 2.83E+08
5744.21 15715155 7.28 436946.5 114156.3 2.99E+08
7036.66 15698561 7.27 460149.9 121193 3.14E+08
6282.17 15697525 7.27 483492.4 127475.1 3.3E+08
6274.43 15694743 7.27 506946.1 133749.6 3.46E+08
6265.8 15625285 7.26 530337.2 140015.4 3.61E+08
5934.62 15638636 7.27 553738.2 145950 3.77E+08
5934.62 15638636 7.27 577139.2 151884.6 3.93E+08
5934.62 15638636 7.27 600540.2 157819.2 4.08E+08
7239.39 15600841 7.22 624132.1 165058.6 4.24E+08
6221.23 15591461 7.22 647756.3 171279.8 4.39E+08
6226.69 15590223 7.22 670969 177506.5 4.55E+08
6232.99 15583874 7.25 691747.3 183739.5 4.71E+08
183739.5 15688578
<PAGE>
Evergreen Strategic Income Fund CLASS C
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 122833.7
TOTAL EXPENSES FOR PERIOD 32591.49
30 DAY YTM 0.054225 AVERAGE SHARES OUTSTANDING 2789388
LAST PRICE DURING PERIOD 7.24
PRICE ST FIXED PIK INCOME LONG TERM MORTAGE AMORT GAIN/LOSS TOTAL DIV ADJUSTED
DATE INCOME INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 761.81 0 66740 0 0 0 67501.81 6.056467 4088.22
2 35887 759.45 0 66681.34 0 0 0 67440.79 6.044622 4076.54
3 35888 837.83 0 66292.65 0 0 0 67130.48 6.053582 4063.8
4 35889 837.83 0 66292.65 0 0 0 67130.48 6.053582 4063.8
5 35890 837.83 0 66292.65 0 0 0 67130.48 6.053582 4063.8
6 35891 1026.82 0 66200.88 0 0 0 67227.7 6.029953 4053.8
7 35892 213.19 0 67378.01 0 0 0 67591.2 6.036032 4079.83
8 35893 69.75 0 67824.21 0 0 0 67893.96 6.050184 4107.71
9 35894 222.94 0 67487.78 0 0 0 67710.72 6.049685 4096.29
10 35895 222.94 0 67487.78 0 0 0 67710.72 6.049685 4096.29
11 35896 222.94 0 67487.78 0 0 0 67710.72 6.049685 4096.29
12 35897 222.94 0 67487.78 0 0 0 67710.72 6.049685 4096.29
13 35898 190.93 0 67476.79 0 0 0 67667.72 6.05345 4096.23
14 35899 652.43 0 67877.8 0 0 0 68530.23 6.051027 4146.78
15 35900 1405.05 0 67233.43 0 0 0 68638.48 6.053435 4154.99
16 35901 901.33 0 67092.07 0 0 0 67993.4 6.090057 4140.84
17 35902 887.37 0 67137.12 0 0 0 68024.49 6.101538 4150.54
18 35903 887.37 0 67137.12 0 0 0 68024.49 6.101538 4150.54
19 35904 887.37 0 67137.12 0 0 0 68024.49 6.101538 4150.54
20 35905 1153.51 0 66465.84 0 0 0 67619.35 6.081413 4112.21
21 35906 747.66 0 67210.85 0 0 0 67958.51 6.085908 4135.89
22 35907 279.09 0 67885.28 0 0 0 68164.37 6.096041 4155.33
23 35908 3.31 0 68116.51 0 0 0 68119.82 6.105765 4159.24
24 35909 0 0 68082.24 0 0 0 68082.24 6.033634 4107.83
25 35910 0 0 68082.24 0 0 0 68082.24 6.033634 4107.83
26 35911 0 0 68082.24 0 0 0 68082.24 6.033634 4107.83
27 35912 0 0 68712.32 0 0 0 68712.32 6.027633 4141.73
28 35913 0 0 68736.91 0 0 0 68736.91 6.013885 4133.76
29 35914 304.7 0 67191.72 0 0 0 67496.42 6.017265 4061.44
30 35915 0 0 68004.53 0 0 -7793.15 60211.38 6.041217 3637.5
14536.39 0 2021316 0 0 -7793.15 2028059 181.6994 122833.7
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0 0
1084.62 2820388 7.26 4088.22 1084.62 2820388
1084.48 2815505 7.26 8164.76 2169.1 5635893
1021.437 2819107 7.28 12228.56 3190.537 8455000
1021.437 2819107 7.28 16292.36 4211.973 11274107
1021.437 2819107 7.28 20356.16 5233.41 14093213
1248.96 2804999 7.28 24409.96 6482.37 16898212
1079.97 2805239 7.28 28489.79 7562.34 19703451
1081.31 2809707 7.27 32597.5 8643.65 22513158
1015.045 2807620 7.27 36693.79 9658.695 25320778
1015.045 2807620 7.27 40790.08 10673.74 28128398
1015.045 2807620 7.27 44886.37 11688.79 30936017
1015.045 2807620 7.27 48982.66 12703.83 33743637
1341.15 2807682 7.25 53078.89 14044.98 36551319
1075.14 2804132 7.27 57225.67 15120.12 39355451
1080.27 2802347 7.28 61380.66 16200.39 42157798
1083.4 2797472 7.28 65521.5 17283.79 44955270
1022.5 2802533 7.28 69672.04 18306.29 47757803
1022.5 2802533 7.28 73822.58 19328.79 50560337
1022.5 2802533 7.28 77973.12 20351.29 53362870
1249.19 2785633 7.27 82085.33 21600.48 56148503
1112.63 2784796 7.26 86221.22 22713.11 58933299
1113.11 2784140 7.26 90376.55 23826.22 61717439
1106.55 2781830 7.25 94535.79 24932.77 64499269
1040.817 2748625 7.26 98643.62 25973.59 67247894
1040.817 2748625 7.26 102751.5 27014.4 69996519
1040.817 2748625 7.26 106859.3 28055.22 72745144
1268.4 2742242 7.22 111001 29323.62 75487386
1089.02 2731569 7.21 115134.8 30412.64 78218954
1089.43 2731155 7.21 119196.2 31502.07 80950110
1089.42 2731526 7.24 122833.7 32591.49 83681636
32591.49 2789388
<PAGE>
Evergreen Strategic Income Fund CLASS Y
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 21600.63
TOTAL EXPENSES FOR PERIOD 2780.78
30 DAY YTM 0.064464 AVERAGE SHARES OUTSTANDING 504272.7
LAST PRICE DURING PERIOD 7.04
PRICE ST FIXED ZERO COUPON LONG TERM TOTAL DIV ADJUSTED
DATE INCOME AND DIV INC INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 761.81 0 66740 0 67501.81 1.383228 933.7
2 35887 759.45 0 66681.34 0 67440.79 1.382917 932.65
3 35888 837.83 0 66292.65 0 67130.48 1.383202 928.55
4 35889 837.83 0 66292.65 0 67130.48 1.383202 928.55
5 35890 837.83 0 66292.65 0 67130.48 1.383202 928.55
6 35891 1026.82 0 66200.88 0 67227.7 1.368017 919.69
7 35892 213.19 0 67378.01 0 67591.2 1.36797 924.63
8 35893 69.75 0 67824.21 0 67893.96 1.369 929.47
9 35894 222.94 0 67487.78 0 67710.72 1.36635 925.17
10 35895 222.94 0 67487.78 0 67710.72 1.36635 925.17
11 35896 222.94 0 67487.78 0 67710.72 1.36635 925.17
12 35897 222.94 0 67487.78 0 67710.72 1.36635 925.17
13 35898 190.93 0 67476.79 0 67667.72 1.367633 925.45
14 35899 652.43 0 67877.8 0 68530.23 1.382373 947.34
15 35900 1405.05 0 67233.43 0 68638.48 1.383867 949.87
16 35901 901.33 0 67092.07 0 67993.4 0.76392 519.42
17 35902 887.37 0 67137.12 0 68024.49 0.764517 520.06
18 35903 887.37 0 67137.12 0 68024.49 0.764517 520.06
19 35904 887.37 0 67137.12 0 68024.49 0.764517 520.06
20 35905 1153.51 0 66465.84 0 67619.35 0.767144 518.74
21 35906 747.66 0 67210.85 0 67958.51 0.767307 521.45
22 35907 279.09 0 67885.28 0 68164.37 0.770875 525.46
23 35908 3.31 0 68116.51 0 68119.82 0.775821 528.49
24 35909 0 0 68082.24 0 68082.24 0.775923 528.27
25 35910 0 0 68082.24 0 68082.24 0.775923 528.27
26 35911 0 0 68082.24 0 68082.24 0.775923 528.27
27 35912 0 0 68712.32 0 68712.32 0.77705 533.93
28 35913 0 0 68736.91 0 68736.91 0.778306 534.98
29 35914 304.7 0 67191.72 0 67496.42 0.778862 525.7
30 35915 0 0 68004.53 68004.53 0.438705 298.34
14536.39 0 2021316 0 2035852 31.85932 21600.63
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
120.03 662503 7.06 933.7 120.03 662503
119.8 662503 7.06 1866.35 239.83 1325006
105.8433 662503 7.08 2794.9 345.6733 1987509
105.8433 662503 7.08 3723.45 451.5167 2650012
105.8433 662503 7.08 4652 557.36 3312515
156.07 654505.7 7.08 5571.69 713.43 3967020
117.77 653879.8 7.07 6496.32 831.2 4620900
117.95 653879.8 7.07 7425.79 949.15 5274780
102.9375 652182.4 7.07 8350.96 1052.088 5926962
102.9375 652182.4 7.07 9276.13 1155.025 6579145
102.9375 652182.4 7.07 10201.3 1257.963 7231327
102.9375 652182.4 7.07 11126.47 1360.9 7883510
176.77 652403.1 7.05 12051.92 1537.67 8535913
118.29 658865.8 7.07 12999.26 1655.96 9194779
118.95 658898.1 7.08 13949.13 1774.91 9853677
65.7 360907.7 7.08 14468.55 1840.61 10214585
58.1533 3360907.7 7.08 14988.61 1898.763 10575492
58.1533 3360907.7 7.08 15508.67 1956.917 10936400
58.1533 3360907.7 7.08 16028.73 2015.07 11297308
87.2 361155.4 7.07 16547.47 2102.27 11658463
70.41 360855.1 7.07 17068.92 2172.68 12019318
70.69 361845.2 7.07 17594.38 2243.37 12381164
71.1 363288 7.06 18122.87 2314.47 12744452
63.67667 363288 7.07 18651.14 2378.147 13107740
63.67667 363288 7.07 19179.41 2441.823 13471028
63.67667 363288 7.07 19707.68 2505.5 13834316
93.33 363332.1 7.02 20241.61 2598.83 14197648
70.88 363332.1 7.02 20776.59 2669.71 14560980
71.09 363332.1 7.02 21302.29 2740.8 14924312
39.98 203868.2 7.04 21600.63 2780.78 15128180
2780.78 504272.7
<PAGE>
F275 Evergreen US Govt Fund CLASS A
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 198753.9
TOTAL EXPENSES FOR PERIOD 32610.54
30 DAY YTM 0.050115 AVERAGE SHARES OUTSTANDING 3956309
LAST PRICE DURING PERIOD 10.16
PRICE ST VARIABLE GAIN/LOSS LONG TERM ASSET BACKED TOTAL DIV ADJUSTED
DATE INCOME INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35885
1 35886 27.81 -12604.5 31457.16 29791.39 48671.91 11.56158 5627.24
2 35887 27.03 0 31275.43 29659.17 60961.63 11.56913 7052.73
3 35888 33.83 0 31019.67 29659.17 60712.67 11.58742 7035.03
4 35889 33.83 0 31019.67 29659.17 60712.67 11.58742 7035.03
5 35890 33.83 0 31019.67 29659.17 60712.67 11.58742 7035.03
6 35891 151.05 0 30983.19 29659.17 60793.41 11.59324 7047.93
7 35892 49.16 0 30976.82 29659.17 60685.15 11.46621 6958.29
8 35893 7.42 0 31025.16 29659.17 60691.75 11.49211 6974.76
9 35894 52.61 -17152.1 31054.46 29659.17 43614.18 11.48669 5009.82
10 35895 52.61 -57131.2 31054.46 29659.17 3635.07 11.48669 417.55
11 35896 52.61 0 31054.46 29659.17 60766.24 11.48669 6980.03
12 35897 52.61 0 31054.46 29659.17 60766.24 11.48669 6980.03
13 35898 0 0 31206.61 28875.09 60081.7 11.48285 6899.09
14 35899 0 0 31161.69 28875.09 60036.78 11.48388 6894.55
15 35900 102.5 0 31105.64 28875.09 60083.23 11.45807 6884.38
16 35901 409.43 0 30992.98 28848.77 60251.18 11.45716 6903.07
17 35902 418.65 0 31104.42 28848.77 60371.84 11.49392 6939.09
18 35903 418.65 0 31104.42 28848.77 60371.84 11.49392 6939.09
19 35904 418.65 0 31104.42 28848.77 60371.84 11.49392 6939.09
20 35905 357.67 0 31137.25 28848.77 60343.69 11.48401 6929.88
21 35906 305.735 0 31259.12 28848.77 60413.63 11.49126 6942.29
22 35907 261.77 0 31243.7 28848.77 60354.24 11.50303 6942.57
23 35908 92.3 0 31238.05 28848.77 60179.12 11.35843 6835.41
24 35909 14.87 0 31284.52 28848.77 60148.16 11.39297 6852.66
25 35910 14.87 0 31284.52 28848.77 60148.16 11.39297 6852.66
26 35911 14.87 0 31284.52 28848.77 60148.16 11.39297 6852.66
27 35912 614.345 0 31590.14 28848.77 61053.26 11.93156 7284.61
28 35913 278.24 0 31530.37 28848.77 60657.38 11.39254 6910.41
29 35914 55.84 0 31608.43 28848.77 60513.04 11.44189 6923.84
30 35915 81.08 0 31243.84 28848.77 60173.69 11.42532 6875.03
4433.87 -86887.7 935479.3 875399.1 1728425 198753.9
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
1094.54 4016056 10.18 5627.24 1094.54 4016056
1098.56 4014993 10.2 12679.97 2193.1 8031048
1101.523 4016125 10.25 19715 3294.623 12047173
1101.523 4016125 10.25 26750.03 4396.147 16063298
1101.523 4016125 10.25 33785.06 5497.67 20079423
1099.5 4014900 10.23 40832.99 6597.17 24094323
1087.83 3963014 10.22 47791.28 7685 28057336
1088.41 3968719 10.18 54766.04 8773.41 32026055
1085.97 3964302 10.19 59775.86 9859.38 35990357
1085.97 3964302 10.19 60193.41 10945.35 39954660
1085.97 3964302 10.19 67173.44 12031.32 43918962
1085.97 3964302 10.19 74153.47 13117.29 47883264
1085.58 3959321 10.16 81052.56 14202.87 51842586
1082.51 3956959 10.17 87947.11 15285.38 55799545
1082.05 3945418 10.18 94831.49 16367.43 59744963
1082.72 3941239 10.19 101734.6 17450.15 63686202
1083.273 3955035 10.19 108673.7 18533.42 67641236
1083.273 3955035 10.19 115612.7 19616.7 71596271
1083.273 3955035 10.19 122551.8 20699.97 75551306
1082.19 3946330 10.17 129481.7 21782.16 79497635
1081.31 3945091 10.16 136424 22863.47 83442726
1075.47 3945350 10.15 143366.6 23938.94 87388076
1080.67 3882885 10.15 150202 25019.61 91270961
1081.96 3889570 10.16 157054.6 26101.57 95160531
1081.96 3889570 10.16 163907.3 27183.53 99050101
1081.96 3889570 10.16 170760 28265.49 1.03E+08
1121.18 4097073 10.11 178044.6 29386.67 1.07E+08
1078.5 3885911 10.11 184955 30465.17 1.11E+08
1064 3885783 10.1 191878.8 31529.17 1.15E+08
1081.37 3880831 10.16 198753.9 32610.54 1.19E+08
32610.54 3956309
<PAGE>
Evergreen US Govt Fund CLASS B
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 687866.4
TOTAL EXPENSES FOR PERIOD 194387
30 DAY YTM 0.045087 AVERAGE SHARES OUTSTANDING 13695005
LAST PRICE DURING PERIOD 9.68
PRICE ST VARIABLE LONG TERM TOTAL DIV ADJUSTED
DATE INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 27.81 -12604.5 31457.16 29791.39 48671.91 39.9744 19456.3
2 35887 27.03 0 31275.43 29659.17 60961.63 39.94555 24351.46
3 35888 33.83 0 31019.67 29659.17 60712.67 39.96368 24263.02
4 35889 33.83 0 31019.67 29659.17 60712.67 39.96368 24263.02
5 35890 33.83 0 31019.67 29659.17 60712.67 39.96368 24263.02
6 35891 151.05 0 30983.19 29659.17 60793.41 39.9557 24290.43
7 35892 49.16 0 30976.82 29659.17 60685.15 39.99283 24269.71
8 35893 7.42 0 31025.16 29659.17 60691.75 39.9502 24246.48
9 35894 52.61 -17152.1 31054.46 29659.17 43614.18 39.93386 17416.82
10 35895 52.61 -57131.2 31054.46 29659.17 3635.07 39.93386 1451.62
11 35896 52.61 0 31054.46 29659.17 60766.24 39.93386 24266.3
12 35897 52.61 0 31054.46 29659.17 60766.24 39.93386 24266.3
13 35898 0 0 31206.61 28875.09 60081.7 39.91201 23979.81
14 35899 0 0 31161.69 28875.09 60036.78 39.88076 23943.13
15 35900 102.5 0 31105.64 28875.09 60083.23 39.83306 23932.99
16 35901 409.43 0 30992.98 28848.77 60251.18 39.78844 23973.01
17 35902 418.65 0 31104.42 28848.77 60371.84 39.74694 23995.96
18 35903 418.65 0 31104.42 28848.77 60371.84 39.74694 23995.96
19 35904 418.65 0 31104.42 28848.77 60371.84 39.74694 23995.96
20 35905 357.67 0 31137.25 28848.77 60343.69 39.6663 23936.11
21 35906 305.735 0 31259.12 28848.77 60413.63 39.61812 23934.74
22 35907 261.77 0 31243.7 28848.77 60354.24 39.62504 23915.39
23 35908 92.3 0 31238.05 28848.77 60179.12 39.72002 23903.16
24 35909 14.87 0 31284.52 28848.77 60148.16 39.65892 23854.11
25 35910 14.87 0 31284.52 28848.77 60148.16 39.65892 23854.11
26 35911 14.87 0 31284.52 28848.77 60148.16 39.65892 23854.11
27 35912 614.345 0 31590.14 28848.77 61053.26 39.39956 24054.72
28 35913 278.24 0 31530.37 28848.77 60657.38 39.59881 24019.6
29 35914 55.84 0 31608.43 28848.77 60513.04 39.72091 24036.33
30 35915 81.08 0 31243.84 28848.77 60173.69 39.6897 23882.76
4433.87 -86887.7 935479.3 875399.1 1728425 687866.4
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
6540.42 13885592 9.7 19456.3 6540.42 13885592
6555.85 13862849 9.72 43807.76 13096.27 27748441
6563.86 313851151 9.76 68070.78 19660.13 41599592
6563.86 313851151 9.76 92333.8 26224 55450743
6563.86 313851151 9.76 116596.8 32787.86 69301893
6572.43 13837214 9.74 140887.3 39360.29 83139108
6556.71 13822539 9.73 165157 45917 96961647
6544.5 13796524 9.7 189403.4 52461.5 1.11E+08
6524.28 313782030 9.71 206820.3 58985.78 1.25E+08
6524.28 313782030 9.71 208271.9 65510.07 1.38E+08
6524.28 313782030 9.71 232538.2 72034.35 1.52E+08
6524.28 313782030 9.71 256804.5 78558.63 1.66E+08
6516.46 13761777 9.68 280784.3 85075.09 1.8E+08
6487.66 13741567 9.69 304727.4 91562.75 1.93E+08
6481.25 13715927 9.7 328660.4 98044 2.07E+08
6482.27 13687143 9.71 352633.4 104526.3 2.21E+08
6465.05 313676842 9.71 376629.4 110991.3 2.34E+08
6465.05 313676842 9.71 400625.3 117456.4 2.48E+08
6465.05 313676842 9.71 424621.3 123921.4 2.62E+08
6449.2 13630802 9.69 448557.4 130370.6 2.75E+08
6434.8 13601388 9.68 472492.2 136805.4 2.89E+08
6417.15 13590733 9.67 496407.5 143222.6 3.03E+08
6426.49 13578304 9.67 520310.7 149649.1 3.16E+08
6413.97 313539586 9.68 544164.8 156063 3.3E+08
6413.97 313539586 9.68 568018.9 162477 3.43E+08
6413.97 313539586 9.68 591873 168891 3.57E+08
6391.55 13529065 9.63 615927.8 175282.5 3.7E+08
6374.68 13506865 9.63 639947.4 181657.2 3.84E+08
6365.5 13489623 9.62 663983.7 188022.7 3.97E+08
6364.23 13481379 9.68 687866.4 194387 4.11E+08
194387 13695005
<PAGE>
Evergreen US Govt Fund CLASS C
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 29800.45
TOTAL EXPENSES FOR PERIOD 8428.03
30 DAY YTM 0.045078 AVERAGE SHARES OUTSTANDING 593252.8
LAST PRICE DURING PERIOD 9.68
PRICE ST FIXED ZERO COUPON LONG TERM TOTAL DIV ADJUSTED
DATE INCOME AND DIV INC INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 27.81 -12604.5 31457.16 29791.39 48671.91 1.768757 860.89
2 35887 27.03 0 31275.43 29659.17 60961.63 1.74094 1061.31
3 35888 33.83 0 31019.67 29659.17 60712.67 1.743894 1058.76
4 35889 33.83 0 31019.67 29659.17 60712.67 1.743894 1058.76
5 35890 33.83 0 31019.67 29659.17 60712.67 1.743894 1058.76
6 35891 151.05 0 30983.19 29659.17 60793.41 1.733613 1053.92
7 35892 49.16 0 30976.82 29659.17 60685.15 1.740068 1055.96
8 35893 7.42 0 31025.16 29659.17 60691.75 1.724368 1046.55
9 35894 52.61 -17152.1 31054.46 29659.17 43614.18 1.720199 750.25
10 35895 52.61 -57131.2 31054.46 29659.17 3635.07 1.720199 62.53
11 35896 52.61 0 31054.46 29659.17 60766.24 1.720199 1045.3
12 35897 52.61 0 31054.46 29659.17 60766.24 1.720199 1045.3
13 35898 0 0 31206.61 28875.09 60081.7 1.721788 1034.48
14 35899 0 0 31161.69 28875.09 60036.78 1.720793 1033.11
15 35900 102.5 0 31105.64 28875.09 60083.23 1.713223 1029.36
16 35901 409.43 0 30992.98 28848.77 60251.18 1.714903 1033.25
17 35902 418.65 0 31104.42 28848.77 60371.84 1.714405 1035.02
18 35903 418.65 0 31104.42 28848.77 60371.84 1.714405 1035.02
19 35904 418.65 0 31104.42 28848.77 60371.84 1.714405 1035.02
20 35905 357.67 0 31137.25 28848.77 60343.69 1.707705 1030.49
21 35906 305.735 0 31259.12 28848.77 60413.63 1.709338 1032.67
22 35907 261.77 0 31243.7 28848.77 60354.24 1.710999 1032.66
23 35908 92.3 0 31238.05 28848.77 60179.12 1.716701 1033.1
24 35909 14.87 0 31284.52 28848.77 60148.16 1.718962 1033.92
25 35910 14.87 0 31284.52 28848.77 60148.16 1.718962 1033.92
26 35911 14.87 0 31284.52 28848.77 60148.16 1.718962 1033.92
27 35912 614.345 0 31590.14 28848.77 61053.26 1.710628 1044.39
28 35913 278.24 0 31530.37 28848.77 60657.38 1.722104 1044.58
29 35914 55.84 0 31608.43 28848.77 60513.04 1.729622 1046.65
30 35915 81.08 0 31243.84 28848.77 60173.69 1.72932 1040.6
4433.87 -86887.7 935479.3 875399.1 1728425 29800.45
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0 0
286.87 614399 9.7 860.89 286.87 614399
286.13 604182.3 9.72 1922.2 573 1218581
286.9567 604422.3 9.76 2980.96 859.9567 1823004
286.9567 604422.3 9.76 4039.72 1146.913 2427426
286.9567 604422.3 9.76 5098.48 1433.87 3031848
286.85 600374.4 9.74 6152.4 1720.72 3632223
285.7 601411.6 9.73 7208.36 2006.42 4233634
284.34 595498.6 9.7 8254.91 2290.76 4829133
281.79 593677.6 9.71 9005.16 2572.55 5422811
281.79 593677.6 9.71 9067.69 2854.34 6016488
281.79 593677.6 9.71 10112.99 3136.13 6610166
281.79 593677.6 9.71 11158.29 3417.92 7203843
281.2 593677.6 9.68 12192.77 3699.12 7797521
280.33 592927.1 9.69 13225.88 3979.45 8390448
279.79 589923.3 9.7 14255.24 4259.24 8980371
279.35 589923.3 9.71 15288.49 4538.59 9570295
278.5167 589923.3 9.71 16323.51 4817.107 10160218
278.5167 589923.3 9.71 17358.53 5095.623 10750141
278.5167 589923.3 9.71 18393.55 5374.14 11340064
277.93 586830.5 9.69 19424.04 5652.07 11926895
277.62 586836.8 9.68 20456.71 5929.69 12513732
277.18 586844.6 9.67 21489.37 6206.87 13100576
278.08 586854.9 9.67 22522.47 6484.95 13687431
278.0167 586854.9 9.68 23556.39 6762.967 14274286
278.0167 586854.9 9.68 24590.31 7040.983 14861141
278.0167 586854.9 9.68 25624.23 7319 15447996
277.57 587397.2 9.63 26668.62 7596.57 16035393
277.12 587397.2 9.63 27713.2 7873.69 16622790
277.1 587397.2 9.62 28759.85 8150.79 17210187
277.24 587397.2 9.68 29800.45 8428.03 17797584
8428.03 593252.8
<PAGE>
Evergreen US Govt Fund CLASS Y
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 812003.8
TOTAL EXPENSES FOR PERIOD 100701
30 DAY YTM 0.055186 AVERAGE SHARES OUTSTANDING 16161065
LAST PRICE DURING PERIOD 9.68
PRICE ST FIXED ZERO COUPON LONG TERM TOTAL DIV ADJUSTED
DATE INCOME AND DIV INC INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 27.81 -12604.5 31457.16 29791.39 48671.91 46.69526 22727.48
2 35887 27.03 0 31275.43 29659.17 60961.63 46.74438 28496.14
3 35888 33.83 0 31019.67 29659.17 60712.67 46.70501 28355.86
4 35889 33.83 0 31019.67 29659.17 60712.67 46.70501 28355.86
5 35890 33.83 0 31019.67 29659.17 60712.67 46.70501 28355.86
6 35891 151.05 0 30983.19 29659.17 60793.41 46.71745 28401.13
7 35892 49.16 0 30976.82 29659.17 60685.15 46.80089 28401.19
8 35893 7.42 0 31025.16 29659.17 60691.75 46.83332 28423.96
9 35894 52.61 -17152.1 31054.46 29659.17 43614.18 46.85926 20437.28
10 35895 52.61 -57131.2 31054.46 29659.17 3635.07 46.85926 1703.37
11 35896 52.61 0 31054.46 29659.17 60766.24 46.85926 28474.61
12 35897 52.61 0 31054.46 29659.17 60766.24 46.85926 28474.61
13 35898 0 0 31206.61 28875.09 60081.7 46.88335 28168.31
14 35899 0 0 31161.69 28875.09 60036.78 46.91456 28165.99
15 35900 102.5 0 31105.64 28875.09 60083.23 46.99565 28236.51
16 35901 409.43 0 30992.98 28848.77 60251.18 47.0395 28341.85
17 35902 418.65 0 31104.42 28848.77 60371.84 47.04473 28401.77
18 35903 418.65 0 31104.42 28848.77 60371.84 47.04473 28401.77
19 35904 418.65 0 31104.42 28848.77 60371.84 47.04473 28401.77
20 35905 357.67 0 31137.25 28848.77 60343.69 47.14198 28447.21
21 35906 305.735 0 31259.12 28848.77 60413.63 47.18128 28503.92
22 35907 261.77 0 31243.7 28848.77 60354.24 47.16093 28463.62
23 35908 92.3 0 31238.05 28848.77 60179.12 47.20484 28407.46
24 35909 14.87 0 31284.52 28848.77 60148.16 47.22914 28407.46
25 35910 14.87 0 31284.52 28848.77 60148.16 47.22914 28407.46
26 35911 14.87 0 31284.52 28848.77 60148.16 47.22914 28407.46
27 35912 614.345 0 31590.14 28848.77 61053.26 46.95824 28669.54
28 35913 278.24 0 31530.37 28848.77 60657.38 47.28656 28682.79
29 35914 55.84 0 31608.43 28848.77 60513.04 47.10757 28506.22
30 35915 81.08 0 31243.84 28848.77 60173.69 47.15566 28375.3
4433.87 -86887.7 935479.3 875399.1 1728425 812003.8
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
3347.24 16220165 9.7 22727.48 3347.24 16220165
3360.51 16222342 9.72 51223.62 6707.75 32442507
3361.627 16187651 9.76 79579.48 10069.38 48630158
3361.627 16187651 9.76 107935.3 13431 64817809
3361.627 16187651 9.76 136291.2 16792.63 81005460
3363.37 16178904 9.74 164692.3 20156 97184364
3362.21 16175576 9.73 193093.5 23518.21 1.13E+08
3361.04 16173563 9.7 221517.5 26879.25 1.3E+08
3355.788 16172135 9.71 241954.8 30235.04 1.46E+08
3355.788 16172135 9.71 243658.1 33590.83 1.62E+08
3355.788 16172135 9.71 272132.7 36946.61 1.78E+08
3355.788 16172135 9.71 300607.4 40302.4 1.94E+08
3356.73 16165515 9.68 328775.7 43659.13 2.1E+08
3349.44 16165176 9.69 356941.7 47008.57 2.27E+08
3356.42 16182261 9.7 385178.2 50364.99 2.43E+08
3362.04 16181491 9.71 413520 53727.03 2.59E+08
3359.053 16187997 9.71 441921.8 57086.08 2.75E+08
3359.053 16187997 9.71 470323.6 60445.14 2.91E+08
3359.053 16187997 9.71 498725.3 63804.19 3.07E+08
3363.95 16199722 9.69 527172.5 67168.14 3.24E+08
3362.95 16197916 9.68 555676.5 70531.09 3.4E+08
3352.1 16175421 9.67 584140.1 73883.19 3.56E+08
3365.64 16136993 9.67 612547.5 77248.83 3.72E+08
3363.173 16124065 9.68 640955 80612 3.88E+08
3363.173 16124065 9.68 669362.5 83975.18 4.04E+08
3363.173 16124065 9.68 697769.9 87338.35 4.21E+08
3344.09 16124572 9.63 726439.5 90682.44 4.37E+08
3355.21 16129101 9.63 755122.2 94037.65 4.53E+08
3326.68 15998205 9.62 783628.5 97364.33 4.69E+08
3336.65 16017339 9.68 812003.8 100701 4.85E+08
100701 16161065
<PAGE>
EVERGREEN DIVERSIFED BOND FUND CLASS A
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 3084625
TOTAL EXPENSES FOR PERIOD 492652.5
30 DAY YTM 0.059212 AVERAGE SHARES OUTSTANDING 31821317
LAST PRICE DURING PERIOD 16.71
PRICE ST VARIABLE GAIN/ LONG TERM EQUITY TOTAL DIV ADJUSTED
DATE INCOME LOSS INCOME INCOME INCOME FACTOR INCOME
35885
<S> <C> <C> <C> <C> <C> <C>
1 35886 885.94 113559.2 114445.2 87.77778 100457.4
2 35887 15.21 114923.7 114938.9 87.77623 100889.1
3 35888 62.52667 114526.9 114589.4 87.7619 100565.8
4 35889 62.53 114526.9 114589.4 87.7619 100565.8
5 35890 62.52 114526.9 114589.4 87.7619 100565.8
6 35891 0 115768.7 115768.7 87.77472 101615.7
7 35892 0 116483.5 116483.5 87.80851 102282.5
8 35893 15.5 116874.7 116890.2 87.7731 102598.2
9 35894 0 117945.5 117945.5 87.76758 103517.9
10 35895 0 117945.5 117945.5 87.76758 103517.9
11 35896 0 117945.5 117945.5 87.76758 103517.9
12 35897 0 117945.5 117945.5 87.76758 103517.9
13 35898 0 118150.2 118150.2 87.75078 103677.7
14 35899 0 118152.3 118152.3 87.75649 103686.3
15 35900 0 118212.1 118212.1 87.74794 103728.7
16 35901 0 118144.6 118144.6 87.77136 103697.1
17 35902 145.44 116821.1 116966.5 87.76329 102653.7
18 35903 145.44 116821.1 116966.5 87.76329 102653.7
19 35904 145.43 116821.1 116966.5 87.76329 102653.6
20 35905 217.13 117124 117341.2 87.79514 103019.8
21 35906 194.82 117268.2 117463 87.77436 103102.4
22 35907 0 118011.8 118011.8 87.77743 103587.7
23 35908 0 118152.9 118152.9 87.7632 103694.7
24 35909 128.19 118123.6 118251.8 87.7662 103785.1
25 35910 128.19 118123.6 118251.8 87.7662 103785.1
26 35911 128.19 118123.6 118251.8 87.7662 103785.1
27 35912 717.21 117914.2 118631.4 87.68246 104018.9
28 35913 0 117763.2 117763.2 87.74762 103334.4
29 35914 219.75 118015.1 118234.8 87.71372 103708.2
30 35915 0 -1016.85 117798.2 116781.3 87.72042 102441.1
3274.017 -1016.85 3512513 0 3514770 3084625
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
15740.58 32170123 16.79 100457.4 15740.58 32170123
15972.95 32116234 16.83 201346.5 31713.53 64286357
14390.71 32073689 16.91 301912.3 46104.24 96360046
14390.71 32073689 16.91 402478.1 60494.96 1.28E+08
14390.71 32073689 16.91 503043.9 74885.67 1.61E+08
20036.25 32045736 16.86 604659.6 94921.92 1.93E+08
15808.89 32005332 16.86 706942.1 110730.8 2.25E+08
15797.51 31967090 16.82 809540.2 126528.3 2.57E+08
14180.56 31932502 16.82 913058.1 140708.9 2.88E+08
14180.56 31932502 16.82 1016576 154889.4 3.2E+08
14180.56 31932502 16.82 1120094 169070 3.52E+08
14180.56 31932502 16.82 1223612 183250.6 3.84E+08
22076.95 31915794 16.77 1327290 205327.5 4.16E+08
15757.55 31859381 16.8 1430976 221085.1 4.48E+08
15734.15 31834690 16.82 1534705 236819.2 4.8E+08
15730.72 31807803 16.83 1638402 252549.9 5.12E+08
15794.63 31768465 16.83 1741055 268344.6 5.43E+08
15794.63 31768465 16.83 1843709 284139.2 5.75E+08
15794.63 31768465 16.83 1946363 299933.8 6.07E+08
21488.28 31738173 16.79 2049383 321422.1 6.39E+08
17170.95 31713891 16.77 2152485 338593.1 6.7E+08
17177.69 31681578 16.77 2256073 355770.7 7.02E+08
17162.06 31634474 16.75 2359767 372932.8 7.34E+08
15722.02 31612723 16.77 2463552 388654.8 7.65E+08
15722.02 31612723 16.77 2567337 404376.8 7.97E+08
15722.02 31612723 16.77 2671123 420098.9 8.29E+08
21407.55 31587379 16.63 2775141 441506.4 8.6E+08
17083.17 31513502 16.61 2878476 458589.6 8.92E+08
17041.61 31490062 16.6 2982184 475631.2 9.23E+08
17021.28 31463630 16.71 3084625 492652.5 9.55E+08
492652.5 31821317
<PAGE>
EVERGREEN DIVERSIFED BOND FUND CLASS B
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 430101.1
TOTAL EXPENSES FOR PERIOD 112465.5
30 DAY YTM 0.054572 AVERAGE SHARES OUTSTANDING 4436885
LAST PRICE DURING PERIOD 15.92
PRICE ST VARIABLE GAIN/LOSS LONG TERM EQUITY TOTAL DIV ADJUSTED
DATE INCOME INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
1 35886 885.94 0 113559.2 0 114445.2 12.22222 13987.75
2 35887 15.21 0 114923.7 0 114938.9 12.22377 14049.86
3 35888 62.52667 0 114526.9 0 114589.4 12.2381 14023.57
4 35889 62.53 0 114526.9 0 114589.4 12.2381 14023.57
5 35890 62.52 0 114526.9 0 114589.4 12.2381 14023.57
6 35891 0 0 115768.7 0 115768.7 12.22528 14153.05
7 35892 0 0 116483.5 0 116483.5 12.19149 14201.08
8 35893 15.5 0 116874.7 0 116890.2 12.2269 14292.05
9 35894 0 0 117945.5 0 117945.5 12.23242 14427.59
10 35895 0 0 117945.5 0 117945.5 12.23242 14427.59
11 35896 0 0 117945.5 0 117945.5 12.23242 14427.59
12 35897 0 0 117945.5 0 117945.5 12.23242 14427.59
13 35898 0 0 118150.2 0 118150.2 12.24922 14472.48
14 35899 0 0 118152.3 0 118152.3 12.24188 14464.06
15 35900 0 0 118212.1 0 118212.1 12.25043 14481.49
16 35901 0 0 118144.6 0 118144.6 12.22658 14445.04
17 35902 145.44 0 116821.1 0 116966.5 12.23465 14310.44
18 35903 145.44 0 116821.1 0 116966.5 12.23465 14310.44
19 35904 145.43 0 116821.1 0 116966.5 12.23465 14310.44
20 35905 217.13 0 117124 0 117341.2 12.2028 14318.91
21 35906 194.82 0 117268.2 0 117463 12.22357 14358.18
22 35907 0 0 118011.8 0 118011.8 12.2205 14421.63
23 35908 0 0 118152.9 0 118152.9 12.23473 14455.69
24 35909 128.19 0 118123.6 0 118251.8 12.23173 14464.24
25 35910 128.19 0 118123.6 0 118251.8 12.23173 14464.24
26 35911 128.19 0 118123.6 0 118251.8 12.23173 14464.24
27 35912 717.21 0 117914.2 0 118631.4 12.31546 14610
28 35913 0 0 117763.2 0 117763.2 12.24927 14425.13
29 35914 219.75 0 118015.1 0 118234.8 12.28317 14522.98
30 35915 0 -1016.85 117798.2 0 116781.3 12.27647 14336.62
3274.017 3512513 0 3514770 430101.1
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
3660.81 4479349 15.99 13987.75 3660.81 4479349
3699.11 4472488 16.03 28037.61 7359.92 8951837
3479.82 4472533 16.11 42061.18 10839.74 13424370
3479.82 4472533 16.11 56084.75 14319.56 17896902
3479.82 4472533 16.11 70108.32 17799.38 22369435
4278.87 4463333 16.06 84261.37 22078.25 26832768
3677.85 4443676 16.06 98462.45 25756.1 31276445
3668.78 4453044 16.02 112754.5 29424.88 35729488
3440.793 4450513 16.02 127182.1 32865.67 40180002
3440.793 4450513 16.02 141609.7 36306.47 44630515
3440.793 4450513 16.02 156037.3 39747.26 49081028
3440.793 4450513 16.02 170464.9 43188.05 53531542
4547.74 4455142 15.97 184937.3 47735.79 57986683
3659.16 4444304 16 199401.4 51394.95 62430987
3653.38 4444390 16.02 213882.9 55048.33 66875377
3649.87 4430809 16.03 228327.9 58698.2 71306186
3653.82 4428656 16.03 242638.4 62352.02 75734842
3653.82 4428656 16.03 256948.8 66005.84 80163498
3653.82 4428656 16.03 271259.3 69659.66 84592153
4439.99 4411316 15.99 285578.2 74099.65 89003470
3836.61 4416490 15.97 299936.3 77936.26 93419960
3839.33 4410712 15.97 314358 81775.59 97830673
3844.84 4409998 15.95 328813.7 85620.43 1.02E+08
3640.98 4405733 15.97 343277.9 89261.41 1.07E+08
3640.98 4405733 15.97 357742.1 92902.39 1.11E+08
3640.98 4405733 15.97 372206.4 96543.37 1.15E+08
4453.03 4436563 15.84 386816.4 100996.4 1.2E+08
3832.88 4399134 15.82 401241.5 104829.3 1.24E+08
3821.39 4409702 15.81 415764.5 108650.7 1.29E+08
3814.83 4403272 15.92 430101.1 112465.5 1.33E+08
112465.5 4436885
<PAGE>
EVERGREEN DIVERSIFED BOND FUND CLASS C
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 44.04
TOTAL EXPENSES FOR PERIOD 10.66
30 DAY YTM 0.056601 AVERAGE SHARES OUTSTANDING 449.7413
LAST PRICE DURING PERIOD 15.92
PRICE ST FIXED GAIN/LOSS LONG TERM EQUITY TOTAL DIV ADJUSTED
DATE INCOME INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
1 35886 885.94 0 113559.2 0 114445.2 0 0
2 35887 15.21 0 114923.7 0 114938.9 0 0
3 35888 62.52667 0 114526.9 0 114589.4 0 0
4 35889 62.53 0 114526.9 0 114589.4 0 0
5 35890 62.52 0 114526.9 0 114589.4 0 0
6 35891 0 0 115768.7 0 115768.7 0 0
7 35892 0 0 116483.5 0 116483.5 0 0
8 35893 15.5 0 116874.7 0 116890.2 0 0
9 35894 0 0 117945.5 0 117945.5 0 0
10 35895 0 0 117945.5 0 117945.5 0 0
11 35896 0 0 117945.5 0 117945.5 0 0
12 35897 0 0 117945.5 0 117945.5 0 0
13 35898 0 0 118150.2 0 118150.2 4.28E-06 0.01
14 35899 0 0 118152.3 0 118152.3 0.001629 1.93
15 35900 0 0 118212.1 0 118212.1 0.00163 1.93
16 35901 0 0 118144.6 0 118144.6 0.00206 2.43
17 35902 145.44 0 116821.1 0 116966.5 0.002062 2.41
18 35903 145.44 0 116821.1 0 116966.5 0.002062 2.41
19 35904 145.43 0 116821.1 0 116966.5 0.002062 2.41
20 35905 217.13 0 117124 0 117341.2 0.002065 2.42
21 35906 194.82 0 117268.2 0 117463 0.002066 2.43
22 35907 0 0 118011.8 0 118011.8 0.002068 2.44
23 35908 0 0 118152.9 0 118152.9 0.002071 2.45
24 35909 128.19 0 118123.6 0 118251.8 0.002073 2.45
25 35910 128.19 0 118123.6 0 118251.8 0.002073 2.45
26 35911 128.19 0 118123.6 0 118251.8 0.002073 2.45
27 35912 717.21 0 117914.2 0 118631.4 0.002077 2.46
28 35913 0 0 117763.2 0 117763.2 0.003107 3.66
29 35914 219.75 0 118015.1 0 118234.8 0.003108 3.67
30 35915 0 -1016.85 117798.2 0 116781.3 0.003111 3.63
3274.017 3512513 0 3514770 44.04
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 16.02 0 0 0
0 0 16.02 0 0 0
0 0 16.02 0 0 0
0 0 16.02 0 0 0
0 0 16.02 0 0 0
0 1.557 15.97 0.01 0 1.557
0.5 591.532 16 1.94 0.5 593.089
0.5 591.532 16.02 3.87 1 1184.621
0.55 746.543 16.03 6.3 1.55 1931.164
0.556667 746.543 16.03 8.71 2.106667 2677.707
0.556667 746.543 16.03 11.12 2.663333 3424.25
0.556667 746.543 16.03 13.53 3.22 4170.793
0.67 746.543 15.99 15.95 3.89 4917.336
0.59 746.543 15.97 18.38 4.48 5663.879
0.57 746.543 15.97 20.82 5.05 6410.422
0.65 746.543 15.95 23.27 5.7 7156.965
0.62 746.543 15.97 25.72 6.32 7903.508
0.62 746.543 15.97 28.17 6.94 8650.051
0.62 746.543 15.97 30.62 7.56 9396.594
0.75 748.11 15.84 33.08 8.31 10144.7
0.79 1115.845 15.82 36.74 9.1 11260.55
0.79 1115.845 15.81 40.41 9.89 12376.39
0.77 1115.845 15.92 44.04 10.66 13492.24
10.66 449.7413
<PAGE>
EVERGREEN DIVERSIFED BOND FUND CLASS D
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 0
TOTAL EXPENSES FOR PERIOD 0
30 DAY YTM #DIV/0! AVERAGE SHARES OUTSTANDING 0
LAST PRICE DURING PERIOD 0
PRICE ST FIXED ZERO COUPON LONG TERM TOTAL DIV ADJUSTED
DATE INCOME AND DIV INC INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 885.94 0 113559.2 0 0 0 114445.2 0 0
2 35887 15.21 0 114923.7 0 0 0 114938.9 0 0
3 35888 62.52667 0 114526.9 0 0 0 114589.4 0 0
4 35889 62.53 0 114526.9 0 0 0 114589.4 0 0
5 35890 62.52 0 114526.9 0 0 0 114589.4 0 0
6 35891 0 0 115768.7 0 0 0 115768.7 0 0
7 35892 0 0 116483.5 0 0 0 116483.5 0 0
8 35893 15.5 0 116874.7 0 0 0 116890.2 0 0
9 35894 0 0 117945.5 0 0 0 117945.5 0 0
10 35895 0 0 117945.5 0 0 0 117945.5 0 0
11 35896 0 0 117945.5 0 0 0 117945.5 0 0
12 35897 0 0 117945.5 0 0 0 117945.5 0 0
13 35898 0 0 118150.2 0 0 0 118150.2 0 0
14 35899 0 0 118152.3 0 0 0 118152.3 0 0
15 35900 0 0 118212.1 0 0 0 118212.1 0 0
16 35901 0 0 118144.6 0 0 0 118144.6 0 0
17 35902 145.44 0 116821.1 0 0 0 116966.5 0 0
18 35903 145.44 0 116821.1 0 0 0 116966.5 0 0
19 35904 145.43 0 116821.1 0 0 0 116966.5 0 0
20 35905 217.13 0 117124 0 0 0 117341.2 0 0
21 35906 194.82 0 117268.2 0 0 0 117463 0 0
22 35907 0 0 118011.8 0 0 0 118011.8 0 0
23 35908 0 0 118152.9 0 0 0 118152.9 0 0
24 35909 128.19 0 118123.6 0 0 0 118251.8 0 0
25 35910 128.19 0 118123.6 0 0 0 118251.8 0 0
26 35911 128.19 0 118123.6 0 0 0 118251.8 0 0
27 35912 717.21 0 117914.2 0 0 0 118631.4 0 0
28 35913 0 0 117763.2 0 0 0 117763.2 0 0
29 35914 219.75 0 118015.1 0 0 0 118234.8 0 0
30 35915 0 -1016.85 117798.2 0 0 0 116781.3 0 0
#REF! #REF! #REF! 0 0 0 #REF! #REF! #REF!
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
#REF! 0
<PAGE>
EVERGREEN HIGH YIELD BOND FUND CLASS A
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 2944830
TOTAL EXPENSES FOR PERIOD 456008.9
30 DAY YTM 0.068339 AVERAGE SHARES OUTSTANDING 93110915
LAST PRICE DURING PERIOD 4.76
PRICE ST VARIABLE ZERO LONG TERM EQUITY TOTAL DIV ADJUSTED
DATE INCOME COUPON INCOME INCOME INCOME FACTOR INCOME
35885
<S> <C> <C> <C> <C> <C> <C> <C>
1 35886 1495.6 10052.21 108972.5 3.98 120524.3 81.31626 98005.84
2 35887 1479.89 10051.41 108956 3.98 120491.3 81.29929 97958.57
3 35888 1434.72 10020.96 108722 3.98 120181.7 81.30138 97709.36
4 35889 1434.72 10020.96 108722 3.98 120181.7 81.30138 97709.36
5 35890 1434.72 10020.96 108722 3.98 120181.7 81.30138 97709.36
6 35891 1507.61 10026.03 108798.9 3.98 120336.5 81.28393 97814.24
7 35892 331.38 10016.03 111546.1 3.98 121897.5 81.19543 98975.17
8 35893 881.02 10354.84 108633.4 3.98 119873.2 81.18613 97320.4
9 35894 2832.22 10395.29 106096 3.98 119327.4 81.17235 96860.89
10 35895 2832.22 10395.29 106096 3.98 119327.4 81.17235 96860.89
11 35896 2832.22 10395.29 106096 3.98 119327.4 81.17235 96860.89
12 35897 2832.22 10395.29 106096 3.98 119327.4 81.17235 96860.89
13 35898 2449.61 10436.1 106869.5 3.98 119759.2 81.15904 97195.38
14 35899 2246.79 10452.7 107265.8 3.98 119969.3 81.13721 97339.7
15 35900 1751.01 10141.58 108375 3.98 120271.6 81.07638 97511.83
16 35901 1651.64 10142.07 109505.9 3.98 121303.6 81.07699 98349.3
17 35902 1920.64 10139.31 108956.6 3.98 121020.5 81.07775 98120.72
18 35903 1920.64 10139.31 108956.6 3.98 121020.5 81.07775 98120.72
19 35904 1920.64 10139.31 108956.6 3.98 121020.5 81.07775 98120.72
20 35905 1381.65 10134.95 109881.8 3.98 121402.4 81.07737 98429.84
21 35906 730.8 10127.55 110869.8 3.98 121732.1 81.1704 98810.42
22 35907 319.31 10122.94 111558.4 3.98 122004.6 81.01264 98839.13
23 35908 0 10330.25 112837.8 3.98 123172.1 81.13882 99940.36
24 35909 86.49 10060.37 111827.6 3.98 121978.4 81.14873 98983.93
25 35910 86.49 10060.37 111827.6 3.98 121978.4 81.14873 98983.93
26 35911 86.49 10060.37 111827.6 3.98 121978.4 81.14873 98983.93
27 35912 0 10150 113342.7 3.98 123496.7 81.15688 100226.1
28 35913 0 10175.09 113439.9 3.98 123619 81.2307 100416.6
29 35914 0 9302.01 110542.6 3.98 119848.6 81.22396 97345.74
30 35915 2660.54 8575.86 109956.6 3.98 121197 81.2447 98466.14
40541.28 302834.7 3284255 115.42 3627750 2435.259 2944830
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
14679.12 93639882 4.79 98005.84 14679.12 93639882
15004.84 93631440 4.79 195964.4 29683.96 1.87E+08
13288.71 93553191 4.79 293673.8 42972.67 2.81E+08
13288.71 93553191 4.79 391383.1 56261.38 3.74E+08
13288.71 93553191 4.79 489092.5 69550.09 4.68E+08
19185.18 93608649 4.79 586906.7 88735.27 5.62E+08
14747.9 93564862 4.79 685881.9 103483.2 6.55E+08
14767.86 93491534 4.79 783202.3 118251 7.49E+08
13085.59 93428992 4.79 880063.2 131336.6 8.42E+08
13085.59 93428992 4.79 976924.1 144422.2 9.35E+08
13085.59 93428992 4.79 1073785 157507.8 1.03E+09
13085.59 93428992 4.79 1170646 170593.4 1.12E+09
21322.38 93336383 4.79 1267841 191915.8 1.22E+09
14722.92 93248244 4.79 1365181 206638.7 1.31E+09
14702.35 93173939 4.79 1462693 221341 1.4E+09
14719.61 93141511 4.79 1561042 236060.6 1.5E+09
13237.22 93063198 4.79 1659163 249297.9 1.59E+09
13237.22 93063198 4.79 1757284 262535.1 1.68E+09
13237.22 93063198 4.79 1855404 275772.3 1.77E+09
20409.8 92997055 4.79 1953834 296182.1 1.87E+09
15974.69 92668855 4.79 2052644 312156.8 1.96E+09
15966.03 92697508 4.79 2151484 328122.8 2.05E+09
15996.45 92542428 4.79 2251424 344119.3 2.15E+09
14513.3 92571884 4.79 2350408 358632.6 2.24E+09
14513.3 92571884 4.79 2449392 373145.9 2.33E+09
14513.3 92571884 4.79 2548376 387659.2 2.42E+09
20438.52 92511042 4.77 2648602 408097.7 2.52E+09
15991.69 92587089 4.77 2749018 424089.4 2.61E+09
15997.82 92665735 4.76 2846364 440087.2 2.7E+09
15921.69 92540516 4.76 2944830 456008.9 2.79E+09
456008.9 93110915
<PAGE>
EVERGREEN HIGH YIELD BOND FUND CLASS B
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 675313.6
TOTAL EXPENSES FOR PERIOD 164585.7
30 DAY YTM 0.064199 AVERAGE SHARES OUTSTANDING 21354071
LAST PRICE DURING PERIOD 4.53
PRICE ST VARIABLE ZERO LONG TERM EQUITY TOTAL DIV ADJUSTED
DATE INCOME COUPON INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 1495.6 10052.21 108972.5 3.98 120524.3 18.49953 22296.42
2 35887 1479.89 10051.41 108956 3.98 120491.3 18.48919 22277.87
3 35888 1434.72 10020.96 108722 3.98 120181.7 18.48974 22221.28
4 35889 1434.72 10020.96 108722 3.98 120181.7 18.48974 22221.28
5 35890 1434.72 10020.96 108722 3.98 120181.7 18.48974 22221.28
6 35891 1507.61 10026.03 108798.9 3.98 120336.5 18.51906 22285.19
7 35892 331.38 10016.03 111546.1 3.98 121897.5 18.60768 22682.29
8 35893 881.02 10354.84 108633.4 3.98 119873.2 18.60833 22306.4
9 35894 2832.22 10395.29 106096 3.98 119327.4 18.6222 22221.39
10 35895 2832.22 10395.29 106096 3.98 119327.4 18.6222 22221.39
11 35896 2832.22 10395.29 106096 3.98 119327.4 18.6222 22221.39
12 35897 2832.22 10395.29 106096 3.98 119327.4 18.6222 22221.39
13 35898 2449.61 10436.1 106869.5 3.98 119759.2 18.63021 22311.39
14 35899 2246.79 10452.7 107265.8 3.98 119969.3 18.65228 22377
15 35900 1751.01 10141.58 108375 3.98 120271.6 18.71158 22504.71
16 35901 1651.64 10142.07 109505.9 3.98 121303.6 18.71137 22697.56
17 35902 1920.64 10139.31 108956.6 3.98 121020.5 18.71043 22643.46
18 35903 1920.64 10139.31 108956.6 3.98 121020.5 18.71043 22643.46
19 35904 1920.64 10139.31 108956.6 3.98 121020.5 18.71043 22643.46
20 35905 1381.65 10134.95 109881.8 3.98 121402.4 18.71066 22715.19
21 35906 730.8 10127.55 110869.8 3.98 121732.1 18.61414 22659.38
22 35907 319.31 10122.94 111558.4 3.98 122004.6 18.77295 22903.85
23 35908 0 10330.25 112837.8 3.98 123172.1 18.64607 22966.75
24 35909 86.49 10060.37 111827.6 3.98 121978.4 18.63621 22732.15
25 35910 86.49 10060.37 111827.6 3.98 121978.4 18.63621 22732.15
26 35911 86.49 10060.37 111827.6 3.98 121978.4 18.63621 22732.15
27 35912 0 10150 113342.7 3.98 123496.7 18.62745 23004.29
28 35913 0 10175.09 113439.9 3.98 123619 18.55458 22936.99
29 35914 0 9302.01 110542.6 3.98 119848.6 18.55982 22243.67
30 35915 2660.54 8575.86 109956.6 3.98 121197 18.53873 22468.39
40541.28 302834.7 3284255 119.4 3627750 558.4515 675313.6
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
5332.09 21305168 4.56 22296.42 5332.09 21305168
5411.08 21295794 4.56 44574.29 10743.17 42600962
5021.37321278077 4.56 66795.57 15764.54 63879039
5021.37 21278077 4.56 89016.85 20785.91 85157115
5021.37 21278077 4.56 111238.1 25807.28 1.06E+08
6369.67 21329078 4.56 133523.3 32176.95 1.28E+08
5372.55 21444421 4.56 156205.6 37549.5 1.49E+08
5393.09 21430826 4.56 178512 42942.59 1.71E+08
5009.76321436086 4.56 200733.4 47952.36 1.92E+08
5009.76 21436086 4.56 222954.8 52962.12 2.14E+08
5009.76 21436086 4.56 245176.2 57971.88 2.35E+08
5009.76 21436086 4.56 267397.6 62981.64 2.56E+08
6900.1 21427567 4.56 289709 69881.74 2.78E+08
5390.69 21438503 4.56 312086 75272.43 2.99E+08
5396.54 21505641 4.56 334590.7 80668.97 3.21E+08
5410.15 21497707 4.56 357288.2 86079.12 3.42E+08
5065.64321478306 4.56 379931.7 91144.76 3.64E+08
5065.64321478306 4.56 402575.2 96210.4 3.85E+08
5065.64321478306 4.56 425218.6 101276 4.07E+08
6722.74 21463411 4.56 447933.8 107998.8 4.28E+08
5708.66 21252994 4.56 470593.2 113707.4 4.49E+08
5683.39 21482785 4.56 493497 119390.8 4.71E+08
5667.22 21268769 4.56 516463.8 125058.1 4.92E+08
5325.99 21261688 4.56 539195.9 130384 5.13E+08
5325.99 21261688 4.56 561928.1 135710 5.35E+08
5325.99 21261688 4.56 584660.2 141036 5.56E+08
6684.44 21235598 4.54 607664.5 147720.5 5.77E+08
5639.55 21150684 4.54 630601.5 153360 5.98E+08
5621.73 21176337 4.53 652845.2 158981.7 6.2E+08
5603.96 21118305 4.53 675313.6 164585.7 6.41E+08
164585.7 21354071
<PAGE>
EVERGREEN HIGH YIELD BOND FUND CLASS C
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 7574.26
TOTAL EXPENSES FOR PERIOD 1853.2
30 DAY YTM 0.06414 AVERAGE SHARES OUTSTANDING 239419.3
LAST PRICE DURING PERIOD 4.53
PRICE ST FIXED ZERO LONG TERM EQUITY TOTAL DIV ADJUSTED
DATE INCOME COUPON INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 1495.6 10052.21 108972.5 3.98 120524.3 0.184213 222.02
2 35887 1479.89 10051.41 108956 3.98 120491.3 0.211519 254.86
3 35888 1434.72 10020.96 108722 3.98 120181.7 0.208885 251.04
4 35889 1434.72 10020.96 108722 3.98 120181.7 0.208885 251.04
5 35890 1434.72 10020.96 108722 3.98 120181.7 0.208885 251.04
6 35891 1507.61 10026.03 108798.9 3.98 120336.5 0.197005 237.07
7 35892 331.38 10016.03 111546.1 3.98 121897.5 0.196893 240.01
8 35893 881.02 10354.84 108633.4 3.98 119873.2 0.205538 246.38
9 35894 2832.22 10395.29 106096 3.98 119327.4 0.20545 245.16
10 35895 2832.22 10395.29 106096 3.98 119327.4 0.20545 245.16
11 35896 2832.22 10395.29 106096 3.98 119327.4 0.20545 245.16
12 35897 2832.22 10395.29 106096 3.98 119327.4 0.20545 245.16
13 35898 2449.61 10436.1 106869.5 3.98 119759.2 0.21075 252.39
14 35899 2246.79 10452.7 107265.8 3.98 119969.3 0.20879 250.48
15 35900 1751.01 10141.58 108375 3.98 120271.6 0.210327 252.96
16 35901 1651.64 10142.07 109505.9 3.98 121303.6 0.209924 254.65
17 35902 1920.64 10139.31 108956.6 3.98 121020.5 0.210103 254.27
18 35903 1920.64 10139.31 108956.6 3.98 121020.5 0.210103 254.27
19 35904 1920.64 10139.31 108956.6 3.98 121020.5 0.210103 254.27
20 35905 1381.65 10134.95 109881.8 3.98 121402.4 0.210251 255.25
21 35906 730.8 10127.55 110869.8 3.98 121732.1 0.213727 260.17
22 35907 319.31 10122.94 111558.4 3.98 122004.6 0.212692 259.49
23 35908 0 10330.25 112837.8 3.98 123172.1 0.213381 262.83
24 35909 86.49 10060.37 111827.6 3.98 121978.4 0.213338 260.23
25 35910 86.49 10060.37 111827.6 3.98 121978.4 0.213338 260.23
26 35911 86.49 10060.37 111827.6 3.98 121978.4 0.213338 260.23
27 35912 0 10150 113342.7 3.98 123496.7 0.213933 264.2
28 35913 0 10175.09 113439.9 3.98 123619 0.213952 264.48
29 35914 0 9302.01 110542.6 3.98 119848.6 0.215453 258.22
30 35915 2660.54 8575.86 109956.6 3.98 121197 0.2158 261.54
40541.28 302834.7 3284255 119.4 3627750 6.262927 7574.26
</TABLE>
<PAGE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0 0
53.05 212117.5 4.56 222.02 53.05 212117.5
57.95 243589.9 4.56 476.88 111 455707.4
58.31 240353.9 4.56 727.92 169.31 696061.3
58.31 240353.9 4.56 978.96 227.62 936415.3
58.31 240353.9 4.56 1230 285.93 1176769
70.7 226867.1 4.56 1467.07 356.63 1403636
58.27 226867.1 4.56 1707.08 414.9 1630503
59.56 236669.3 4.56 1953.46 474.46 1867173
55.82 236450 4.56 2198.62 530.28 2103623
55.82 236450 4.56 2443.78 586.1 2340073
55.82 236450 4.56 2688.94 641.92 2576523
55.82 236450 4.56 2934.1 697.74 2812973
76.9 242348.7 4.56 3186.49 774.64 3055321
60.65 239933.6 4.56 3436.97 835.29 3295255
60.78 241687.6 4.56 3689.93 896.07 3536943
60.78 241139.3 4.56 3944.58 956.85 3778082
56.88333 241139.3 4.56 4198.85 1013.733 4019221
56.88333 241139.3 4.56 4453.12 1070.617 4260360
56.88333 241139.3 4.56 4707.39 1127.5 4501500
75.53 241139.3 4.56 4962.64 1203.03 4742639
64.51 243980.8 4.56 5222.81 1267.54 4986620
64.82 243344.8 4.56 5482.3 1332.36 5229965
64.84 243344.8 4.56 5745.13 1397.2 5473310
60.96 243344.8 4.56 6005.36 1458.16 5716654
60.96 243344.8 4.56 6265.59 1519.12 5959999
60.96 243344.8 4.56 6525.82 1580.08 6203344
76.91 243838.3 4.54 6790.02 1656.99 6447182
65.13 243838.3 4.54 7054.5 1722.12 6691021
65.64 245779.3 4.53 7312.72 1787.76 6936800
65.44 245779.3 4.53 7574.26 1853.2 7182579
1853.2 239419.3
<PAGE>
EVERGREEN HIGH YIELD BOND FUND CLASS Y
<TABLE>
<CAPTION>
PRICING DATE 35915
TOTAL INCOME FOR PERIOD 32.14
TOTAL EXPENSES FOR PERIOD 4.24
30 DAY YTM 0.074428 AVERAGE SHARES OUTSTANDING 1008.289
LAST PRICE DURING PERIOD 4.53
PRICE ST FIXED ZERO LONG TERM EQUITY TOTAL DIV ADJUSTED
DATE INCOME COUPON INCOME INCOME INCOME FACTOR INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 35886 1495.6 10052.21 108972.5 3.98 120524.3 0 0
2 35887 1479.89 10051.41 108956 3.98 120491.3 0 0
3 35888 1434.72 10020.96 108722 3.98 120181.7 0 0
4 35889 1434.72 10020.96 108722 3.98 120181.7 0 0
5 35890 1434.72 10020.96 108722 3.98 120181.7 0 0
6 35891 1507.61 10026.03 108798.9 3.98 120336.5 0 0
7 35892 331.38 10016.03 111546.1 3.98 121897.5 0 0
8 35893 881.02 10354.84 108633.4 3.98 119873.2 0 0
9 35894 2832.22 10395.29 106096 3.98 119327.4 0 0
10 35895 2832.22 10395.29 106096 3.98 119327.4 0 0
11 35896 2832.22 10395.29 106096 3.98 119327.4 0 0
12 35897 2832.22 10395.29 106096 3.98 119327.4 0 0
13 35898 2449.61 10436.1 106869.5 3.98 119759.2 0 0
14 35899 2246.79 10452.7 107265.8 3.98 119969.3 0.001718 2.06
15 35900 1751.01 10141.58 108375 3.98 120271.6 0.001718 2.07
16 35901 1651.64 10142.07 109505.9 3.98 121303.6 0.001718 2.08
17 35902 1920.64 10139.31 108956.6 3.98 121020.5 0.00172 2.08
18 35903 1920.64 10139.31 108956.6 3.98 121020.5 0.00172 2.08
19 35904 1920.64 10139.31 108956.6 3.98 121020.5 0.00172 2.08
20 35905 1381.65 10134.95 109881.8 3.98 121402.4 0.001721 2.09
21 35906 730.8 10127.55 110869.8 3.98 121732.1 0.001729 2.1
22 35907 319.31 10122.94 111558.4 3.98 122004.6 0.001725 2.1
23 35908 0 10330.25 112837.8 3.98 123172.1 0.001731 2.13
24 35909 86.49 10060.37 111827.6 3.98 121978.4 0.001731 2.11
25 35910 86.49 10060.37 111827.6 3.98 121978.4 0.001731 2.11
26 35911 86.49 10060.37 111827.6 3.98 121978.4 0.001731 2.11
27 35912 0 10150 113342.7 3.98 123496.7 0.001732 2.14
28 35913 0 10175.09 113439.9 3.98 123619 0.000766 0.95
29 35914 0 9302.01 110542.6 3.98 119848.6 0.000765 0.92
30 35915 2660.54 8575.86 109956.6 3.98 121197 0.000766 0.93
40541.28 302834.7 3284255 119.4 3627750 0.026441 32.14
</TABLE>
DAILY DAILY DAILY ACCUMULATED ACCUMULATED ACCUMULATED
EXPENSES SHARES PRICE INCOME EXPENSES SHARES
0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0 0 0 0 0 0
0.27 1973.684 4.56 2.06 0.27 1973.684
0.27 1973.684 4.56 4.13 0.54 3947.368
0.27 1973.684 4.56 6.21 0.81 5921.052
0.223333 1973.684 4.56 8.29 1.033333 7894.736
0.223333 1973.684 4.56 10.37 1.256667 9868.42
0.223333 1973.684 4.56 12.45 1.48 11842.1
0.38 1973.684 4.56 14.54 1.86 13815.79
0.3 1973.684 4.56 16.64 2.16 15789.47
0.3 1973.684 4.56 18.74 2.46 17763.16
0.3 1973.684 4.56 20.87 2.76 19736.84
0.253333 1973.684 4.56 22.98 3.013333 21710.52
0.253333 1973.684 4.56 25.09 3.266667 23684.21
0.253333 1973.684 4.56 27.2 3.52 25657.89
0.39 1973.684 4.54 29.34 3.91 27631.58
0.11 872.362 4.54 30.29 4.02 28503.94
0.11 872.362 4.53 31.21 4.13 29376.3
0.11 872.362 4.53 32.14 4.24 30248.66
4.24 1008.289
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN U.S. GOVERNMENT FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 324,579,032
<INVESTMENTS-AT-VALUE> 325,584,248
<RECEIVABLES> 7,706,942
<ASSETS-OTHER> 53,150
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 333,344,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,099,063
<TOTAL-LIABILITIES> 1,099,063
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41,908,956
<SHARES-COMMON-STOCK> 4,148,338
<SHARES-COMMON-PRIOR> 3,862,891
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,172,138)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 399,457
<NET-ASSETS> 40,136,275
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,375,664
<OTHER-INCOME> 0
<EXPENSES-NET> (335,307)
<NET-INVESTMENT-INCOME> 2,040,357
<REALIZED-GAINS-CURRENT> (77,563)
<APPREC-INCREASE-CURRENT> 974,242
<NET-CHANGE-FROM-OPS> 2,937,036
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,040,357)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,750,112
<NUMBER-OF-SHARES-REDEEMED> (1,642,684)
<SHARES-REINVESTED> 133,072
<NET-CHANGE-IN-ASSETS> 22,517,880
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,172,138)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162,755
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (335,307)
<AVERAGE-NET-ASSETS> 32,654,980
<PER-SHARE-NAV-BEGIN> 9.39
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN U.S. GOVERNMENT FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 324,579,032
<INVESTMENTS-AT-VALUE> 325,584,248
<RECEIVABLES> 7,706,942
<ASSETS-OTHER> 53,150
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 333,344,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,099,063
<TOTAL-LIABILITIES> 1,099,063
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147,666,505
<SHARES-COMMON-STOCK> 13,495,849
<SHARES-COMMON-PRIOR> 15,064,865
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,722,735)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,367,958)
<NET-ASSETS> 130,575,812
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,391,570
<OTHER-INCOME> 0
<EXPENSES-NET> (2,516,026)
<NET-INVESTMENT-INCOME> 7,875,544
<REALIZED-GAINS-CURRENT> (325,560)
<APPREC-INCREASE-CURRENT> 4,225,320
<NET-CHANGE-FROM-OPS> 11,775,304
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,875,544)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,223,681
<NUMBER-OF-SHARES-REDEEMED> (4,306,873)
<SHARES-REINVESTED> 414,856
<NET-CHANGE-IN-ASSETS> (12,109,545)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (14,722,735)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 708,330
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (2,516,026)
<AVERAGE-NET-ASSETS> 141,626,183
<PER-SHARE-NAV-BEGIN> 9.39
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN U.S. GOVERNMENT FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 324,579,032
<INVESTMENTS-AT-VALUE> 325,584,248
<RECEIVABLES> 7,706,942
<ASSETS-OTHER> 53,150
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 333,344,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,099,063
<TOTAL-LIABILITIES> 1,099,063
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,142,035
<SHARES-COMMON-STOCK> 588,802
<SHARES-COMMON-PRIOR> 647,823
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (95,884)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (349,241)
<NET-ASSETS> 5,696,910
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 345,852
<OTHER-INCOME> 0
<EXPENSES-NET> (84,798)
<NET-INVESTMENT-INCOME> 261,054
<REALIZED-GAINS-CURRENT> (10,337)
<APPREC-INCREASE-CURRENT> 141,965
<NET-CHANGE-FROM-OPS> 392,682
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (261,054)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 696,809
<NUMBER-OF-SHARES-REDEEMED> (173,356)
<SHARES-REINVESTED> 16,871
<NET-CHANGE-IN-ASSETS> 5,324,428
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (95,884)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23,791
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (84,798)
<AVERAGE-NET-ASSETS> 4,758,365
<PER-SHARE-NAV-BEGIN> 9.39
<PER-SHARE-NII> 0.53
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (0.53)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 1.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN U.S. GOVERNMENT FUND CLASS Y
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 324,579,032
<INVESTMENTS-AT-VALUE> 325,584,248
<RECEIVABLES> 7,706,942
<ASSETS-OTHER> 53,150
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 333,344,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,099,063
<TOTAL-LIABILITIES> 1,099,063
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 158,333,510
<SHARES-COMMON-STOCK> 16,106,634
<SHARES-COMMON-PRIOR> 14,290,367
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,820,188)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,322,958
<NET-ASSETS> 155,836,280
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,351,834
<OTHER-INCOME> 0
<EXPENSES-NET> (1,097,627)
<NET-INVESTMENT-INCOME> 9,254,207
<REALIZED-GAINS-CURRENT> (351,446)
<APPREC-INCREASE-CURRENT> 4,213,892
<NET-CHANGE-FROM-OPS> 13,116,653
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,254,414)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,285,039
<NUMBER-OF-SHARES-REDEEMED> (2,541,523)
<SHARES-REINVESTED> 825,744
<NET-CHANGE-IN-ASSETS> 28,673,966
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (5,820,188)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 706,531
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,097,627)
<AVERAGE-NET-ASSETS> 141,243,507
<PER-SHARE-NAV-BEGIN> 9.39
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.29
<PER-SHARE-DIVIDEND> (0.63)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.68
<EXPENSE-RATIO> 0.78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> STRATEGIC INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 316,493,467
<INVESTMENTS-AT-VALUE> 321,532,272
<RECEIVABLES> 9,862,101
<ASSETS-OTHER> 748,924
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 332,143,297
<PAYABLE-FOR-SECURITIES> 2,053,037
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,255,224
<TOTAL-LIABILITIES> 4,308,261
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 231,739,910
<SHARES-COMMON-STOCK> 26,845,937
<SHARES-COMMON-PRIOR> 8,613,751
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (863,917)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (42,775,286)
<ACCUM-APPREC-OR-DEPREC> 5,517,061
<NET-ASSETS> 193,617,768
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,757,788
<OTHER-INCOME> 65,551
<EXPENSES-NET> (1,069,284)
<NET-INVESTMENT-INCOME> 5,754,055
<REALIZED-GAINS-CURRENT> 2,098,617
<APPREC-INCREASE-CURRENT> 1,260,821
<NET-CHANGE-FROM-OPS> 9,113,493
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,750,571)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,421,498
<NUMBER-OF-SHARES-REDEEMED> (4,673,022)
<SHARES-REINVESTED> 483,710
<NET-CHANGE-IN-ASSETS> 134,892,693
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (475,689)
<OVERDIST-NET-GAINS-PRIOR> (39,103,173)
<GROSS-ADVISORY-FEES> (530,890)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,069,284)
<AVERAGE-NET-ASSETS> 84,660,188
<PER-SHARE-NAV-BEGIN> 6.82
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.38
<PER-SHARE-DIVIDEND> (0.49)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.21
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> STRATEGIC INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 316,493,467
<INVESTMENTS-AT-VALUE> 321,532,272
<RECEIVABLES> 9,862,101
<ASSETS-OTHER> 748,924
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 332,143,297
<PAYABLE-FOR-SECURITIES> 2,053,037
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,255,224
<TOTAL-LIABILITIES> 4,308,261
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 137,787,269
<SHARES-COMMON-STOCK> 15,614,180
<SHARES-COMMON-PRIOR> 16,071,930
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (560,210)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (24,153,580)
<ACCUM-APPREC-OR-DEPREC> 62,840
<NET-ASSETS> 113,136,319
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 9,348,733
<OTHER-INCOME> 82,943
<EXPENSES-NET> (2,372,493)
<NET-INVESTMENT-INCOME> 7,059,183
<REALIZED-GAINS-CURRENT> 2,951,537
<APPREC-INCREASE-CURRENT> 3,434,236
<NET-CHANGE-FROM-OPS> 13,444,956
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,053,895)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,990,872
<NUMBER-OF-SHARES-REDEEMED> (5,964,560)
<SHARES-REINVESTED> 515,938
<NET-CHANGE-IN-ASSETS> 3,054,647
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (28,059)
<OVERDIST-NET-GAINS-PRIOR> (19,186,516)
<GROSS-ADVISORY-FEES> (728,389)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (2,372,493)
<AVERAGE-NET-ASSETS> 116,155,177
<PER-SHARE-NAV-BEGIN> 6.85
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 0.39
<PER-SHARE-DIVIDEND> (0.43)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.25
<EXPENSE-RATIO> 2.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> STRATEGIC INCOME FUND CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 316,493,467
<INVESTMENTS-AT-VALUE> 321,532,272
<RECEIVABLES> 9,862,101
<ASSETS-OTHER> 748,924
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 332,143,297
<PAYABLE-FOR-SECURITIES> 2,053,037
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,255,224
<TOTAL-LIABILITIES> 4,308,261
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,892,691
<SHARES-COMMON-STOCK> 2,713,720
<SHARES-COMMON-PRIOR> 3,552,632
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (176,049)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,509,834)
<ACCUM-APPREC-OR-DEPREC> (568,276)
<NET-ASSETS> 19,638,532
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,819,888
<OTHER-INCOME> 16,383
<EXPENSES-NET> (461,262)
<NET-INVESTMENT-INCOME> 1,375,009
<REALIZED-GAINS-CURRENT> 572,457
<APPREC-INCREASE-CURRENT> 721,409
<NET-CHANGE-FROM-OPS> 2,668,875
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,374,051)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 414,856
<NUMBER-OF-SHARES-REDEEMED> (1,375,841)
<SHARES-REINVESTED> 122,073
<NET-CHANGE-IN-ASSETS> (4,665,065)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (72,650)
<OVERDIST-NET-GAINS-PRIOR> (6,546,089)
<GROSS-ADVISORY-FEES> (141,434)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (461,262)
<AVERAGE-NET-ASSETS> 22,554,194
<PER-SHARE-NAV-BEGIN> 6.84
<PER-SHARE-NII> 0.44
<PER-SHARE-GAIN-APPREC> 0.39
<PER-SHARE-DIVIDEND> (0.43)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 7.24
<EXPENSE-RATIO> 2.05
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 104
<NAME> STRATEGIC INCOME FUND CLASS Y
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 316,493,467
<INVESTMENTS-AT-VALUE> 321,532,272
<RECEIVABLES> 9,862,101
<ASSETS-OTHER> 748,924
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 332,143,297
<PAYABLE-FOR-SECURITIES> 2,053,037
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,255,224
<TOTAL-LIABILITIES> 4,308,261
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,499,337
<SHARES-COMMON-STOCK> 204,966
<SHARES-COMMON-PRIOR> 1
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (4,247)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (49,730)
<ACCUM-APPREC-OR-DEPREC> (2,943)
<NET-ASSETS> 1,442,417
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 71,743
<OTHER-INCOME> 498
<EXPENSES-NET> (9,239)
<NET-INVESTMENT-INCOME> 63,002
<REALIZED-GAINS-CURRENT> 13,106
<APPREC-INCREASE-CURRENT> (2,943)
<NET-CHANGE-FROM-OPS> 73,165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (62,982)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 761,672
<NUMBER-OF-SHARES-REDEEMED> (562,382)
<SHARES-REINVESTED> 5,675
<NET-CHANGE-IN-ASSETS> 1,442,410
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (5,781)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (9,239)
<AVERAGE-NET-ASSETS> 921,863
<PER-SHARE-NAV-BEGIN> 6.65
<PER-SHARE-NII> 0.46
<PER-SHARE-GAIN-APPREC> 0.41
<PER-SHARE-DIVIDEND> (0.48)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.04
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> HIGH YIELD BOND FUND CLASS A
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 481,818,150
<INVESTMENTS-AT-VALUE> 484,227,114
<RECEIVABLES> 58,200,137
<ASSETS-OTHER> 215,039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 542,642,290
<PAYABLE-FOR-SECURITIES> 21,612,175
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,541,541
<TOTAL-LIABILITIES> 24,153,716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 379,813,249
<SHARES-COMMON-STOCK> 92,827,579
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,352
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 44,200,760
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,239,511)
<NET-ASSETS> 420,777,850
<DIVIDEND-INCOME> 242,056
<INTEREST-INCOME> 10,951,719
<OTHER-INCOME> 230,255
<EXPENSES-NET> (1,448,860)
<NET-INVESTMENT-INCOME> 9,975,170
<REALIZED-GAINS-CURRENT> 5,885,445
<APPREC-INCREASE-CURRENT> 432,317,397
<NET-CHANGE-FROM-OPS> 448,178,012
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,975,169)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,781,307
<NUMBER-OF-SHARES-REDEEMED> (7,005,782)
<SHARES-REINVESTED> 1,396,499
<NET-CHANGE-IN-ASSETS> 420,777,850
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,227,866
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,448,860)
<AVERAGE-NET-ASSETS> 429,449,830
<PER-SHARE-NAV-BEGIN> 4.52
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.53
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> HIGH YIELD BOND FUND CLASS B
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 481,818,150
<INVESTMENTS-AT-VALUE> 484,227,114
<RECEIVABLES> 58,200,137
<ASSETS-OTHER> 215,039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 542,642,290
<PAYABLE-FOR-SECURITIES> 21,612,175
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,541,541
<TOTAL-LIABILITIES> 24,153,716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 509,549,348
<SHARES-COMMON-STOCK> 21,298,722
<SHARES-COMMON-PRIOR> 125,390,766
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (1,465,297)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (417,202,419)
<ACCUM-APPREC-OR-DEPREC> 5,653,857
<NET-ASSETS> 96,535,489
<DIVIDEND-INCOME> 90,176
<INTEREST-INCOME> 25,576,275
<OTHER-INCOME> 96,900
<EXPENSES-NET> (5,394,295)
<NET-INVESTMENT-INCOME> 20,369,056
<REALIZED-GAINS-CURRENT> 10,660,606
<APPREC-INCREASE-CURRENT> (428,846,033)
<NET-CHANGE-FROM-OPS> (397,816,371)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20,369,058)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,409,185
<NUMBER-OF-SHARES-REDEEMED> (20,273,137)
<SHARES-REINVESTED> 2,427,463
<NET-CHANGE-IN-ASSETS> (450,854,512)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,468,219)
<OVERDIST-NET-GAINS-PRIOR> (463,428,580)
<GROSS-ADVISORY-FEES> 1,070,742
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (5,394,295)
<AVERAGE-NET-ASSETS> 374,495,635
<PER-SHARE-NAV-BEGIN> 4.37
<PER-SHARE-NII> 0.25
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.53
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> HIGH YIELD BOND FUND CLASS C
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 481,818,150
<INVESTMENTS-AT-VALUE> 484,227,114
<RECEIVABLES> 58,200,137
<ASSETS-OTHER> 215,039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 542,642,290
<PAYABLE-FOR-SECURITIES> 21,612,175
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,541,541
<TOTAL-LIABILITIES> 24,153,716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,099,971
<SHARES-COMMON-STOCK> 254,831
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 5
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 60,183
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,909)
<NET-ASSETS> 1,155,250
<DIVIDEND-INCOME> 51
<INTEREST-INCOME> 15,230
<OTHER-INCOME> 371
<EXPENSES-NET> (3,308)
<NET-INVESTMENT-INCOME> 12,344
<REALIZED-GAINS-CURRENT> 5,553
<APPREC-INCREASE-CURRENT> (6,548)
<NET-CHANGE-FROM-OPS> 11,349
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (12,343)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 273,398
<NUMBER-OF-SHARES-REDEEMED> (21,094)
<SHARES-REINVESTED> 2,527
<NET-CHANGE-IN-ASSETS> 1,155,249
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,751
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (3,308)
<AVERAGE-NET-ASSETS> 612,300
<PER-SHARE-NAV-BEGIN> 4.52
<PER-SHARE-NII> 0.1
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.10)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.53
<EXPENSE-RATIO> 2.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 104
<NAME> HIGH YIELD BOND FUND CLASS Y
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 481,818,150
<INVESTMENTS-AT-VALUE> 484,227,114
<RECEIVABLES> 58,200,137
<ASSETS-OTHER> 215,039
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 542,642,290
<PAYABLE-FOR-SECURITIES> 21,612,175
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,541,541
<TOTAL-LIABILITIES> 24,153,716
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,259
<SHARES-COMMON-STOCK> 4,412
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15
<NET-ASSETS> 19,985
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35
<OTHER-INCOME> 1
<EXPENSES-NET> (4)
<NET-INVESTMENT-INCOME> 32
<REALIZED-GAINS-CURRENT> (35)
<APPREC-INCREASE-CURRENT> (7)
<NET-CHANGE-FROM-OPS> (10)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (32)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,506
<NUMBER-OF-SHARES-REDEEMED> (1,101)
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 19,986
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (4)
<AVERAGE-NET-ASSETS> 8,367
<PER-SHARE-NAV-BEGIN> 4.56
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.53
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 101
<NAME> EVERGREEN DIVERSIFIED BOND FUND CLASS A
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 576,701,041
<INVESTMENTS-AT-VALUE> 591,455,445
<RECEIVABLES> 23,095,342
<ASSETS-OTHER> 335,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 614,885,911
<PAYABLE-FOR-SECURITIES> 31,467,726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,729,291
<TOTAL-LIABILITIES> 43,197,017
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 514,601,681
<SHARES-COMMON-STOCK> 31,500,841
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (1,539,204)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (24,083)
<ACCUM-APPREC-OR-DEPREC> (11,491,538)
<NET-ASSETS> 501,546,856
<DIVIDEND-INCOME> 144,883
<INTEREST-INCOME> 10,758,749
<OTHER-INCOME> 114,296
<EXPENSES-NET> (1,526,727)
<NET-INVESTMENT-INCOME> 9,491,201
<REALIZED-GAINS-CURRENT> 6,456,714
<APPREC-INCREASE-CURRENT> (10,208,361)
<NET-CHANGE-FROM-OPS> 5,739,554
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,491,200)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34,090,336
<NUMBER-OF-SHARES-REDEEMED> (2,951,611)
<SHARES-REINVESTED> 362,116
<NET-CHANGE-IN-ASSETS> 501,546,856
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (762,542)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,526,727)
<AVERAGE-NET-ASSETS> 518,952,705
<PER-SHARE-NAV-BEGIN> 16.08
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> (0.16)
<PER-SHARE-DIVIDEND> (0.30)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.92
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 102
<NAME> EVERGREEN DIVERSIFIED BOND FUND CLASS B
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 576,701,041
<INVESTMENTS-AT-VALUE> 591,455,445
<RECEIVABLES> 23,095,342
<ASSETS-OTHER> 335,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 614,885,911
<PAYABLE-FOR-SECURITIES> 31,467,726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,729,291
<TOTAL-LIABILITIES> 43,197,017
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 201,635,944
<SHARES-COMMON-STOCK> 4,403,544
<SHARES-COMMON-PRIOR> 29,687,317
<ACCUMULATED-NII-CURRENT> 1,936,382
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (159,513,182)
<ACCUM-APPREC-OR-DEPREC> 26,053,510
<NET-ASSETS> 70,112,654
<DIVIDEND-INCOME> 77,802
<INTEREST-INCOME> 14,698,123
<OTHER-INCOME> 40,524
<EXPENSES-NET> (3,718,894)
<NET-INVESTMENT-INCOME> 11,097,555
<REALIZED-GAINS-CURRENT> 4,480,136
<APPREC-INCREASE-CURRENT> 13,754,860
<NET-CHANGE-FROM-OPS> 29,332,551
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,097,556)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,105,986
<NUMBER-OF-SHARES-REDEEMED> (27,746,911)
<SHARES-REINVESTED> 357,152
<NET-CHANGE-IN-ASSETS> (387,588,201)
<ACCUMULATED-NII-PRIOR> 2,801,682
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (160,349,985)
<GROSS-ADVISORY-FEES> (1,084,933)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (3,718,894)
<AVERAGE-NET-ASSETS> 291,741,527
<PER-SHARE-NAV-BEGIN> 15.42
<PER-SHARE-NII> 0.61
<PER-SHARE-GAIN-APPREC> 0.50
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.92
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 103
<NAME> EVERGREEN DIVERSIFIED BOND FUND CLASS C
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 576,701,041
<INVESTMENTS-AT-VALUE> 591,455,445
<RECEIVABLES> 23,095,342
<ASSETS-OTHER> 335,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 614,885,911
<PAYABLE-FOR-SECURITIES> 31,467,726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,729,291
<TOTAL-LIABILITIES> 43,197,017
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,030
<SHARES-COMMON-STOCK> 1,433
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (36)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (136)
<ACCUM-APPREC-OR-DEPREC> (47)
<NET-ASSETS> 22,811
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 45
<OTHER-INCOME> 1
<EXPENSES-NET> (11)
<NET-INVESTMENT-INCOME> 35
<REALIZED-GAINS-CURRENT> 16
<APPREC-INCREASE-CURRENT> (55)
<NET-CHANGE-FROM-OPS> (4)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,432
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 22,811
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (3)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (11)
<AVERAGE-NET-ASSETS> 12,172
<PER-SHARE-NAV-BEGIN> 16.06
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> (0.14)
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.92
<EXPENSE-RATIO> 1.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACCOUNTING
RECORDS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ACCOUNTING
RECORDS.
</LEGEND>
<SERIES>
<NUMBER> 104
<NAME> EVERGREEN DIVERSIFIED BOND FUND CLASS Y
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> APR-30-1998
<INVESTMENTS-AT-COST> 576,701,041
<INVESTMENTS-AT-VALUE> 591,455,445
<RECEIVABLES> 23,095,342
<ASSETS-OTHER> 335,124
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 614,885,911
<PAYABLE-FOR-SECURITIES> 31,467,726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,729,291
<TOTAL-LIABILITIES> 43,197,017
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,674
<SHARES-COMMON-STOCK> 413
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (19)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (82)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,573
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 407
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 6,573
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 6,508
<PER-SHARE-NAV-BEGIN> 16.03
<PER-SHARE-NII> 0.24
<PER-SHARE-GAIN-APPREC> (0.11)
<PER-SHARE-DIVIDEND> (0.24)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.92
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ K. Dun Gifford
- -------------------------------- Trustee
K. Dun Gifford
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Charles A. Austin III
- ----------------------------- Trustee
Charles A. Austin III
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Laurence B. Ashkin
- -------------------------------- Trustee
Laurence B. Ashkin
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ William Walt Pettit
- -------------------------------- Trustee
William Walt Pettit
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ James S. Howell
- -------------------------------- Trustee
James S. Howell
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Leroy Keith, Jr.
- -------------------------------- Trustee
Leroy Keith, Jr.
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Gerald M. McDonnell
- -------------------------------- Trustee
Gerald M. McDonnell
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Thomas L. McVerry
- -------------------------------- Trustee
Thomas L. McVerry
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ David M. Richardson
- -------------------------------- Trustee
David M. Richardson
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Richard J. Shima
- -------------------------------- Trustee
Richard J. Shima
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Michael S. Scofield
- -------------------------------- Trustee
Michael S. Scofield
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ Russell A. Salton, III, M.D. Trustee
- --------------------------------
Russell A. Salton, III M.D.
POWER OF ATTORNEY
I, the undersigned, hereby constitute Maureen E. Towle, Michael H. Koonce,
T. Hal Clarke, John A. Dudley, Robert N. Hickey, David M. Leahy and William J.
Tomko, and each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Trustee and for which Keystone Investment Management
Company, Evergreen Asset Management Corp., First Union National Bank, or any
other investment advisory affiliate of First Union National Bank, serves as
Adviser or Manager and registering from time to time the shares of such
companies, and generally to do all such things in my name and on my behalf to
enable such investment companies to comply with the provisions of the Securities
Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all
requirements and regulations of the Securities and Exchange Commission
thereunder, hereby ratifying and confirming my signature as it may be signed by
my said attorneys to any and all registration statements and amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of
March 27, 1998.
Signature Title
/s/ William J. Tomko
- ----------------------- President and Treasurer
William J. Tomko
