PROSPECTUS September 3, 1997
As Supplemented February 1, 1998
EVERGREEN(SM) SHORT AND (Evergreen logo
INTERMEDIATE TERM BOND FUNDS appears here)
EVERGREEN SHORT-INTERMEDIATE BOND FUND
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND
EVERGREEN INTERMEDIATE TERM BOND FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Short and Intermediate Term Bond Funds (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, or is a series of,
an open-end, diversified, 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 for the Funds dated
September 3, 1997, as supplemented from time to time, has been filed with
the Securities and Exchange Commission and is incorporated by reference
herein. The Statement of Additional Information provides information
regarding certain matters discussed in this Prospectus and other matters
which may be of interest to investors, and may be obtained without charge
by calling the 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.
AN INVESTMENT IN THE FUNDS IS NOT A DEPOSIT OR AN OBLIGATION OF OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND SHARES 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, AND
INVOLVE RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 11
Investment Practices and Restrictions 14
ORGANIZATION AND SERVICE PROVIDERS 19
Service Providers 20
Distribution Plans and Agreements 21
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 22
How to Redeem Shares 25
Exchange Privilege 27
Shareholder Services 27
Banking Laws 28
OTHER INFORMATION
Dividends, Distributions and Taxes 29
General Information 30
</TABLE>
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C shares of a
Fund. For further information see "Purchase and Redemption of Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as 3.25% None
a % of offering price)
Maximum Contingent Deferred Sales Charge (as a None1 5.00%2
% of original purchase price or redemption
proceeds, whichever is lower)
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class C Shares
<S> <C>
Maximum Sales Charge Imposed on Purchases (as None
a % of offering price)
Maximum Contingent Deferred Sales Charge (as a 1.00%2
% of original purchase price or redemption
proceeds, whichever is lower)
</TABLE>
Annual operating expenses reflect the normal operating expenses of the
Fund, and include costs such as management, distribution and other fees. The
table below shows the Fund's actual or estimated annual operating expenses for
the fiscal period ending on the date set forth besides the Fund's name. The
example shows what you would pay if you invested $1,000 over periods indicated.
The example assumes 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 SHORT-INTERMEDIATE BOND FUND (JUNE 30, 1997)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES* at End of Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50% .50%
After 1 Year $ 40 $ 66 $ 26 $ 16 $ 16
12b-1 Fees3 .10% 1.00% 1.00%
After 3 Years $ 55 $ 81 $ 51 $ 51 $ 51
Other Expenses .12% .12% .12%
After 5 Years $ 71 $ 108 $ 88 $ 88 $ 88
After 10 Years $ 119 $ 156 $ 192 $ 156 $ 192
Total .72% 1.62% 1.62%
</TABLE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND (JUNE 30, 1997)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES* at End of Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .60% .60% .60%
After 1 Year $ 41 $ 68 $ 28 $ 18 $ 18
12b-1 Fees3 .05% 1.00% 1.00%
After 3 Years $ 59 $ 87 $ 57 $ 57 $ 57
Other Expenses .21% .21% .21%
After 5 Years $ 79 $ 118 $ 98 $ 98 $ 98
After 10 Years $ 135 $ 175 $ 213 $ 175 $ 213
Total .86% 1.81% 1.81%
</TABLE>
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND (JUNE 30, 1997)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES* at End of Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .48% .48% .48%
After 1 Year $ 42 $ 67 $ 27 $ 17 $ 17
12b-1 Fees3 .25% 1.00% 1.00%
After 3 Years $ 61 $ 83 $ 53 $ 53 $ 53
Other Expenses .19% .19% .19%
After 5 Years $ 82 $ 111 $ 91 $ 91 $ 91
After 10 Years $ 142 $ 168 $ 198 $ 168 $ 198
Total 0.92% 1.67% 1.67%
</TABLE>
3
<PAGE>
EVERGREEN INTERMEDIATE TERM BOND FUND (JUNE 30, 1998)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES* at End of Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .64% .64% .64%
After 1 Year $42 $69 $29 $19 $19
12b-1 Fees3 .25% 1.00% 1.00%
After 3 Years $66 $88 $58 $58 $58
Other Expenses .21% .21% .21%
Total 1.10% 1.85% 1.85%
</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.
*The annual operating expenses and examples reflect fee waivers and expense
reimbursements. Actual expenses for Class A, Class B and Class C for the most
recent fiscal period ended were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EVERGREEN SHORT-INTERMEDIATE BOND FUND Not Applicable
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND .94% 1.89% 1.90%
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND 1.47% 2.23% 2.23%
EVERGREEN INTERMEDIATE TERM BOND FUND 1.45% 2.20% 2.20%
</TABLE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
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 EVERGREEN SHORT-INTERMEDIATE BOND FUND and
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND has been audited by KPMG Peat
Marwick LLP, each Fund's independent auditors. For EVERGREEN INTERMEDIATE-TERM
GOVERNMENT SECURITIES FUND, the information in the tables for the fiscal year
ended June 30, 1997 and the ten month period ended June 30,1996, has been
audited by KPMG Peat Marwick LLP. Information for the fiscal periods prior to
June 30, 1996 has been audited by other auditors. The EVERGREEN INTERMEDIATE
TERM BOND FUND commenced operations as of January 23, 1998. Consequently, no
financial highlights are currently available. A report of KPMG Peat Marwick LLP
on the audited information with respect to each Fund is incorporated by
reference into the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are incorporated by reference into the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN SHORT-INTERMEDIATE BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
NINE
SIX MONTHS MONTHS YEAR
ENDED YEAR ENDED ENDED ENDED
YEAR ENDED JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, MARCH 31,
1997 1996 1995(C) 1994 1993 1992 1991 1990(D) 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING
OF PERIOD.............. $9.82 $10.02 $9.52 $10.42 $10.41 $10.54 $9.99 $9.72 $9.50
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... 0.63 0.63 0.32 0.65 0.65 0.71 0.73 0.55 0.79
Net realized and
unrealized gain (loss)
on investments......... 0.02 (0.19) 0.50 (0.91) 0.19 (0.06) 0.60 0.24 0.20
Total from investment
operations............. 0.65 0.44 0.82 (0.26) 0.84 0.65 1.33 0.79 0.99
LESS DISTRIBUTIONS FROM:
Net investment income.... (0.64) (0.64) (0.32) (0.64) (0.65) (0.67) (0.70) (0.52) (0.77)
Net realized gains....... 0 0 0 0 (0.18) (0.11) (0.07) 0 0
In excess of net
investment income...... 0 0 0 0 0 0 (0.01) 0 0
Total distributions...... (0.64) (.64) (.32) (.64) (.83) (.78) (.78) (.52) (.77)
NET ASSET VALUE END OF
PERIOD................. $9.83 $9.82 $10.02 $9.52 $10.42 $10.41 $10.54 $9.99 $9.72
Total return(b).......... 6.77% 4.45% 8.77% (2.57%) 8.29% 6.39% 13.74% 8.31% 10.51%
RATIOS/SUPPLEMENTAL DATA:
RATIOS TO AVERAGE NET
ASSETS:
Total expenses......... 0.72% 0.79% 0.77%(a) 0.75% 0.93% 0.90% 0.80% 1.01%(a) 1.00%
Total expenses
excluding indirectly
paid expenses 0.72% -- -- -- -- -- -- -- --
Total expenses
excluding waivers and
reimbursements -- -- -- -- -- -- 0.89% 1.82%(a) 1.50%
Net investment
income............... 6.37% 6.35% 6.58%(a) 6.46% 6.15% 6.79% 7.30% 7.53%(a) 7.57%
Portfolio turnover
rate................... 45% 76% 34% 48% 73% 66% 53% 27% 32%
Net assets end of period
(thousands)............ $17,703 $18,630 $18,898 $19,127 $22,865 $21,488 $17,680 $11,765 $6,496
<CAPTION>
JANUARY 28,
1989
(COMMENCE-
MENT OF
CLASS
OPERATIONS)
THROUGH
MARCH 31,
1989
<S> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING
OF PERIOD.............. $9.70
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.... 0.10
Net realized and
unrealized gain (loss)
on investments......... (0.14)
Total from investment
operations............. (0.04)
LESS DISTRIBUTIONS FROM:
Net investment income.... (0.16)
Net realized gains....... 0
In excess of net
investment income...... 0
Total distributions...... (.16)
NET ASSET VALUE END OF
PERIOD................. $9.50
Total return(b).......... (0.31%)
RATIOS/SUPPLEMENTAL DATA:
RATIOS TO AVERAGE NET
ASSETS:
Total expenses......... 1.78%(a)
Total expenses
excluding indirectly
paid expenses --
Total expenses
excluding waivers and
reimbursements --
Net investment
income............... 6.10%(a)
Portfolio turnover
rate................... 18%
Net assets end of period
(thousands)............ $11,580
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year end from December 31 to June 30.
(d) The Fund changed its fiscal year end from March 31 to December 31.
5
<PAGE>
EVERGREEN SHORT-INTERMEDIATE BOND FUND -- CLASS B AND CLASS C SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
JANUARY 25,
1993
(COMMENCE-
MENT OF
CLASS
SIX MONTHS OPERATIONS) SIX MONTHS
YEAR ENDED ENDED YEAR ENDED THROUGH YEAR ENDED ENDED
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1997 1996 1995(C) 1994 1993 1997 1996 1995(C)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING OF
PERIOD....................... $ 9.84 $10.04 $9.54 $10.44 $10.57 $9.84 $10.05 $9.55
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.54 0.55 0.28 0.58 0.58 0.54 0.55 0.26
Net realized and unrealized
gain (loss) on investments... 0.01 (0.19) 0.50 (0.92) 0.05 0.01 (0.20) 0.50
Total from investment
operations................... 0.55 0.36 0.78 (0.34) 0.63 0.55 0.35 0.76
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.......... (0.54) (0.56) (0.28) (0.56) (0.58) (0.54) (0.56) (0.26)
Net realized gains on
investments.................. 0 0 0 0 (0.18) 0 -- --
Total distributions............ (0.54) (0.56) (0.28) (0.56) (0.76) (0.54) (0.56) (0.26)
NET ASSET VALUE END OF
PERIOD....................... $9.85 $9.84 $10.04 $9.54 $10.44 $9.85 $9.84 $10.05
Total return (b)............... 5.78% 3.62% 8.31% (3.33%) 6.08% 5.77% 3.51% 8.23%
RATIOS/SUPPLEMENTAL DATA:
RATIOS TO AVERAGE NET ASSETS:
Total expenses............... 1.62% 1.69% 1.67%(a) 1.50% 1.57%(a) 1.62% 1.69% 1.67%(a)
Total expenses excluding
indirectly paid expenses... 1.62% -- -- -- -- 1.62% -- --
Net investment income........ 5.48% 5.45% 5.68%(a) 5.75% 5.42%(a) 5.47% 5.46% 5.69%(a)
Portfolio turnover rate........ 45% 76% 34% 48% 73% 45% 76% 34%
NET ASSETS END OF PERIOD
(THOUSANDS).................. $22,237 $21,006 $17,366 $17,625 $8,876 $1,029 $1,155 $527
<CAPTION>
SEPTEMBER 6,
1994
(COMMENCE-
MENT OF
CLASS
OPERATIONS)
THROUGH
DECEMBER 31,
1994
<S> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING OF
PERIOD....................... $9.85
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.18
Net realized and unrealized
gain (loss) on investments... (0.30)
Total from investment
operations................... (0.12)
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income.......... (0.18)
Net realized gains on
investments.................. --
Total distributions............ (0.18)
NET ASSET VALUE END OF
PERIOD....................... $9.55
Total return (b)............... (1.27%)
RATIOS/SUPPLEMENTAL DATA:
RATIOS TO AVERAGE NET ASSETS:
Total expenses............... 1.65%(a)
Total expenses excluding
indirectly paid expenses... --
Net investment income........ 5.87%(a)
Portfolio turnover rate........ 48%
NET ASSETS END OF PERIOD
(THOUSANDS).................. $512
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year end from December 31 to June 30.
6
<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
MAY 2, 1995 FEBRUARY 9, APRIL 10
(COMMENCE- 1996 1996
MENT OF (COMMENCE- (COMMENCE-
CLASS MENT OF CLASS MENT OF CLASS
YEAR TEN MONTHS OPERATIONS) YEAR OPERATIONS) YEAR OPERATIONS)
ENDED ENDED THROUGH ENDED THROUGH ENDED THROUGH
JUNE 30, JUNE 30, AUGUST 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996(C) 1995 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING OF PERIOD.... $9.99 $10.15 $9.95 $9.99 $10.38 $9.99 $10.01
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.................. 0.55 0.46 0.19 0.45 0.18 0.40 0.11
Net realized and unrealized gain (loss)
on investments....................... 0.03 (0.16) 0.20 0.04 (0.39) 0.09 (0.02)
Total from investment operations....... 0.58 0.30 0.39 0.49 (0.21) 0.49 0.09
LESS DISTRIBUTIONS FROM:
Net investment income.................. (0.55) (0.46) (0.19) (0.46) (0.18) (0.46) (0.11)
Total distributions.................... (0.55) (0.46) (0.19) (0.46) (0.18) (0.46) (0.11)
NET ASSET VALUE END OF PERIOD.......... $10.02 $9.99 $10.15 $10.02 $9.99 $10.02 $9.99
Total return (b)....................... 6.00% 3.00% 3.90% 5.03% (1.99%) 5.03% 0.89%
RATIOS/SUPPLEMENTAL DATA:
RATIOS TO AVERAGE NET ASSETS:
Total expenses....................... 0.86% 0.81%(a) 0.80%(a) 1.81% 1.80%(a) 1.81% 1.80%(a)
Total expenses excluding indirectly
paid expenses...................... 0.86% -- -- 1.81% -- 1.81% --
Total expenses excluding waivers and
reimbursements..................... 0.94% 1.06%(a) 1.34%(a) 1.89% 1.91%(a) 1.90% 1.91%(a)
Net investment income................ 5.47% 5.49%(a) 5.42%(a) 4.53% 4.62%(a) 4.53% 4.47%(a)
Portfolio turnover rate................ 68% 28% 45% 68% 28% 68% 28%
NET ASSETS END OF PERIOD (THOUSANDS)... $571 $497 $9 $742 $359 $12 $32
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) The Fund changed its fiscal year end from August 31 to June 30.
7
<PAGE>
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
DECEMBER 30, 1994
(COMMENCEMENT OF
NINE MONTHS YEAR ENDED CLASS OPERATIONS)
ENDED SEPTEMBER 30, THROUGH
JUNE 30, 1997 (D) 1996 (C) SEPTEMBER 30, 1995
<S> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING OF PERIOD................................. $ 9.74 $ 9.68 $ 9.51
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................... 0.46 0.61 0.46
Net realized and unrealized gain on investments..................... 0.03 0.01 0.14
Total from investment operations.................................... 0.49 0.62 0.60
LESS DISTRIBUTIONS FROM:
Net investment income............................................... (0.42) (0.53) (0.42)
In excess of net investment income.................................. (0.01) 0 (0.01)
Tax basis return of capital......................................... 0 (0.03) 0
Total distributions................................................. (0.43) (0.56) (0.43)
NET ASSET VALUE END OF PERIOD....................................... $ 9.80 $ 9.74 $ 9.68
Total return (b).................................................... 5.12% 6.56% 6.36%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses.................................................... 0.92%(a) 0.91% 0.86%(a)
Total expenses excluding indirectly paid expenses................. 0.90%(a) 0.90% 0.82%(a)
Total expenses excluding waivers and reimbursements............... 1.47%(a) 1.33% 1.27%(a)
Net investment income............................................. 6.24%(a) 6.31% 6.37%(a)
Portfolio turnover rate............................................. 52% 74% 67%
NET ASSETS END OF PERIOD (THOUSANDS)................................ $15,751 $22,684 $ 19,293
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Calculation based on average shares outstanding.
(d) The Fund changed its fiscal year end from September 30 to June 30.
8
<PAGE>
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
JULY 1, 1991
(COMMENCEMENT OF
NINE MONTHS CLASS OPERATIONS)
ENDED YEAR ENDED SEPTEMBER 30, THROUGH
JUNE 30, 1997 (D) 1996 (C) 1995 1994 1993 1992 SEPTEMBER 30, 1991
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING OF
PERIOD....................... $ 9.75 $ 9.68 $ 9.62 $ 9.91 $ 9.88 $ 10.06 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.......... 0.39 0.55 0.52 0.47 0.45 0.58 0.18
Net realized and unrealized
gain (loss) on investments... 0.04 0.01 0.03 (0.41) (0.05) (0.21) 0.06
Total from investment
operations................... 0.43 0.56 0.55 0.06 0.40 0.37 0.24
LESS DISTRIBUTIONS FROM:
Net investment income.......... (0.36) (0.46) (0.48) (0.34) (0.37) (0.55) (0.18)
In excess of net investment
income....................... (0.01) 0 (0.01) (0.01) 0 0 0
Tax basis return of capital.... 0 (0.03) 0 0 0 0 0
Total distributions............ (0.37) (0.49) (0.49) (0.35) (0.37) (0.55) (0.18)
NET ASSET VALUE END OF
PERIOD....................... $ 9.81 $ 9.75 $ 9.68 $ 9.62 $ 9.91 $ 9.88 $ 10.06
Total return (b)............... 4.53% 5.90% 5.81% 0.58% 4.16% 3.71% 2.43%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses............... 1.67%(a) 1.63% 1.53% 1.50% 1.50% 1.36% 1.19%(a)
Total expenses excluding
indirectly paid expenses... 1.65%(a) 1.62% 1.50% -- -- -- --
Total expenses excluding
waivers and
reimbursements............. 2.23%(a) 2.09% 2.09% 1.93% 1.94% 2.03% 3.19%(a)
Net investment income........ 5.52%(a) 5.63% 5.46% 4.05% 4.44% 5.50% 6.42%(a)
Portfolio turnover rate........ 52% 74% 67% 34% 60% 41% 2%
NET ASSETS END OF PERIOD
(THOUSANDS).................. $32,694 $ 44,096 $62,998 $95,761 $144,725 $186,742 $ 25,769
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Calculation based on average shares outstanding.
(d) The Fund changed its fiscal year end from September 30 to June 30.
9
<PAGE>
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
FEBRUARY 1, 1993
(COMMENCEMENT OF
NINE MONTHS YEAR ENDED CLASS OPERATIONS)
ENDED SEPTEMBER 30, THROUGH
JUNE 30, 1997 (D) 1996 (C) 1995 1994 SEPTEMBER 30, 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE BEGINNING OF PERIOD..................... $ 9.74 $ 9.67 $ 9.60 $ 9.90 $ 9.82
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................... 0.40 0.54 0.52 0.40 0.23
Net realized and unrealized gain (loss) on
investments........................................... 0.03 0.02 0.04 (0.35) 0.09
Total from investment operations........................ 0.43 0.56 0.56 0.05 0.32
LESS DISTRIBUTIONS FROM:
Net investment income................................... (0.36) (0.46) (0.48) (0.34) (0.24)
In excess of net investment income...................... (0.01) 0 (0.01) (0.01) 0
Tax basis return of capital............................. 0 (0.03) 0 0 0
Total distributions..................................... (0.37) (0.49) (0.49) (0.35) (0.24)
NET ASSET VALUE END OF PERIOD........................... $ 9.80 $ 9.74 $ 9.67 $ 9.60 $ 9.90
Total return (b)........................................ 4.53% 5.91% 5.93% 0.48% 3.28%
RATIOS/SUPPLEMENTAL DATA
RATIOS TO AVERAGE NET ASSETS:
Total expenses........................................ 1.67%(a) 1.64% 1.53% 1.50% 1.50%(a)
Total expenses excluding indirectly paid expenses..... 1.65%(a) 1.62% 1.50% -- --
Total expenses excluding waivers and reimbursements... 2.23%(a) 2.09% 2.08% 1.94% 1.67%(a)
Net investment income................................. 5.53%(a) 5.60% 5.51% 4.08% 2.91%(a)
Portfolio turnover rate................................. 52% 74% 67% 34% 60%
NET ASSETS END OF PERIOD (THOUSANDS).................... $ 4,105 $4,152 $2,755 $2,874 $2,077
</TABLE>
(a) Annualized.
(b) Excluding applicable sales charges.
(c) Calculation based on average shares outstanding.
(d) The Fund changed its fiscal year end from September 30 to June 30.
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DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objectives are nonfundamental; as a result a Fund
may change its objectives 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 Statement of Additional Information ("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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND
The objective of EVERGREEN SHORT-INTERMEDIATE BOND FUND is to attain a
high level of current income, with capital growth as a secondary objective. The
Fund invests in a broad range of investment grade debt securities. The Fund is
suitable for conservative investors who want attractive income and permits them
to participate in a broad portfolio of fixed income securities rather than
purchasing a single issue.
The Fund will invest at least 65% of its assets in bonds that, at the
date of investment, are rated within the four highest categories by Standard &
Poor's Ratings Group ("S&P") (AAA, AA, A and BBB), by Moody's Investors Service
("Moody's") (Aaa, Aa, A and Baa), by Fitch Investors Service, L.P. ("Fitch")
(AAA, AA, A and BBB) or, if not rated under a different system, are of
comparable quality to obligations so rated as determined by another nationally
recognized statistical ratings organization or by the Fund's investment adviser.
The Fund may invest the remaining 35% of its assets in lower rated bonds, but it
will not invest in bonds rated below B. The Fund is not required to sell or
otherwise dispose of any security that loses its rating or has its rating
reduced after the Fund has purchased it.
Debt securities may include fixed, adjustable rate, zero coupon, or
stripped securities, debentures, notes, U.S. government securities, and debt
securities convertible into, or exchangeable for, preferred or common stock.
Debt securities may also include mortgage-backed and asset-backed securities
(see "Investment Practices and Restrictions", below). The duration of the
securities will not exceed 10 years. The Fund intends to maintain a dollar-
weighted average maturity of 5 years or less.
In normal market conditions the Fund may invest up to 20% of its assets
in money market instruments consisting of: (1) high grade commercial paper,
including master demand notes; (2) obligations of banks or savings and loan
associations having at least $1 billion in deposits, including certificates of
deposit and bankers' acceptances; (3) A-rated or better corporate obligations;
(4) obligations issued or guaranteed by the U.S. government or by any agency or
instrumentality of the U.S. government; and (5) repurchase agreements
collateralized by any security listed above.
The types of U.S. government securities in which the Fund may invest
include: direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds, and discount notes of U.S. government
agencies or instrumentalities, such as the Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
Farmers Home Administration; Federal Home Loan Banks; Federal Home Loan Mortgage
Corporation ("FHLMC"); Federal National Mortgage Association ("FNMA");
Government National Mortgage Association ("GNMA"); Student Loan Marketing
Association; Tennessee Valley Authority; Export-Import Bank of the United
States; Commodity Credit Corporation; Federal Financing Bank; and National
Credit Union Administration (collectively, "U.S. government securities"). Some
U.S. government agency obligations are backed by the full faith and credit of
the U.S. Treasury. Others in which the Fund may invest are supported by: the
issuer's right to borrow an amount limited to a specific line of credit from the
U.S. Treasury; discretionary authority of the U.S. government to purchase
certain obligations of an agency or instrumentality; or the credit of the agency
or instrumentality.
The Fund may also invest up to 20% of its assets in foreign securities or
U.S. securities traded in foreign markets in order to provide further
diversification. The Fund may also invest in preferred stock; units which are
debt
11
<PAGE>
securities with stock or warrants attached; and obligations denominated in
foreign currencies. In making these decisions, the Fund's investment adviser
will consider such factors as the condition and growth potential of various
economies and securities markets, currency and taxation considerations and other
pertinent financial, social, national and political factors. (See "Investment
Practices and Restrictions" -- "Foreign Investments").
The Fund may enter into dollar rolls in which the Fund sells income
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, the Fund foregoes principal and
interest paid on such securities. The Fund is compensated by the difference
between the current sales price and forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. Dollar rolls are treated by the Fund in the same
manner as reverse repurchase agreements for leverage purposes.
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The investment objective of EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND is to preserve principal value and maintain a high degree of
liquidity while providing current income.
The Fund invests exclusively in U.S. Treasury obligations, obligations
issued or guaranteed as to principal and interest by agencies and
instrumentalities of the U.S. government, receipts evidencing separately traded
principal and interest components of U.S. government obligations, obligations of
supranational entities and repurchase agreements involving any of such
obligations. No more than 35% of the Fund's assets may be invested in receipts,
obligations of supranational entities and repurchase agreements involving such
securities.
The Fund will maintain an average weighted remaining maturity of
approximately three to ten years, although under normal conditions the
investment adviser expects to maintain an average maturity of three to six
years. No remaining maturity will exceed ten years. The investment adviser may
vary the average maturity substantially in anticipation of a change in the
interest rate environment.
The U.S. government obligations that the Fund may acquire include
securities representing an interest in a pool of mortgage loans that are issued
or guaranteed by a U.S. government agency. The primary issuers of these
mortgage-backed securities are GNMA, FNMA and FHLMC. The only agency which may
actually guarantee principal or interest is the GNMA. Mortgage-backed securities
are in most cases "pass through" instruments through which the holder receives a
share of all interest and principal payments from the mortgages underlying the
certificates. The mortgages backing these securities include conventional
thirty-year fixed rate mortgages. However, due to scheduled and unscheduled
principal payments on the underlying loans, these securities have a shorter
average maturity and, therefore, less principal volatility than comparable
bonds. During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities can be expected to accelerate. When the
mortgage obligations are prepaid, the Fund will reinvest the prepaid amounts in
securities, the yield of which reflects interest rates prevailing at the time.
For purposes of complying with the Fund's investment policy of acquiring
securities with remaining maturity of ten years or less, the investment adviser
will use the expected life of a mortgage-backed security.
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND
The investment objective of EVERGREEN CAPITAL PRESERVATION AND INCOME
FUND is to seek a high level of current income consistent with low volatility of
principal.
Under ordinary circumstances, the Fund invests at least 65% of its assets
in loan pool securities ("Loan Pool(s)") or in mortgage securities or other
securities collateralized by, or representing an interest in, a pool of
mortgages (collectively, "Mortgage Securities") that have interest rates that
reset at periodic intervals and are issued or guaranteed by the U.S. government,
its agencies or instrumentalities.
The Fund may also invest in (i) securities rated AAA by S&P, Moody's
and/or Fitch or, if not rated or rated under a different system, believed by the
Fund's investment adviser to be of comparable quality, and (ii) high grade
commercial paper of United States or foreign issuers. The Fund may invest up to
20% of its assets in the foregoing investments.
12
<PAGE>
The Fund does not attempt to maintain a constant price per share.
However, the Fund does follow a strategy that seeks to minimize changes in its
net asset value per share by investing primarily in adjustable-rate securities,
whose interest rates are periodically reset when market rates change. The
average dollar weighted reset period of adjustable-rate securities held by the
Fund will not exceed one year. The Fund seeks to provide a relatively stable net
asset value while providing high current income relative to high quality,
short-term investment alternatives.
By investing primarily in Mortgage Securities and Loan Pools with
adjustable rates of interest that are issued or guaranteed by the U.S.
government, its agencies or instrumentalities, the Fund will achieve a less
volatile net asset value per share than is characteristic of mutual funds that
invest primarily in U.S. government securities paying a fixed-rate of interest.
Unlike fixed rate mortgages and loans, adjustable-rate mortgage
securities ("ARMS") and adjustable-rate Loan Pools ("AR Loan Pools") allow the
Fund to participate in increases in interest rates through periodic adjustments
in the coupons of the underlying mortgages or loans, resulting in both higher
current yields and lower price fluctuations in the Fund's net asset value per
share. The Fund is also affected by decreases in interest rates through periodic
decreases in the coupons of the underlying mortgages or loans resulting in lower
income to the Fund. This downward adjustment results in lower price fluctuations
in the net asset value per share in a decreasing interest rate environment. As
the interest rates on the mortgages or loans underlying the Fund's investments
are reset periodically, coupons of portfolio securities will gradually align
themselves to reflect changes in market rates and should cause the net asset
value per share of the Fund to fluctuate less dramatically than it would if the
Fund invested in more traditional long-term, fixed-rate mortgages.
The portion of the Fund that is not invested in ARMS and AR Loan Pools is
intended to add incremental yield from changes in market rates without
materially increasing the volatility of the net asset value per share. As a
result, the overall impact on the Fund of this portion of the Fund's portfolio
is expected to be neutral in terms or price risk.
The Fund may invest in GNMA, FNMA and FHLMC fixed-rate Mortgage
Securities. The expected price behavior of fixed-rate GNMA, FNMA and FHLMC
Mortgage Securities is like that of other fixed rate debt securities in that
their principal value rises as market interest rates fall and declines as market
interest rates rise. (See "Investment Practices and Restrictions -- Risks of
Asset-Backed Securities").
The Fund may also invest in fixed-rate and adjustable-rate collateralized
mortgage obligations ("CMO's"), including CMOs with rates that move inversely to
market rates that are issued by and guaranteed as to principal and interest by
the U.S. government, its agencies or instrumentalities. The principal
governmental issuer of CMOs is FNMA. In addition, FHLMC issues a significant
number of CMOs. The Fund will not invest in CMOs that are issued by private
issuers. CMOs are debt obligations collateralized by Mortgage Securities in
which the payment of the principal and interest is supported by the credit of,
or guaranteed by, the U.S. government or an agency or instrumentality of the
U.S. government. The secondary market for such CMOs is actively traded.
EVERGREEN INTERMEDIATE TERM BOND FUND
The Fund seeks current income by investing primarily in a broad range of
investment quality debt securities. As a secondary objective, the Fund seeks to
protect capital. Where appropriate the Fund will take advantage of opportunities
to realize capital appreciation.
The Fund seeks current income by normally investing at least 80% of its
assets in debt securities including U.S. Treasury bills, notes and bonds;
mortgage-backed securities issued by the U.S. government, its agencies or
instrumentalities; mortgage-backed securities issued by private issuers;
corporate debt securities; and commercial paper. The Fund's debt securities may
also include fixed and adjustable-rate or stripped bonds, debentures, notes,
equipment trust certificates and debt securities convertible into, or
exchangeable for, preferred or common stock. The Fund may also invest in units,
which are debt securities with stock or warrants to buy stock attached, and
preferred stock.
Under ordinary circumstances, the Fund expects to invest at least 65% of
its assets in bonds and debentures. The Fund will invest in securities that, at
the time of investment, are rated within the four highest grades by S&P (AAA,
AA, A and BBB), by Moody's (Aaa, Aa, A and Baa) or by Fitch (AAA, AA, A and
BBB), or if
13
<PAGE>
not rated or rated under a different system, are of comparable quality to
obligations so rated, as determined by its investment adviser. The Fund may
invest up to 25% of its assets in below-investment grade securities having a
rating range of BB to CCC by S&P and Ba to Caa by Moody's, or if unrated or
rated under a different system, believed by its investment adviser to be of
comparable quality.
Securities rated BB or lower by S&P or Fitch, or Ba or lower by Moody's,
are considered predominately speculative with respect to the ability of the
issuer to meet principal and interest payments. For more information on
below-investment grade securities, see the statement of additional information.
The Fund may also invest up to 50% of its assets in securities that are
principally traded in securities markets located outside the United States.
The Fund currently expects that the dollar weighted average maturity of
its investments will range from three to seven years. However, the Fund may
invest in securities with remaining maturities of ten years or less.
Bonds which are rated BBB or Baa are considered to be 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. 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. Such bonds lack outstanding investment characteristics and may have
speculative characteristics.
When the Fund buys securities, it will consider the ratings of Moody's
S&P and Fitch assigned to various debt securities as well as many other factors,
including the preservation of capital, the potential for realizing capital
appreciation, maturity and yield to maturity. The Fund will adjust its
investments in particular securities or in types of debt securities in response
to its appraisal of changing economic conditions and trends. The Fund may sell
one security and purchase another security of comparable quality and maturity to
take advantage of what it believes to be short-term differentials in market
values or yield disparities.
Other Eligible Securities. The Fund may invest up to 20% of its total assets
under ordinary circumstances and, when in its investment adviser's opinion
market conditions warrant, up to 100% of its assets for temporary defensive
purposes in the following types of money market instruments: (1) commercial
paper, including master demand notes, that at the date of investment is rated
A-1, the highest grade by S&P, P-1, the highest grade by Moody's or, if not
rated by such services, is issued by a company which at the date of investment
has an outstanding issue rated A or better by S&P or Moody's; (2) 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; (3) corporate obligations which at the
date of investment are rated A or better by S&P or Moody's; and (4) obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities.
The Fund may also invest in certain other types of derivative
instruments, including interest rate swaps, equity swaps, index swaps, currency
swaps and caps and floors, in addition to forwards, futures, options,
mortgage-backed securities and other asset-backed securities mentioned below.
In addition to the investment policies detailed above, the Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions."
INVESTMENT PRACTICES AND RESTRICTIONS
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.
14
<PAGE>
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 adviser, market conditions warrant a temporary defensive investment
strategy.
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND may invest up to 35% of
its assets under ordinary circumstances and, when in its investment advisers
opinion market conditions warrant, up to 100% of its assets for temporary
defensive purposes in the following instruments: obligations of the U.S.
government, its agencies or instrumentalities, including the Federal Home Loan
Banks, FNMA, GNMA, Bank for Cooperatives (including Central Bank for
Cooperatives), Federal Land Banks, Federal Intermediate Credit Banks, Tennessee
Valley Authority, Export-Import Bank of the United States, Commodity Credit
Corporation, Federal Financing Bank, The Student Loan Marketing Association,
FHLMC, Small Business Administration or the National Credit Union
Administration.
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. Repurchase
agreements are agreements 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. Each Fund's
investment adviser will monitor the creditworthiness of the firms with which the
Funds enter into repurchase agreements.
Reverse Repurchase Agreements. EVERGREEN SHORT-INTERMEDIATE BOND FUND, EVERGREEN
CAPITAL PRESERVATION AND INCOME FUND and EVERGREEN INTERMEDIATE TERM BOND FUND
may also 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 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 a Fund.
When-Issued, Delayed-Delivery and Forward Commitment Transactions. A Fund may
enter into transactions whereby it commits to buying a security, but does not
pay for or take delivery of the security until some specified date in the
future. The value of these securities is subject to market fluctuation during
this period and no income accrues to 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, a Fund may be
disadvantaged.
Securities Lending. In order to generate additional income, a Fund may lend up
to 15% of its portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. There is the risk that when
lending portfolio securities, the securities may not be available to a Fund on a
timely basis and a Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition of the
securities may be delayed pending court action.
Options And Futures. EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN
INTERMEDIATE TERM BOND FUND may engage in options and/or futures transactions.
Options and futures transactions are intended to enable a Fund to manage market,
interest rate or exchange rate risk, and the Funds do not use these transactions
for speculation or leverage.
EVERGREEN SHORT-INTERMEDIATE BOND FUND may attempt to hedge all or a
portion of its portfolio through the purchase of both put and call options on
its portfolio securities and listed put options on financial futures contracts
for portfolio securities. The Fund may also write covered call options on its
portfolio securities to attempt to increase current income. The Fund will
maintain its positions in securities, option rights, and segregated cash subject
to puts
15
<PAGE>
and calls until the options are exercised, closed, or have expired. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. The Fund may purchase listed put options on
financial futures contracts. These options will be used only to protect
portfolio securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.
EVERGREEN SHORT-INTERMEDIATE BOND FUND 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. EVERGREEN SHORT-INTERMEDIATE
BOND FUND also may 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, the 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 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 enters into financial futures contracts directly
to hedge its holdings of fixed income securities, it would enter into contracts
to deliver securities at an undetermined price (i.e., "go short") to protect
itself against the possibility that the prices of its fixed income securities
may decline during a Fund's anticipated holding period. The Fund would agree to
purchase securities in the future at a predetermined price (i.e., "go long") to
hedge against a decline in market interest rates.
The EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN INTERMEDIATE
TERM BOND FUND 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 rates, 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. 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 remains in effect until the contract is terminated.
The Funds may sell or purchase currency or 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, a Fund sells futures contracts in order to offset a possible decline in
the profit on its 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 EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN INTERMEDIATE
TERM BOND FUND may enter into closing purchase and sale transactions in order to
terminate a futures contract. 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 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
16
<PAGE>
contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, a Fund will continue to be required to maintain the margin deposits
on the contract and to complete the contract according to its terms, in which
case it would continue to bear market risk on the transaction.
Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the 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). The Funds 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, the Funds' investment advisers could
be incorrect in their expectations and forecasts about the direction or extent
of market factors, such as interest rates, securities price movements, and other
economic factors. Even if the Funds' investment advisers correctly predict
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 the Funds'
investment advisers 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 the Fund could be significant.
Zero-Coupon And Stripped Securities. EVERGREEN SHORT-INTERMEDIATE BOND FUND,
EVERGREEN INTERMEDIATE TERM BOND FUND and EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND 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
17
<PAGE>
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 SHORT-INTERMEDIATE BOND FUND and EVERGREEN
INTERMEDIATE TERM BOND FUND may invest in foreign securities or securities
denominated in or indexed to foreign currencies. In addition, EVERGREEN
SHORT-INTERMEDIATE BOND FUND may invest in foreign currencies. Foreign
securities 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. Foreign markets may be less liquid or more
volatile than U.S. markets and may offer less protection to investors. It may
also be more difficult to enforce contractual obligations abroad than would be
the case in the United States because of differences in the legal systems.
Foreign securities may be subject to foreign taxes, which may reduce yield, and
may be less marketable than comparable U.S. securities. All these factors are
considered by the investment adviser before making any of these types of
investments.
Foreign Currency Transactions. As discussed above, the EVERGREEN
SHORT-INTERMEDIATE BOND FUND and EVERGREEN INTERMEDIATE TERM 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
will be affected by changes in exchange rates.
As one way of managing exchange rate risk, in addition to entering into
currency futures contracts, the 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 the Funds
will deliver or receive when the contract is completed) is fixed when a Fund
enters into the contract. The Funds usually will enter into these contracts to
stabilize the U.S. dollar value of a security it has agreed to buy or sell. The
Funds intend to use these contracts to hedge the U.S. dollar value of a security
it already owns, particularly if the Funds expect a decrease in the value of the
currency in which the foreign security is denominated. Although the Funds will
attempt to benefit from using forward contracts, the success of its hedging
strategy will depend on the investment adviser's ability to predict accurately
the future exchange rates between foreign currencies and the U.S. dollar. The
value of the Fund's investment denominated in foreign currencies will depend on
the relative strength of those currencies and the U.S. dollar, and the Funds 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.
Risk Characteristics Of 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.
18
<PAGE>
For certain types of asset pools, such as collateralized mortgage obligations,
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.
Derivatives. The EVERGREEN INTERMEDIATE TERM BOND FUND may invest in derivatives
only if the expected risks and rewards are consistent with its objectives and
policies.
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.
Losses from derivatives can sometimes be substantial. This is true partly
because small price movements in the underlying asset can result in immediate
and substantial gains or losses in the value of the derivative. Derivatives can
also cause the Fund to lose money if the Fund fails to correctly predict the
direction in which the underlying asset or economic factor will move.
Borrowing. The Funds may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. The
specific limits applicable to borrowing by each Fund are set forth in the
Statement of Additional Information.
Illiquid Securities. The Funds may invest up to 15% of their 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 purposes 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 adviser determines the liquidity of Rule 144A securities according to
guidelines and procedures adopted by the Fund's Board of Trustees. The Board of
Trustees monitors the investment adviser's application of those guidelines and
procedures. Securities eligible for resale pursuant to Rule 144A, which a Fund's
investment adviser has determined to be liquid or readily marketable, are not
subject to the 15% limit on illiquid securities.
ORGANIZATION AND SERVICE PROVIDERS
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 17,
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 each Fund's activities, reviewing,
among other things, each Fund's performance and its contractual arrangements
with various service providers.
Shareholder Rights. All shareholders of a given Class participate equally in
dividends and distributions from a Fund's assets and have equal liquidation and
other rights. Shareholders may exchange shares as described under "Exchanges,"
but will have no other preference, conversion, exchange or preemptive rights.
When issued and paid
19
<PAGE>
for, your shares will be fully paid and nonassessable. Shares of the Funds are
redeemable, transferable and freely assignable as collateral. The Funds may
establish additional classes or series of shares.
The Funds do not hold annual shareholder meetings; a Fund may, however,
hold special meetings for such purposes as electing or removing Trustees,
changing fundamental policies and approving investment advisory agreements or
12b-1 plans. In addition, the Funds are prepared to assist shareholders in
communicating with one another for the purpose of convening a meeting to elect
trustees. If any matters are to be voted on by shareholders, each share owned as
of the record date for the meeting would be entitled to one vote for each dollar
of net asset value applicable to each share.
SERVICE PROVIDERS
Investment Adviser. The investment advisor to EVERGREEN SHORT-INTERMEDIATE BOND
FUND and EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND is the Capital
Management Group of First Union National Bank ("FUNB"), a subsidiary of First
Union Corporation ("First Union"). First Union and FUNB are located at 201 South
College Street, Charlotte, North Carolina 28288-0630. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States.
The investment adviser to EVERGREEN CAPITAL PRESERVATION AND INCOME FUND
and EVERGREEN INTERMEDIATE TERM 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 is an indirect subsidiary of FUNB.
The EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND pays FUNB an annual fee for its
services equal to 0.50% and 0.60% of the Fund's average daily net assets,
respectively.
The EVERGREEN CAPITAL PRESERVATION AND INCOME FUND and EVERGREEN
INTERMEDIATE TERM BOND FUND pays Keystone a fee, calculated on an annual basis,
equal to 2.0% of gross dividend and interest income of the Fund plus 0.50% of
the first $100,000,000 of the aggregate net asset value of shares of each Fund,
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 each business
day and paid monthly.
Portfolio Managers. Thomas L. Ellis has been the portfolio manager of EVERGREEN
SHORT-INTERMEDIATE BOND FUND since its inception in 1988. Mr. Ellis has over 28
years of experience in investments. Since joining First Union in 1985, Mr. Ellis
has been a Vice President and Senior Portfolio Manager. At First Union he is
responsible for the portfolio management of over $1 billion in taxable fixed
income assets, including Evergreen Select Fixed Income Fund; the Fixed Income
Fund, a common trust fund; and 17 separate accounts. Prior to joining First
Union, Mr. Ellis served in the bond department of 1st Tennessee Bank.
The portfolio manager of EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND since its inception in 1991 has been Robert Cheshire. Since
joining First Fidelity Bank in 1990, which was acquired by First Union in 1995,
Robert Cheshire has been a Vice President and Senior Portfolio Manager. He is
also head of the Newark Taxable Fixed Income Unit.
Christopher P. Conkey is the portfolio manager of EVERGREEN INTERMEDIATE
TERM BOND FUND. 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.
Gary Pzegeo has been the portfolio manager of EVERGREEN CAPITAL
PRESERVATION AND INCOME FUND since 1997. Mr. Pzegeo is a Keystone Vice President
and Portfolio Manager in the Fixed Income group. Mr. Pzegeo joined Keystone in
1990 and has experience as a Senior Cash Manager, Senior Research Associate and
Analyst.
Administrator. Evergreen Investment Services, Inc. ("EIS") serves as
administrator to EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND. EIS provides each
20
<PAGE>
fund with facilities, equipment and personnel. For its services as
administrator, EIS is entitled to receive a fee based on the aggregate average
daily net assets of each fund at a rate based on the total assets of all the
mutual funds advised by First Union subsidiaries. The administration fee is
calculated in accordance with the following schedule:
Administration Fee
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
EIS also provides facilities, equipment and personnel to EVERGREEN
CAPITAL PRESERVATION AND INCOME FUND and EVERGREEN INTERMEDIATE TERM BOND FUND
on behalf of their investment adviser.
Transfer Agent and Dividend Disbursing Agent. Evergreen Service Company ("ESC"),
200 Berkeley Street, Boston, Massachusetts 02116, acts as each Fund's transfer
agent and dividend disbursing agent. ESC is an indirect, wholly-owned subsidiary
of First Union Corporation.
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 a
distribution plan that it has adopted pursuant to Rule 12b-1 under the 1940 Act
(each a "Plan" or collectively the "Plans"). Under the Plans, each Fund may
incur distribution-related and shareholder servicing-related expenses which are
based upon the following maximum annual rates:
<TABLE>
<CAPTION>
Share Class % of Class's average daily net assets
<S> <C>
Class A shares 0.75%, currently limited to 0.25% for
EVERGREEN CAPITAL PRESERVATION AND
INCOME FUND and EVERGREEN
INTERMEDIATE TERM BOND FUND and
0.10% for EVERGREEN SHORT-
INTERMEDIATE BOND FUND
0.50% currently limited to 0.25% for
EVERGREEN INTERMEDIATE-TERM
GOVERNMENT SECURITIES FUND
Class B shares 1.00%
Class C shares 1.00%
</TABLE>
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 adviser 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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND has a shareholder service plan
("Service Plan") in addition to the Plan adopted with respect to its Class B
shares. The Service Plan permits the fund to incur a fee of up to 0.25% of Class
B aggregate average daily net assets for ongoing personal services and/or the
maintenance of shareholder accounts. Plan and Service Plan payments to financial
intermediaries will not exceed 0.25% of the aggregate average daily net assets
attributable to each Class of shares of the Fund.
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<PAGE>
The Plans are in compliance with the Conduct Rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to an annual rate of 0.75% and 0.25%, respectively, of the average
aggregate annual net assets attributable to that class. The rules also limit the
aggregate of all front-end, deferred and asset-based sales charges imposed with
respect to a class of shares by a mutual fund that also charges a service fee to
6.25% of cumulative gross sales of shares of that class, plus interest on the
unpaid amount at the prime rate plus 1% per annum.
Distribution Agreements. The EVERGREEN INTERMEDIATE TERM BOND FUND has also
entered into distribution agreements (each a "Distribution Agreement" or
collectively the "Distribution Agreements") with EDI. Pursuant to the
Distribution Agreements, the Fund will compensate EDI for its services as
distributor based upon the maximum annual rate as a percentage of the Fund's
average daily net assets attributable to the Class, as follows:
<TABLE>
<S> <C>
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 the Fund for payments (1) to compensate broker-dealers or
other persons for distributing shares of the Fund, including interest and
principal payments made in respect of amounts paid to broker-dealers or other
persons that have been financed (EDI may assign its rights to receive
compensation under the Plans to secure such financings), (2) to otherwise
promote the sale of shares of the Fund, and (3) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Fund's
shareholders. FUNB or its affiliates may finance the payments made by EDI to
compensate broker-dealers or other persons for distributing shares of the Fund.
In the event the Fund acquires the assets of other mutual funds,
compensation paid to EDI under the Distribution Agreements may be paid by EDI to
the distributors of the funds or their predecessors.
Since EDI's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EDI, the amount of compensation
received by EDI under the Distribution Agreements during any year may be more or
less than its actual expenses and may result in a profit to EDI. Distribution
expenses incurred by EDI in one fiscal year that exceed the level of
compensation paid to EDI for that year may be paid from distribution fees
received from the Fund in subsequent fiscal years.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You may purchase shares of each Fund 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 Evergreen
Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121, a completed
Application and a check payable to the Fund. You may also telephone
1-800-343-2898 to obtain the number of an account to which you can wire or
electronically transfer funds and then send in a completed Application. The
minimum initial investment is $1,000, which may be waived in certain situations.
Subsequent investments in any amount may be made by check, by wiring federal
funds, by direct deposit or by an electronic funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. See the Application
for more information. Only Class A, Class B and Class C shares are offered
through this Prospectus (see "General Information" -- "Other Classes of
Shares").
Class A Shares-Front-End Sales Charge Alternative. You may purchase Class A
shares 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
22
<PAGE>
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
As a % of the Net Offering Commission to Dealer/Agent
Amount of Purchase Amount Invested Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 3.36% 3.25% 2.75%
$ 50,000 - $ 99,000 3.09% 3.00% 2.75%
$ 100,000 - $ 249,999 2.56% 2.50% 2.25%
$ 250,000 - $ 499,999 2.04% 2.00% 1.75%
$ 500,000 - $ 999,999 1.52% 1.50% 1.25%
</TABLE>
Investment of $1 million or more -- Investments of $1 million or more are
available without a front-end sales charge. There is, however, a CDSC of 1.00%
on any shares redeemed during the month of purchase and the 12-month period
following the month of 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.
No front-end sales charges are imposed on Class A shares purchased by (a)
institutional investors, which may include bank trust departments and registered
investment advisers; (b) investment advisers, consultants or financial planners
who place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; (c) clients
of investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; (d) institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with 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) and upon the initial purchase of an Evergreen fund by
investors reinvesting the proceeds from a redemption within the preceding thirty
days of shares of other mutual funds, provided such shares were initially
purchased with a front-end sales charge or subject to a CDSC. Certain broker-
dealers or other financial institutions may impose a fee on transactions in
shares of the Funds.
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. Certain
purchases of Class A shares may qualify for reduced sales charges in accordance
with a Fund's concurrent purchases, Rights of Accumulation, Letter of Intent,
certain Retirement Plans and Reinstatement Privilege. Consult the Application
for additional information concerning these reduced sales charges.
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<PAGE>
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 therafter.
</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 the Distributor to have been
compensated for the expenses associated with the sale of such shares.
Class C Shares. Class C shares are offered only through broker-dealers who have
special distribution agreements with EDI. Class C shares are offered at net
asset value, without an initial sales charge. With certain exceptions, each Fund
imposes a CDSC of 1.00% on shares redeemed during the month of purchase and the
12-month period following the month of purchase. No CDSC is imposed on amounts
redeemed thereafter. If imposed, the CDSC is deducted from the redemption
proceeds otherwise payable to you. The CDSC is retained by EDI or its
predecessor. See "Contingent Deferred Sales Charge and Waiver of Sales Charges"
below.
Contingent Deferred Sales Charge. 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 a CDSC to certain Directors, Trustees,
officers and employees of the Funds, Keystone, FUNB, 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.
24
<PAGE>
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 a 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 market.
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 because 100% of your purchase is
invested immediately and because 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 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 dealers, EDI and EIS
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
United States. Such a broker-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 adviser, and select broker-dealers, pursuant to which
incentives are paid, including gift certificates and payments in amounts up to
1.0% 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 adviser over and above the
usual trail commissions or shareholder servicing payments applicable to a given
Class of shares.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse a Fund or a Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual 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 Fund shares for cash at their net redemption value on any
day the Exchange is open, either by writing to each 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 for Class
B or Class C shares) next calculated after the Fund receives your request in
proper form. Proceeds generally will be sent to you within seven days. However,
for shares recently purchased by check, 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
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charge you for this service. Certain financial intermediaries may require that
you give instructions earlier than 4:00 p.m. (Eastern time).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to the Fund, c/o ESC, the registrar, transfer
agent and dividend-disbursing agent for 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 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 a 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, 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 Securities and Exchange Commission ("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
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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 the other Evergreen funds through your financial
intermediary or 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 contingent deferred sales charge 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 complete 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 a 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 Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen funds.
If you redeem shares, the CDSC applicable to the Class B or Class C shares of
the Evergreen fund originally purchased for cash is applied. Also, Class B
shares will continue to age following an exchange for purposes of conversion to
Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. Generally, your financial
intermediary must receive exchange instructions 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 made after 4:00 p.m. (Eastern
time) will be processed using the net asset value determined on 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 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.
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Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the Application. Under
this plan, you may receive (or designate a third party to receive) payments in a
stated amount of at least $75, or a maximum of 1.0% per month or 3.0% per
quarter of the total net asset value of your account when the Plan was opened.
Fund shares will be redeemed as necessary to meet withdrawal payments. All
participants must elect to have their dividends and capital gain distributions
reinvested automatically. Any applicable CDSC will be waived with respect to
redemptions occurring under a Systematic 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 benefit and savings plans may make shares of the Funds and the
other Evergreen funds available to their participants. Investments made by such
employee benefit plans may be exempt from front-end sales charges if they meet
the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Evergreen Asset, Keystone 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 a 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) a
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; 403(b)(7)
Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Medical Savings Accounts
and Money Purchase Pension 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 adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Keystone,
since it is a subsidiary of FUNB, and FUNB are subject to and in compliance with
the aforementioned laws and regulations.
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Changes to applicable laws and regulations or future judicial or
administrative decisions could result in FUNB or Keystone 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 a
Fund by its customers. If FUNB or Keystone 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 its shareholders such dividends monthly. The Funds intend to
declare and distribute all net realized capital gains at least annually.
Shareholders receive a Fund's 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 a 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.
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"). While so qualified, it
is expected that 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.
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.
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.
A Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
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, you must certify on the Application, or on a separate
form supplied by the Funds' transfer agent, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within ninety days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
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A Fund intends to distribute its 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
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 Statement of
Additional Information. 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 a Fund directly affects the transaction costs
relating to the purchase and sale of securities which the Fund bears directly. A
high rate of portfolio turnover will increase such costs. See the SAI for
further information regarding the practices of the Fund affecting portfolio
turnover.
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, 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. EVERGREEN SHORT-INTERMEDIATE BOND FUND, EVERGREEN
INTERMEDIATE TERM BOND FUND and EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND currently offer 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) all
shareholders of record in one or more of the Funds for which Evergreen Asset
served as investment adviser as of December 30, 1994, (2) certain institutional
investors and (3) investment advisory clients of FUNB, Evergreen Asset, Keystone
or their affiliates. EVERGREEN CAPITAL PRESERVATION AND INCOME FUND currently
offers Class A, Class B and Class C shares. 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.
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. A 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 the Funds' financial statements. To calculate yield, a Fund takes
the interest 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
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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 a Fund's shares, including data from Lipper Analytical
Services, Inc. and Morningstar, Inc. and other industry publications. 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 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. The
materials may also reprint, and use as advertising and sales literature,
articles from EVERGREEN EVENTS, a quarterly magazine provided free of charge to
Evergreen fund shareholders.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Securities Act of 1933, as amended. Copies of the
Registration Statements may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the offices of the SEC in Washington, D.C.
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INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN SHORT-INTERMEDIATE BOND FUND
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
Keystone Investment Management Company, 200 Berkeley Street, Boston,
Massachusetts 02116-5034
EVERGREEN CAPITAL PRESERVATION AND INCOME FUND
EVERGREEN INTERMEDIATE TERM BOND FUND
CUSTODIAN
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
TRANSFER AGENT
Evergreen Service Company, Box 2121, Boston, Massachusetts 02106-2121
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Distributor, Inc., 125 W. 55th Street, New York, New York 10019
64981 541692-Rev1
