KEYSTONE HIGH INCOME BOND FUND B-4, PRES14A, 1997-10-03

KEYSTONE HIGH INCOME BOND FUND B-4
PRES14A, 1997-10-03

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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the Appropriate Box:

[x] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) [ ]

[ ] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

<PAGE>

Keystone Capital Preservation and Income Fund
Keystone Institutional Adjustable Rate Fund
Keystone Strategic Income Fund
Keystone Fund for Total Return
Evergreen Latin America Fund
Keystone Global Opportunities Fund
Keystone State Tax Free Fund
Keystone State Tax Free Fund - Series II
--------------------------------------------------------------
(Name of Registrants as Specified in Their Charters)

Evergreen Trust
Evergreen Equity Trust
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Income and Growth Fund
The Evergreen American Retirement Trust
Evergreen Foundation Trust
The Evergreen Municipal Trust
Evergreen Money Market Trust
Evergreen Investment Trust
The Evergreen Lexicon Fund
Evergreen Tax Free Trust
Keystone Global Resources and Development Fund
Keystone Growth and Income Fund (S-1)
Keystone Institutional Trust
Keystone International Fund Inc.
Keystone Omega Fund
Keystone Precious Metals Holdings, Inc.
Keystone Strategic Growth Fund (K-2)
Keystone High Income Bond Fund (B-4)
Keystone Capital Preservation and Income Fund
Keystone Institutional Adjustable Rate Fund
Keystone Strategic Income Fund
Keystone Fund for Total Return
Evergreen Latin America Fund
Keystone Global Opportunities Fund
Keystone State Tax Free Fund
Keystone State Tax Free Fund - Series II
--------------------------------------------------------------------
(Name of Persons Filing Proxy Statement)

Payment of filing fee (check the appropriate box):

[X] No fee required.

<PAGE>

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction
applies:

______________________________________________

(2) Aggregate number of securities to which transaction applies:

______________________________________________

(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):

______________________________________________

(4) Proposed maximum aggregate value of transaction:

______________________________________________

(5) Total fee paid:

______________________________________________

[ ] Fee paid previously with preliminary material

[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:_____________________

(2) Form, Schedule or Registration Statement No.:___________

(3) Filing Party:_______________________________

(4) Date Filed:_________________________________

<PAGE>

[Evergreen Funds Letterhead]

October 1997

Dear Shareholder:

I am writing to shareholders of the Evergreen Funds to inform you of a special
shareholder meeting to be held on December 15, 1997. Before that meeting I would
like your vote on the important issues affecting your fund as described in the
attached Proxy Statement.

The proxy statement includes proposals relating to the reorganization of each
fund as a series of a Delaware business trust and the adoption of standardized
investment restrictions for each of the funds. These proposals are intended to
provide consistency and increased flexibility throughout the fund family. More
specific information about all of the proposals is contained in the proxy
statement.

The Boards of Trustees have unanimously approved the proposals and recommend
that you vote FOR all of the proposals described within this document.

I realize that this proxy statement will take time to review, but your vote is
very important. Please familiarize yourself with the proposals presented and
sign and return your proxy card(s) in the enclosed postage-paid envelope today.
You may receive more than one proxy card if you own shares in more than one
fund. Please sign and return each card you receive.

If we do not receive your completed proxy card(s) after several weeks, you may
be contacted by our proxy solicitor, Shareholder Communications Corporation.
They will remind you to vote your shares or will record your vote over the phone
if you choose to vote in that manner. You may also call Shareholder
Communications Corporation directly at 800-733-8481 ext.404 and vote by phone.

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

Sincerely,

William M. Ennis
Managing Director
Evergreen Funds

<PAGE>

October 1997

IMPORTANT NEWS
FOR EVERGREEN SHAREHOLDERS

We encourage you to read the attached proxy statement in full; however, the
following questions and answers represent some typical concerns that
shareholders might have regarding this proxy.

Q: WHY IS EVERGREEN SENDING ME THIS PROXY?

Mutual funds are required to obtain shareholders' votes for certain types of
changes. As a shareholder, you have a right to vote on major policy decisions,
such as those included here.

Q: WHAT ARE THE ISSUES CONTAINED IN THIS PROXY?

There are several different proposals represented here and they are outlined on
the chart at the beginning of the proxy statement. Several of them apply to all
the funds and others are fund-specific.

Q: HOW WILL THE BROAD-BASED PROPOSALS AFFECT ME AS A FUND
SHAREHOLDER?

The reorganization of all the funds into a series of a Delaware business trust
will provide both consistency across the fund family and flexibility compared to
their previous forms of organization. In addition, Delaware law offers certain
advantages for business trusts and some important protections for shareholders.
See Part I of the proxy statement for more information.

Changing the fundamental investment objective to non-fundamental and changing
certain fundamental restrictions to non-fundamental gives each fund's investment
adviser greater flexibility to respond to market, regulatory or industry
changes. These reclassifications are not intended to materially alter any fund's
investment objective.

Adopting standardized investment restrictions across all funds will help provide
operational efficiencies and make it easier to monitor compliance with these
restrictions. Standardized investment restrictions will also make it easier for
the investment advisers to respond quickly to market, regulatory or industry
developments. These changes will not substantially affect the way the funds are
currently managed.

<PAGE>

Q: WHY IS EVERGREEN PROPOSING THESE CHANGES?

These proposals represent some final steps we are undertaking to unify the
Evergreen and Keystone fund families. Shareholders can anticipate the following
benefits:

A comprehensive fund family with a common risk/reward spectrum

The elimination of any overlap or gaps in fund offerings

Reduced confusion surrounding privileges associated with each fund,
specifically regarding exchangeability, letter of intent, and rights of
accumulation.

A user-friendly product line for both shareholders and investment
professionals

A single location for fund information, whether you're looking up funds
in the newspaper or locating a Morningstar report on the Internet.

Q: HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?

The Board members of all the funds recommend that you vote in favor or FOR all
of the proposals on the enclosed proxy card.

Q: WHOM DO I CALL FOR MORE INFORMATION OR TO PLACE MY VOTE?

Please call Shareholder Communications at 800-733-8481 ext. 404 for additional
information. You can vote one of three ways:

Use the enclosed proxy card to record your vote of either For, Against
or Abstain for each issue, then return the card in the postpaid envelope
provided.
or
Complete the enclosed proxy card and FAX to 800-733-1885.
or
Call 800-733-8481 ext. 404 and record your vote by telephone.

Q: WHY ARE MULTIPLE CARDS ENCLOSED?

If you own shares of more than one fund, you will receive a proxy card for each
fund you own. Please sign, date and return each proxy card you receive.

<PAGE>

EVERGREEN FUNDS
200 Berkeley Street
Boston, Massachusetts 02116

NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
To Be Held on December 15, 1997

NOTICE IS HEREBY GIVEN that a Joint Special Meeting (the "Meeting") of
Shareholders of each series (a "Fund") of Evergreen American Retirement Trust,
Evergreen Equity Trust, Evergreen Foundation Trust, Evergreen Growth and Income
Fund, Evergreen Income and Growth Fund, Evergreen Investment Trust (except
Evergreen Balanced Fund and Evergreen Florida Municipal Bond Fund series), The
Evergreen Lexicon Fund (except Evergreen Intermediate Term Bond Fund), The
Evergreen MicroCap Fund, Inc., The Evergreen Money Market Trust, The Evergreen
Municipal Trust, Evergreen Tax Free Trust, Evergreen Trust, Evergreen Capital
Preservation and Income Fund, Evergreen Fund for Total Return, Evergreen Latin
America Fund, Evergreen Global Opportunities Fund, Evergreen Global Resources
and Development Fund, Keystone Growth and Income Fund (S-1), Keystone High
Income Bond Fund (B-4), Evergreen Institutional Adjustable Rate Fund, Evergreen
Institutional Trust, Keystone International Fund Inc., Evergreen Omega Fund,
Keystone Precious Metals Holdings, Inc., Evergreen State Tax Free Fund (except
Evergreen Florida Tax Free Fund), Evergreen State Tax Free Fund-Series II,
Keystone Strategic Growth Fund (K-2) and Evergreen Strategic Income Fund will be
held at 200 Berkeley Street, 26th Floor, Boston, Massachusetts on Monday,
December 15, 1997 at 3:00 p.m., Eastern time, for the following purposes:

1. To approve an Agreement and Plan of Reorganization (the
"Plan") for each Fund providing for the reorganization of the
Fund as a corresponding series (a "Successor Fund") of one of
several Delaware business trusts, and in connection therewith,
the acquisition of all of the assets of the Fund in exchange
for shares of the Successor Fund, and the assumption by the
Successor Fund of all of the liabilities of the Fund. Each
Plan also provides for the distribution of such shares of the
Successor Fund to shareholders of the Fund in liquidation and
subsequent termination of the Fund.

2. To approve the proposed reclassification of each Fund's
investment objective from fundamental to nonfundamental.

3. To approve the adoption of standardized fundamental investment
restrictions by amending or reclassifying the current
fundamental investment restrictions of each Fund.

4. For Evergreen Institutional Tax-Exempt Money Market Fund,
Evergreen Pennsylvania Tax-Free Money Market Fund and
Evergreen Tax Exempt Money Market Fund only, to approve an
amendment to the Fund's investment objective to permit the
Fund to invest without limit in obligations subject to the
Federal alternative minimum tax.

<PAGE>

5. For Evergreen Latin America Fund only, to approve an amendment
to the investment objective of the Fund to permit the Fund to
invest without limit in securities of issuers located in Latin
America.

6. For Evergreen Latin America Fund only, to approve an amendment
to the Fund's investment restriction relating to industry
concentration to require the Fund to invest at least 25% of
its assets in issuers in the banking, construction, energy,
food and beverage, retail, telecommunications and utility
industries and in conglomerates.

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

The close of business on October 16, 1997 has been fixed as the record date for
the determination of shareholders of each Fund entitled to notice of and to vote
at the Meeting or any adjournments thereof. Shareholders of Keystone
International Fund Inc. should consult Exhibit B in the proxy materials
regarding appraisal rights.

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

By Order of the Boards

George O. Martinez
Secretary
October 24, 1997

The name of each Fund set forth in this notice reflects the name of
such Fund as of October 31, 1997.

<PAGE>

INSTRUCTIONS FOR EXECUTING PROXY CARD

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

1. Individual Accounts: Sign your name exactly as it appears on
the proxy card.

2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to a name shown on the
proxy card.

3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
name on the proxy card. For example:

<TABLE>
<CAPTION>
Registration Valid Signature

Corporate Accounts
<S> <C> <C>
(1) ABC Corp. (1) ABC Corp.
John Doe, Treasurer
(2) ABC Corp. (2) John Doe, Treasurer
c/o John Doe, Treasurer
(3) ABC Corp. Profit Sharing Plan (3) John Doe, Trustee

Trust Accounts
(1) ABC Trust (1) Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee (2) Jane B. Doe
u/t/d 12/28/78

Custodial or Estate Accounts
(1) John B. Smith, Cust. (1) John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Jr. (2) John B. Smith, Jr., Executor
</TABLE>

<PAGE>

EVERGREEN FUNDS
200 Berkeley Street
Boston, Massachusetts 02116
-------------------------------------------------

PROXY STATEMENT
Joint Special Meeting of Shareholders
December 15, 1997
------------------------------------------------

This proxy statement is furnished in connection with the solicitation
by the respective Board of each of the Evergreen investment companies listed in
the accompanying notice of meeting (each a "Registrant," and collectively the
"Registrants") for the joint special meeting of shareholders to be held on
Monday, December 15, 1997, at 200 Berkeley Street, 26th Floor, Boston,
Massachusetts at 3:00 p.m., and all adjournments thereof (the "Meeting").
Shareholders of record at the close of business on October 16, 1997 (the "Record
Date") are entitled to notice of, and to vote at, the Meeting. This proxy
statement and the accompanying notice of meeting and proxy card(s) are first
being mailed to shareholders on or about October 24, 1997.

The shares of the Registrants entitled to vote at the Meeting are
issued in one or more separate series representing one or more investment
portfolios, each of which is referred to herein as a "Fund." As used in this
proxy statement, each Registrant's board of directors or trustees is referred to
as a "Board," and the term "Trustee" includes each director of those Registrants
organized as corporations rather than trusts. In addition, the names of the
Registrants, the Funds and other related entities used herein reflect the names
in use as of October 31, 1997.

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<PAGE>

SUMMARY OF PROPOSALS REQUIRING SHAREHOLDER VOTE

Proposal 1. Reorganization of Each Fund

<TABLE>
<CAPTION>
Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
---------------------------- --------------------------------------------
Vote
----
<S> <C> <C>
Approval of an Agreement and All Funds
Plan of Reorganization (the
"Plan") for each Fund providing
for the reorganization of the
Fund as a corresponding series
(a "Successor Fund") of one of
several Delaware business
trusts, and in connection
therewith, the acquisition of all
of the assets of the Fund in
exchange for shares of the
Successor Fund, and the
assumption by the Successor
Fund of all of the liabilities of
the Fund. Each Plan also
provides for the distribution of
such shares of the Successor
Fund to shareholders of the
Fund in liquidation and
subsequent termination of the
Fund.
</TABLE>

Proposal 2. Reclassification of Investment Objective of Certain Funds from
Fundamental to Nonfundamental

<TABLE>
<CAPTION>
Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
---------------------------- --------------------------------------------
Vote
----
<S> <C> <C>
Reclassification of the All Funds except:
Investment Objective of Certain Evergreen Omega Fund
Funds from Fundamental to
Nonfundamental
</TABLE>

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<PAGE>

Proposal 3. Changes to Fundamental Investment Restrictions

<TABLE>
<CAPTION>
Standardization of Fundamental Investment Restrictions (Proposals 3A-3I)

Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
---------------------------- --------------------------------------------
Vote
----
<S> <C> <C>
3A. Diversification of Investments All Funds
3B. Concentration of Fund's Assets All Funds
in a Particular Industry
3C. Issuance of Senior Securities All Funds
3D. Borrowing All Funds except:
Evergreen American Retirement Fund
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
3E. Underwriting All Funds
3F. Investment in Real Estate All Funds
3G. Commodities All Funds
3H. Lending All Funds
3I. Investment in Federally Tax Evergreen Tax Strategic Foundation Fund
Exempt Securities Evergreen Tax Exempt Money Market Fund
Evergreen Institutional Tax-Exempt Money Market Fund
Evergreen Pennsylvania Tax-Free Money Market Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen New Jersey Tax-Free Income Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen High Grade Tax Free Fund
Evergreen State Tax Free Fund: Massachusetts Tax Free Fund, New York Tax
Free Fund and Pennsylvania Tax Free Fund
Evergreen State Tax Free Fund - Series II: California Tax Free Fund and
Missouri Tax Free Fund

-4-

<PAGE>

<CAPTION>
(Proposal 3, continued)

Reclassification of Other Fundamental Restrictions of Certain Funds as
Nonfundamental (Proposal 3J)

Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
---------------------------- --------------------------------------------
Vote
----
<S> <C> <C>
3J. (See current fundamental All Funds except:
restrictions shown by an "R" Evergreen Institutional Money Market Fund
in Exhibit D) Evergreen Institutional Treasury Money Market
Fund
Evergreen Institutional Trust: Institutional Small
Capitalization Growth Fund
</TABLE>

Proposal 4. Amendment to Investment Objectives of Evergreen Institutional
Tax-Exempt Money Market Fund, Evergreen Pennsylvania Tax-Free
Money Market Fund and Evergreen Tax Exempt Money Market
Fund

<TABLE>
<CAPTION>
Matter Requiring Shareholder Funds For Which Shareholder Vote is Required
---------------------------- --------------------------------------------
Vote
----
<S> <C>
To permit each Fund to invest Evergreen Institutional Tax-Exempt Money Market
without limit in obligations Fund
subject to the Federal Evergreen Pennsylvania Tax-Free Money Market Fund
alternative minimum tax Evergreen Tax Exempt Money Market Fund
</TABLE>

Proposal 5. Amendment to Investment Objective of Evergreen Latin America
Fund

<TABLE>
<CAPTION>
Matter Requiring Shareholder Fund For Which Shareholder Vote is Required
---------------------------- -------------------------------------------
Vote
----
<S> <C>
To permit Fund to invest Evergreen Latin America Fund
without limit in securities of
issuers located in Latin
America, and to provide that
Fund's primary objective is
long term growth of capital
through investments in equity
and fixed income securities of
issuers located in Latin
America (Mexico and countries
in South and Central America)
</TABLE>

-5-

<PAGE>

Proposal 6. Amendment to Fundamental Restriction of Evergreen Latin America
Fund Regarding Concentration

<TABLE>
<CAPTION>
Matter Requiring Shareholder Fund For Which Shareholder Vote is Required
---------------------------- -------------------------------------------
Vote
----
<S> <C>
To provide that Fund will not Evergreen Latin America Fund
invest more than 25 percent of
its total assets, taken at
market value, in the securities
of issuers primarily engaged in
any particular industry (other
than securities issued or
guaranteed by the U.S.
government, or its agencies or
instrumentalities) and except
for investments in the banking,
construction, energy, food and
beverage, retail,
telecommunications and utility
industries, and in
conglomerates
</TABLE>

-6-

<PAGE>

PART I

PROPOSAL 1 - THE PROPOSED REORGANIZATIONS
OF THE FUNDS AS SERIES OF DELAWARE BUSINESS TRUSTS

At the Meeting, the shareholders of each Fund will be asked to approve
an Agreement and Plan of Reorganization (the "Agreement"), which provides for
the reorganization (the "Reorganization") of each Fund into a corresponding
series (each a "Successor Fund," and collectively the "Successor Funds") of one
of several Delaware business trusts (each a "Successor Trust"). The
Reorganizations are part of an overall restructuring of the Evergreen Funds,
each of which is advised by First Union National Bank or one of its affiliates.
The restructuring involves, among other components, the Reorganizations, the
reclassification of investment objectives from "fundamental" (i.e., changeable
by shareholder vote only) to "nonfundamental" (i.e., changeable by vote of the
Trustees), the adoption of standardized fundamental investment restrictions, the
reclassification of certain investment restrictions from fundamental to
nonfundamental, and the amendment of fundamental investment objectives and
policies of certain Funds. The reclassification of investment objectives, the
adoption of standardized investment restrictions and the reclassification of
certain investment restrictions are discussed in Part II of this proxy
statement. The amendment of fundamental investment objectives and policies of
certain Funds are discussed in Part III of this proxy statement. The
restructuring also includes several consolidations to combine certain other
Evergreen investment companies with substantially similar investment objectives
and policies. The Funds are not a party to such proposed consolidations, and the
votes of shareholders of such other funds are not being solicited by this proxy
statement. The intended result of the overall restructuring is to produce a more
integrated mutual fund complex with the potential for greater operational
efficiencies.

Selection of Delaware Business Trust Form of Organization

On September 16 and 17, 1997, the Board of each Registrant unanimously
approved a proposal by each Fund's investment adviser to reorganize the Funds as
separate series of various Delaware business trusts. Each Registrant is
currently organized as a Massachusetts business trust, a Pennsylvania common law
trust, or a Delaware, Maryland or Massachusetts corporation. The Funds are
proposed to be structured as business trusts, as opposed to corporations, due to
the inherent flexibility of the business trust form of organization. The
principal reason for reorganizing the Funds in Delaware is the availability of
certain advantages of Delaware law with respect to business trusts. The Delaware
Business Trust Act (the "Delaware Act") has been specifically drafted to
accommodate the unique governance needs of investment companies and provides
that its policy is to give maximum freedom of contract to the trust instrument
of a Delaware business trust.

Under the Delaware Act, a shareholder of a Delaware business trust is
entitled to the same limitation of personal liability extended to stockholders
of Delaware corporations. No similar statutory or other authority limiting
business trust shareholder liability exists in Massachusetts, Pennsylvania or in
any other state. As a result, Delaware law is generally considered to afford
additional protection to shareholders of Massachusetts or Pennsylvania trusts
against potential shareholder liability. See "Certain Comparative Information
About the Registrants and the Successor Trusts - Shareholder Liability."
Similarly, Delaware law provides that, should a Delaware trust issue multiple
series of

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<PAGE>

shares, each series shall not be liable for the debts of another series, another
potential, though remote, risk in the case of other business trusts.

Delaware has obtained a favorable national reputation for its business
laws and business environment. The Delaware courts, which may be called upon to
interpret the Delaware Act, are among the nation's most highly respected and
have an expertise in corporate matters which in part grew out of the fact that
Delaware legal issues are concentrated in the Court of Chancery where there are
no juries and where judges issue written opinions explaining their decisions.
Thus, there is a well established body of precedent which may be relevant in
deciding issues pertaining to a Delaware business trust.

There are other advantages that may be afforded by a Delaware business
trust. Under Delaware law, the Successor Funds will have the flexibility to
respond to future business contingencies. For example, the Trustees will have
the power to incorporate a Successor Trust, to merge or consolidate it with
another entity, to cause each series to become a separate trust, and to change
the Successor Trust's domicile without a shareholder vote. This flexibility
could help to assure that the Successor Trust operates under the most advanced
form of organization and could reduce the expense and frequency of future
shareholder meetings for non-investment related issues.

Description of the Reorganizations

The detailed terms and conditions of each Reorganization are contained
in a Plan of Reorganization applicable to each Fund. The information in this
proxy statement with respect to each Plan of Reorganization is qualified in its
entirety by reference to, and made subject to, the complete text of the form of
the Plan of Reorganization, a copy of which is attached to this proxy statement
as Exhibit A.

It is anticipated that each of the Funds will participate in the
Reorganization and that the Reorganization, if approved by the shareholders of
each Fund, will be effected contemporaneously as to each Fund. If shareholders
of one or more of the Funds do not approve the Reorganization, that Fund will
continue as currently organized, but each other Fund that has received
shareholder approval may nevertheless implement the Reorganization.

If the shareholders of a Fund approve the Reorganization and the
conditions of the Reorganization are satisfied, all of the assets and
liabilities of that Fund will be transferred to the corresponding Successor Fund
and each shareholder of the Fund will receive shares of the corresponding
Successor Fund (the "New Shares"). The New Shares of each Successor Fund will be
issued to the corresponding Fund in consideration of the transfer to the
Successor Fund by the corresponding Fund of all assets and liabilities of the
corresponding Fund. Immediately thereafter, each Fund will liquidate and
distribute the New Shares to its shareholders. New Shares will be issued on a
class by class basis, so that shareholders will receive New Shares of the same
class as the class of shares issued by the Fund. As a result of the
Reorganization, each shareholder will receive, in exchange for his or her Fund
shares, New Shares with a total net asset value equal to the total net asset
value of the shareholder's Fund shares immediately prior to the consummation of
the Reorganization.

It will not be necessary for holders of share certificates of a Fund to
exchange their certificates for new certificates following consummation of the
Reorganization.

-8-

<PAGE>

Certificates for shares of a Fund issued prior to the Reorganization will
represent outstanding shares of the corresponding Successor Fund after the
Reorganization. Shareholders of a Fund who have not been issued certificates and
whose shares are held in an open account will automatically have those shares
designated as shares of the corresponding Successor Fund.

If approved by shareholders of a Fund, it is currently contemplated
that the Reorganization will become effective as to that Fund on or about the
opening of business on December 22, 1997. However, a Reorganization may become
effective at another time and date should the Meeting be adjourned to a later
date or should any other condition to the Reorganization not be satisfied at
that time. Notwithstanding prior shareholder approval, the Plan of
Reorganization may be terminated as to any Fund at any time prior to its
implementation by the mutual agreement of the parties thereto.

The Successor Trusts

Each Successor Trust was established pursuant to a substantially
identical Agreement and Declaration of Trust (each a "Master Trust Agreement")
under the laws of the State of Delaware. Each Successor Trust is organized as a
"series company" as that term is used in Rule 18f-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"). Each Successor Trust consists of
Successor Funds of the same asset class.

The Board of Trustees of each Successor Trust is comprised of some,
but not all, of the individuals who currently serve as trustees of the Trusts.
Accordingly, different Trustees will have ultimate responsibility for the
oversight and management of the Successor Funds subsequent to the
Reorganizations. The Trustees of each Successor Trust are Laurence B. Ashkin,
Charles A. Austin III, K. Dun Gifford, James S. Howell, Leroy Keith, Jr., Gerald
M. McDonnell, Thomas L. McVerry, David M. Richardson, Russell A. Salton III,
Michael S. Scofield, Richard J. Shima, and William W. Pettit.

The Successor Trust is authorized to issue shares divisible into an
indefinite number of different series. The interests of investors in the various
series of the Successor Trust will be separate and distinct. All consideration
received for the sales of shares of a particular series of the Successor Trust,
all assets in which such consideration is invested, and all income, earnings and
profits derived from such investments, will be allocated to that series. The
Master Trust Agreement of each Successor Trust provides that the Board of
Trustees of the Successor Trust may: (i) establish one or more additional series
thereof; (ii) issue the shares of any series in any number of classes; (iii)
issue shares of a series to different groups of investors; and (iv) convert a
series into a pooled fund structure, without any further action by the
shareholders of the Successor Trust. The Successor Trusts will not engage in any
activities prior to the Reorganization with respect to the Successor Funds,
except as may be required in connection with effecting the Reorganization.

The Master Trust Agreement of each Successor Trust provides for
shareholder voting only for the following matters: (a) the election or removal
of Trustees as provided in the Master Trust Agreement; and (b) with respect to
such additional matters relating to the Successor Trust as may be required by
(i) applicable law, (ii) any by-laws adopted by the Trustees, or (iii) as the
Trustees may consider necessary or desirable. Certain of

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<PAGE>

the foregoing matters will involve separate votes of one or more of the affected
series (or affected classes of a series) of the Successor Trust, while others
will require a vote of the Successor Trust's shareholders as a whole.

All shares of all series vote together as a single class for the
election or removal of Trustees of the Successor Trust with each having one vote
for each dollar of net asset value applicable to each share, regardless of
series. See "Certain Comparative Information About the Registrants and the
Successor Trusts - Voting Rights" below.

As required by the 1940 Act, shareholders of each series of the
Successor Trusts, voting separately, will have the power to vote at special
meetings for, among other things, changes in fundamental investment restrictions
applicable to such series, approval of any new or amended investment advisory
agreement, approval of any new or amended Rule 12b-1 plan and certain other
matters that affect the shareholders of that series. If, at any time, less than
a majority of the Trustees holding office has been elected by the shareholders,
the Trustees then in office will call a shareholders' meeting for the purpose of
electing Trustees of the Successor Trust.

Certain Comparative Information About the Registrants and the Successor Trusts

As a Delaware business trust, each Successor Trust's operations
will be governed by the Master Trust Agreement and applicable Delaware law,
rather than by the applicable trust document of each Registrant organized as a
trust, or articles of incorporation of each Registrant organized as a
corporation, and the law of the state of its organization. For ease of
reference, the organizational document of each Registrant is sometimes referred
to as a "Charter," regardless of its form of organization. As discussed below,
certain of the differences between the Registrants and the Successor Trusts
derive from provisions of the Successor Trust's Master Trust Agreement and
By-laws. Shareholders entitled to vote at the Meeting may obtain a copy of a
Successor Trust's Master Trust Agreement and By-laws, without charge, upon
written request to the Funds at the address on the cover page of this proxy
statement.

Capitalization. The beneficial interests in each Successor Trust
are issued as transferable shares of beneficial interest, $.001 par value per
share. The Master Trust Agreement permits the Trustees to issue an unlimited
number of shares and to divide such shares into an unlimited number of series or
classes thereof, all without shareholder approval. Each share of a Successor
Trust series represents an equal proportionate interest in the assets and
liabilities belonging to that series (or class) as declared by the Board of
Trustees. Each Registrant organized as a trust is authorized to divide its
shares into an unlimited number of series, and the Trustees of such trust are
empowered to establish other classes. Each Registrant organized as a trust has
the authority to issue an unlimited number of transferable shares of beneficial
interest. The ownership in the Registrants organized as corporations is
represented by a fixed number of shares of common stock.

Amendments to Governing Instrument. Generally, the provisions of
the Master Trust Agreement of a Successor Trust may be amended without
shareholder approval so long as such amendment is not in contravention of
applicable law, by an instrument in writing signed by a majority of the then
Trustees of the Successor Trust (or by an officer of the Successor Trust
pursuant to the vote of a majority of such Trustees). Under the Master Trust
Agreement of the Successor Trust, except as provided by applicable law, a

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quorum is 25 percent of the shares entitled to vote. The quorum requirements of
the Registrants range from 25 to 51 percent of the shares entitled to vote. The
affirmative vote of a majority of the shares entitled to be cast is generally
required to amend the Charter applicable to each Registrant (unless otherwise
specifically required by the applicable governing documents or other law,
including the 1940 Act), except that some Charters of the Registrants organized
as business trusts may be amended by the Trustees of the Trust without the vote
of shareholders in certain limited circumstances. For a Registrant organized as
a corporation, a Charter amendment generally also requires adoption of a
resolution approving the amendment by the Board of Directors in addition to the
required shareholder vote.

Voting Rights. The Charter applicable to each Registrant that is a
business trust generally provides that a special meeting of shareholders for the
purpose of considering the removal of a person serving as a Trustee of the Trust
shall be called upon the written request of shareholders representing 10 percent
of the outstanding shares. The By-laws of each Successor Trust provide that, to
the extent required by the 1940 Act, meetings of the shareholders for the
purpose of voting on the removal of any Trustee shall be called promptly by the
Trustees upon the written request of Shareholders holding at least 10 percent of
the outstanding shares of the Successor Trust entitled to vote. Like each
Registrant other than Keystone International Fund Inc. and Keystone Precious
Metals Holdings, Inc., a Successor Trust will not be required to hold annual
meetings of its shareholders and, at this time, does not intend to do so.
Keystone International Fund, Inc. and Keystone Precious Metals Holdings, Inc.
are currently required to hold such meetings. The record date for determining
shareholders who are entitled to notice of, and to vote at, a shareholders'
meeting is either subject to the discretion of the Board or may not be more than
60 days preceding the scheduled meeting date under the applicable governing
documents of each Registrant. Under the By-laws of each Successor Trust the
record date may not be more than 90 days nor less than 10 days preceding the
scheduled meeting date.

The Master Trust Agreement provides for shareholder voting in
certain circumstances. See "The Successor Trusts" above. Shareholders of a
Registrant organized as a business trust generally have the power to vote with
respect to the election of Trustees, the removal of Trustees, the approval or
termination of any investment advisory or management agreement, certain
amendments to the Declaration of Trust, whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a class
action on behalf of the Trust to the same extent as shareholders of a
corporation, and with respect to certain other actions, such as a transfer of
all or substantially all of the Trust's assets or the dissolution of the Trust.
Shareholders of a Registrant organized as a corporation have the power to vote
only with respect to those matters provided by applicable corporate law.

A Trustee of the Successor Trust may be removed at any meeting of
shareholders by a vote of at least two-thirds of the outstanding shares of the
Successor Trust. The Charter of certain Registrants organized as a business
trust permits removal of a Trustee with cause by action of at least two-thirds
of the other Trustees, and in general the Charter of Registrants organized as
corporations permits removal of a Trustee by vote of two-thirds of outstanding
shares.

The Master Trust Agreement of each Successor Trust provides that a
majority of the shares voted at a meeting at which a quorum is present shall
decide any questions and that a plurality shall elect a Trustee, except when a
different vote is required or

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permitted by any provision of the 1940 Act or other applicable law or by the
Master Trust Agreement or the By-laws of the Successor Trust. Similar
requirements apply to each Registrant. Shareholders of the Successor Trusts are
not required to approve the termination or reorganization of the Successor
Trust. Unlike the Master Trust Agreement of the Successor Trusts, the Charter
applicable to certain Registrants requires that any termination or
reorganization of a Fund must be approved by the vote of a majority of the
outstanding voting shares of such Fund.

Under each Master Trust Agreement, each share of a Successor Fund
is entitled to one vote for each dollar of net asset value applicable to each
share. Under the current voting provisions governing the Funds that are
organized in multiple series, each share of beneficial interest or stock is
entitled to one vote, regardless of the specific Fund it represents. Under a
Fund's Charter or applicable law, a matter affecting only one Fund is voted on
only by that Fund. Generally, the Charters further provide that, where required
by law or applicable regulation, certain matters will be voted on separately by
each Fund. In all other matters, all Funds vote together as a group. Over time,
the net asset values of such Funds have changed in relation to one another and
are expected to continue to do so in the future. Because of the divergence in
net asset values, a given dollar investment in a Fund with a lower net asset
value will purchase more shares, and under the Registrant's current voting
provisions, have more votes, than the same investment in a Fund with a higher
net asset value. Under the Master Trust Agreement, voting power is related to
the dollar value of the shareholders' investments rather than to the number of
shares held.

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

Shareholders of a Registrant organized as a Massachusetts business
trust or Pennsylvania common law trust may, under certain circumstances, be held
personally liable under the applicable state law for the obligations of the
trust. However, the trust agreement, under which each Fund that is organized as
a Massachusetts or Pennsylvania business trust is established contains an
express disclaimer of shareholder liability and requires that notice of such
disclaimer be given in each agreement entered into or executed by the trust or
the trustees of the trust. Each trust agreement also provides for
indemnification out of the property of the trust. A stockholder in a corporation
such as

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The Evergreen MicroCap Fund, Inc., Keystone International Fund Inc. or Keystone
Precious Metals Holdings, Inc. does not have this potential liability.

Liability and Indemnification of Trustees and Directors. Under the
Master Trust Agreement of each Successor Trust, a Trustee is liable to a
Successor Trust and its shareholders only for such Trustee's own willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the office of Trustee or the discharge of the duties
of a Trustee. Trustees and officers of a Successor Trust are entitled to be
indemnified for the expenses of litigation against them except with respect to
any matter as to which it has been determined that such person (i) did not act
in good faith in the reasonable belief that his or her action was in or not
opposed to the best interests of the Successor Trust; or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of his or
her duties; and (iii) for a criminal proceeding, had reasonable cause to believe
that his or her conduct was unlawful, such determination to be based upon the
outcome of a court action or administrative proceeding or a reasonable
determination, following a review of the facts, by (a) a vote of a majority of
those Trustees who are neither "interested persons" within the meaning of the
1940 Act nor parties to the proceeding, or (b) an independent legal counsel in a
written opinion. A Successor Trust may also advance money to any Trustee or
officer involved in a proceeding discussed above provided that the Trustee or
officer undertakes to repay the Successor Trust if his or her conduct is later
determined to preclude indemnification and certain other conditions are met. It
is currently the view of the staff of the Securities and Exchange Commission
("SEC") that to the extent that any provisions such as those described above are
inconsistent with the 1940 Act, the provisions of the 1940 Act may preempt the
foregoing provisions.

The Charter of each Registrant generally provides that its Trustees
shall not be liable to the Registrant or its shareholders, except for the
Trustees' acts of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duties involved in the conduct of their office. The Charters
generally also provide that Trustees and officers of the Trust will be
indemnified against liability and expenses of litigation against them unless
their conduct constituted willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of their office.

Right of Inspection. The By-laws of each Registrant generally
provide that no shareholder shall have the right to inspect the books of account
and stock ledger of the Registrant except as conferred by law, the By-laws, or
as authorized by the Board of the Registrant or a resolution of shareholders.
The By-laws of the Successor Trust provide that no shareholder of the Successor
Trust shall have any right to inspect any account or book or document of the
Successor Trust except as conferred by law or otherwise by the Trustees or by
resolution of the shareholders.

The foregoing is only a summary of certain of the differences
between the governing instruments and laws generally applicable to a Registrant
and Successor Trust.
It is not a complete list of differences. Shareholders should refer directly to
the provisions of the governing instruments and applicable law for more complete
information.

Current and Successor Advisory Agreements

As a result of the Reorganizations, each Successor Fund will be
subject to a new investment advisory agreement (the "Successor Advisory
Agreement") between the

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Successor Trust on behalf of the Successor Fund and the current investment
adviser of the corresponding Fund. Since, with certain exceptions, each Fund
currently receives substantially identical services, each Successor Advisory
Agreement has been standardized with the fee schedules being the only variant.
The current investment advisory agreement of each Fund (the "Current Advisory
Agreement") is similar in many respects to the Successor Advisory Agreement.
Except as noted below, the Successor Advisory Agreement contains the material
terms of the Current Advisory Agreement. Most importantly, the rate at which
fees are required to be paid by each Fund for investment advisory services, as a
percentage of average daily net assets, will remain the same.

The following summarizes certain aspects of the Current Advisory
Agreement and the Successor Advisory Agreement of each Fund.

Brokerage Transactions. The Successor Advisory Agreement sets forth
specific terms as to brokerage transactions and the investment adviser's use of
broker-dealers. For example, the investment adviser will be obligated to use its
best efforts to seek to execute portfolio transactions at prices which, under
the circumstances, result in total costs or proceeds being most favorable to the
Successor Funds. In assessing the best overall terms available for any
transaction, the investment adviser will consider all factors it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer,
research services provided and the reasonableness of the commission, if any,
both for the specific transaction and on a continuing basis. The Successor
Advisory Agreement also specifically states that the investment adviser is
entitled to rely on the provisions of Section 28(e) of the Securities Exchange
Act of 1934, as amended (the "1934 Act"), which permits an investment adviser to
have its client, including an investment company, pay more than the lowest
available commission for executing a securities trade in return for research
services and products. The Current Advisory Agreement of each of the Evergreen
Funds (which term includes each Fund for which the Capital Management Group of
First Union National Bank or Evergreen Investment Management Corp. serves as
investment adviser), other than the Funds that are series of Evergreen
Investment Trust, does not specify the standards to be used in the selection of
brokers or refer to the provisions of Section 28(e) of the 1934 Act.

Expenses. Each Successor Advisory Agreement and the Current
Advisory Agreement for each Evergreen Fund that was formerly a Keystone Fund
(which term includes each Fund for which Keystone Investment Management Company
served as investment adviser), except Keystone International Fund Inc., provides
that the investment adviser is required to pay or reimburse the Successor Fund
for (i) the compensation (if any) of the Trustees who are affiliated with the
investment adviser or with its affiliates, or with any adviser retained by the
investment adviser, and of all officers of the Successor Fund as such, and (ii)
all expenses of the investment adviser incurred in connection with its services
thereunder. The substance of the Current Advisory Agreement of each Evergreen
Fund and Keystone International Fund Inc. is the same, except that affiliated
Trustees are not required to serve at the investment adviser's cost.

Liability and Indemnification. Each Successor Advisory Agreement
and the Current Advisory Agreement for each Evergreen Fund that was formerly a
Keystone Fund, except Keystone International Fund Inc. and Keystone Precious
Metals Holdings, Inc., and for the Funds that are series of Evergreen Investment
Trust provide that the

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investment adviser shall have no liability in connection with rendering services
thereunder, other than liabilities resulting from the adviser's willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties.
The Current Advisory Agreements for Keystone International Fund Inc., Keystone
Precious Metals Holdings, Inc. and each Evergreen Fund other than the Funds that
are series of Evergreen Investment Trust either omit liability standards or have
different provisions.

Indemnification. The Current Advisory Agreement for each Evergreen
Fund that was formerly a Keystone Fund, except Keystone International Fund Inc.
and Keystone Precious Metals Holdings, Inc., and for the Funds that are series
of Evergreen Investment Trust provides that each such Fund will indemnify the
investment adviser against liabilities, losses and expenses incurred in
connection with the performance of such Agreement, except those stated above and
liabilities involving a breach of the investment adviser's fiduciary duties in
respect of the receipt of compensation for its services. The Current Advisory
Agreements for Keystone International Fund Inc., Keystone Precious Metals
Holdings, Inc. and each Evergreen Fund except the Funds that are series of
Evergreen Investment Trust do not contain provisions indemnifying the investment
adviser. The Successor Advisory Agreement will reflect the current
indemnification provisions of each Fund.

Amendments. The Current Advisory Agreement of Keystone
International Fund Inc., of Keystone Precious Metals Holdings, Inc. and of the
Funds that are series of Evergreen Investment Trust provides that all changes
(rather than only substantial changes) must be approved by shareholders. Each
other Current Advisory Agreement and each Successor Advisory Agreement,
including the Successor Advisory Agreement applicable to Keystone International
Fund Inc., Keystone Precious Metals Holdings, Inc. and the Funds that are series
of Evergreen Investment Trust, provides that only amendments of substance
require shareholder approval.

Current and Successor Administration Agreements

Evergreen Investment Services, Inc., located at 200 Berkeley
Street, Boston, Massachusetts 02116, serves as administrator to the Funds. It is
anticipated that no material change will occur in the Funds' administrative fees
or arrangements as a result of the Reorganizations.

Current and Successor Distribution Arrangements

Evergreen Distributor, Inc., located at 125 West 55th Street, New
York, New York 10019, serves as principal underwriter for the Funds. It is
anticipated that no material change will occur in the Funds' distribution
agreement or the Funds' Rule 12b-1 plans as a result of the Reorganizations.

Names

The name of each Successor Fund will be the same as that of the
corresponding Fund at the time the Reorganization becomes effective, except for
the following name changes which will become effective on January 9, 1998.

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Fund Name Successor Fund Name

Keystone International Fund Inc. Evergreen International Growth Fund
Keystone Precious Metal Holdings, Inc. Evergreen Precious Metals Fund
Keystone Growth and Income Fund (S-1) Evergreen Blue Chip Fund
Keystone High Income Bond Fund (B-4) Evergreen High Yield Bond Fund
Keystone Strategic Growth Fund (K-2) Evergreen Strategic Growth Fund

Certain Votes to be Taken Prior to the Reorganizations

Prior to the Reorganizations, Evergreen Distributor, Inc., the
principal underwriter of each Fund and a subsidiary of the BISYS Group, Inc.,
will own a single outstanding share of the corresponding Successor Fund. The
purpose of the issuance by each Fund of this nominal share prior to the
effective time of the Reorganization is to enable the Successor Trust to
eliminate the need to incur the additional expense by a Successor Trust of
having to hold a separate meeting of shareholders of the Successor Funds in
order to comply with certain shareholder approval requirements of the 1940 Act.

Investment Objectives and Restrictions

Each Successor Fund will have the same investment objective(s) as
the corresponding Fund except that, if Proposal 2 in this proxy statement is
approved by shareholders, the Successor Fund's investment objective(s) will not
be considered "fundamental". As a result, a Successor Fund's investment
objective(s) could be changed by its Trustees, without shareholder approval,
after prior notice to shareholders. The investment objective(s) of certain Funds
are proposed to be amended as described in Part III of this proxy statement. The
investment restrictions of each Fund are proposed to be changed as described in
Part II below.

Except as described in Parts II and III below, the investment
advisers do not presently intend to change in any material way for the Successor
Funds the investment strategy or operations employed for the Funds.

Federal Income Tax Consequences

It is anticipated that the transactions contemplated by the Plan of
Reorganization will be tax-free. Sullivan & Worcester LLP, counsel to the Funds,
has informed each Board that if substantially all of the assets and liabilities
of the Funds are transferred to the corresponding Successor Funds, it will issue
an opinion that a Reorganization will not give rise to the recognition of
income, gain or loss to the Fund, the Successor Fund, or shareholders of the
Fund for federal income tax purposes pursuant to sections 361, 1032 (a) and 354
(a) (1), respectively, of the Internal Revenue Code of 1986, as amended. Such
opinion will be based upon customary representations of the Registrant and the
Successor Trust and certain customary assumptions. The receipt of such an
opinion is a condition to the consummation of each Reorganization.

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A shareholder's adjusted basis for tax purposes in shares of the
Successor Fund after the Reorganization will be the same as the shareholder's
adjusted basis for tax purposes in the shares of the Fund immediately before the
Reorganization. The holding period for the shares of the Successor Fund received
in the Reorganization will include a shareholder's holding period for shares of
the Fund (provided that the shares of the Fund were held as capital assets on
the date of the Reorganization). Shareholders should consult their own tax
advisers with respect to the state and local tax consequences of the proposed
transaction.

Reorganization Expenses

The expenses of the Reorganization will be borne by the Funds.

Appraisal Rights

Neither the applicable Charter nor Massachusetts or Pennsylvania
law grants shareholders of any Registrant organized as a Massachusetts business
trust or Pennsylvania common law trust any rights in the nature of appraisal or
dissenters' rights with respect to any action upon which such shareholders may
be entitled to vote. In addition, neither the applicable Charter nor Delaware or
Maryland law grants shareholders of Keystone Precious Metals Holdings, Inc. or
The Evergreen MicroCap Fund, Inc., respectively, any such rights. However, the
customary right of mutual fund shareholders to redeem their shares is not
affected by the proposed Reorganization.

Shareholders of Keystone International Fund Inc. who do not vote in
favor of the Reorganization have the right under Massachusetts law to receive
payment for their shares from the Fund and an appraisal thereof upon compliance
with the procedures specified in chapter 156B Section 86 of the Massachusetts
Business Corporation Law. A copy of the relevant provisions of the Massachusetts
Business Corporation Law is set forth as Exhibit B to this proxy statement. A
vote by a shareholder of Keystone International Fund Inc. against the
Reorganization or the execution of a proxy directing such a vote will not
satisfy the requirements of the provisions of Massachusetts law. A failure to
vote against the Reorganization will not constitute a waiver of such rights.

For federal income tax purposes dissenting shareholders obtaining
payment for their shares in accordance with the above-referenced provisions will
recognize gain or loss measured by the difference between any such payment and
the tax basis for their shares. Shareholders of Keystone International Fund Inc.
are advised to consult their personal tax advisers as to the tax consequences of
dissenting.

Shareholders of Keystone International Fund Inc. will continue to
be able to redeem their shares at their current net asset value until the
effective date of the Reorganization. Redemption requests received by Keystone
International Fund Inc. thereafter will be treated as requests for the
redemption of Shares of the Successor Fund received by the shareholder in the
Reorganization.

Recommendation of Trustees

The Board of each Registrant requested, received and considered
such information as it deemed reasonably necessary to enable the members of such
Board to evaluate the Plan of Reorganization. The Boards reviewed the potential
benefits

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associated with the proposed Reorganization and adoption of the proposed Master
Trust Agreement. In this regard, the Trustees considered: (i) the potential
disadvantages which apply to operating the Funds under their current form of
organization; (ii) the advantages which apply to operating the Successor Funds
as series of Delaware business trusts; (iii) the advantages of adopting the new
Master Trust Agreements under Delaware law; (iv) the expected federal tax
consequences to the Funds, the Successor Funds and shareholders resulting from
the proposed Reorganization, and the likelihood that no recognition of income,
gain or loss for federal shareholders will occur as a result thereof.

At the meetings of the Boards called for the purpose on September
16 and 17, 1997, the Board of each Registrant voted to approve the proposed Plan
of Reorganization and determined that participation in the Reorganization is in
the best interests of each Fund and that the interests of existing shareholders
will not be diluted as a result of the Reorganization.

Required Vote

The affirmative vote of the holders of a majority of the shares of
Evergreen Fund and Evergreen Aggressive Growth Fund present and entitled to vote
on the Proposal at the Meeting is required to approve the Reorganization.

The affirmative vote of the holders of a majority of the shares of
Evergreen Intermediate Term Government Securities Fund voted on the Proposal at
the Meeting is required to approve the Reorganization.

The affirmative vote of the holders of a majority of the issued and
outstanding shares of the following Funds is required to approve the
Reorganization. Evergreen Income and Growth Fund, Evergreen Growth and Income
Fund, Evergreen Money Market Fund, Evergreen Institutional Money Market Fund,
Evergreen Institutional Treasury Money Market Fund, Evergreen American
Retirement Fund, Evergreen Small Cap Equity Income Fund, Evergreen Tax Exempt
Money Market Fund, Evergreen Short-Intermediate Municipal Fund, Evergreen
Florida High Income Municipal Bond Fund, Evergreen Institutional Tax Exempt
Money Market Fund, Evergreen Global Real Estate Equity Fund, Evergreen U.S. Real
Estate Equity Fund, Evergreen Global Leaders Fund, Evergreen Foundation Fund,
Evergreen Tax Strategic Foundation Fund, Evergreen Emerging Markets Growth Fund,
Evergreen International Equity Fund, Evergreen Value Fund, Evergreen Utility
Fund, Evergreen Short-Intermediate Bond Fund, Evergreen U.S. Government Fund,
Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina Municipal Bond
Fund, Evergreen South Carolina Municipal Bond Fund, Evergreen Virginia Municipal
Bond Fund, Evergreen High Grade Tax Free Fund, Evergreen Treasury Money Market
Fund, Evergreen Latin America Fund, Evergreen Capital Preservation and Income
Fund, Evergreen Fund for Total Return, Evergreen Global Opportunities Fund,
Evergreen Natural Resources Fund, Evergreen Omega Fund, Evergreen Massachusetts
Tax Free Fund, Evergreen Pennsylvania Tax Free Fund, Evergreen New York Tax Free
Fund, Evergreen California Tax Free Fund, Evergreen Missouri Tax Free Fund,
Evergreen Strategic Income Fund, Keystone High Income Bond Fund (B-4), Keystone
Strategic Growth Fund (K-2), Keystone Growth and Income Fund (S-1), Evergreen
Institutional Adjustable Rate Fund, Evergreen Institutional Trust, Keystone
International Fund Inc., and Keystone Precious Metals Holdings, Inc.

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The affirmative vote of the holders of two-thirds of the issued and
outstanding shares of The Evergreen MicroCap Fund, Inc., Evergreen Pennsylvania
Tax Free Money Market Fund and Evergreen New Jersey Tax Free Income Fund is
required to approve the Reorganization.

The Trustees recommend that shareholders vote to approve Proposal
1.

PART II

PROPOSAL 2 - RECLASSIFICATION AS NONFUNDAMENTAL OF THE INVESTMENT
OBJECTIVE OF THOSE FUNDS WHOSE INVESTMENT OBJECTIVE IS CURRENTLY
CLASSIFIED AS FUNDAMENTAL

Reclassification of Fundamental Investment Objectives as Nonfundamental

Under the 1940 Act, a Fund's investment objective is not required
to be classified as "fundamental." A fundamental investment objective may be
changed only by vote of a Fund's shareholders. In order to provide each Fund's
investment adviser with enhanced investment management flexibility to respond to
market, industry or regulatory changes, the Trustees of the Funds (other than
Evergreen Omega Fund) have approved the reclassification from fundamental to
nonfundamental of each Fund's investment objective. The investment objective of
Evergreen Omega Fund is currently classified as nonfundamental. A nonfundamental
investment objective may be changed at any time by the Trustees of a Fund
without approval by the Fund's shareholders.

For a complete description of the investment objective(s) of your
Fund(s), please consult your Fund(s)' prospectuses. The reclassification from
fundamental to nonfundamental will not alter any Fund's investment objective. If
at any time in the future, the Trustees of a Fund approve a change in a Fund's
nonfundamental investment objective, shareholders of such Fund will be given
notice of such change prior to its implementation; however, if such a change
were to occur, shareholders would not be asked to approve such change.

If the reclassification of any Fund's investment objective from
fundamental to nonfundamental is not approved by shareholders of a particular
Fund, such Fund's investment objective will remain fundamental and shareholder
approval (and its attendant costs and delays) will continue to be required prior
to any change in investment objective.

Recommendation of Trustees

The Trustees of each Registrant have considered the enhanced
management flexibility to respond to market, industry or regulatory changes that
would accrue to the Funds' investment advisers if each Fund's fundamental
investment objectives were reclassified as nonfundamental.

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At the meetings of the Trustees called for the purpose on September
16 and 17, 1997, the Trustees of each Registrant voted to approve the
reclassification of the investment objective of each Fund currently classified
as fundamental to nonfundamental.

Required Vote

The affirmative vote of the holders of a majority of the
outstanding voting securities of a Fund is required to approve the
reclassification of a Fund's investment objective from fundamental to
nonfundamental. This means the vote: (1) of 67% or more of the voting securities
of the Fund present at the Meeting, if the holders of more than 50% of the
outstanding voting securities of such Fund are present or represented by proxy
at the Meeting; or (2) of more than 50% of the outstanding voting securities of
the Fund, whichever is less.

The Trustees recommend that shareholders vote to approve Proposal 2.

PROPOSAL 3 - CHANGES TO FUNDAMENTAL
INVESTMENT RESTRICTIONS

Adoption of Standardized Investment Restrictions (Proposals 3A-3I)

The primary purpose of proposed Changes 3A through 3I below of this
Proposal is to revise and standardize the Funds' fundamental investment
restrictions (the "Restrictions"). The Trustees have concurred with the Funds'
investment advisers' efforts to analyze the fundamental and nonfundamental
investment restrictions of the various Funds offered by the Evergreen family of
mutual funds and, where practicable and appropriate to a Fund's investment
objective and policies, propose to shareholders adoption of standardized
Restrictions.

It is not anticipated that any of the changes will substantially
affect the way the Funds are currently managed. These proposals are being
presented to shareholders for approval because it is believed that increased
standardization will help to promote operational efficiencies and facilitate
monitoring of compliance with the Restrictions. Because the proposed
standardized fundamental Restrictions in general are phrased more broadly than
many Funds' current fundamental Restrictions, the investment advisers will be
able to respond more expeditiously to changed market, industry or regulatory
developments. Set forth below, as sub-sections of this Proposal, are general
descriptions of each of the proposed changes. You will be given the option to
approve all, some, or none of the proposed changes on the proxy card enclosed
with this proxy statement.

A listing of the proposed standardized fundamental Restrictions to
be adopted by each Fund is set forth in Exhibit C to this proxy statement. Item
3I in Exhibit C deals only with the adoption of standardized policies regarding
investments by the following Funds: The Evergreen: Tax Strategic Foundation
Fund, Tax Exempt Money Market Fund, Institutional Tax Exempt Money Market Fund,
Pennsylvania Tax- Free Money Market Fund, Georgia Municipal Bond Fund, North
Carolina Municipal Bond Fund, South Carolina Municipal Fund, Virginia Municipal
Bond Fund, New Jersey Tax Free Income Fund, Short-Intermediate Municipal Fund,
High Grade

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Tax Free Fund, State Tax Free Fund (Massachusetts, New York, and Pennsylvania
Tax Free Funds) and State Tax Free Fund: Series II (California and Missouri
Funds).

Item 2.b in Part I of Exhibit C deals only with the Evergreen U.S.
Real Estate Equity Fund, the Evergreen Global Real Estate Equity Fund, the
Evergreen Utility Fund and Keystone Precious Metals Holdings, Inc. with respect
to Restrictions concerning concentration. A listing of the current fundamental
Restrictions of each Fund is set forth in Exhibit D. The first page of Exhibit D
contains an index to assist you in locating the page(s) at which your Fund(s)'
current fundamental Restrictions are described. Those fundamental Restrictions
that you are being requested to vote to standardize are shown in Exhibit D by an
"S", which stands for "To be Standardized." If a particular change is not
approved by shareholders of a Fund, the current fundamental Restriction will
remain in place.

Because of the variety of ways in which the various Funds' current
fundamental Restrictions are expressed as well as differences among the
fundamental Restrictions themselves, the discussions below are general. To
compare your Fund's current fundamental Restriction to the proposed changed
fundamental Restriction, please refer to Exhibit D.

Many of the Funds' current Restrictions are accompanied by
descriptive language. Such descriptive language should not be read as part of
the fundamental Restriction. To the extent such descriptive language in a
current Restriction does not conflict with the language in a proposed
Restriction, the language will be retained but will not be considered
fundamental and, as such, may be changed by the Trustees without a further
shareholder vote.

If approved by shareholders, the revised fundamental Restrictions
described in Proposal 3A through Proposal 3I will remain fundamental and, as
such, cannot be changed without a further shareholder vote. If a proposed
standardized fundamental Restriction is not approved by shareholders of a
particular Fund, the current Restriction will remain fundamental and shareholder
approval (and its attendant costs and delays) will continue to be required prior
to any change in the Restriction.

Reclassification of Fundamental Restrictions as Nonfundamental (Proposal 3J)

The reclassification from fundamental to nonfundamental of certain
of the Funds' other current fundamental Restrictions will enhance the ability of
the Funds to achieve their respective investment objectives because their
investment advisers will have greater investment management flexibility to
respond to changed market, industry or regulatory conditions without the delay
and expense of the solicitation of shareholder approval.

Recommendation of Trustees

The Trustees of each Registrant have reviewed the potential
benefits associated with the proposed standardization of the Funds' fundamental
Restrictions (Proposals 3A through 3I below) as well as the potential benefits
associated with the reclassification of certain of the Funds' other fundamental
Restrictions to nonfundamental (Proposal 3J).

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At the meetings of the Trustees called for the purpose on September
16 and 17, 1997, the Trustees of each Registrant voted to approve the proposed
standardization of the Funds' fundamental Restrictions (Proposals 3A through 3I
below) and the reclassification from fundamental to nonfundamental of certain of
the Funds' other fundamental Restrictions (Proposal 3J below).

Required Vote

The affirmative vote of the holders of a majority of the
outstanding voting securities of a Fund is required to standardize the language
of the Funds' fundamental Restrictions, (Proposals 3A through 3I) and to approve
the reclassification of fundamental Restrictions to nonfundamental (Proposal
3J). This means the vote: (1) of 67% or more of the voting securities of the
Fund present at the Meeting, if the holders of more than 50% of the outstanding
voting securities of such Fund are present or represented by proxy at the
Meeting; or (2) of more than 50% of the outstanding voting securities of the
Fund, whichever is less.

The Trustees recommend that shareholders vote to approve Proposal 3.

Proposal 3A: To Amend The Fundamental Restriction Concerning Diversification
of Investments

Diversified Funds

The current fundamental Restriction of many of the Funds concerning
diversification of investments provides generally that a Fund cannot purchase
the securities of an issuer if the purchase would cause more than 5% of the
Fund's total assets taken at market value to be invested in the securities of
such issuer, except United States government securities, or if the purchase
would cause more than 10% of the outstanding voting securities of any one issuer
to be held in the Fund's portfolio. Most Funds apply this limitation to 75% of
their total assets. The Funds express this Restriction in a variety of ways. It
is proposed that shareholders approve new language standardizing this
Restriction.

Most of the Funds have elected to be "diversified" open-end
management investment companies under the 1940 Act, which requires the 5% of
assets and 10% of outstanding voting securities tests described above to apply
to 75% of the total assets of the Fund. The current policy of certain
diversified Funds (the "100% Funds") is more restrictive than required by the
1940 Act, since such Funds apply the foregoing tests to 100% of their assets,
rather than 75% of their assets. The primary purpose of the proposed change with
respect to the 100% Funds is to allow the Funds to invest in accordance with the
less restrictive limits contained in the 1940 Act for diversified investment
companies. The proposed change would allow 100% Funds the flexibility to
purchase larger amounts of issuers' securities when their investment adviser
deems an opportunity attractive. The new policy would allow the investment
policies of the 100% Funds to conform with the definition of "diversified" as it
appears in the 1940 Act.

With respect to those Funds currently applying the 1940 Act
standard, the amendment of the fundamental Restriction will allow such Funds to
respond more quickly to changes of that standard, as well as to other legal,
regulatory, and market developments without the delay or expense of a
shareholder vote. The amendment of

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the fundamental Restriction would also standardize the Restrictions across the
Funds. Adoption of this change is not expected to materially affect the
operation of the Funds.

Non-diversified Funds

Some funds are classified as "non-diversified". A non-diversified
management investment company may have no more than 25% of its total assets
invested in the securities (other than U.S. government securities or the shares
of other regulated investment companies) of any one issuer and must invest 50%
of its total assets under the 5% of assets and 10% of outstanding voting
securities tests applicable to diversified Funds as described above. For those
Funds that are currently non-diversified, no change other than standardized
language is being proposed and as with the diversified Funds, adoption of the
change is not expected to materially affect the operation of the non-diversified
Funds.

No Fund is changing its current classification. As proposed, each
Fund's fundamental Restriction regarding diversification, or non-diversification
as the case may be, will be replaced with the following fundamental Restriction:

"The Fund may not make any investment inconsistent
with the Fund's classification as a diversified
[non-diversified] investment company under the
Investment Company Act of 1940."

Proposal 3B: To Amend the Fundamental Restriction Concerning Concentration
of a Fund's Assets in a Particular Industry.

Most of the Funds currently have a fundamental Restriction
concerning the concentration of investments in a particular industry. The staff
of the Securities and Exchange Commission (the "SEC") takes the position that a
mutual fund "concentrates" its investments in a particular industry if more than
25% of the mutual fund's assets exclusive of cash and U.S. government securities
are invested in the securities of issuers in such industry. The Restrictions
generally embody the SEC staff interpretation by stating that a Fund will not
concentrate its investments in a particular industry by investing more than 25%
of its assets, exclusive of cash and U.S. government securities in securities of
issuers in any one industry.

Shareholders of most of the Funds are being requested to approve
amendment of the foregoing fundamental Restriction. As proposed and except for
the Funds named below, each Fund's current fundamental Restriction regarding
concentration of the Fund's assets in a particular industry will be replaced by
the following fundamental Restriction:

"The Fund may not concentrate its investments in
the securities of issuers primarily engaged in any
particular industry (other than securities issued
or guaranteed by the U.S. government or its
agencies or instrumentalities or [in the case of
Money Market Funds] domestic bank money
instruments)."

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The primary purpose of the proposed amendment is to adopt insofar
as possible a standardized Restriction regarding concentration for those Funds
that do not concentrate their investments. Adoption of this change is not
expected to materially affect the operation of the Funds.

Certain Funds currently follow a policy of concentration. The
Evergreen U.S. Real Estate Equity Fund and the Evergreen Global Real Estate
Equity Fund concentrate their investments in the real estate industry. The
Evergreen Utility Fund concentrates its investments in the utilities industry
and Keystone Precious Metals Holdings, Inc. concentrates its investments in
securities related to mining, processing or dealing in gold or other precious
metals and minerals. Shareholders of these Funds are being requested to vote to
amend and simplify their Funds' current Restriction concerning concentration.
Shareholders of these Funds can find the proposed amended and simplified
fundamental Restriction concerning concentration in Part II of Exhibit C and can
find their Fund's current fundamental Restriction concerning concentration in
Exhibit D.

With respect to Evergreen Latin America Fund, see Proposal 6 below
regarding a proposed amendment to the Fund's fundamental Restriction regarding
concentration.

The primary purpose of the proposed amendment is to simplify the
above-named Funds' discussion of their concentration policies and allow for
future investment management flexibility in response to regulatory requirements
without the necessity of a further shareholder vote. Adoption of the simplified
fundamental Restrictions on concentration for the above-named Funds is not
expected to materially affect the operation of such Funds because each Fund will
continue to abide by the description of its current concentration policy
described in Exhibit D.

Proposal 3C: To Amend The Fundamental Restriction concerning the Issuance of
Senior Securities

The Funds' current fundamental Restrictions regarding the issuance
of senior securities generally state that a Fund shall not issue any senior
security or state the criteria under which a security is deemed not to be a
senior security.

It is proposed that shareholders approve replacing the Funds'
current fundamental Restrictions concerning the issuance of senior securities
with the following fundamental Restriction governing the issuance of senior
securities:

"Except as permitted under the
Investment Company Act of 1940,
the Fund may not issue
senior securities."

The primary purpose of this proposed change is to standardize the
Funds' fundamental Restriction regarding senior securities.

The proposed fundamental Restriction clarifies that the Funds may
issue senior securities to the full extent permitted under the 1940 Act.
Although the definition of a "senior security" involves complex statutory and
regulatory concepts, a senior security is generally an obligation of a Fund
which has a claim to the Fund's assets or earnings that takes precedence over
the claims of the Fund's shareholders. The 1940 Act generally prohibits open-end
investment companies (i.e. mutual funds) from issuing any senior securities;
however, under current SEC staff interpretations, mutual funds are permitted to
engage in certain types of transactions that might be considered "senior
securities" as long as certain conditions are satisfied. For example, a
transaction that obligates a Fund to pay money at a future date (e.g., the
purchase of securities to be settled on a date that is farther away than the
normal settlement period) may be considered a "senior security." A mutual fund
is permitted to enter into this type of transaction if it maintains a segregated
account containing liquid securities in an amount equal to its obligation to pay
cash for the securities at a future date. Funds would engage in transactions
that could be considered to involve "senior securities" only in accordance with
applicable regulatory requirements under the 1940 Act.

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<PAGE>
Adoption of the proposed fundamental Restriction concerning senior
securities is not expected to materially affect the operation of the Funds.
However, adoption of a standardized fundamental Restriction will facilitate the
Funds' investment Advisers' investment compliance efforts and will allow the
Funds to respond to legal, regulatory and market developments which may make the
use of permissible senior securities advantageous to the Funds and their
shareholders.

Proposal 3D: To Amend The Fundamental Restriction Concerning Borrowing

Generally, the Funds' current fundamental Restrictions concerning
borrowing state that a Fund shall not borrow money except in an amount not in
excess of 5% of the total assets of the Fund, and then only for emergency and
extraordinary purposes, which shall not prohibit escrow and collateral
arrangements in connection with investment in financial futures contracts and
related options. Some Funds have more broad borrowing authority. When reviewing
your Fund(s)' policies on borrowings as set forth in Exhibit D, you should also
review your Fund(s)' policies on the issuance of senior securities since the
topics are interrelated.

In general, under the 1940 Act, a Fund may not borrow money, except
that (i) a Fund may borrow from banks (as defined in the Investment Company Act
of 1940, as amended) or enter into reverse repurchase agreements, in amounts up
to 33 1/3% of its total assets (including the amount borrowed), (ii) a Fund may
borrow up to an additional 5% of its total assets for temporary purposes, (iii)
a Fund may obtain such short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities, and (iv) a Fund may not pledge
its assets other than to secure such borrowings or, to the extent permitted by
the Fund's investment policies, as such policies may be set forth in its
Prospectus and Statement of Additional Information, as they may be amended from
time to time, in connection with hedging transactions, short sales, when-issued
and forward commitment transactions and similar investment strategies.

It is proposed that shareholders approve replacing the Funds'
current fundamental Restrictions regarding borrowing with the following
fundamental Restriction:

"The Fund may not borrow money, except to the
extent permitted by applicable law and the
guidelines set forth in the Fund's Prospectus and
Statement of Additional Information, as they may
be amended from time to time."

If the proposal is approved, all Funds other than the Evergreen
American Retirement Fund, the Evergreen Global Real Estate Equity Fund and the
Evergreen U.S. Real Estate Equity Fund will disclose that they will not engage
in leveraging.

The primary purpose of the proposed change to the fundamental
Restriction concerning borrowing is to standardize the Restriction.

Adoption of the proposed Restriction is not currently expected to
materially affect the operations of the Funds. However, many of the Funds'
current Restrictions restrict borrowing to a lower percentage of total assets
than the 33 1/3% permitted under the 1940 Act. The proposed Restriction
therefore would allow a Fund to purchase a security while borrowings
representing more than 5% of total assets are outstanding. While the Funds other
than Evergreen American Retirement Fund, the Evergreen Global Real Estate Equity
Fund and the Evergreen U.S. Real Estate Equity Fund have no current intention to
leverage, the flexibility to do so may be beneficial to a Fund at a future date.

Proposal 3E: To Amend The Fundamental Restriction Concerning Underwriting

Each Fund is currently subject to a fundamental Restriction
concerning underwriting. The Restrictions generally provide that a Fund shall
not underwrite any securities. It is proposed that shareholders approve
replacing the current fundamental Restriction with the following fundamental
Restriction concerning underwriting:

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

The primary purpose of the proposed change is to clarify that the
Funds are not prohibited from selling securities if, as a result of the sale,
the Funds would be considered underwriters under the federal securities laws. It
is also intended to standardize the Funds' fundamental Restrictions regarding
underwriting. While the proposed change will have no current impact on the
Funds, adoption of the proposed standardized fundamental Restriction will
advance the goals of standardization.

Proposal 3F: To Amend The Fundamental Restriction Concerning Investment in
Real Estate

The Funds currently have a fundamental Restriction concerning the
purchase of real estate. In general, the Restrictions state that a Fund shall
not purchase or sell real estate. In the opinion of management, this Restriction
does not currently preclude investment in securities of issuers that deal in
real estate.

Shareholders are being asked to approve amendment of Restrictions
similar to that described above. As proposed, the Funds' current fundamental
Restrictions will be replaced by the following fundamental Restriction which
will govern future purchases and sales of real estate:

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

The primary purpose of the proposed amendment is to clarify the
types of securities in which the Funds are authorized to invest and to
standardize the Funds' fundamental Restriction concerning real estate.

The proposed fundamental Restriction would make it explicit that
each of the Funds may acquire a security or other instrument whose payments of
interest and principal may be secured by a mortgage or other right to foreclose
on real estate, in the event of default. Any investments in these securities
are, of course, subject to the Fund's investment objective and policies and to
other limitations regarding diversification and concentration. However, in view
of the types of securities in which the Funds other than the Evergreen U.S. Real
Estate Equity Fund and the Evergreen Global Real Estate Equity Fund regularly
invest, the investment advisers consider this to be a remote possibility.

To the extent that a Fund buys securities and instruments of
companies in the real estate business, the Fund's performance will be affected
by the condition of the real estate market. This industry is sensitive to
factors such as changes in real estate values and property taxes, overbuilding,
variations in rental income, and interest rates. Performance could also be
affected by the structure, cash flow, and management skill of real estate
companies.

While the proposed change will have no current impact on the Funds,
adoption of the proposed standardized fundamental Restriction will advance the
goals of standardization.

Proposal 3G: To Amend The Fundamental Investment Restriction Concerning
Commodities

The Funds currently are subject to various fundamental Restrictions
that generally provide that a Fund shall not purchase or sell commodities or
commodity contracts, except that certain Funds may, for hedging purposes, buy or
sell financial futures contracts and related options.

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<PAGE>
It is proposed that shareholders approve replacing the current
fundamental Restrictions with the following fundamental Restriction concerning
commodities:

"The Fund may not purchase or sell commodities or
contracts on commodities except to the extent that
the Fund may engage in financial futures contracts
and related options and currency contracts and
related options and may otherwise do so in
accordance with applicable law and the Fund's
Prospectus and Statement of Additional
Information, as they may be amended from time to time
and without registering as a commodity pool operator
under the Commodity Exchange Act."

The proposed amendment is intended to allow appropriate Funds to
have the flexibility to invest in futures contracts and related options,
including financial futures such as interest rate and stock index futures (S&P
500, etc.). Certain Funds currently have the ability to invest in financial
futures. Under the proposed amendment, these types of securities may be used for
hedging or for investment purposes and involve certain risks.

The investment advisers recognize that investment in futures
contracts and related options may not be appropriate for all Funds. If the
proposed amendment is approved, the investment advisers will determine the
appropriateness of investment in futures contracts (including financial futures)
and related options on a Fund-by-Fund basis.

While the proposed change will have no material impact on the
operation of the Funds, adoption of the proposed fundamental Restriction will
advance the goals of standardization.

Proposal 3H: To Amend The Fundamental Investment Restriction Concerning
Lending

The Funds' current fundamental Restrictions concerning lending
state generally that a Fund shall not lend its portfolio securities except under
certain percentage and other limitations. In general, it is the Funds' current
policy that such loans must be secured continuously by cash collateral
maintained on a current basis in an amount at least equal to the market value of
the securities loaned, or by irrevocable letters of credit. During the existence
of the loan, a Fund must continue to receive the equivalent of the interest and
dividends paid by the issuer on the securities loaned and interest on the
investment of the collateral; the Fund must have the right to call the loan and
obtain the securities loaned at any time on five days' notice, including the
right to call the loan to enable the Fund to vote the securities. To comply with
previous (but as a result of federal legislation passed last year, now
superseded) requirements of certain state securities administrators, such loans
were not to exceed one-third of the Fund's net assets taken at market value.

It is proposed that shareholders approve the replacement of the
foregoing fundamental Restriction with the following amended fundamental
Restriction concerning lending:

"The Fund may not make loans to other persons,
except that the acquisition of investment
securities or other investment instruments in
accordance with the Fund's Prospectus and
Statement of Additional Information shall not be
deemed to be the making of a loan, and except
further that the Fund may lend its portfolio
securities, provided that the lending of portfolio
securities may be made only in accordance with
applicable law and the guidelines set forth in the
Fund's

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Prospectus and Statement of Additional
Information, as they may be amended from
time to time."

The proposal is not expected to materially affect the operation of
the Funds. However, the proposed Restriction would clarify the Funds' ability to
invest in direct debt instruments such as loans and loan participations, which
are interests in amounts owed to another party by a company, government or other
borrower. These types of securities may have additional risks beyond
conventional debt securities because they may provide less legal protection for
the Fund, or there may be a requirement that the Fund supply additional cash to
a borrower on demand.

The adoption of a standardized fundamental Restriction, will
advance the goals of standardization.

Proposal 3I: To Amend the Fundamental Restriction Concerning Investment in
Federally Tax Exempt Securities

This proposed change applies only to the following funds:
Evergreen: Tax Exempt Money Market, Institutional Tax-Exempt Money Market,
Pennsylvania Tax-Free Money Market, Short-Intermediate Municipal, High Grade Tax
Free, Tax Strategic Foundation, High Grade Tax Free, Georgia Municipal Bond,
North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal
Bond, New Jersey Tax Free Income, Massachusetts Tax Free, New York Tax Free,
Pennsylvania Tax Free, California Tax Free, Missouri Tax Free Funds.

The 1940 Act provides, in effect, that a mutual fund cannot use a
name or title which, may be deceptive or misleading. If a fund's name suggests a
certain type of investment policy, its name should be consistent with its
statement of policy. The SEC staff has taken the position that if a mutual
fund's name implies that its distributions will be exempt from federal income
taxation it should have a fundamental policy requiring that during periods of
normal market conditions either (1) the fund's assets will be invested so that
at least 80% of the income will be tax-exempt or (2) the fund will have at least
80% of its net assets invested in tax-exempt securities. While expressed in a
variety of ways, each of the Funds listed above currently has a fundamental
policy complying with the foregoing requirement.

If the Fund's name implies that its distributions will be exempt
from federal income taxation, it is proposed that shareholders of the
above-named Funds approve replacing such Funds' current fundamental Restrictions
regarding the foregoing 80% test with the following fundamental Restriction:

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"The Fund will, during periods of normal market
conditions, invest its assets in accordance with
applicable guidelines, issued by the staff of the
Securities and Exchange Commission concerning
investment in tax-exempt securities."

This proposed fundamental Restriction, if adopted by shareholders,
will permit the Funds' investment advisers to respond to changed regulatory
requirements without the delay and expense of the solicitation of shareholder
approval. Adoption of the proposed change is not expected to materially affect
the operation of the Funds and the Funds will continue to follow applicable SEC
staff guidelines as embodied in the applicable Funds' current fundamental
Restrictions. The above-named Funds' current fundamental Restrictions in this
regard may be found in Exhibit D under item 9.

Proposal 3J: Reclassification as Nonfundamental of All Current Fundamental
Restrictions Other than the Fundamental Restrictions Described in
the Foregoing Proposals 3A through 3I.

Like all mutual funds, when the Funds were established the Trustees
adopted certain investment Restrictions that would govern the efforts of the
Funds' investment advisers in seeking the Funds' respective investment
objectives. Some of these Restrictions were designated as "fundamental" and, as
such, may not be changed unless the change has first been approved by the
Trustees and then by the shareholders of the relevant Fund. Many of the Funds'
investment restrictions were required to be classified as fundamental under the
securities laws of various states. Since October 1996, such state securities
laws and regulations regarding fundamental investment restrictions have been
preempted by federal law and no longer apply.

The Funds' fundamental Restrictions were established to reflect
certain regulatory, business or industry conditions as they existed at the time
a Fund was established. Many such conditions no longer exist. The 1940 Act
requires only that the Restrictions discussed in Proposals 3A through 3H above
be classified as fundamental and certain SEC staff guidelines require Proposal
3I to be classified as fundamental. As a result, this Proposal 3J proposes to
reclassify as nonfundamental all current fundamental Restrictions of certain
Funds other than the fundamental Restrictions discussed in the foregoing
Proposals 3A through 3I.

Nonfundamental Restrictions may be changed or eliminated by a
Fund's Trustees at any time without approval of the Fund's shareholders. The
current fundamental Restrictions proposed to be reclassified as nonfundamental
are shown in Exhibit D by an "R", which stands for "To be Reclassified." You
will find the page(s) in which your Fund(s) Restrictions are described in the
index at the beginning of Exhibit D.

None of the proposed changes will alter any Fund's investment
objective. Indeed, the Trustees believe that approval of the reclassification of
fundamental Restrictions to nonfundamental Restrictions will enhance the ability
of the Funds to achieve their respective investment objectives because the
Funds' investment advisers will have greater investment management flexibility
to respond to changed market, industry or regulatory conditions without the
delay and expense of the solicitation of shareholder approval.

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PART III

PROPOSAL 4 - AMENDMENT TO THE INVESTMENT OBJECTIVE OF
EVERGREEN INSTITUTIONAL TAX-EXEMPT MONEY MARKET FUND,
EVERGREEN PENNSYLVANIA TAX-FREE MONEY MARKET FUND
AND EVERGREEN TAX EXEMPT MONEY MARKET FUND

The Boards of Trustees of Evergreen Institutional Tax-Exempt Money
Market Fund, Evergreen Pennsylvania Tax-Free Money Market Fund and Evergreen Tax
Exempt Money Market Fund have proposed amending each Fund's investment objective
to permit each Fund to invest without limit in obligations subject to the
Federal alternative minimum tax. If the change in investment objective is
approved, the respective Board has approved a change in the name of the Fund
respectively from Evergreen Institutional Tax-Exempt Money Market Fund to
Evergreen Institutional Municipal Money Market Fund, from Evergreen Pennsylvania
Tax-Free Money Market Fund to Evergreen Pennsylvania Municipal Money Market
Fund, and from Evergreen Tax Exempt Money Market Fund to Evergreen Municipal
Money Market Fund.

Each Fund has a substantially similar investment objective of
seeking high current income exempt from Federal income tax, and in the case of
the Evergreen Pennsylvania Tax- Free Money Market Fund, exempt from Pennsylvania
personal income taxes. Interest income on certain types of bonds issued after
August 7, 1986 to finance nongovernmental activities is an item of
"tax-preference" subject to the Federal alternative minimum tax for individuals
and corporations. To the extent a Fund invests in these "private activity" bonds
(some of which were formerly referred to as "industrial development" bonds),
individual and corporate shareholders, depending on their status, may be subject
to the alternative minimum tax on the part of the Fund's distributions derived
from the bonds. As a matter of fundamental policy, which may not be changed
without shareholder approval, each of the Funds currently invests at least 80%
of its net assets in municipal obligations, the interest from which is not
subject to the Federal alternative minimum tax.

The investment adviser to each Fund believes that it would be
advantageous to shareholders to permit the Fund to invest without limit in
obligations subject to the Federal alternative minimum tax. Such a change could
result in enhanced yields. Since relatively few people are subject to such tax
it is not expected that such change will negatively affect the vast majority of
shareholders.

If shareholders approve the proposed change to amend the investment
objective of the Funds named above, under normal circumstances it is anticipated
that each Fund will invest its assets so that at least 80% of its annual
interest income is exempt from Federal income tax other than the Federal
alternative minimum tax.

Required Vote

The affirmative vote of a majority of the issued and outstanding
voting securities of each Fund is required to approve Proposal 4. Under the 1940
Act, the affirmative vote of "a majority of the outstanding voting securities"
of a Fund is defined as the lesser of (a) a majority of the outstanding shares
of the Fund or (b) 67% or more of the shares of the Fund present or represented
by proxy at the Meeting if more than 50% of the outstanding shares of the Fund
are represented.

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The Trustees of Each Applicable Registrant Recommend That
Shareholders Vote to Approve Proposal 4.

PROPOSAL 5 - AMENDMENT TO THE INVESTMENT OBJECTIVE OF
EVERGREEN LATIN AMERICA FUND

The Trustees of Evergreen Latin America Fund have proposed amending
the Fund's investment objective to permit the Fund to invest without limit in
securities of issuers located in Latin America. If the change in investment
objective is approved, the Fund would no longer be required to invest a
percentage of its assets in securities of issuers in the United States and
Canada.

The Fund's current primary objective is long term growth of capital
through investments in equity and fixed income securities of North America (the
United States and Canada) and Latin America (Mexico and countries in South and
Central America). As a secondary objective, the Fund seeks current income. The
Fund's investment objectives are fundamental and may not be changed without
shareholder approval.

Under normal circumstances, the Fund invests at least 65% of its
assets in securities of issuers in Latin America. The Fund ordinarily maintains
investments in at least three Latin American countries. The Fund deems Latin
America to include Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa
Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru, Uruguay and Venezuela. An issuer is deemed to be in Latin
America if it is organized under the laws of a country within that region; its
principal securities trading market is in that region; it derives at least 50%
of its revenue or profits from goods produced or sold, investments made, or
services performed in that region or it has at least 50% of its assets located
in the region.

If shareholders approve the proposed change, the Fund's investment
objectives would be amended to provide that the Fund's primary objective is long
term growth of capital through investments in equity and fixed income securities
of issuers located in Latin America (Mexico and countries in South and Central
America). The Fund's investment adviser believes that the amended investment
objective better reflects the Fund's emphasis of investing in Latin America and
the recent name change from Keystone Fund of the Americas. While investments in
Latin America's emerging market present strong long-term growth potential, such
investments are subject to special risks, such as political and economic
uncertainties, fluctuating currency exchange rates, less-regulated securities
markets and different legal standards. If the change in investment objective is
approved, the Fund will continue to be permitted to invest up to 35 percent of
its assets in securities of United States and Canadian issues.

Required Vote

The affirmative vote of a majority of the issued and outstanding
voting securities of Evergreen Latin America Fund is required to approve
Proposal 5. Under the 1940 Act, the affirmative vote of "a majority of the
outstanding voting securities" of a Fund is defined as the lesser of (a) a
majority of the outstanding voting shares of the Fund, or (b) 67% or more of the
shares of the Fund present or represented by proxy at the Meeting if more than
50% of the outstanding shares of the Fund are represented.

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The Trustees of Evergreen Latin America Fund Recommend That
Shareholders Vote to Approve Proposal 5.

PROPOSAL 6 - AMENDMENT TO THE FUNDAMENTAL RESTRICTION OF
EVERGREEN LATIN AMERICA FUND RELATING TO
INDUSTRY CONCENTRATION

The Trustees of Evergreen Latin America Fund also have proposed
amending the Fund's investment restriction relating to industry concentration.
The Fund's current investment restriction states that it will not invest 25
percent or more of its total assets (taken at market value) in securities of
issuers in a particular industry or group or related industries, including a
foreign government, except United States government securities. If shareholders
approve the proposed amendment, the Fund's investment restriction regarding
industry concentration would be amended to provide that the Fund will not invest
more than 25% of its total assets, taken at market value, in the securities of
issuers primarily engaged in any particular industry (other than securities
issued or guaranteed by the U.S. government, or its agencies or
instrumentalities) and except for investments in the banking, construction,
energy, food and beverage, retail, telecommunications and utility industries and
in conglomerates.

It is the position of the staff of the SEC that investment
(including holdings of debt securities) of more than 25 percent of the value of
a mutual fund's assets in any one industry represents concentration. If the
investment company intends to concentrate in a particular industry or group of
industries it is required to specify the industry or group of industries in
which it will concentrate. If a mutual fund desires to change a policy of
concentration, the 1940 Act requires that shareholder approval of a new policy
must be obtained.

If approved by shareholders, the proposal would require that the
Fund invest at least 25 percent of its assets in issuers in the banking,
construction, energy, food and beverage, retail, telecommunications and utility
industries and in conglomerates. The investment adviser to the Fund believes
that it would be advantageous to shareholders to permit the Fund to concentrate
its investments in the industries specified above. The specified industries
represent a proportionately larger percentage of Latin American issuers than the
same industries in the United States. Certain issuers in the specified
industries were formed from former government monopolies that have recently been
privatized and may represent attractive investment opportunities. As a result of
the Fund's investment concentration in the specified industries, however, if the
proposal is approved, the Fund would be subject to the risks of investment in
the specified industries to a greater degree than if the Fund did not
concentrate its investments as proposed.

Required Vote

The affirmative vote of a majority of the issued and outstanding
voting securities of Evergreen Latin America Fund is required to approve
Proposal 6. Under the 1940 Act, the affirmative vote of "a majority of the
outstanding voting securities" of a Fund is defined as the lesser of (a)
majority of the outstanding share of the Fund or (b) 67% or more of the shares
of the Fund present or represented by proxy at the Meeting if more that 50% of
the outstanding shares of the Fund are represented.

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<PAGE>

The Trustees of Evergreen Latin America Fund Recommend That
Shareholders Vote to Approve Proposal 6.

VOTING INFORMATION CONCERNING THE MEETING

Only shareholders of record as of the close of business on the
Record Date will be entitled to notice of, and to vote at, the Meeting or any
adjournment thereof. The holders of a majority of the shares outstanding at the
close of business on the Record Date present in person or represented by proxy
will constitute a quorum for the Meeting for the following Funds: Evergreen
Fund, Evergreen Aggressive Growth Fund, Evergreen Income and Growth Fund,
Evergreen Growth and Income Fund, Evergreen Money Market Fund, Evergreen
Institutional Money Market Fund, Evergreen Institutional Treasury Money Market
Fund, Evergreen American Retirement Fund, Evergreen Small Cap Equity Income
Fund, Evergreen Tax Exempt Money Market Fund, Evergreen Short-Intermediate
Municipal Fund, Evergreen Florida High Income Municipal Bond Fund, Evergreen
Institutional Tax Exempt Money Market Fund, Evergreen Global Real Estate Equity
Fund, Evergreen U.S. Real Estate Equity Fund, Evergreen Global Leaders Fund,
Evergreen Foundation Fund, Evergreen Tax Strategic Foundation Fund, Evergreen
Intermediate Term Government Securities Fund, Evergreen Intermediate Term Bond
Fund, Evergreen Pennsylvania Tax Free Money Market Fund, Evergreen New Jersey
Tax Free Income Fund, Evergreen Latin America Fund, Evergreen Capital
Preservation and Income Fund, Evergreen Fund for Total Return, Evergreen Natural
Resources Fund, Evergreen Omega Fund, Evergreen Massachusetts Tax Free Fund,
Evergreen Pennsylvania Tax Free Fund, Evergreen New York Tax Free Fund,
Evergreen California Tax Free Fund, Evergreen Missouri Tax Free Fund, Evergreen
Strategic Income Fund, Keystone High Income Bond Fund (B-4), Keystone Strategic
Growth Fund (K-2), Keystone Growth and Income Fund (S-1), Evergreen
Institutional Adjustable Rate Fund, Evergreen Institutional Trust, and Keystone
Precious Metals Holdings, Inc.

The holders of one-third of the shares outstanding at the close of
business on the Record Date present in person or represented by form of proxy
will constitute a quorum for the Meeting of The Evergreen MicroCap Fund, Inc.

The holders of one-fourth of the shares outstanding at the close of
business on the Record Date present in person or represented by form of proxy
will constitute a quorum for the Meeting of the following Funds: Evergreen
Emerging Markets Growth Fund, Evergreen International Equity Fund, Evergreen
Value Fund, Evergreen Utility Fund, Evergreen Short-Intermediate Bond Fund,
Evergreen U.S. Government Fund, Evergreen Georgia Municipal Bond Fund, Evergreen
North Carolina Municipal Bond Fund, Evergreen South Carolina Municipal Bond
Fund, Evergreen Virginia Municipal Bond Fund, Evergreen High Grade Tax Free
Fund, and Evergreen Treasury Money Market Fund, Evergreen Global Opportunities
Fund, and Keystone International Fund Inc.

If the enclosed form of proxy is properly executed and returned in
time to be voted at the Meeting, the proxies named therein will vote the shares
represented by the proxy in accordance with the instructions marked thereon.
Unmarked proxies will be voted FOR each proposal listed thereon and FOR any
other matters deemed appropriate. Proxies that reflect abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or the persons
entitled to vote or (ii) the broker or nominee does not have discretionary
voting power on a particular matter) will be counted as shares that are present
and

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<PAGE>

entitled to vote for purposes of determining the presence of a quorum, but will
have no effect on the outcome of the vote to approve any proposal requiring a
vote based on the percentage of shares actually voted. A proxy may be revoked at
any time on or before the Meeting by written notice to the Secretary of the
appropriate Fund, 200 Berkeley Street, Boston, Massachusetts 02116. Unless
revoked, all valid proxies will be voted in accordance with the specifications
thereon or, in the absence of such specifications, FOR approval of the Plan and
the Reorganization contemplated thereby described in Part I of this proxy
statement and FOR the proposals described in Parts II and III described in this
proxy statement.

Each full share outstanding is entitled to one vote and each
fractional share outstanding is entitled to a proportionate share of one vote.
The number of shares of each Fund outstanding as of the close of business on
October 16, 1997 is set forth in Exhibit E.

Proxy solicitations will be made primarily by mail, but proxy
solicitations may also be made by telephone, telegraph or personal solicitations
conducted by officers and employees of First Union National Bank, its affiliates
or other representatives of the Funds (who will not be paid for their
solicitation activities). Shareholder Communications Corporation ("SCC") and its
agents have been engaged by the Funds to assist in soliciting proxies, and may
call shareholders to ask if they would be willing to authorize SCC to execute a
proxy on their behalf authorizing the voting of their shares in accordance with
the instructions given over the telephone by the shareholders. In addition,
shareholders may call SCC at 1-800-733-8481, extension 404 between the hours of
9:00 a.m. and 11:00 p.m. Eastern time in order to initiate the processing of
their votes by telephone. SCC will utilize a telephone vote solicitation
procedure designed to authenticate the shareholder's identity by asking the
shareholder to provide his or her social security number ( in the case of an
individual) or taxpayer identification number (in the case of an entity). The
shareholder's telephone instructions will be implemented in a proxy executed by
SCC and a confirmation will be sent to the shareholder to ensure that the vote
has been authorized in accordance with the shareholder's instructions. Although
a shareholder's vote may be solicited and cast in this manner, each shareholder
will receive a copy of this proxy statement and may vote by mail using the
enclosed proxy card. The Funds believe that this telephonic voting system
complies with applicable law and have reviewed opinions of counsel to that
effect.

If you wish to participate in the Meeting, but do not wish to give
your proxy by telephone, you may still submit the proxy card included with this
proxy statement or attend in person. Any proxy given by you, whether in writing
or by telephone, is revocable.

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

-34-

<PAGE>

Except for Keystone International Fund Inc. and Keystone Precious
Metals Holdings, Inc., no Fund is required or intends to hold annual or other
periodic meeting of shareholders except as may be required by the 1940 Act. If
the Reorganization is not approved by shareholders of a Fund, the next meeting
of the shareholders of such Fund will be held at such time as the Board may
determine or as may be legally required. If any change proposed in Parts II and
III of this proxy statement is not approved by shareholders of a Fund, the
current restriction, limitation or policy will remain in place as to such Fund.
Shareholders wishing to submit proposals for consideration for inclusion in a
proxy statement for a subsequent shareholder meeting should send their written
proposals to the Secretary of the Fund at the address set forth on the cover of
this proxy statement such that they will be received by the Fund in a reasonable
period of time prior to any such meeting.

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

ADDITIONAL INFORMATION

Payment of Expenses

Each Fund will pay its proportionate share of expenses of the
preparation, printing and mailing to its shareholders of the proxy, accompanying
notice of meeting and this proxy statement and any supplementary solicitation of
its shareholders.

It is expected that the cost of retaining SCC to assist in the
proxy solicitation process will not exceed $909,000, which cost will be
allocated among the Funds pro rata based on their respective net assets.

Beneficial Ownership

Exhibit F contains information about the beneficial ownership by
shareholders of five percent or more of each Fund's outstanding Shares, as of
September 30, 1997. On that date, the existing Trustees and officers of the
Fund, together as a group, "beneficially owned" less than one percent of each
Fund's outstanding Shares.

The term "beneficial ownership" is as defined under Section 13(d)
of the Securities Exchange Act of 1934. The information as to beneficial
ownership is based on statements furnished to each Fund by the existing
Trustees, officers of such Fund, and/or on records of Evergreen Service Company.

Annual and Semi-Annual Reports to Shareholders

Each of the Funds will furnish, without charge, a copy of its most
recent annual report (and most recent semi-annual report succeeding the annual
report, if any) to a shareholder of the Fund upon request. Any such request
should be directed to Evergreen Service Company at 200 Berkeley Street, Boston,
Massachusetts 02116-5034 or (800) 343-2898.

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<PAGE>

OTHER BUSINESS

The Boards do not intend to present any other business at the
Meeting. If, however, any other matters are properly brought before the Meeting,
the persons named in the accompanying proxy card(s) will vote thereon in
accordance with their judgment.

EACH BOARD, INCLUDING ITS INDEPENDENT TRUSTEES, RECOMMENDS APPROVAL
OF EACH PROPOSAL AND ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY
WILL BE VOTED IN FAVOR OF APPROVAL OF THE PROPOSALS.

October 1997

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<PAGE>

EXHIBIT A

[FORM OF AGREEMENT AND PLAN OF REORGANIZATION]

AGREEMENT AND PLAN OF CONVERSION AND TERMINATION dated
_____________, 1997 (the "Agreement"), between [Name of Trust], a Massachusetts
business trust [or Pennsylvania common law trust or New York, Delaware or
Maryland Corporation] having an office at 200 Berkeley Street, Boston,
Massachusetts 02116 (the "Original Fund") and [Name of Successor Trust], a
Delaware business trust having an office at 200 Berkeley Street, Boston,
Massachusetts 02116.

WHEREAS, the Board of Trustees of the Original Fund and the Board
of Trustees of the Successor Trust have determined that it is in the best
interests of the Original Fund and the Successor Trust, respectively, that the
assets of the Original Fund be acquired by the Successor Trust pursuant to this
Agreement and in accordance with the applicable laws of the state of
organization of the Original Fund and the State of Delaware; and

WHEREAS, the parties desire to enter into a plan of exchange which
would constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended:

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

1. PLAN OF EXCHANGE.

(A) Subject to the terms and conditions set forth herein, on the
Exchange Date (as defined herein), the Original Fund shall assign, transfer and
convey the assets of each of its series (collectively, the "Funds" and each
individually, a "Fund"), including all securities and cash held by each Fund
(subject to the liabilities of each such Fund) to a corresponding series of the
Successor Trust (collectively, the "Successor Funds" and each individually, a
"Successor Fund"), and each such Successor Fund shall acquire all of the assets
of each corresponding Fund (subject to the liabilities of each such Fund) in
exchange for full and fractional shares of beneficial interest of such Successor
Fund, $.001 par value per share (the "Fund Shares"), to be issued by the
Successor Trust, having, in the case of each Successor Fund, an aggregate net
asset value equal to the value of the net assets of the corresponding Fund
acquired. The value of the assets of each of the Funds and the net asset value
per share of the Fund Shares of each of the Successor Funds shall be determined
as of the Valuation Date in accordance with the procedures for determining the
value of each Fund's assets set forth in the Original Fund's organizational
document and the then-current prospectus and statement of additional information
for each Current Fund that forms a part of the Successor Fund's Registration
Statement on Form N-1A (the "Registration Statement". In lieu of delivering
certificates for the Fund Shares, the Successor Trust shall credit the Fund
Shares to the Original Fund's account on the share record books of the Successor
Trust and shall deliver a confirmation thereof to the Original Fund. The
Original Fund shall then deliver written instructions to the Successor Trust's
transfer agent to establish accounts for the shareholders on the share record
books relating to each of the Funds. With respect to any Fund that offers more
than one class of shares as of the Exchange Date, the exchange transaction
described above will involve the delivery of shares of classes relative to the
corresponding class of each such, respectively. Fund Shares of each such class
shall have the same aggregate net asset value as the

A-1

<PAGE>

aggregate net asset value of the corresponding class of the Fund.
Notwithstanding anything expressly or by implication set forth herein (but
without limiting the rights of the Boards of Trustees of the Original Fund and
Successor Trust under Section 8 hereof), this Agreement, and the transactions
contemplated herein, shall be deemed to apply to each Fund as to which the
condition precedent set forth in section 6(a) hereof shall have been satisfied
and its corresponding Successor Fund, and shall not apply to any Fund (or its
corresponding Successor Fund) as to which such condition precedent shall not
have been satisfied.

(b) Delivery of the assets of each of the Funds to be transferred
shall be made not later than the next business day following the Valuation Date
(the "Exchange Date"). Assets transferred shall be delivered to State Street
Bank and Trust Company, the Successor Trust's custodian (the "Custodian"), for
the account of the Successor Trust and the Successor Funds, with all securities
not in bearer or book entry form duly endorsed, or accompanied by duly executed
separate assignments or stock powers, in proper form for transfer, with
signatures guaranteed, and with all necessary stock transfer stamps, sufficient
to transfer good and marketable title thereto (including all accrued interest
and dividends and rights pertaining thereto) to the Custodian for the account of
the Successor Trust and the Successor Funds free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash delivered shall be in
the form of immediately available funds payable to the order of the Custodian
for the account of the Successor Trust and the Successor Funds. All assets
delivered to the Custodian as provided herein shall be allocated by the
Successor Trust to each Successor Fund corresponding to the Fund from which, or
on the account of which, the assets were transferred.

(c) The Original Fund will pay or cause to be paid to the Successor
Trust any interest received on or after the Exchange Date with respect to assets
transferred from any Fund to the corresponding Successor Fund hereunder and the
Successor Trust any distributions, rights or other assets received by the
Original Fund after the Exchange Date as distributions on or with respect to the
securities transferred from any Fund to the corresponding Successor Fund
hereunder and the Successor Trust shall allocate any such distributions, rights
or other assets to the appropriate Successor Fund. All such assets shall be
deemed included in assets transferred to the Funds on the Exchange Date and
shall not be separately valued.

(d) The Valuation Date shall be December 19, 1997, or such earlier
or later date as may be mutually agreed upon by the parties.

(e) As soon as practicable after the Exchange Date, the Original
Fund shall distribute all of the Fund Shares of each of the Successor Funds
received by it among the shareholders of each corresponding Fund in proportion
to the number of shares each such shareholder holds in each such Fund and, upon
the effecting of such a distribution on behalf of all of the Funds, the Original
Fund will dissolve and terminate. After an Exchange Date, a Fund which has been
the subject of the exchange transactions on such Exchange Date shall not conduct
any business except in connection with its dissolution and termination.

2. THE ORIGINAL FUND'S REPRESENTATIONS AND WARRANTIES. The Original
Fund represents and warrants to and agrees with the Successor Trust as follows:

(a) The Original Fund is duly organized, validly existing and in
good standing

A-2

<PAGE>

under the laws of the state of its organization and has power to own all of its
properties and assets and, subject to the approval of its shareholders as
contemplated hereby, to carry out this Agreement.

(b) The Original Fund is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company, and such registration has not been revoked or rescinded and is in full
force and effect.

(c) Except as shown on the audited financial statements of each
Current Fund for its most recently completed fiscal period and as incurred in
the ordinary course of the Original Fund's and each Fund's business since then,
neither the Original Fund nor any Fund has any known liabilities of a material
amount, contingent or otherwise, and there are no material legal, administrative
or other proceedings pending or threatened against the Original Fund or any
Fund.

(d) On the Exchange Date, the Original Fund will have full right,
power and authority to sell, assign, transfer and deliver the assets to be
transferred by it hereunder.

3. THE SUCCESSOR TRUST'S REPRESENTATIONS AND WARRANTIES. The
Successor Trust represents and warrants to and agrees with the Original Fund as
follows:

(a) The Successor is a business trust duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
power to carry on its business as it is now being conducted and to carry out
this Agreement.

(b) The Successor Trust is registered or will register as an
open-end management investment company and adopt the Registration Statement of
the Original Fund, for purposes of the Securities Act of 1933, as amended, and
the 1940 Act.

(c) Neither the Successor Trust nor any Successor Fund has any
known liabilities of a material amount, contingent or otherwise, and there are
no material legal, administrative or other proceedings pending or threatened
against the Successor Trust or any Successor Fund.

(d) At the Exchange Date, the Fund Shares to be issued to the
Original Fund (the only Fund Shares to be issued as of the Exchange Date, except
for the initial capital, if any, of the Successor Trust) will have been duly
authorized and, when issued and delivered pursuant to this Agreement, will be
legally and validly issued and will be fully paid and non-assessable by the
Successor Trust. No Successor Trust or Successor Fund shareholder will have any
preemptive right of subscription or purchase in respect thereof.

4. THE SUCCESSOR TRUST'S CONDITIONS PRECEDENT. The obligations of
the Successor Trust hereunder shall be subject to the following conditions:

(a) The Original Fund shall have furnished to the Successor Trust a
statement of the Original Fund's assets, including a list of securities owned by
the Original Fund with their respective tax costs and values determined as
provided in Section 1 hereof, all as of the Exchange Date.

(b) As of the Exchange Date, all representations and warranties of
the

A-3

<PAGE>

Original Fund made in this Agreement shall be true and correct as if made at and
as of such date, and the Original Fund shall have complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such date.

(c) For each Fund, a vote approving this Agreement and the
transactions and exchange contemplated hereby shall have been adopted by a "vote
of a majority of the outstanding voting securities" (within the meaning of the
1940 Act and the rules thereunder) of the Fund.

5. THE ORIGINAL FUND'S CONDITIONS PRECEDENT. The obligations of the
Original Fund hereunder shall be subject to the condition that as of the
Exchange Date all representations and warranties of the Successor Trust made in
the Agreement shall be true and correct as if made at and as of such date, and
that the Successor Trust shall have complied with all of the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to such date.

6. THE SUCCESSOR TRUST'S AND THE ORIGINAL FUND'S CONDITIONS
PRECEDENT. The obligations of both the Successor Trust and the Original Fund
hereunder as to any particular Fund and its corresponding Successor Fund shall
be subject to the following conditions:

(a) This Agreement and the transactions contemplated hereby shall
have been approved by a "vote of a majority of the outstanding voting
securities" (within the meaning of the 1940 Act and the rules thereunder) of the
Fund.

(b) The receipt of such authority, including "no-action" letters
and orders from the Securities and Exchange Commission (the "Commission") or
state securities commissions, as may be necessary to permit the parties to carry
out the transaction contemplated by this Agreement shall have been received.

(c) The Successor Trust's adoption of the Registration Statement on
Form N- 1A under the 1933 Act and the 1940 Act shall have become effective, and
any post-effective amendments to such Registration Statement as are determined
by the Trustees to be necessary and appropriate, shall have been filed with the
Commission and shall have become effective.

(d) The Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted nor threatened to
institute any proceeding seeking to enjoin consummation of the reorganization
transactions contemplated hereby under Section 25(c) of the 1940 Act and no
other action, suit or other proceeding shall be threatened or pending before any
court or governmental agency which seeks to restrain or prohibit, or obtain
damages or other relief in connection with, this Agreement or the transactions
contemplated herein.

A-4

<PAGE>

Provided, however, that at any time prior to the Exchange Date, any
of the foregoing conditions in this Section 6 may be waived by the parties if,
in the judgment of the parties, such waiver will not have a material adverse
effect on the benefits intended under this Agreement to the shareholders of the
Original Fund.

7. INDEMNIFICATION. The Successor Trust hereby agrees with the
Original Fund and each Trustee or Director of the Original Fund: (i) to
indemnify each Trustee or Director of the Original Fund against all liabilities
and expenses referred to in the indemnification provisions of the Original
Fund's organizational documents, to the extent provided therein, incurred by any
Trustee or Director of the Original Fund; and (ii) in addition to the
indemnification provided in (i) above, to indemnify each Trustee or Director of
the Original Fund against all liabilities and expenses and pay the same as they
arise and become due, without any exception, limitation or requirement of
approval by any person, and without any right to require repayment thereof by
any such Trustee (unless such Trustee has had the same repaid to him or her)
based upon any subsequent or final disposition or findings made in connection
therewith or otherwise, if such action, suit or other proceeding involves such
Trustee's participation in authorizing or permitting or acquiescing in, directly
or indirectly, by action or inaction, the making of any distribution in any
manner of all or any assets of the Original Fund without making provision for
the payment of any liabilities of any kind, fixed or contingent, of the Original
Fund, which liabilities were not actually and consciously personally known to
such Trustee to exist at the time of such Trustee's participation in so
authorizing or permitting or acquiescing in the making of any such distribution.

8. TERMINATION OF AGREEMENT. As to any Fund and its corresponding
Successor Fund, this Agreement and the transactions contemplated hereby may be
terminated and abandoned by resolution of the Board of Trustees of the Original
Fund or the Board of Trustees of the Successor Trust, at any time prior to the
Exchange Date (and notwithstanding any vote of the shareholders of the Fund) if
circumstances should develop that, in the opinion of either the Board of
Trustees of the Original Fund or the Board of Trustees of the Successor Trust,
make proceeding with this Agreement inadvisable. In making any such
determination as to any Fund and its corresponding Successor Fund, the
respective Boards of Trustees may consider, among other factors, whether
approval has been rendered by shareholders of all (or only some) of the Funds.

As to any Fund and its corresponding Successor Fund, if this
Agreement is terminated and the exchange contemplated hereby is abandoned
pursuant to the provisions of this Section 8, this Agreement shall become void
and have no effect, without any liability on the part of any party hereto or the
trustees, officers or shareholders of the Successor Trust or the trustees,
officers or shareholders of the Original Fund, in respect of this Agreement.

9. WAIVER AND AMENDMENTS. At any time prior to the Exchange Date,
any of the conditions set forth in Section 4 may be waived by the Board of
Trustees/Directors of the Original Fund, and any of the conditions set forth in
Section 5 may be waived by the Board of Trustees of the Successor Trust, if, in
the judgment of the waiving party, such waiver will not have a material adverse
effect on the benefits intended under this Agreement to the shareholders of the
Original Fund or the shareholders of the Successor Trust, as the case may be. In
addition, prior to the Exchange Date, any provision of this Agreement may be
amended or modified by the Board of Trustees of the Original Fund and Successor
Trust if such amendment or modification would not have a material adverse effect
upon the benefits intended under

A-5

<PAGE>

this Agreement and would be consistent with the best interests of shareholders.

10. NO SURVIVAL OF REPRESENTATIONS. None of the representations and
warranties included or provided for herein shall survive consummation of the
transactions contemplated hereby.

11. GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of Delaware, without giving effect to principles of
conflict of laws; provided, however, that the due authorization, execution and
delivery of this Agreement, in the case of the Original Fund, shall be governed
and construed in accordance with the laws of the state of organization of the
Original Fund without giving effect to principles of conflict of laws.

12. CAPACITY OF TRUSTEES, ETC. With respect to the Original Fund,
if organized as a Trust, the names refer respectively to the Trust created and,
as the case may be, the Trustees, as trustees but not individually or
personally, acting from time to time under organizational documents filed in the
Original Fund's state of organization, which is hereby referred to and is also
on file at the principal office of the Original Fund. The obligations of the
Original Fund entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders or
representatives of the Original Fund personally, but bind only the trust
property, and all persons dealing with any Current Fund of the Original Fund
must look solely to the trust property belonging to such Current Fund for the
enforcement of any claims against the Original Fund.

13. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which, when executed and delivered, shall be deemed to be an original.

IN WITNESS WHEREOF, the Original Fund and the Successor Trust have
caused this Agreement and Plan of Conversion and Termination to be executed as
of the date above first written.

[Original Fund]

ATTEST:_______________________ By:___________________________
Title:

Evergreen [Successor Trust]

ATTEST:_______________________ By:___________________________
Title:

A-6

<PAGE>

EXHIBIT B

FOR KEYSTONE INTERNATIONAL FUND INC. (the "FUND") ONLY

BUSINESS CORPORATION LAW OF THE
COMMONWEALTH OF MASSACHUSETTS

Chapter 156B, ss.86 and 87 Right of Appraisal. If a corporation
proposes to take a corporate action as to which any section of this chapter
provides that a stockholder who objects to such action shall have the right to
demand payment for his shares and an appraisal thereof, sections eighty-seven to
ninety-eight, inclusive, shall apply except as otherwise specifically provided
in any section of this chapter. Except as provided in section eighty-two and
eighty-three, no stockholder shall have such right unless (1) he files with the
corporation before the taking of the vote of the shareholders on such corporate
action, written objection to the proposed action stating that he intends to
demand payment for his shares if the action is taken and (2) his shares are not
voted in favor of the proposed action.

If the proposed Reorganization is approved by the stockholders at the
Meeting and effected by the Fund, any stockholder (1) who files with the Fund
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he or she intends to demand payment for his
or her shares if the action is taken and (2) whose shares are not voted in favor
of such action has or may have the right to demand in writing from the Fund or
the Successor Fund within twenty days after the date of mailing to him or her of
notice in writing that the corporate action has become effective, payment for
his or her shares and an appraisal of the value thereof. The Fund and any such
stockholder shall in such cases have the rights and duties and shall follow the
procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts.

B-1

<PAGE>

EXHIBIT C

PART I

PROPOSED STANDARDIZED FUNDAMENTAL RESTRICTIONS

1. Diversification of Investments

"The Fund may not make any investment inconsistent
with the Fund's classification as a diversified
[non-diversified] investment company under the
Investment Company Act of 1940, as amended."

2a. Concentration of a Fund's Assets in a Particular Industry. [All
Funds Other than those listed in 2(b) below.]

"The Fund may not concentrate its investments in the
securities of issuers primarily engaged in any
particular industry (other than securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities or [in the case of Money Market
Funds] domestic bank money instruments)."

2b. Shareholders of Evergreen U.S. Real Estate Equity Fund, Evergreen
Global Real Estate Equity Fund, Evergreen Utility Fund and Keystone
Precious Metals Holdings Inc., please see Part II of this Appendix
2.

3. Issuance of Senior Securities

"Except as permitted under the Investment Company Act
of 1940, as amended, the Fund may not issue senior
securities."

4. Borrowing

"The Fund may not borrow money, except to the extent
permitted by applicable law and the guidelines set
forth in the Fund's Prospectus and Statement of
Additional Information, as they may be amended from
time to time."

[The following is applicable to all Funds other than Evergreen American
Retirement Fund, Evergreen Global Real Estate Equity Fund and Evergreen U.S.
Real Estate Equity Fund.]

"As an operating policy, the Fund shall not purchase
additional investment securities at any time during
which outstanding borrowings exceed 5% of the total
assets of the Fund."

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<PAGE>

5. Underwriting

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

6. Investment in Real Estate

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

7. Commodities

"The Fund may not purchase or sell commodities or
contracts on commodities except to the extent that the
Fund may engage in financial futures contracts and
related options and currency contracts and related
options and may otherwise do so in accordance with
applicable law and the Fund's Prospectus and Statement
of Additional Information, as they may be amended from
time to time and without registering as a commodity
pool operator under the Commodity Exchange Act.

8. Lending

The Fund may not make loans to other persons, except
that the acquisition of investment securities or other
investment instruments in accordance with the Fund's
Prospectus and Statement of Additional Information
shall not be deemed, to be the making of a loan, and
except further that the Fund may lend its portfolio
securities, provided that the lending of portfolio
securities may be made only in accordance with
applicable law and the guidelines set forth in the
Fund's Prospectus and Statement of Additional
Information, as they may be amended from time to
time."

9. Investment in Federally Tax Exempt Securities

For: Evergreen Tax Exempt Money Market, Evergreen Institutional Tax
Free Money Market, Evergreen Pennsylvania Tax-Free Money Market,
Evergreen Short-Intermediate Municipal, Evergreen Tax Strategic
Foundation, Evergreen

C-2

<PAGE>

High Grade Tax Free, Evergreen Georgia Municipal Bond, Evergreen
North Carolina Municipal Bond, Evergreen Virginia Municipal Bond,
Evergreen New Jersey Tax Free Income, Evergreen Massachusetts Tax
Free, Evergreen New York Tax Free, Evergreen Pennsylvania Tax Free,
Evergreen California Tax Free and Evergreen Missouri Tax Free
Funds:

"If the Fund's name implies that its distributions
will be exempt from federal income taxation, the Fund
will, during periods of normal market conditions,
invest its assets in accordance with applicable
guidelines, issued by the staff of the Securities and
Exchange Commission."

C-3

<PAGE>

EXHIBIT C

PART II

PROPOSED AMENDED FUNDAMENTAL RESTRICTIONS
REGARDING CONCENTRATION FOR
THOSE FUNDS THAT CONCENTRATE
THEIR INVESTMENTS

1. For Evergreen U.S. Real Estate Equity Fund and Evergreen Global
Real Estate Equity Fund:

"The Fund will concentrate its
investments in the real estate
industry."

2. For Evergreen Utility Fund:

"The Fund will concentrate its
investments in the utilities industry."

3. For Keystone Precious Metals Holdings, Inc.:

"The Fund will concentrate its investments in
industries related to the mining, processing or
dealing in of gold or other precious metals and
minerals."

C-4

<PAGE>

EXHIBIT D

INDEX

EVERGREEN FUNDS

Page D-
I. Equity Funds

Evergreen Fund.........................................................
Evergreen U.S. Real Estate Equity Fund.................................
Evergreen Limited Market Fund, Inc.....................................
Evergreen Aggressive Growth Fund.......................................
Evergreen Growth and Income Fund.......................................
Evergreen Utility Fund.................................................
Evergreen Small Cap Equity Income Fund.................................
Evergreen Income and Growth Fund.......................................
Evergreen Value Fund...................................................

II Bond Funds

Evergreen U.S. Government Fund.........................................
Evergreen Short-Intermediate Bond Fund.................................
Evergreen Intermediate-Term Government Securities Fund.................

III Balanced Funds

Evergreen Foundation Fund..............................................
Evergreen Tax Strategic Foundation Fund................................
Evergreen American Retirement Fund.....................................

IV International / Global Funds

Evergreen Global Real Estate Equity Fund...............................
Evergreen Emerging Markets Growth Fund.................................
Evergreen International Equity Fund....................................
Evergreen Global Leaders Fund..........................................

V Money Market

Evergreen Money Market Fund............................................
Evergreen Tax Exempt Money Market Fund.................................
Evergreen Treasury Money Market Fund...................................
Evergreen Institutional Money Market Fund..............................
Evergreen Institutional Treasury Money Market Fund.....................
Evergreen Institutional Tax Exempt Money Market Fund...................
Evergreen Pennsylvania Tax-Free Money Market Fund......................

VI Municipal (Tax Free) Funds

Evergreen Georgia Municipal Bond Fund..................................
Evergreen North Carolina Municipal Bond Fund...........................
Evergreen South Carolina Municipal Bond Fund...........................
Evergreen Virginia Municipal Bond Fund.................................
Evergreen Florida High Income Municipal Bond Fund......................
Evergreen New Jersey Tax Free Income Fund..............................
Evergreen Short-Intermediate Municipal Fund............................
Evergreen High Grade Tax Free Fund.....................................

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<PAGE>

EVERGREEN (FORMERLY KEYSTONE) FUNDS

Page D-

I Equity Funds

Evergreen Natural Resources Fund (formerly Keystone Global
Resources and Development Fund)........................................
Keystone Growth and Income Fund (S-1)...................................
Evergreen Institutional Small Cap Growth Fund (formerly Keystone .......
Institutional Trust: Institutional Small Capitalization Growth Fund)...
Evergreen (formerly Keystone) Omega Fund ...............................
Keystone Precious Metals Holdings, Inc..................................
Keystone Strategic Growth Fund (K-2)....................................

II. Bond Funds

Keystone High Income Bond Fund (B-4)....................................
Evergreen (formerly Keystone) Capital Preservation and Income Fund......
Evergreen (formerly Keystone) Institutional Adjustable Rate Fund........
Evergreen (formerly Keystone) Strategic Income Fund.....................

III. Balanced Funds

Evergreen (formerly Keystone) Fund for Total Return.....................

IV. International / Global Funds............................................

Evergreen Latin America Fund
Evergreen (formerly Keystone) Global Opportunities Fund.................
Keystone International Fund Inc.........................................

V. Municipal (Tax Free) Funds

Evergreen (formerly Keystone) State Tax Free Fund:......................
Massachusetts..................................................
New York.......................................................
Pennsylvania...................................................

Evergreen (formerly Keystone) State Tax Free Fund - Series II:..........
California.....................................................
Missouri.......................................................

D-2

<PAGE>
EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

EVERGREEN FUND

1. Diversification(S)

The Fund may not invest more than 5% of their net assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities. The Fund may not
purchase more than 10% of any class of securities of any one issuer other than
the U.S. government and its agencies or instrumentalities.

2. Concentration (S)

The Fund may not concentrate its investments in any one industry,
except that the Fund may invest up to 25% of its total net assets in any one
industry; provided, that this limitation shall not apply with respect to the
Fund, to obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities. For purposes of this restriction, utility companies, gas,
electric, water and telephone companies will be considered separate industries.

3. Issuing Senior Securities(S)

See "Borrowing"

4. Borrowing (including Reverse Repurchase Agreements)(S)

The Fund may not borrow except as a temporary measure 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 Fund may not borrow money except from banks as a
temporary measure for extraordinary or emergency purposes (i) on an unsecured
basis, subject to the requirements that the value of the Fund's assets,
including the proceeds of borrowings, does not at any time become less than 300%
of the Fund's indebtedness; provided, however, that if the value of the Fund's
assets becomes less than such amount, the Fund will reduce its borrowings within
three business days so that the value of the Fund's assets will be at least 300%
of its indebtedness, or (ii) may make such borrowings on a secured basis,
provided that the aggregate amount of such borrowings shall not exceed 5% of the
value of its total net assets at the time of any such borrowing, or mortgage,
pledge or hypothecate its assets, except in an amount not exceeding 15% of its
total net assets taken at cost to secure such borrowing.

D-3

<PAGE>

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

6. Real Estate (S)

7. Commodities(S)

The Fund may not purchase, sell or invest in commodities or commodity
contracts.

8. Loans to Others (S)

The Fund may not lend its funds to other persons, except through the
purchase of a portion of an issue of debt securities publicly distributed or the
entering into of repurchase agreements. The Fund may not lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the current market value of the loaned securities,
including accrued interest, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's net assets.

9. Unseasoned Issuers (R)

The Fund may not invest more than 5% of its net assets in securities of
unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of their predecessors.

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Short Sales (R)

The Fund may not make short sales of securities unless, at the time of
each such sale and thereafter while a short position exists, the Fund owns an
equal amount of securities of the same issue or owns securities which, without
payment by the Fund of any consideration, are convertible into, or are
exchangeable for, an equal amount of securities of the same issue (and provided
that transactions in futures contracts and options are not deemed to constitute
selling securities short).

12. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by the Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

D-4

<PAGE>

13. Officers' and Directors' Ownership of Shares (R)

The Fund may not purchase or retain the securities of any issuer if (i)
one or more officers or Trustees/Directors of the Fund or its investment adviser
individually owns or would own, directly or beneficially, more than 1/2 of 1% of
the securities of such issuer, and (ii) in the aggregate, such persons own or
would own, directly or beneficially, more than 5% of such securities.

14. Warrants (R)

The Fund may not invest more than 5% of its net assets in warrants,
and, of this amount, no more than 2% of each Fund's total net assets may be
invested in warrants that are listed on neither the New York nor the American
Stock Exchange.

15. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

16. Joint Trading (R)

The Fund may not participate on a joint or joint and several basis in
any trading account in any securities. (A Fund's "bunching" of orders for the
purchase or sale of portfolio securities with its investment adviser or accounts
under its management to reduce brokerage commissions, to average prices among
them or to facilitate such transactions is not considered a trading account in
securities for purposes of this restriction).

17. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof, except that the Fund is authorized to write covered call
options on portfolio securities and to purchase call options in closing purchase
transactions, provided that (i) such options are listed on a national securities
exchange, (ii) the aggregate market value of the underlying securities does not
exceed 25% of the Fund's total net assets, taken at current market value on the
date of any such writing, and (iii) the Fund retains the underlying securities
for so long as call options written against them make the shares subject to
transfer upon the exercise of any options.

D-5

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

U.S. REAL ESTATE EQUITY FUND

1. Diversification (S)

2. Concentration (S)

The Fund may not concentrate its investments in any one industry,
except that the Fund will invest at least 65% of its total assets in securities
of companies engaged principally in the real estate industry. The Fund may
invest more than 25% of its total assets in any one sector of the real estate or
real estate related industries. In addition, the Fund may, from time to time,
invest in the securities of companies unrelated to the real estate industry
whose real estate assets are substantial relative to the price of the companies'
securities.

3. Issuing Senior Securities (S)

4. Borrowing (Reverse Repurchase Agreements) (S)

The Fund may not borrow money except as a temporary measure 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 Fund may not borrow money, issue senior
securities or enter into reverse repurchase agreements, except for temporary or
emergency purposes, and not for leveraging, and then in amounts not in excess of
10% of the value of the Fund's total assets at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of each Fund's total assets at the time of such
borrowing. The Fund will not enter into reverse repurchase agreements exceeding
5% of the value of its total assets.

D-6

<PAGE>

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate, except that (i) the Fund may purchase, sell or invest in
marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts; and (ii) the Fund may purchase
securities secured by real estate or interests therein, or issued by companies
or investment trusts which invest in real estate or interests therein. The Fund
will not purchase direct interests in real estate.

7. Commodities (S)

The Fund may not purchase, sell or invest in physical commodities
unless acquired as a result of ownership of securities or other instruments (but
this shall not prevent a Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities).

8. Loans to Others (S)

9. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

D-7

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

LIMITED MARKET FUND, INC.

1. Diversification (S)

2. Concentration

3. Issuing Senior Securities (S)

The Fund may not issue senior securities, as defined in the Investment
Company Act of 1940, as amended, except insofar as the Fund may be deemed to
have issued a senior security by reason of borrowing money in accordance with
the restrictions described above.

4. Borrowing (Reverse Repurchase Agreements) (S)

The Fund may not borrow money except as a temporary measure 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 Fund may not borrow money except from
banks as a temporary measure to facilitate redemption requests which might
otherwise require the untimely disposition of portfolio investments and for
extraordinary or emergency purposes provided that the aggregate amount of such
borrowings shall not exceed 5% of the value of the Fund's total net assets at
the time of any such borrowing, or mortgage, pledge or hypothecate its assets,
except in an amount sufficient to secure any such borrowing.

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

D-8

<PAGE>

6. Real Estate (S)

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities or commodity
contracts.

8. Loans to Others (S)

9. Short Sales (R)

10. Margin Purchases (R)

11. Officers' and Directors' Ownership of Shares (R)

12. Warrants (R)

D-9

<PAGE>

13. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

14. Joint Trading (R)

15. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof.

D-10

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

AGGRESSIVE GROWTH FUND

1. Diversification (S)

2. Concentration (S)

3. Issuing Senior Securities (S)

See "Borrowing"

4. Borrowing (Reverse Repurchase Agreements) (S)

The Fund may not borrow money except as a temporary measure 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 Fund may not borrow money except on an
unsecured basis up to 25% of its net assets, subject to the requirements that
the value of the Fund's assets, including the proceeds of borrowings, does not
at any time become less than 300% of the Fund's indebtedness; provided, however,
that if the value of the Fund's assets becomes less than such amount, the Fund
will reduce its borrowings within three business days so that the value of the
Fund's assets will be at least 300% of its indebtedness.

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

D-11

<PAGE>

6. Real Estate (S)

7. Commodities (S)

8. Loans to Others (S)

9. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R) The

Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

D-12

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

GROWTH AND INCOME FUND

1. Diversification (S)

The Fund may invest more than 5% of its net assets, at the time of the
investment in question, in the securities of any one issuer other than the U.S.
government and its agencies or instrumentalities. The Fund may not purchase more
than 10% of any class of securities of any one issuer other than the U.S.
government and its agencies or instrumentalities.

2. Concentration (S)

The Fund may not concentrate its investments in any one industry,
except that each Fund may invest up to 25% of its total net assets in any one
industry.

3. Issuing Senior Securities (S)

The Fund may not issue senior securities, as defined in the Investment
Company Act of 1940, except that this restriction shall not be deemed to
prohibit the Fund from (i) making any permitted borrowings, mortgages or
pledges, (ii) lending its portfolio securities, or (iii) entering into permitted
repurchase transactions.

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money except from banks as a temporary measure
for extraordinary or emergency purposes, provided that the aggregate amount of
such borrowings shall not exceed 5% of the value of the Fund's total assets at
the time of such borrowing; or mortgage, pledge or hypothecate its assets,
except in an amount not exceeding 15% of its assets taken at cost to secure such
borrowing.

5. Underwriting Securities of Other Issuers (S)

The Fund will not underwrite any issue of securities except as they may
be deemed an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with their investment objective, policies and
limitations.

D-13

<PAGE>

6. Real Estate (S)

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities or commodity
contracts.

8. Loans to Others (S)

The Fund may not lend its funds to other persons, except through the
purchase of a portion of an issue of debt securities publicly distributed.

9. Unseasoned Issuers (R)

The Fund may not invest more than 10% of its total net assets in
securities of unseasoned issuers that have been in continuous operation for less
than three years, including operating periods of their predecessors.

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Short Sales (R)

The Fund may not make short sales of securities unless, at the time of
each such sale and thereafter while a short position exists, the Fund owns an
equal amount of securities of the same issue or owns securities which, without
payment by the Fund of any consideration, are convertible into, or are
exchangeable for, an equal amount of securities of the same issue. The Fund may,
as a defensive strategy, make short sales of securities

12. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

13. Other Investment Companies (R)

The Fund may purchase the securities of other investment companies,
except to the extent such purchases are not permitted by applicable law.

D-14

<PAGE>

14. Officers' and Directors' Ownership of Shares (R)

The Fund may not purchase or retain the securities of any issuer if (i)
one or more officers or Trustees of the fund or its investment adviser
individually owns or would own, directly or beneficially, more than 1/2 of 1% of
the securities of such issuer, and (ii) in the aggregate, such persons own or
would own, directly or beneficially, more than 5% of such securities. Portfolio
securities of the Fund may not be purchased from or sold or loaned to its
Adviser or affiliate thereof, or any of their directors, officers or employees.

15. Warrants (R)

The Fund may not invest more than 5% of its net assets in warrants and,
of this amount, no more than 2% of the Fund's net assets may be invested in
warrants that are listed on neither the New York nor the American Stock
Exchange.

16. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

17. Joint Trading (R)

The Fund may not participate on a joint or joint and several basis in
any trading account in any securities. (The "bunching" of orders or the purchase
or sale of portfolio securities with its investment adviser or accounts under
its management to reduce brokerage commissions, to average prices among them or
to facilitate such transactions is not considered a trading account in
securities for purposes of this restriction).

18. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof, except that the Fund is authorized to write covered call
options on portfolio securities and to purchase call options in closing purchase
transactions, provided that (i) such options are listed on a national securities
exchange, (ii) the aggregate market value of the underlying securities does not
exceed 25% of the Fund's net assets, taken at current market value on the date
of any such writing, and (iii) the Fund retains the underlying securities for so
long as call options written against them make the shares subject to transfer
upon the exercise of any options.

D-15

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

UTILITY FUND

1. Diversification (S)

Fund may not invest more than 5% of its total assets, at the time of
the investment in question, in the securities of any one issuer other than the
U.S. government and its agencies or instrumentalities, except that up to 25% of
the value of the fund's total assets may be invested without regard to such 5%
limitation. The Fund may not purchase more than 10% of the outstanding voting
securities of any one issuer.

2. Concentration (S)

The Fund will not invest more than 25% of its total assets (valued at
the time of investment) in securities of companies engaged principally in any
one industry other than the utilities industry, except that this restriction
does not apply to cash or cash items and securities issued or guaranteed by the
U.S.
government, its agencies or instrumentalities.

3. Issuing Senior Securities (S)

Fund will not issue senior securities except that each Fund may borrow
money and engage in reverse repurchase agreements in amounts up to one-third or
the value of its total assets, including the amounts borrowed and except to the
extent a Fund may enter into futures contracts

4. Borrowing (including Reverse Repurchase Agreements) (S)

Fund may borrow money and engage in reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including the amounts
borrowed and except to the extent a Fund may enter into futures contracts. The
Funds will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary or emergency
measure to facilitate management of their portfolios by enabling them to, for
example, meet redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of total assets are outstanding. The
Fund will not mortgage, pledge or hypothecate any assets except to secure
permitted borrowings, and then the Fund may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 15% of the value of
total assets at the time of borrowing. Margin deposits for the purchase and sale
of financial futures contracts and related options and segregation or collateral
arrangements made in connection with options activities are not deemed to be a
pledge.

D-16

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

Fund will not buy or sell real estate although each Fund may invest in
securities of companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate. The Fund will not invest in limited partnership interests in real
estate.

7. Commodities (S)

Fund will not purchase or sell commodities or commodity contracts;
however, the Fund may enter into futures contracts on financial instruments or
currency and sell or buy options on such contracts.

8. Loans to Others (S)

Fund will not lend any of its assets, except portfolio securities up to
15% of the value of its total assets. This does not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
agreements, or other transactions which are permitted by the Fund's investment
objective and policies or the Declaration of Trust governing the Fund.

9. Short Sales (R)

The Fund will not sell any securities short.

10. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

11. Other Investment Companies (R)

The Fund may invest in securities of other investment companies. The
Fund will purchase securities of investment companies only in open-market
transactions involving customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a merger,
consolidation or acquisition of assets. It should be noted that investment
companies incur certain expenses such as management fees and therefore any
investment by a Fund in shares of another investment company would be subject to
such duplicate expenses.

D-17

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S" Fundamental Restriction to be Standardized

"R" Fundamental Restriction to be Reclassified as Non-Fundamental

SMALL CAP EQUITY INCOME FUND

1. Diversification (S)

The Fund may not invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S government and its agencies or instrumentalities, except that up to 25%
of the value of a Fund's total assets may be invested without regard to such 5%
limitation. The Fund may not purchase more than 10% of any class of securities
of any one issuer other than the U.S. government and its agencies or
instrumentalities.

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply (i) with respect to the
Fund, to obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities. For purposes of this restriction, utility companies, gas,
electric, water and telephone companies will be considered separate industries.

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposed, and
then not for leveraging, in then in amounts not in excess of 10% of the value of
the Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such borrowing, provided that
the Fund will not purchase any securities at any time when borrowings, including
reverse repurchase agreements, exceed 5% of the value of its total assets. The
Fund will not enter into reverse repurchase agreements exceeding 5% of the value
of its total assets.

D-18

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund may not purchase or invest in real estate or interests in real
estate (but this shall not prevent the Fund from investing in marketable
securities issued by companies such as real estate investment trusts which deal
in real estate or interests therein). The Fund may invest without limit in
investments related to real estate, including REITS)

7. Commodities (S)

The Fund may not purchase, sell or invest in physical commodities
unless acquired as a result of ownership of securities or other instruments (but
this shall not prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities).

8. Loans to Others (S)

The Fund may not lend its portfolio securities, unless the borrower is
a broker, dealer or financial institution that pledges and maintains collateral
with the Fund consisting of cash or securities issued or guaranteed by the U.S.
government having a value at all times not less than 100% of the current market
value of the loaned securities, including accrued interest, provided that the
aggregate amount of such loans shall not exceed 30% of the Fund's total assets.

9. Other Investment Companies (R)

The Fund may purchase the securities of other investment companies,
except to the extent such purchases are not permitted by applicable law.

10. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

D-19

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS AND POLICIES

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INCOME AND GROWTH FUND

1. Diversification (S)

2. Concentration (S)

The Fund may not concentrate its investments in any one industry,
except that each Fund may invest up to 25% of its total net assets in any one
industry.

3. Issuing Senior Securities (S)

(See "Borrowing")

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money except from banks as a temporary measure
to facilitate redemption requests which might otherwise require the untimely
disposition of portfolio investments and for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings shall not exceed
5% of the value of the Fund's total net assets at the time of any such
borrowing, or mortgage, pledge or hypothecate its assets, except in an amount
sufficient to secure any such borrowing.

5. Underwriting Securities of Other Issuers (S) The Fund will not underwrite any
issue of securities except as they may be deemed an underwriter under the
Securities Act of 1933 in connection with the sale of securities in accordance
with their investment objective, policies and limitations.

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate, except that (i) the Fund may purchase, sell or invest in
marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts. The Fund may invest up to 15%of
its net assets in investments related to real estate, including REITS.

D-20

<PAGE>

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities or commodity
contracts.

8. Loans to Others (S)

The Fund may not lend its portfolio securities, unless the borrower is
a broker, dealer or financial institution that pledges and maintains collateral
with the Fund consisting of cash, letters of credit or securities issued or
guaranteed by the U.S. government having a value at all times not less than 100%
of the value of the loaned securities, including accrued interest, provided that
the aggregate amount of such loans shall not exceed 30% of the Fund's net
assets.

9. Unseasoned Issuers (R)

The Fund may not invest more than 5% of its total assets in securities
of unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of their predecessors.

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Short Sales (R)

The Fund may not make short sales of securities unless, at the time of
each such sale and thereafter while a short position exists, the Fund owns an
equal amount of securities of the same issue or owns securities which, without
payment by the Fund of any consideration, are convertible into, or are
exchangeable for, an equal amount of securities of the same issue. The Fund may,
as a defensive strategy, make short sales of securities.

12. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

13. Other Investment Companies (R)

The Fund may purchase the securities of other investment companies,
except to the extent such purchases are not permitted by applicable law.

14. Officers' and Directors' Ownership of Shares (R)

The Fund may not purchase or retain the securities of any issuer if (i)
one or more officers or Trustees of the Fund or its investment adviser
individually owns or would own, directly or beneficially, more than 1/2 of 1% of
the securities of such issuer, and (ii) in the aggregate, such persons own or
would own, directly or beneficially, more than 5% of such securities. Portfolio
securities of the Fund may not be purchased from or sold or loaned to its
Adviser or affiliate thereof, or any of their directors, officers or employees.

D-21

<PAGE>

15. Warrants (R)

16. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R) The

Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

17. Joint Trading (R)

18. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof, except that the Fund is authorized to write covered call
options on portfolio securities and to purchase call options in closing purchase
transactions, provided that (i) such options are listed on a national securities
exchange, (ii) the aggregate market value of the underlying securities does not
exceed 25% of the Fund's net assets, taken at current market value on the date
of any such writing, and (iii) the Fund retains the underlying securities for so
long as call options written against them make the shares subject to transfer
upon the exercise of any options.

D-22

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

VALUE FUND

1. Diversification (S)

2. Concentration (S)

The Fund will not invest 25% or more of the value of their total assets
in any one industry except the Fund may invest 25% or more of its total assets
in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

3. Issuing Senior Securities (S)

The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as a temporary
measure for extraordinary or emergency purposes and then only in amounts not in
excess of 10% of the value of its total assets; provided that while borrowings
exceed 5% of the Fund's total assets, any such borrowings will be repaid before
additional investments are made. The Fund will not purchase any securities while
borrowings in excess of 5% of the value of its total assets are outstanding.

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may borrow money directly or through reverse repurchase
agreements as a temporary measure for extraordinary or emergency purposes and
then only in amounts not in excess of 10% of the value of its total assets;
provided that while borrowings exceed 5% of the Fund's total assets, any such
borrowings will be repaid before additional investments are made. The Fund will
not purchase any securities while borrowings in excess of 5% of the value of its
total assets are outstanding. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage purposes. The Fund will
not mortgage, pledge or hypothecate any assets except to secure permitted
borrowings. In these cases, the Fund may pledge assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 10% of the value of total
assets at the time of borrowing. Margin deposits for the purchase and sale of
financial futures contracts and related options and segregation or collateral
arrangements made in connection with options activities are not deemed to be a
pledge.

D-23

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

7. Commodities (S)

Fund will not purchase or sell commodities or commodity contracts;
however, the Fund may enter into futures contracts on financial instruments or
currency and sell or buy options on such contracts.

8. Loans to Others (S)

The Fund will not lend any of its assets except that it may purchase or
hold corporate or government bonds, debentures, notes, certificates or
indebtedness or other debt securities of an issuer, repurchase agreements or
other transactions which are permitted by the Fund's investment objectives and
policies or the Declaration of Trust by which the Fund is governed or lend
portfolio securities valued at not more than 5% of its total assets to
broker-dealers.

9. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

10. Short Sales (R)

The Fund will not sell any securities short.

11. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

12. Other Investment Companies (R)

The Fund will purchase securities of investment companies only in
open-market transactions involving customary broker's commissions. However,
these limitations are not applicable if the securities are acquired in a merger,
consolidation or acquisition of assets. It should be noted that investment
companies incur certain expenses such as management fees and therefore any
investment by a Fund in shares of another investment company would be subject to
such duplicate expenses.

D-24

<PAGE>

13. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund will not purchase interests in oil, gas or other mineral
exploration or development programs or leases, although it may purchase the
publicly traded securities of companies engaged in such activities.

14. Restricted Securities (R)

The Fund will not invest more than 10% of their net assets in
securities subject to restrictions on resale under the Securities Act of 1933.

D-25

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Bond Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

U.S. GOVERNMENT

1. Diversification (S)

With respect to 75% of the value of its assets, the Fund will not
purchase securities of any one issuer (other than cash, cash items or securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities)
if as a result more than 5% of the value of its total assets would be invested
in the securities of the issuer. The Fund will not acquire more than 10% of the
outstanding voting securities of any one issuer.

2. Concentration (S)

The Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer. The Fund will not invest more than 25% of the
value of its total assets in any one industry, except the Fund may invest more
than 25% of its total assets in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

3. Issuing Senior Securities (S)

The Fund will not issue senior securities.

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
Fund may borrow money directly or through reverse repurchase agreements as a
temporary measure for extraordinary or emergency purposes in an amount up to
one-third of the value of its total assets, including the amounts borrowed. The
Fund will not purchase any securities while borrowings in excess of 5% of the
value of their total assets are outstanding.

5. Underwriting Securities of Other Issuers (S)

D-26

<PAGE>

6. Real Estate (S)

The Fund may not buy or sell real estate although the Fund may invest
in securities of companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interest in real
estate.

7. Commodities (S)

The Fund will not purchase or sell commodities or commodity contracts;
however, each Fund may enter into futures contracts on financial instruments or
currency and sell or buy options on such contracts. However, subject to their
permitted investments, the Fund may invest in companies which invest in
commodities or commodities contracts.

8. Loans to Others (S)

The Fund may lend securities pursuant to agreements requiring that the
loans be continuously secured by cash, securities of the U.S. Government or its
agencies, or any combination of cash and such securities, as collateral equal at
all times to 100% of the market value of the securities lent. The collateral
received when a Fund lends portfolio securities must be valued daily and, should
the market value of the loaned securities increase, the borrower must furnish
additional collateral to the lending Fund. During the time portfolio securities
are on loan, the borrower pays the Fund any dividends or interest paid on such
securities. Loans are subject to termination at the option of the Fund or the
borrower. A Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest earned
on the cash or equivalent collateral to the borrower or placing broker. A Fund
does not have the right to vote securities on loan, but would terminate the loan
and regain the right to vote if that were considered important with respect to
the investment. Any loan may be terminated by either party upon reasonable
notice to the other party. However, loans are made only to the borrower deemed
by the Adviser to be of good standing and when, in the judgment of the Adviser,
the consideration which can be earned currently from such securities loans
justifies the attendant risk. Such loans will not be made if, as a result, the
aggregate amount of all outstanding securities loans for the Fund exceed
one-third of the value of the Fund's total assets taken at fair market value.

In order to generate additional income, the Fund may lend portfolio
securities 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. As a matter of fundamental investment policy which cannot be
changed without shareholder approval, the Fund will lend any of its assets
except portfolio securities up to one-third of its total assets.

9. Short Sales (R)

The Fund will not sell any securities short.

10. Margin Purchases (R)

The Fund will not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin. [Prospectus also states: In
computing its daily net asset value, a Fund will mark-to-market its open futures
positions. The Fund is also required to deposit and maintain margin when it
write call options on futures contracts.

11. Pledging (R)

The Fund will not mortgage, pledge or hypothecate any assets except to
secure permitted borrowings.

D-27

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Bond Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

SHORT-INTERMEDIATE BOND

1. Diversification (S)

2. Concentration (S)

The Fund will not invest more than 25% of the value of its total assets
in any one industry except the Fund may invest more than 25% of its total assets
in securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

3. Issuing Senior Securities (S)

See "Borrowing"

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
Fund may borrow only in amounts not in excess of 5% of the value of its total
assets in order to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The entry by the
Fund into futures contracts shall be deemed a borrowing. Any such borrowings
need not be collateralized. The Fund will not purchase any securities while
borrowings in excess of 5% of the value of their total assets are outstanding.
The Fund may also enter into reverse repurchase agreements.

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

D-28

<PAGE>

7. Commodities (S)

8. Loans to Others (S)

The Fund will not lend portfolio securities valued at more than 15% of
its total assets to broker-dealers. The Fund may lend securities pursuant to
agreements requiring that the loans be continuously secured by cash, securities
of the U.S. Government or its agencies, or any combination of cash and such
securities, as collateral equal at all times to 100% of the market value of the
securities lent. The collateral received when a Fund lends portfolio securities
must be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the lending Fund.
During the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
at the option of the Fund or the borrower. A Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to the borrower or placing broker. A Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote if
that were considered important with respect to the investment. Any loan may be
terminated by either party upon reasonable notice to the other party. However,
loans are made only to the borrower deemed by the Adviser to be of good standing
and when, in the judgement of the Adviser, the consideration which can be earned
currently from such securities loans justifies the attendant risk. Such loans
will not be made if, as a result, the aggregate amount of all outstanding
securities loans for the Fund exceed 15% of the value of the Fund's total assets
taken at fair market value.

9. Short Sales (R)

The Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or of securities which, without payment of any further
consideration are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short. The use of short
sales will allow a Fund to retain certain bonds in its portfolio longer than it
would without such sales. To the extent that the Fund receives the current
income produced by such bonds for a longer period than it might otherwise, the
Fund's investment objective is furthered.

10. Margin Purchases (R)

The Fund will not purchase securities on margin , except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin. [Prospectus also states: In
computing its daily net asset value, a Fund will mark-to-market its open futures
positions. The Fund is also required to deposit and maintain margin when it
write call options on futures contracts.

11. Other Investment Companies (R)

The Fund will purchase securities of investment companies only in
open-market transactions involving customary broker's commissions. It should be
noted that investment companies incur certain expenses such as management fees
and therefore any investment by a Fund in shares of another investment company
would be subject to such duplicate expenses. It is the position of the
Securities and Exchange Commission's Staff that certain nongovernmental issuers
of CMOs and REMICs constitute investment companies pursuant to the Investment
Company Act of 1940 and either (a) investments in such instruments are subject
to the limitations set forth above or (b) the issuers of such instruments have
received orders from the Securities and Exchange Commission exempting such
instruments from the definition of investment company.

D-29

<PAGE>

12. Pledging (R)

The Fund will not mortgage, pledge or hypothecate any assets except to
secure permitted borrowings. In these cases, the Fund may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 15% of
the value of total assets at the time of borrowing. Margin deposits for the
purchase and sale of financial futures contracts and related options and
segregation or collateral arrangements made in connection with options
activities are not deemed to be a pledge.

13. Restricted Securities (R)

The Fund will not invest more than 10% of their net assets in
securities subject to restrictions on resale under the Securities Act of 1922.

14. Illiquid Securities (R)

The Fund will not invest more than 10% of their net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain securities determined by the Trustees
not to be liquid.

The Fund which invests in Rule 144A securities believes that the Staff
of the SEC has left the question of determining the liquidity of all restricted
securities (eligible for resale under the Rule) for determination by the
Trustees. The Fund may invest up to 10% of its net assets in illiquid
securities.

D-30

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Bond Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INTERMEDIATE TERM GOVERNMENT SECURITIES

1. Diversification (S)

2. Concentration

N/A

3. Issuing Senior Securities

See "Borrowing"

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
Fund will not borrow money except as a temporary measure for extraordinary or
emergency purposes in an amount up to one-third of the value of total assets,
including the amounts borrowed. Any borrowing will be done from a bank and to
the extent such borrowing exceeds 5% of the value of a Fund's total assets,
asset coverage of at least 300% is required. In the event that such asset
coverage shall at any time fall below 300%, the Fund shall within three days
thereafter or such longer period as the Securities and Exchange Commission may
prescribe by rules and regulations, reduce the amounts of its borrowings to such
an extent that the asset coverage of such borrowings shall be at least 300%.
This borrowing provision is included solely to facilitate the orderly sale of
portfolio securities to accommodate heavy redemption requests if they should
occur and is not for investment purposes. All borrowings will be repaid before
making additional investments and any interest paid on such borrowings will
reduce income.

5. Underwriting Securities of Other Issuers (S)

D-31

<PAGE>

6. Real Estate (S)

7. Commodities (S)

The Fund may not purchase commodities or commodity contracts. However,
subject to their permitted investments, the Fund may invest in companies which
invest in commodities contracts. The Fund may not make loans, except that (a)
the Fund may purchase or hold debt instruments in accordance with its investment
objective and policies; (b) the Fund may enter into repurchase agreements, and
(c) the Fund may engage in securities lending as described in the Prospectus and
in this Statement of Additional Information.

8. Loans to Others (S)

U.S. government securities equal to at least 100% of the value of the
securities loaned. As a matter of fundamental investment policy which cannot be
changed without shareholder approval, the Fund will lend any of its assets
except portfolio securities up to 15% of its total assets.

9. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control.

10. Short Sales (R)

The Fund will not sell any securities short.

11. Margin Purchases (R)

12. Other Investment Companies (R)

The Fund may only purchase securities of other investment companies
which are money market funds and CMOs and REMICs deemed to be investment
companies. In each case the Funds will only make such purchases to the extent
permitted by the Investment Company Act of 1940 and the rules and regulations
thereunder. However, these limitations are not applicable if the securities are
acquired in a merger, consolidation or acquisition of assets. It should be noted
that investment companies incur certain expenses such as management fees and
therefore any investment by a Fund in shares of another investment company would
be subject to such duplicate expenses. It is the position of the Securities and
Exchange Commission's Staff that certain nongovernmental issuers of CMOs and
REMICS constitute investment companies pursuant to the Investment Company Act of
1940 and either (a) investments in such instruments are subject to the
limitations set forth above or (b) the issuers of such instruments have received
orders from the Securities and Exchange Commission exempting such instruments
from the definition of investment company.

13. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund will not purchase interests in oil, gas or other mineral
exploration or development programs or leases, although each Fund may purchase
the securities of other issuers which invest in or sponsor such programs.

D-32

<PAGE>

14. Options (R)

The Fund may not write or purchase puts, calls, options or combinations
thereof.

15. Pledging (R)

The Fund will not mortgage, pledge or hypothecate any assets except to
secure permitted borrowings. The Fund may do so in amounts up to 10% of their
total assets. Margin deposits for the purchase and sale of financial futures
contracts and related options and segregation or collateral arrangements made in
connection with options activities are not deemed to be a pledge.

D-33

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Balanced Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

FOUNDATION FUND

1. Diversification (S)

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply (i) with respect to
each Fund, to obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities. For purposes of this restriction, utility
companies, gas, electric, water and telephone companies will be considered
separate industries.

3. Issuing Senior Securities (S)

The Fund may not issue senior securities, except as permitted by the
Investment Company Act of 1940.

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money except from banks as a temporary measure
to facilitate redemption requests which might otherwise require the untimely
disposition of portfolio investments and for extraordinary or emergency purposes
provided that the aggregate amount of such borrowings shall not exceed 5% of the
value of the Fund's total assets at the time of any such borrowing, or mortgage,
pledge or hypothecate its assets, except in an amount sufficient to secure any
such borrowing. The Fund may not enter into repurchase agreements or reverse
repurchase agreements.

5. Underwriting Securities of Other Issuers (S)

D-34

<PAGE>

6. Real Estate (S)

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities or commodity
contracts.

8. Loans to Others (S)

The Fund may not lend its funds to other persons, except through the
purchase of a portion of an issue of debt securities publicly distributed. The
Fund may not lend its portfolio securities, unless the borrower is a broker,
dealer or financial institution that pledges and maintains collateral with the
Fund consisting of cash or securities issued or guaranteed by the U.S.
government having a value at all times not less than 100% of the current market
value of the loaned securities, including accrued interest, provided that the
aggregate amount of such loans shall not exceed 30% of the Fund's total assets.

9. Unseasoned Issuers (R)

The Fund may not invest in the securities of unseasoned issuers that
have been in continuous operation for less than three years, including operating
periods of their predecessors.

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Short Sales (R)

The Fund may not make short sales of securities unless, at the time of
each such sale and thereafter while a short position exists, the Fund owns the
securities sold or securities convertible into or carrying rights to acquire
such securities.

12. Margin Purchases (R)

The Fund may not purchase securities on margin, except that each Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

13. Other Investment Companies (R)

The Fund may purchase the securities of other investment companies,
except to the extent such purchases are not permitted by applicable law.

D-35

<PAGE>

14. Officers' and Directors' Ownership of Shares (R)

The Fund may not purchase or retain the securities of any issuer if (i)
one or more officers or Trustees of a Fund or its investment adviser
individually owns or would own, directly or beneficially, more than 1/2 of 1% of
the securities of such issuer, and (ii) in the aggregate, such persons own or
would own, directly or beneficially, more than 5% of such securities. Portfolio
securities of any Fund may not be purchased from or sold or loaned to its
Adviser or any affiliate thereof, or any of their directors, officers or
employees.

15. Warrants (R)

The Fund may not invest more than 5% of its net assets in warrants and,
of this amount, no more than 2% of each Fund's net assets may be invested in
warrants that are listed on neither the New York nor the American Stock
Exchange.

16. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

17. Joint Trading (R)

The Fund may not participate on a joint or joint and several basis in
any trading account in any securities. (The "bunching of orders or the purchase
or sale of portfolio securities with its investment adviser or accounts under
its management to reduce brokerage commissions, to average prices among them or
to facilitate such transactions is not considered a trading account in
securities for purposes of this restriction).

18. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof.

D-36

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Balanced Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

TAX STRATEGIC FOUNDATION FUND

1. Diversification (S)

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply (i) with respect to
each Fund, to obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities, or (ii) to municipal securities. For purposes of
this restriction, utility companies, gas, electric, water and telephone
companies will be considered separate industries.

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements)(S)

The Fund may not borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such borrowing, provided that
the Fund will not purchase any securities at any time when borrowings, including
reverse repurchase agreements, exceed 5% of the value of its total assets. The
Fund will not enter into reverse repurchase agreements exceeding 5% of the value
of its total assets.

D-37

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate, except that (i) the Fund may purchase, sell or invest in
marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts, and (ii) The Fund may purchase,
sell or invest in municipal securities or other debt securities secured by real
estate or interests therein.

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (S)

9. Investment in Federally Tax Exempt Securities (S)

As a matter of fundamental policy, 80% of the Fund's investments in
Municipal Securities will be invested in Municipal Securities, the interest from
which is not subject to the federal alternative minimum tax.

10. Other Investment Companies (R)

The Fund may purchase the securities of other investment companies,
except to the extent such purchases are not permitted by applicable law.

11. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R) The

Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

D-38

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Balanced Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

AMERICAN RETIREMENT FUND

1. Diversification (S)

The Fund may not invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities. The Fund may not
purchase more than 10% of any class of securities of any one issuer other than
the U.S. government and its agencies or instrumentalities.

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply (i) with respect to
each Fund, to obligations issued or guaranteed by the U.S. government or its
agencies or instrumentalities. For purposes of this restriction, utility
companies, gas, electric, water and telephone companies will be considered
separate industries.

3. Issuing Senior Securities (S)

The Fund may not issue senior securities, except as permitted by the
Investment Company Act of 1940.

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money except from banks as a temporary measure
to facilitate redemption requests which might otherwise require the untimely
disposition of portfolio investments and for extraordinary or emergency purposes
and for leverage, provided that the aggregate amount of such borrowings shall
not exceed 5% of the value of the Fund's total assets at the time of any such
borrowing, or mortgage, pledge or hypothecate its assets, except in an amount
sufficient to secure any such borrowing. The Fund may not enter into repurchase
agreements or reverse repurchase agreements.

5. Underwriting Securities of Other Issuers (S)

D-39

<PAGE>

6. Real Estate (S)

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities or commodity
contracts.

8. Loans to Others (S)

The Fund may not lend its funds to other persons, except through the
purchase of a portion of an issue of debt securities publicly distributed. The
Fund may not lend its portfolio securities, unless the borrower is a broker,
dealer or financial institution that pledges and maintains collateral with the
Fund consisting of cash or securities issued or guaranteed by the U.S.
government having a value at all times not less than 100% of the current market
value of the loaned securities, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's net assets.

9. Unseasoned Issuers (R)

The Fund may not invest in the securities of unseasoned issuers that
have been in continuous operation for less than three years, including operating
periods of their predecessors.

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Short Sales (R)

12. Margin Purchases (R)

13. Other Investment Companies (R)

The Fund may purchase the securities of other investment companies,
except to the extent such purchases are not permitted by applicable law.

D-40

<PAGE>

14. Officers' and Directors' Ownership of Shares(R)

15. Warrants (R)

16. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R) The

Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

17. Joint Trading (R)

18. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof, except that the Fund is authorized (i) to write call
options traded on a national securities exchange against no more than 15% of the
value of the equity securities (including securities convertible into equity
securities) held in its portfolio, provided that the Fund owns the optioned
securities or securities convertible into or carrying rights to acquire the
optioned securities and (ii) to purchase call options in closing purchase
transactions.

19. Investment in Equity Securities(R)

The Fund may not invest more than 75% of the value of its total assets
in equity securities (including securities convertible into equity securities).

D-41

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

International/Global Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

GLOBAL REAL ESTATE EQUITY FUND

1. Diversification (S)

The Fund may not invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities. The Fund may not
purchase more than 10% of any class of securities of any one issuer other than
the U.S. government and its agencies or instrumentalities.

2. Concentration (S)

The Fund may not concentrate its investments in any one industry,
except that it will invest at least 65% of its total assets in securities of
companies engaged principally in the real estate industry.

3. Issuing Senior Securities (S)

4. Borrowing (including Repurchase Agreements and Reverse Repurchase
Agreements) (S)

The Fund may not borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such borrowing, provided that
the Fund will not purchase any securities at times when any borrowings
(including reverse repurchase agreements) are outstanding. The Fund will not
enter into reverse repurchase agreements exceeding 5% of the value of its total
assets.

5. Underwriting Securities of Other Issuers (S)

The Fund will not underwrite any issue of securities except as it may
be deemed an underwriter under the Securities Act of 1933, as amended (the "1933
Act") in connection with the sale of securities in accordance with its
investment objectives, policies and limitations.

D-42

<PAGE>

6. Real Estate (S)

The Fund may not purchase or invest in real estate or interests in real
estate (although they may purchase securities secured by real estate or
interests therein or issued by companies or investment trusts which invest in
real estate or interests therein).

7. Commodities (S)

The Funds will not purchase, sell or invest in commodities or commodity
contracts; provided, however, that this policy does not prevent either Fund from
purchasing and selling currency futures contracts and entering into forward
foreign currency contracts.

8. Loans to Others (S)

The Fund may not lend its funds to other persons, except through the
purchase of a portion of an issue of debt securities publicly distributed or the
entering into of repurchase agreements. The Fund may not lend portfolio
securities, unless the borrower is a broker-dealer or financial institution that
pledges and maintains collateral with the Fund consisting of cash or securities
issued or guaranteed by the U.S. government having a value at all times not less
than 100% of the current market-value of the loaned securities, including
accrued interest, provided that the aggregate amount of such loans shall not
exceed 30% of the Fund's total assets.

9. Unseasoned Issuers(R)

The Fund may not invest more than 15% of its net assets in securities
of unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of its predecessors, except obligations
issued or guaranteed by the U.S. government and its agencies or
instrumentalities (this limitation does not apply to real estate investment
trusts).

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Short Sales (R)

12. Margin Purchases (R)

D-43

<PAGE>

13. Officers' and Directors' Ownership of Shares (R)

The Fund may not purchase or retain the securities of any issuer if (i)
one or more officers or Trustees of a Fund or its investment adviser or
investment sub-adviser individually owns or would own, directly or beneficially,
more than 1/2 of 1% of the securities of such issuer, and (ii) in the aggregate,
such persons own or would own, directly or beneficially, more than 5% of such
securities.

14. Warrants (R)

The Fund may not invest more than 5% of its net assets in warrants,
and, of this amount, no more than 2% of the Fund's total net assets may be
invested in warrants that are listed on either the New York nor the American
Stock Exchanges.

15. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R) The

Fund may not purchase, sell or invest in interests in oil, gas or other
mineral exploration or development programs.

16. Joint Trading (R)

The Fund may not participate on a joint or joint and several basis in
any trading account in any securities. (The "bunching of orders for the purchase
or sale of portfolio securities with its investment adviser or accounts under
its management to reduce brokerage commissions, to average prices among them or
to facilitate such transactions is not considered a trading account in
securities for purposes of this restriction).

17. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof except as permitted under "Description of Funds -
Investment Practices and Restrictions" in the Fund's Prospectus.

D-44

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

International/Global Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

EMERGING MARKETS GROWTH FUND

1. Diversification (S)

The Fund may not invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities and repurchase
agreements collateralized by such securities except that up to 25% of the value
of a Fund's total assets may be invested without regard to such 5% limitation.
The Fund may not purchase more than 10% of the outstanding voting securities of
any one issuer.

2. Concentration (S)

The Fund will not invest 25% or more of the value of the total assets
in any one industry except that it may invest more than 25% of its total assets
in securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. For purposes of this restriction, utility companies, gas,
electric, water and telephone companies will be considered separate industries.

3. Issuing Senior Securities (S)

4. Borrowing (including Repurchase Agreements and Reverse Repurchase
Agreements)(S)

The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts borrowed and
except to the extent that a Fund may enter into futures contracts. The Fund will
not borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary or emergency measure to
facilitate management of its portfolios by enabling them to, for example, meet
redemption requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. A Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.

D-45

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although the Fund may invest in securities
of companies whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.

7. Commodities (S)

The Fund will not invest in commodities except that the Fund reserves
the right to engage in transactions including futures contracts, options and
forward contracts with respect to securities indices or currencies.

8. Loans to Others (S)

The Fund will not lend any of its assets, except portfolio securities
up to one-third of the value of its total assets. This does not prevent the Fund
from purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's investment
objectives and policies or the Declaration of Trust governing the Fund.

9. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

10. Short Sales (R)

The Fund will not sell any securities short.

11. Margin Purchases (R)

12. Pledging (R)

The Fund will not mortgage, pledge or hypothecate any assets except to
secure permitted borrowings. In these cases, a Fund may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 15% of
the value of total assets at the time of borrowing. For purposes of this
limitation, the following are not deemed to be pledges: margin deposits for the
purchase and sale of financial futures contracts and related options and
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.

D-46

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

International/Global Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INTERNATIONAL EQUITY FUND

1. Diversification (S)

The Fund may not invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities and repurchase
agreements collateralized by such securities except that up to 25% of the value
of a Fund's total assets may be invested without regard to such 5% limitation.
The Fund may not purchase more than 10% of the outstanding voting securities of
any one issuer.

2. Concentration (S)

3. Issuing Senior Securities (S)

4. Borrowing (including Repurchase Agreements and Reverse Repurchase
Agreements)(S)

D-47

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

7. Commodities (S)

8. Loans to Others (S)

9. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

10. Short Sales (R)

The Fund will not sell any securities short.

11. Margin Purchases (R)

12. Pledging (R)

D-48

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

International/Global Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

GLOBAL LEADERS FUND

1. Diversification (S)

The Fund may not purchase more than 10% of any class of securities of
any one issuer other than the U.S. government and its agencies or
instrumentalities.

2. Concentration (S)

The Fund will not invest 25% or more of the value of its total assets
in any one industry except that it may invest more than 25% of its total assets
in securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. For purposes of this restriction, utility companies, gas,
electric, water and telephone companies will be considered separate industries.

3. Issuing Senior Securities (S)

4. Borrowing (including Repurchase Agreements and Reverse Repurchase
Agreements) (S)

D-49

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

7. Commodities (S)

8. Loans to Others (S)

The Fund may not lend their funds to other persons, except through the
purchase of a portion of an issue of debt securities publicly distributed or the
entering into of repurchase agreements. The Fund may not lend their portfolio
securities, unless the borrower is a broker-dealer or financial institution that
pledges and maintains collateral with the Fund consisting of cash or securities
issued or guaranteed by the U.S. government having a value of at all times not
less than 100% of the current market-value of the loaned securities, including
accrued interest, provided that the aggregate amount of such loans shall not
exceed 30% of the Fund's net assets.

9. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

10. Margin Purchases (R)

D-50

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Money Market Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

MONEY MARKET FUND

1. Diversification (S)

The Fund may not purchase more than 10% of any class of securities of
any one issuer other than the U.S. government and its agencies or
instrumentalities.

For purposes of diversification under the 1940 Act, the identification
of the issuer of Municipal Obligations depends on the terms and conditions of
the obligation.

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply to obligations issues
or guaranteed by the U.S. government or its agencies or instrumentalities, or
with respect to Pennsylvania, Tax Exempt and Institutional Tax Exempt, to
municipal securities and certificates of deposit and bankers' acceptances issued
by domestic branches of U.S. banks.

3. Issuing Senior Securities (S)

4. Borrowing (Including Reverse Repurchase Agreements)(S)

The Fund may not borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such borrowing, provided that
the Fund will not purchase any securities at times when any borrowings
(including reverse repurchase agreements) are outstanding. The Fund will not
enter into reverse repurchase agreements exceeding 5% of the value of its total
assets.

A Fund will not purchase any securities whenever any borrowings
(including reverse repurchase agreements) are outstanding. If a Fund enters into
a reverse repurchase agreement, it will place in a segregated custodial account
cash, United States Government securities or liquid high grade debt obligations
having a value equal to the repurchase price (including accrued interest) and
will subsequently monitor the account to ensure that such equivalent value is
maintained. Reverse repurchase agreements involve risk that the market value of
the securities sold by a Fund may decline below the repurchase price of those
securities.

D-51

<PAGE>

5. Underwriting Securities of Other Issuers(S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate except that the Fund may purchase sell or invest in marketable
securities of companies holding real estate or interests in real estate,
including real estate investment trusts.

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (S)

The Fund may not lend its funds to other persons, provided that it may
purchase money market securities or enter into repurchase agreements. The Fund
may not lend its portfolio securities, unless the borrower is a broker, dealer
or financial institution that pledges and maintains collateral with the Fund
consisting of cash, letters of credit or securities issued or guaranteed by the
U.S. government having a value at all times not less than 100% of the current
market value of the loaned securities, including accrued interest, provided that
the aggregate amount of such loans shall not exceed 30% of the Fund's total
assets.

9. Unseasoned Issuers (R)

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Short Sales (R)

The Fund may not make short sales of securities or maintain a short
position.

12. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

D-52

<PAGE>

13. Officers' and Directors' Ownership of Shares (R)

14. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs(R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

15. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof, except the Fund may do so as permitted under "Description
of the Funds - Investment Objective and Policies" in each Fund's Prospectus.

16. Investment in Money Market Securities (R)

The Fund may not purchase any securities other than money market
instruments as described under "Description of Funds - Investment Objective and
Policies" in the Fund's Prospectus.

D-53

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Money Market Funds

"S" Fundamental Restriction to be Standardized

"R" Fundamental Restriction to be Reclassified as Non-Fundamental

TAX EXEMPT MONEY MARKET FUND

1. Diversification (S)

The Fund may not invest more than 5% of their total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities, except that up to 25%
of the value of the Fund's total assets may be invested without regard to such
5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of each Fund's portfolio.

For purposes of diversification under the 1940 Act, the identification
of the issuer of Municipal Obligations depends on the terms and conditions of
the obligation.

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply to obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, or
with respect to Pennsylvania, Tax Exempt and Institutional Tax Exempt, to
municipal securities and certificates of deposit and bankers' acceptances issued
by domestic branches of U.S. banks.

3. Issuing Senior Securities (S)

4. Borrowing (Including Reverse Repurchase Agreements) (S)

The Fund may not borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such borrowing, provided that
the Fund will not purchase any securities at times when any borrowings
(including reverse repurchase agreements) are outstanding. The Fund will not
enter into reverse repurchase agreements exceeding 5% of the value of its total
assets.

D-54

<PAGE>

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

6. Real Estate(S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate except that the Fund may purchase municipal securities and other
debt securities secured by real estate or interests therein.

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (S)

The Fund may not lend its funds to other persons; however, it may
purchase issues of debt securities, enter into repurchase agreements and acquire
privately negotiated loans made to municipal borrowers. The Fund may not lend
its portfolio securities, unless the borrower is a broker, dealer or financial
institution that pledges and maintains collateral with the Fund consisting of
cash, letters of credit or securities issued or guaranteed by the U.S.
government having a value at all times not less than 100% of the current market
value of the loaned securities, including accrued interest, provided that the
aggregate amount of such loans shall not exceed 30% of the Fund's total assets.

9. Investment in Federally Tax Exempt Securities (S)

As a matter of fundamental policy, which may not be changed without
shareholder approval, the Fund will invest at least 80% of its net assets in
Municipal Securities, the interest from which is not subject to the Federal
alternative minimum tax.

10. Unseasoned Issuers (R)

The Fund may not invest more than 5% of its total assets in taxable
securities of unseasoned issuers that have been in continuous operation for less
than three years, including operating periods of their predecessors, except that
(i) each Fund may invest in obligations issued or guaranteed by the U.S.
government and its agencies or instrumentalities, and (ii) the Fund may invest
in municipal securities.

11. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

12. Short Sales (R)

The Fund may not make short sales of securities or maintain a short
position.

D-55

<PAGE>

13. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

14. Officers' and Directors' Ownership of Shares (R)

15. Warrants (R)

The Fund may not invest more than 5% of their total net assets in
warrants, and, of this amount, no more than 2% of the Fund's total net assets
may be invested in warrants that are listed on neither the New York nor the
American Stock Exchange.

16. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

17. Options(R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof. The Fund may purchase securities with rights to put
securities to the seller in accordance with its investment program.

18. Illiquid Securities (R)

The Fund will limit the value of its investments in any floating or
variable rate securities which are not readily marketable and in all other not
readily marketable securities to 10% or less of its net assets.

19. Investment in Municipal Securities (R)

The Fund may not invest more than 20% of its total assets in securities
other than municipal securities including municipal bonds, short-term municipal
notes and tax exempt commercial paper, unless extraordinary circumstances
dictate a more defensive posture.

D-56

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Money Market Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

TREASURY MONEY MARKET FUND

1. Diversification (S)

For purposes of diversification under the 1940 Act, the identification
of the issuer of Municipal Obligations depends on the terms and conditions of
the obligation.

2. Concentration (S)

N/A

3. Issuing Senior Securities (S)

4. Borrowing (Including Reverse Repurchase Agreements) (S)

The Fund will not issue senior securities except that the Fund may
borrow money directly, as a temporary measure of extraordinary or emergency
purposes and then only in amounts not in excess of 5% of the value of its total
assets, or in an amount up to one-third of the value of its total assets,
including the amount borrowed, in order to meet redemption requests without
immediately selling portfolio instruments. Any such borrowings need not be
collateralized. The Fund will not purchase any securities while borrowings in
excess of 5% of the total value of its total assets are outstanding. The Fund
will not borrow money or engage in reverse repurchase agreements for investment
leverage purposes. The Fund will not mortgage, pledge or hypothecate any assets
except to secure permitted borrowings. In these cases, the Fund may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.

D-57

<PAGE>

5. Underwriting Securities of Other Issuers (S)

N/A

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate.

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (S)

The Fund will not lend any of its assets, except that it may purchase
or hold U.S. Treasury obligations, including repurchase agreements.

9. Short Sales (R)

The Fund may not make short sales of securities or maintain a short
position; except that, at all times when a short position is open it owns an
equal amount of such securities or of securities which, without payment of any
further consideration are convertible into or exchangeable for securities of the
same issue as, and equal in amount to, the securities sold short.

10. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

11. Officers' and Directors' Ownership of Shares (R)

D-58

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Money Market Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INSTITUTIONAL MONEY MARKET FUND

1. Diversification (S)

The Fund may not invest more than 5% of their total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities. For this purpose each
political subdivision, agency or instrumentality and each multi-state agency of
which a state is a member, and each public authority which issues industrial
development bonds on behalf of a private entity, will be regarded as a separate
issuer for determining the diversification of each Fund's portfolio. The Fund
may not purchase more than 10% of any class of securities of any one issuer
other than the U.S. government and its agencies or instrumentalities.

For purposes of diversification under the 1940 Act, the identification
of the issuer of Municipal Obligations depends on the terms and conditions of
the obligation.

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply to obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, or
with respect to Pennsylvania, Tax Exempt and Institutional Tax Exempt, to
municipal securities and certificates of deposit and bankers' acceptances issued
by domestic branches of U.S. banks.

3. Issuing Senior Securities (S)

D-59

<PAGE>

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such borrowing, provided that
the Fund will not purchase any securities at times when any borrowings
(including reverse repurchase agreements) are outstanding. The Fund will not
enter into reverse repurchase agreements exceeding 5% of the value of its total
assets.

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate except that the Fund may purchase, sell or invest in marketable
securities of companies holding real estate or interests in real estate,
including real estate investment trusts.

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (including Repurchase Agreements) (S)

D-60

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Money Market Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INSTITUTIONAL TREASURY MONEY MARKET

1. Diversification (S)

For purposes of diversification under the 1940 Act, the identification
of the issuer of Municipal Obligations depends on the terms and conditions of
the obligation.

2. Concentration (S)

N/A

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund will not issue senior securities except that the Fund may
borrow money directly, as a temporary measure for extraordinary or emergency
purposes and then only in amounts not in excess of 5% of the value of its total
assets, or in an amount up to one-third of the value of its total assets,
including the amount borrowed, in order to meet redemption requests without
immediately selling portfolio instruments. Any such borrowings need not be
collateralized. The Fund will not purchase any securities while borrowings in
excess of 5% of the total value of its total assets are outstanding. The Fund
will not borrow money or engage in reverse repurchase agreements for investment
leverage purposes. The Fund will not mortgage, pledge or hypothecate any assets
except to secure permitted borrowings. In these cases, the Fund may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.

5. Underwriting Securities of Other Issuers (S)

N/A

D-61

<PAGE>

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate.

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (including Repurchase Agreements) (S)

The Fund will not lend any of its assets, except that it may purchase
or hold U.S. Treasury obligations, including repurchase agreements.

D-62

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Money Market Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INSTITUTIONAL TAX-EXEMPT

1. Diversification (S)

For purposes of diversification under the 1940 Act, the identification
of the issuer of Municipal Obligations depends on the terms and conditions of
the obligation.

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply to obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, or to
municipal securities and certificates of deposit and bankers' acceptances issued
by domestic branches of U.S. banks.

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements) (S)

D-63

<PAGE>

5. Underwriting Securities of Other Issuers(S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

6. Real Estate (S)

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (including Repurchase Agreements) (S)

The Fund may not lend its funds to other persons; however, it may
purchase issues of debt securities, enter into repurchase agreements and acquire
privately negotiated loans made to municipal borrowers. The Fund may not lend
its portfolio securities, unless the borrower is a broker, dealer or financial
institution that pledges and maintains collateral with the Fund consisting of
cash, letters of credit or securities issued or guaranteed by the U.S.
government having a value at all times not less than 100% of the current market
value of the loaned securities, including accrued interest, provided that the
aggregate amount of the loaned securities, including accrued interest, provided
that the aggregate amount of such loans shall not exceed 30% of the Fund's total
assets.

9. Investment in Federally Tax Exempt Securities (S)

As a matter of fundamental policy, which may not be changed without
shareholder approval, the Fund will invest at least 80% of its net assets in
Municipal Obligations, the interest from which is not subject to the Federal
alternative minimum tax.

10. Investment in Municipal Securities (R)

D-64

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Money Market Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

PENNSYLVANIA TAX-FREE MONEY MARKET

1. Diversification (S)

For purposes of diversification under the 1940 Act, the identification
of the issuer of Municipal Obligations depends on the terms and conditions of
the obligation.

2. Concentration (S)

The Fund may not invest 25% or more of its total assets in the
securities of issuers conducting their principal business activities in any one
industry; provided, that this limitation shall not apply to obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, or to
municipal securities and certificates of deposit and bankers' acceptances issued
by domestic branches of U.S. banks.

The Fund does not intend to concentrate its investments in any one
industry. Thus, from time to time, the Fund may invest 25%or more of its total
assets in Municipal Obligations which are related in such a way that an
economic, business or political development or change affecting one such
Obligation would also affect the other Obligations.

3. Issuing Senior Securities (S)

The Fund shall not borrow money, issue senior securities, or pledge,
mortgage or hypothecate its assets, except that the Fund may borrow from banks
if immediately after each borrowing there is asset coverage of at least 300%.

D-65

<PAGE>

4. Borrowing (including Reverse Repurchase Agreements) (S)

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers.

6. Real Estate (S)

The Fund will not buy or sell real estate although the Fund may invest
in securities of companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate.

7. Commodities (S)

N/A

8. Loans to Others (including Repurchase Agreements) (S)

The Fund may not lend its portfolio securities, unless the borrower is
a broker, dealer or financial institution that pledges and maintains collateral
with the Fund consisting of cash, letters of credit or securities issued or
guaranteed by the U.S. government having a value at all times not less than 100%
of the current market value of the loaned securities, including accrued
interest, provided that the aggregate amount of such loans shall not exceed 5%
of the Fund's total assets.

The Fund will enter into repurchase agreements only with
broker-dealers, domestic banks or recognized financial institutions which, in
the opinion of the Fund's Adviser, present minimal credit risks.

9. Investment in Federally Tax Exempt Securities (S)

The Fund invests at least 80% of its net assets in municipal
obligations issued by the Commonwealth of Pennsylvania or its counties,
municipalities, authorities or other political subdivisions, and municipal
obligations issued by territories or possessions of the United States, such as
Puerto Rico (collectively, "Municipal Obligations"), the interest on which, in
the opinion of bond counsel, is exempt from Federal taxes. The Fund limits its
investment to Municipal Obligations with remaining maturities of thirteen months
or less and will maintain a dollar-weighted average portfolio maturity of 90
days or less.

10. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

11. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

D-66

<PAGE>

12. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

13. Options (R)

The Fund shall not write, purchase or sell puts, calls, warrants or
options or any combination thereof, except that the Fund may purchase securities
with put or demand rights.

14. Investment in Municipal Securities (R)

The Fund may not invest more than 20% of its total assets in securities
other than municipal securities including municipal bonds, short-term municipal
notes and tax exempt commercial, unless extraordinary circumstances dictate a
more defensive posture.

15. Investment in State Tax Exempt Securities (S)

The Fund invests at least 80% of its net assets in municipal
obligations issued by the Commonwealth of Pennsylvania or its counties,
municipalities, authorities or other political subdivisions, and municipal
obligations issued by territories or possessions of the United States, such as
Puerto Rico (collectively, "Municipal Obligations"), the interest on which, in
the opinion of bond counsel, is exempt from Pennsylvania personal income taxes.
The Fund limits its investment to Municipal Obligations with remaining
maturities of thirteen months or less and will maintain a dollar-weighted
average portfolio maturity of 90 days or less.

D-67

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax-Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

GEORGIA MUNICIPAL BOND

1. Diversification (S)

The Fund intends to comply with Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code") which requires that at the end of each
quarter of each taxable year, with regard to at least 50% of the Fund's total
assets, no more than 5% of the total assets may be invested in the securities of
a single issuer and that with respect to the remainder of the Fund's total
assets, no more than 25% of its total assets are invested in the securities of a
single issuer.

2. Concentration (S)

The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry, or in industrial development bonds or other securities, the interest
upon which is paid from revenues of similar types of projects. However, the Fund
may invest as temporary investments more than 25% of the value of their total
assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or instruments secured by these
money market instruments, such as repurchase agreements.

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements) (S)

As a matter of fundamental policy, which may not be changed without
shareholder approval, the Funds may not borrow money except as a temporary
measure to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio investments and for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings shall not exceed
one-third of the value of the total net assets at the time of such borrowing.
The Fund will not issue senior securities, except each Fund may borrow money
directly or through reverse repurchase agreement as a temporary measure for
extraordinary or emergency purposes in an amount up to one-third of the value of
its total assets, including the amount borrowed, in order to meet redemption
requests without immediately selling portfolio instruments; and except to the
extent a Fund will enter into futures contracts. Any such borrowings need not be
collateralized. The Fund will not purchase any securities while borrowings in
excess of 5% of its total assets are outstanding. The Fund will not borrow money
or engage in reverse repurchase agreements for investment leverage purposes.

D-68

<PAGE>

5. Underwriting Securities of Other Issuers (S)

The Fund may not engage in the business of underwriting the securities
of other issuers, provided that the purchase of municipal securities or other
permitted investments, directly from the issuer thereof (or from an underwriter
for an issuer) and the later disposition of such securities in accordance with a
Fund's investment program shall not be deemed to be an underwriting.

6. Real Estate (S)

The Fund will not buy or sell real estate, including limited
partnership interests, although the Fund may invest in municipal bonds secured
by real estate or interests in real estate.

7. Commodities (S)

The Fund will not purchase or sell commodities. However, the Fund may
purchase put and call options on portfolio securities and on financial futures
contracts. In addition, the Fund reserves the right to hedge its portfolio by
entering into financial futures contracts and to sell puts and calls on
financial futures contracts.

8. Loans to Others (including Repurchase Agreements) (S)

The Fund will not lend any of its assets, except portfolio securities
up to one-third of the value of its total assets. Each Fund may, however,
acquire publicly or non-publicly issued municipal bonds or temporary investments
or enter into repurchase agreements in accordance with its investment objective,
policies and limitations or the Declaration of Trust.

9. Investment in Federally Tax Exempt Securities (S)

The Fund will normally invest its assets so that at least 80% of its
annual interest income is, or at least 80% of its net assets are, invested in
obligations which provide interest income which is exempt from federal regular
income taxes. The interest retains its tax-free status when distributed to the
Funds' shareholders.

10. Short Sales (R)

The Fund will not sell any securities short or maintain a short
position.

11. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

12. Other Investment Companies (R)

The Fund will not purchase securities of investment companies only in
open-market transactions involving customary broker's commissions. However,
these limitations are not applicable if the securities are acquired in a merger,
consolidation or acquisition of assets. It should be noted that investment
companies incur certain expenses such as management fees and therefore any
investment by a Fund in shares of another investment company would be subject to
such duplicate expenses.

13. Investment in Municipal Securities (R)

At least 65% of the value of the Fund's total assets will be invested
in municipal bonds of the state of Georgia.

D-69

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax-Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

NORTH CAROLINA MUNICIPAL BOND

1. Diversification (S)

2. Concentration (S)

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements) (S)

D-70

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund will not buy or sell real estate, including limited
partnership interests, although the Fund may invest in municipal bonds secured
by real estate or interests in real estate.

7. Commodities (S)

8. Loans to Others (including Repurchase Agreements) (S)

9. Investment in Federally Tax Exempt Securities (S)

10. Short Sales (R)

The Fund will not sell any securities short or maintain a short
position.

11. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

12. Investments in Municipal Securities (R)

At least 65% of the value of the Fund's total assets will be invested
in municipal bonds of North Carolina.

D-71

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax-Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

SOUTH CAROLINA MUNICIPAL BOND

1. Diversification (S)

2. Concentration (S)

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements) (S)

D-72

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund will not buy or sell real estate, including limited
partnership interests, although the Fund may invest in municipal bonds secured
by real estate or interests in real estate.

7. Commodities (S)

8. Loans to Others (including Repurchase Agreements) (S)

9. Investment in Federally Tax Exempt Securities (S)

10. Short Sales (R)

The Fund will not sell any securities short or maintain a short
position.

D-73

<PAGE>

11. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

12. Other Investment Companies (R)

13. Investment in Municipal Securities (R)

At least 65% of the value of the Fund's total assets will be invested
in municipal bonds of the state of South Carolina.

D-74

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

VIRGINIA MUNICIPAL BOND

1. Diversification (S)

2. Concentration (S)

3. Issuing Senior Securities (S)

4. Borrowing (including Reverse Repurchase Agreements) (S)

D-75

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund will not buy or sell real estate, including limited
partnership interests, although the Fund may invest in municipal bonds secured
by real estate or interests in real estate.

7. Commodities (S)

8. Loans to Others (including Repurchase Agreements) (S)

9. Investment in Federally Tax Exempt Securities (S)

The Fund will normally invest its assets so that at least 80% of its
net assets are invested in obligations which provide interest income which is
exempt from federal regular income taxes. The interest retains its tax-free
status when distributed to the Fund's shareholders.

10. Investment in Municipal Securities (R)

At least 65% of the value of Fund's total assets will be invested in
municipal bonds of the Commonwealth of Virginia.

D-76

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax-Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

FLORIDA HIGH INCOME MUNICIPAL BOND FUND

1. Diversification (S)

The Fund may not invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities, except that up to 25%
of the value of the Fund's total assets may be invested without regard to such
5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of the Fund's portfolio. Under this limitation, each
governmental subdivision, including states and the District of Columbia,
territories, possessions of the United States, or their political subdivisions,
agencies, authorities, instrumentalities, or similar entities, will be
considered a separate issuer of its assets and revenues are separate from those
of the governmental body creating it and the security is backed only by its own
assets and revenues. Industrial development bonds, backed only by the assets and
revenues of a nongovernmental issuer, are considered to be issued solely by the
that issuer. If, in the case of an industrial development bond or
governmental-issued security, a governmental or other entity guarantees the
security, such guarantee would be considered a separate security issued by the
guarantor as well as the other issuer, subject to limited exclusions allowed by
the Investment Company Act of 1940. The Fund may not purchase more than 10% of
any class of voting securities of any one issuer other than the U.S. government
and its agencies or instrumentalities.

2. Concentration (S)

3. Issuing Senior Securities (S)

D-77

<PAGE>

4. Borrowing (including Reverse Repurchase Agreements) (S)

As a matter of fundamental policy, which may not be changed without
shareholder approval, the Funds may not borrow money except as a temporary
measure to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio investments and for extraordinary or emergency
purposes, provided that the aggregate amount of such borrowings shall not exceed
one-third of the value of the total net assets at the time of such borrowing.
The Fund may not borrow money, issue senior securities or enter into reverse
repurchase agreements, except for temporary or emergency purposes, and not for
leveraging, and then in amounts not in excess of 10% of the value of the Fund's
total assets at the time of such borrowing. The Fund may not mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of each Fund's total assets at the time of such borrowing. No Fund will
enter into reverse repurchase agreements exceeding 5% of the value of its total
assets.

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate, except that it may purchase, sell or invest in marketable
securities of companies holding real estate or interests in real estate,
including real estate investment trusts.

7. Commodities (S)

8. Loans to Others (including Repurchase Agreements) (S)

D-78

<PAGE>

9. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

10. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

11. Joint Trading (R)

12. Investment in Municipal Securities (R)

The Fund will invest, under normal market conditions, at least 80% of
its net assets in municipal securities and at least 90% of such assets will be
invested in Florida obligations.

D-79

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax-Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

NEW JERSEY TAX-FREE INCOME

1. Diversification (S)

The Fund is nondiversified under the federal securities laws. The 1940
Act does not restrict the percentage of a nondiversified fund's assets that may
be invested at any time in the securities of any one issuer. The Fund intends to
comply, however, with the Code's diversification requirements and other
requirements applicable to "regulated investment companies" so that they will
not be subject to U.S. Federal income tax on income and capital gain
distributions to shareholders. The Fund intends to comply with Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code") which requires that
at the end of each quarter of each taxable year, with regard to at least 50% of
the Fund's total assets, no more than 5% of the total asses may be invested in
the securities of a single issuer and that with respect to the remainder of the
Fund's total assets, no more than 25% of its total assets are invested in the
securities of a single issuer. The Fund will treat (1) each state, territory and
possession of the U.S., the District of Columbia and, if its assets and revenues
are separate from those of the entity or entities creating it, each political
subdivision, agency and instrumentality of any one (or more, as in the case of a
multi state authority or agency) of the foregoing as an issuer of all securities
that are backed primarily by its assets or revenues; (2) each company as an
issuer of all securities that are backed primarily by its assets or revenues;
and (3) each of the foregoing entities as an issuer of all securities that it
guarantees; provided, however, that for the purpose of the first fundamental
investment restriction no entity shall be deemed to be an issuer of a security
that it guarantees so long as no more than 10% of a Fund's total assets (taken
at current value) are invested in securities guaranteed by the entity and
securities of which it is otherwise deemed to be an issuer.

2. Concentration (S)

The Fund may not purchase any security of any issuer (other than issues
of the U.S. government, its agencies or instrumentalities) if as a result more
than 25% of its total assets would be invested in a single industry;
governmental issuers of municipal bonds are not regarded as members of an
industry and a Fund may invest more than 25% of its assets in industrial
development bonds and, in certificates of deposit and banker's acceptances
issued by domestic branches of U.S. banks or New Jersey municipal obligations.
The Fund presently does not intend to invest more than 25% of its total assets
in municipal obligations the payment of which depends on revenues derived from a
single facility or similar types of facilities.

D-80

<PAGE>

3. Issuing Senior Securities (S)

The Fund may not issue senior securities; the purchase or sale of
securities on a "when issued" basis, or collateral arrangement with respect to
the writing of options on securities, are not deemed to be the issuance of a
senior security.

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not issue senior securities, borrow money or pledge or
mortgage its assets, except that the Fund may borrow from banks up to 10% of the
value of its total net assets for temporary or emergency purposes only to meet
anticipated redemption requirements. The Fund will not purchase securities while
any such borrowings are outstanding. The Fund may enter into reverse repurchase
agreements (treated as borrowings).

5. Underwriting Securities of Other Issuers (S)

The Fund may not underwrite securities of other issuers, except that
the Fund may purchase securities from the issuer or others and dispose of such
securities in a manner consistent with its investment objective. The Fund will
treat (1) each state, territory and possession of the U.S., the District of
Columbia and, if its assets and revenues are separate from those of the entity
or entities creating it, each political subdivision, agency and instrumentality
of any one (or more, as in the case of a multi state authority or agency) of the
foregoing as an issuer of all securities that are backed primarily by its assets
or revenues; (2) each company as an issuer of all securities that are backed
primarily by its assets or revenues; and (3) each of the foregoing entities as
an issuer of all securities that it guarantees; provided, however, that for the
purpose of the first fundamental investment restriction no entity shall be
deemed to be an issuer of a security that it guarantees so long as no more than
10% of a Fund's total assets (taken at current value) are invested in securities
guaranteed by the entity and securities of which it is otherwise deemed to be an
issuer.

6. Real Estate (S)

The Fund may not purchase or sell commodities or commodity contracts or
real estate, except that it may purchase and sell securities secured by real
estate and securities of companies which invest in real estate.

7. Commodities (S)

D-81

<PAGE>

8. Loans to Others (including Repurchase Agreements) (S)

The Fund may not make loans, except that a Fund may purchase or hold
debt securities consistent with its investment objectives, lend portfolio
securities valued at not more than 15% of its total assets to broker-dealers and
enter into repurchase agreements. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Fund
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. As a matter of fundamental
investment policy, which cannot be changed without shareholder approval, the
Fund will not lend any of their assets except portfolio securities up to 5% of
the value of its net assets.

9. Investment in Federally Tax Exempt Securities (S)

The Fund invests at least 80% of its net assets in municipal securities
issued by the State of New Jersey or its counties, municipalities, authorities
or other political subdivisions and municipal securities issued by territories
or possessions of the United States, such as Puerto Rico, the interest on which,
in the opinion of bond counsel, is exempt from federal taxes.

10. Margin Purchases (R)

The Fund may not purchase securities on margin except that it may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of securities.

11. Other Investment Companies (R)

The Fund may not purchase securities of other investment companies,
except to the extent such purchases are not prohibited by applicable law.
12. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof, except that the Fund may purchase securities with rights
to put securities to the seller in accordance with its investment program.

D-82

<PAGE>

13. Investment in Equity Securities (R)

The Fund may not purchase equity securities or securities convertible
into equity securities.

14. Restricted Securities (R)

The Fund may not purchase restricted securities, which are securities
that must be registered under the Securities Act of 1944 before they may be
offered or sold to the public. This restriction does not apply to restricted
securities which are determined to be liquid by the Fund's investment adviser
under supervision of the Board of Trustees.

15. Investment in State Tax Exempt Securities

D-83

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax-Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

SHORT-INTERMEDIATE MUNICIPAL FUND

1. Diversification (S)

The Fund may not invest more than 5% of its total assets, at the time
of the investment in question, in the securities of any one issuer other than
the U.S. government and its agencies or instrumentalities, except that up to 25%
of the value of the Fund's total assets may be invested without regard to such
5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of the Fund's portfolio. Under this limitation, each
governmental subdivision, including states and the District of Columbia,
territories, possessions of the United States, or their political subdivisions,
agencies, authorities, instrumentalities, or similar entities, will be
considered a separate issuer of its assets and revenues are separate from those
of the governmental body creating it and the security is backed only by its own
assets and revenues. Industrial development bonds, backed only by the assets and
revenues of a nongovernmental issuer, are considered to be issued solely by the
that issuer. If, in the case of an industrial development bond or
governmental-issued security, a governmental or other entity guarantees the
security, such guarantee would be considered a separate security issued by the
guarantor as well as the other issuer, subject to limited exclusions allowed by
the Investment Company Act of 1940. The Fund may not purchase more than 10% of
any class of voting securities of any one issuer other than the U.S. government
and its agencies or instrumentalities.

2. Concentration (S)

3. Issuing Senior Securities (S)

D-84

<PAGE>

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund may not borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of the
Fund's total assets at the time of such borrowing. The Fund may not mortgage,
pledge or hypothecate any assets except in connection with any such borrowing
and in amounts not in excess of the lesser of the dollar amounts borrowed or 10%
of the value of each Fund's total assets at the time of such borrowing. No Fund
will enter into reverse repurchase agreements exceeding 5% of the value of its
total assets.

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund may not purchase, sell or invest in real estate or interests
in real estate, except that each Fund may purchase municipal securities and
other debt securities secured by real estate or interests therein.

7. Commodities (S)

The Fund may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

8. Loans to Others (including Repurchase Agreements) (S)

The Fund may not lend its funds to other persons, provided that the
Fund may purchase issues of debt securities, acquire privately negotiated loans
made to municipal borrowers and enter into repurchase agreements. The Fund may
not lend its portfolio securities, unless the borrower is a broker, dealer or
financial institution that pledges and maintains collateral with the Fund
consisting of cash or securities issued or guaranteed by the U.S. government
having a value at all times not less than 100% of the current market value of
the loaned securities, including accrued interest, provided that the aggregate
amount of such loans shall not exceed 30% of the Fund's total assets.

9. Investment in Federally Tax-Exempt Securities (S)

Under normal circumstances, it is anticipated that the Fund will invest
its assets so that at least 80% of its annual investment income is exempt from
Federal income tax other than the Federal alternative minimum tax.

10. Unseasoned Issuers (R)

The Fund may not invest more than 5% of its total assets in securities
that have been in continuous operation for less than three years, including
operating periods of their predecessors, except that no limitation shall apply
to the extent that the Fund may invest in obligations issued or guaranteed by
the U.S. government and its agencies or instrumentalities.

11. Control or Management (R)

The Fund may not invest in companies for the purpose of exercising
control or management.

D-85

<PAGE>

12. Short Sales (R)

The Fund will not sell any securities short or maintain a short
position.

13. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

14. Officers' and Directors' Ownership of Shares (R)

15. Warrants (R)

The Fund may not invest more than 5% of its total net assets in
warrants, and, of this amount, no more than 2% of the Funds total net assets may
be invested in warrants that are listed on neither the New York nor the American
Stock Exchange.

16. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs (R)

The Fund may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.

17. Options (R)

The Fund may not write, purchase or sell put or call options, or
combinations thereof, except that each Fund may purchase securities with rights
to put securities to the seller in accordance with its investment program.

18. Investment in Municipal Securities (R)

The Fund may not invest more than 20% of its total assets in securities
other than municipal securities (as described under "Description of the Funds -
Investment Objectives and Policies" in the Fund's Prospectus), unless
extraordinary circumstances dictate a more defensive posture.

D-86

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal/Tax Free Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

HIGH GRADE TAX FREE

1. Diversification (S)

With respect to 75% of the value of its total assets, the Fund will not
purchase securities of any one issuer (other than cash, cash items or securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities)
if as a result more than 5% of the value of its total assets would be invested
in the securities of that issuer. Under this limitation, each governmental
subdivision, including states and the District of Columbia, territories,
possessions of the United States, or their political subdivisions, agencies,
authorities, instrumentalities, or similar entities, will be considered a
separate issuer of its assets and revenues are separate from those of the
governmental body creating it and the security is backed only by its own assets
and revenues. Industrial development bonds, backed only by the assets and
revenues of a nongovernmental issuer, are considered to be issued solely by the
that issuer. If, in the case of an industrial development bond or
governmental-issued security, a governmental or other entity guarantees the
security, such guarantee would be considered a separate security issued by the
guarantor as well as the other issuer, subject to limited exclusions allowed by
the Investment Company Act of 1940.

2. Concentration (S)

3. Issuing Senior Securities (S)

D-87

<PAGE>

4. Borrowing (including Reverse Repurchase Agreements) (S)

The Fund will not issue senior securities, except each Fund may borrow
money directly or through reverse repurchase agreement as a temporary measure
for extraordinary or emergency purposes in an amount up to one-third of the
value of its total assets, including the amount borrowed, in order to meet
redemption request without immediately selling portfolio instruments; and except
to the extent a Fund will enter into futures contracts. Any such borrowings need
not be collateralized. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. The Fund will
not borrow money or engage in reverse repurchase agreements for investment
leverage purposes. The Fund will not mortgage, pledge or hypothecate any assets
except to secure permitted borrowings. In those cases, High Grade may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of borrowing. Margin
deposits for the purchase and sale of financial futures contracts and related
options and segregation or collateral arrangements made in connection with
options activities and the purchase of securities on a when-issued basis are not
deemed to be a pledge.

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

The Fund will not buy or sell real estate, although it may invest in
securities of companies whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate.

7. Commodities (S)

The Fund will not purchase or sell commodities or commodity contracts.

8. Loans to Others (including Repurchase Agreements) (S)

The Fund will not lend any of its assets except that it may purchase or
hold money market instruments, including repurchase agreements and variable
amount demand master notes in accordance with its investment objective, policies
and limitations and it may lend portfolio securities valued at not more than 15%
of its total assets to broker-dealers.

9. Investments in Federally Tax Exempt Securities (S)

[Under normal circumstances, it is anticipated that the Fund will
invest its assets so that at least 80% of its annual investment income is exempt
from Federal income tax other than the Federal alternative minimum tax]

D-88

<PAGE>

10. Short Sales (R)

The Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open a Fund owns an equal
amount of such securities or of securities which, without payment of any further
consideration are convertible into or exchange able for securities of the same
issue as, and equal in amount to, the securities sold short. The use of short
sales will allow the funds to retain certain bonds in their portfolios longer
than it would without such sales. To the extent that a Fund receives the current
income produced by such bonds for a longer period than it might otherwise, a
Fund's investment objective is furthered.

11. Margin Purchases (R)

The Fund may not purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the clearance of
transactions. A deposit or payment by a Fund of initial or variation margin in
connection with financial futures contracts or related options transactions is
not considered the purchase of a security on margin.

12. Other Investment Companies (R)

13. Investment in Taxable Securities (R)

The Fund may temporarily invest up to 20% of its total assets in
taxable securities.

D-89

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

GLOBAL RESOURCES AND DEVELOPMENT FUND

1. Diversification (S)

With respect to 75% of its total assets, Fund may not invest more than
5% of the value of its total assets, determined at market or other fair value at
the time of purchase, in the securities of any one issuer, or invest in more
than 10% of the outstanding voting securities of any one issuer, all as
determined immediately after such investment; provided that these limitations do
not apply to investments in securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities.

2. Concentration (S)

Fund may not invest more than 25% of the value of its total assets in
the securities of issuers in any one industry other than securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities.

3. Issuing Senior Securities (S)

Fund may not issue senior securities, except that Fund may (a) make
permitted borrowings of money; (b) enter into firm commitment agreements and
collateral arrangements with respect to the writing of options on securities and
engage in permitted transactions in futures and options thereon and forward
contracts; and (c) issue shares of any additional permitted classes or series.

4. Borrowing (S)

Fund may not borrow money, except that Fund may (a) borrow from any
bank, provided that, immediately after any such borrowing there is asset
coverage of at least 300% for all borrowings; (b) borrow for temporary purposes
only and in an amount not exceeding 5% of the value of the Fund's total assets,
computed at the time of borrowing; or (c) enter into reverse repurchase
agreements, provided that, immediately after entering into any such agreements,
there is asset coverage of at least 300% of all bank borrowings and reverse
repurchase agreements.

5. Underwriting Securities of Other Issuers

N/A

D-90

<PAGE>

6. Real Estate (S)

Fund may not invest in real estate, except that Fund may invest in
securities directly or indirectly secured by real estate and interests therein
and securities of companies that invest in real estate and interests therein,
including mortgages and other liens.

7. Commodities (S)

Fund may not invest in commodities, except that Fund may enter into
financial futures contracts and options thereon for hedging purposes and enter
into forward contracts.

8. Loans to Others (S)

Fund may not make loans, except that Fund may (a) make, purchase, or
hold publicly and nonpublicly offered debt securities (including convertible
securities) and other debt investments, including loans, consistent with its
investment objective; (b) lend its portfolio securities to broker-dealers; and
(c) enter into repurchase agreements.

Fund does not presently intend to lend its securities if, as a result,
the aggregate of all outstanding securities loans exceeds 15% of the value of
the Fund's total assets taken at their current value. Shareholder approval is
necessary to amend the following conditions which Fund must meet in order to be
permitted by the SEC to engage in loan transactions: (1) Fund must receive 100%
collateral in the form of cash or cash equivalents, e.g., U. S. Treasury bills
or notes, from the borrower; and (2) the borrower must increase the collateral
whenever the market value of the securities (determined on a daily basis)
exceeds the value of the collateral. Other such conditions for the making of
loans exist but do not require shareholder approval before being amended from
time to time by Fund's Board of Trustees.

9. Fund of Funds (R)

Notwithstanding any other investment policy or restriction, Fund may
invest all of its assets in the securities of a single open-end management
investment company with substantially the same fundamental investment
objectives, policies and restrictions as the Fund.

D-91

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

GROWTH AND INCOME FUND (S-1)

1. Diversification (S)

2. Concentration (S)

Fund may not invest more than 25% of its total assets in the securities
of issuers in any single industry, other than securities issued by banks and
savings and loan associations or securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

3. Issuing Senior Securities (S)

(See "Borrowing")

4. Borrowing (S)

Fund may not borrow money, except that Fund may (a) borrow money from
banks for temporary or emergency purposes in aggregate amounts up to 10% of the
value of the Fund's net assets (computed at cost); or (b) enter into reverse
repurchase agreements (bank borrowings and reverse repurchase agreements, in
aggregate, shall not exceed 10% of the value of Fund's net assets).

Fund has no current intention of attempting to increase its net income
by borrowing and intends to repay any borrowings made in accordance with the
investment restriction enumerated above before it makes any additional
investments.

5. Underwriting Securities of Other Issuers (S)

Fund may not underwrite securities, except that Fund may purchase
securities from issuers thereof or others and dispose of such securities in a
manner consistent with its other investment policies; in the disposition of
restricted securities, Fund may be deemed to be an underwriter, as defined in
the Securities Act of 1933.

D-92

<PAGE>

6. Real Estate (S)

Fund may not purchase or sell real estate or interests in real estate,
except that it may purchase and sell securities secured by real estate and
securities of companies which invest in real estate.

7. Commodities (S)

Fund will not purchase or sell commodities or commodity contracts,
except that Fund may engage in currency or other financial futures contracts and
related options transactions.

8. Loans to Others (S)

Fund may not make loans, except that Fund may purchase money market
securities, enter into repurchase agreements, buy publicly and privately
distributed debt securities and lend limited amounts of its portfolio securities
to broker-dealers; all such investments must be consistent with Fund's
investment objective and policies.

Fund will not lend securities to brokers or dealers if, as a result, the
aggregate of all outstanding securities loans exceed 15% of the value of the
Fund's total assets taken at their current value.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of the value of its total assets in
companies which have been in operation for less than 3 years.

10. Control or Management (R)

Fund may not invest for the primary purpose of exercising control over
or management of any issuer.

11. Short Sales (R)

Fund may not make short sales of securities.

12. Margin Purchases (R)

Fund may not make margin purchases.

13. Other Investment Companies (R)

Fund may not purchase the securities of any other investment company
except in the open market and at customary brokerage rates and in no event more
than 3% of the voting securities of any investment company.

D-93

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INSTITUTIONAL TRUST: Institutional Small Capitalization Growth Fund

1. Diversification (S)

With respect to 75% of its total assets, Fund may not invest more than
5% of the value of its total assets, determined at market or other fair value at
the time of purchase, in the securities of any one issuer, or invest in more
than 10% of the outstanding voting securities of any one issuer, all as
determined at the time of purchase; provided that these limitations do not apply
to investments in securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities.

2. Concentration (S)

Fund may not concentrate its investments in the securities of issuers
in any one industry other than securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities.

3. Issuing Senior Securities (S)

4. Borrowing (S)

5. Underwriting Securities of Other Issuers (S)

Fund may not engage in the business of underwriting securities issued
by other persons, except insofar as Fund may be deemed to be an underwriter in
connection with the disposition of its portfolio investments.

D-94

<PAGE>

6. Real Estate (S)

7. Commodities (S)

Fund may not invest in commodities, except that Fund may enter into
financial futures contracts and options thereon for hedging purposes and enter
into forward contracts.

8. Loans to Others (S)

Fund will not lend securities to broker-dealers if, as a result, the
aggregate of all outstanding securities loans exceeds 1/3 of the value of Fund's
total assets taken at their current value.

D-95

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized (Remains Fundamental)

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

OMEGA FUND

1. Diversification (S)

Fund may not invest more than 10% of Fund's total assets (taken at
market or fair value as determined by Fund's Board of Trustees) in the
securities of any one issuer (except U.S. government securities).

As a diversified investment company, Fund has undertaken not to
purchase a security if, as a result, more than 10% of the outstanding voting
securities of any single issuer would be held by Fund or more than 5% of its
total assets would be invested in the securities of any one issuer.

2. Concentration (S)

Fund may not concentrate its investments in any particular industry.

3. Issuing Senior Securities (S)

(See "Borrowing")

4. Borrowing (S)

Fund may not borrow, unless, immediately after any such borrowing, such
borrowing and all other such borrowings and other liabilities do not exceed 1/3
of the value of Fund's total assets (including all such borrowings), taken at
market or other fair value.

A borrowing limitation in excess of 5% is generally associated with a
leveraged fund. Fund anticipates borrowing only for temporary purposes. To the
extent Fund's total borrowings exceed 5%, no additional investments will be made
until such borrowings are reduced to 5%.

D-96

<PAGE>

5. Underwriting Securities of Other Issuers (S)

Fund may not act as a securities underwriter, or act as a distributor
of securities of which it is the issuer, except that Fund may issue, sell and
distribute securities of which it is the issuer, including additional shares of
its capital stock, and may act as its own distributor of such securities to the
extent that such action is not in contravention of such rules and regulations as
the SEC may prescribe in respect thereof, and except that Fund might be deemed
an underwriter within the meaning of Section 2(11) of the Securities Act of 1933
in making sales of restricted securities.

6. Real Estate (S)

Fund may not purchase or sell real estate or interests in real estate.

7. Commodities (S)

Fund may not purchase or sell commodities or commodity contracts,
except that Fund may engage in transactions in commodity futures contracts and
options on commodity futures contracts, other than physical commodity futures
contracts.

8. Loans to Others (S)

Fund may not make loans, except by the purchase of a portion of an
issue of bonds, notes, debentures or other obligations publicly distributed or
of a type customarily purchased by financial institutions, or by entering into
loan transactions with respect to portfolio securities not in excess of 25% of
Fund's total assets (taken at current value) immediately after such transaction;
Fund will not lend any of its assets to any investment adviser or principal
underwriter for Fund or to any officer, trustee or employee of either of them or
of Fund.

Loans of Fund securities may not exceed 25% of Fund's total assets.
Shareholder approval is necessary to amend the following conditions which Fund
must meet in order to be permitted by the SEC to engage in loan transactions:
(1) Fund must receive 100% collateral in the form of cash or cash equivalents,
e.g., U. S. Treasury bills or notes, from the borrower; and (2) the borrower
must increase the collateral whenever the market value of the securities
(determined on a daily basis) exceeds the value of the collateral. Other such
conditions for the making of loans exist but do not require shareholder approval
before being amended from time to time by Fund's Board of Trustees

9. Unseasoned Issuers (R)

Fund may not purchase securities of any company with a record of less
than 3 years' continuous operation (including that of predecessors) if such
purchase would cause Fund's investments in such companies taken at cost to
exceed 5% of Fund's total assets taken at market value.

10. Short Sales (R)

Fund may not make short sales of securities or maintain a short
position, unless, at all times when a short position is open, it owns an equal
amount of such securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short and unless not more than 15% of Fund's net
assets (taken at market or fair value as determined by Fund's Board of Trustees)
is held as collateral for such sales at any one time (a reason for making such a
sale would be to defer realization of gain or loss for federal income tax
purposes).

D-97

<PAGE>

11. Margin Purchases (R)

Fund may not purchase securities on margin, provided that Fund may
obtain such short-term credits as may be necessary for the clearance of
purchases and sales of securities.

12. Other Investment Companies (R)

Fund may not purchase or acquire the securities of any other investment
company; except that it may make such a purchase or acquisition in the open
market involving no commission or profit to a sponsor or dealer (other than the
customary broker's commission); provided that, immediately after such purchase
or acquisition, Fund and any company or companies controlled by Fund do not own
in the aggregate: (a) more than 3% of the total outstanding voting stock of the
acquired company; (b) securities issued by the acquired company having an
aggregate value in excess of 5% of the value of the total assets of Fund; or (c)
securities issued by the acquired company and all other investment companies
having an aggregate value in excess of 10% of the value of the total assets of
Fund; and provided that, immediately after such purchase or acquisition, Fund,
other investment companies having the same investment adviser, and companies
controlled by Fund and/or such investment companies do not own more than 10% of
the total outstanding voting stock of any closed-end investment company so
purchased or acquired.

A purchase by Fund of securities of other investment companies would
result in a layering of expenses such that Fund's shareholders would indirectly
bear a proportionate share of the expenses of those investment companies,
including operating costs, investment advisory fees and administrative fees.
Fund does not anticipate purchasing the securities of other investment
companies.

13. Officers' and Directors' Ownership of Shares (R)

Fund may not purchase or retain the securities of any issuer if those
officers and trustees of Fund or its investment adviser owning individually more
than 1/2 of 1% of the securities of such issuer together own more than 5% of the
securities of such issuer.

D-98

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

PRECIOUS METALS HOLDINGS, INC.

1. Diversification (S)

Fund may not invest more than 5% of its total assets taken at market
value in the securities of any one issuer, not including securities of the U.S.
government and its instrumentalities and the securities of one or more domestic
or foreign wholly-owned subsidiaries except that up to 25% of its total assets
may be invested without regard to this limit.

Fund may not acquire, directly or indirectly, more than 10% of the
voting securities of any issuer other than one or more domestic or foreign
wholly-owned subsidiaries.

2. Concentration (S)

P: Fund "concentrates" (within the meaning of the 1940 Act) its assets
in securities related to mining, processing or dealing in gold or other precious
metals and minerals, which means that at least 25% of its assets will be
invested in the securities of these industries.

3. Issuing Senior Securities (S)

Fund may not issue any senior securities.

4. Borrowing (S)

Fund may not borrow money, except that Fund may (a) borrow money from
banks for emergency or extraordinary purposes in aggregate amounts up to 5% of
its net assets and (b) enter into reverse repurchase agreements.

5. Underwriting Securities of Other Issuers (S)

Fund may not underwrite the securities of other issuers, except to the
extent that, in connection with the disposition of securities of the type
referred to in current Fundamental Restriction 17 below, Fund may be deemed to
be an underwriter under certain U.S. securities laws.

D-99

<PAGE>

6. Real Estate (S)

Fund may not purchase or sell real estate or interests therein or real
estate mortgages, provided that the foregoing shall not prevent Fund from
purchasing or selling (a) readily marketable securities which are secured by
interests in real estate and (b) readily marketable securities of companies
which deal in real estate, including real estate investment trusts.

7. Commodities (S)

Fund may not purchase or sell commodities or commodity contracts,
except that Fund may invest in the securities of one or more domestic or foreign
wholly-owned subsidiaries which deal in precious metals and minerals and
contracts relating thereto subject to the limitation that no such investment may
be made if at the time thereof the fair value of all such investments exceeds,
or by virtue of such investment would exceed, an amount equal to 25% of the then
market value of Fund's total assets, and except also that Fund may engage in
currency or other financial futures and related options transactions.

8. Loans to Others (S)

Fund may not make loans to other persons, except through the investment
of up to 25% of the total assets of Fund in one or more domestic or foreign
wholly-owned subsidiaries; for the purposes of this restriction, the purchase of
a portion of an issue of bonds, notes, debentures or other obligations
distributed publicly, whether or not the purchase is made upon the original
issuance of such securities, will not be deemed to be the making of a loan.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of the value of Fund's total assets in
the securities of any issuers which have a record of less than 3 years
continuous operation, including the similar operations of predecessors or
parents, or equity securities of issuers which are not readily marketable,
except that this restriction shall not apply to Fund's investments in one or
more domestic or foreign wholly-owned subsidiaries.

10. Control or Management (R)

Fund may not invest in companies for the purpose of exercising control
or management, except for one or more domestic or foreign wholly-owned
subsidiaries.

11. Short Sales (R)

Fund may not sell securities short, unless at the time it owns an equal
amount of such securities or, by virtue of ownership of convertible or
exchangeable securities, it has the right to obtain through conversion or
exchange of such other securities an amount equal to the securities sold short,
in which case Fund will retain such securities as long as it is in a short
position.

D-100

<PAGE>

12. Margin Purchases (R)

Fund may not purchase or sell securities on margin, but it may obtain
such short-term credits as may be necessary for the clearance of purchased and
sold securities.

13. Other Investment Companies (R)

Fund may not purchase the securities of any other investment company,
except that it may make such a purchase (a) in the open market involving no
commission or profit to a sponsor or dealer, other than the customary broker's
commission, and (b) as part of a merger, consolidation or acquisition of assets;
provided that immediately after any such purchase (a) not more than 10% of
Fund's total assets would be invested in such securities and (b) not more than
3% of the voting stock of such company would be owned by Fund.

14. Officers' and Directors' Ownership of Shares (R)

Fund may not purchase or retain the securities of any issuer if the
Treasurer of Fund has knowledge that those officers and/or Directors of Fund or
its investment adviser who own individually more than 1/2 of 1% of the
securities of such issuer together own more than 5% of the securities of such
issuer.

15. Oil, Gas and Minerals (R)

Fund may not invest in oil and gas interests, puts, calls, straddles,
spreads and options, except that Fund may write covered call options traded on
the London Stock Exchange, a national securities exchange or the
over-the-counter market and purchase call options to close out previously
written call options; this restriction shall not apply to the extent the
investments of one or more domestic or foreign wholly-owned subsidiaries in
metals or minerals contracts might be considered options.

16. Pledges (R)

Fund may not pledge more than 15% of its net assets to secure
indebtedness; the purchase or sale of securities on a "when issued" basis, or
collateral arrangements with respect to the writing of options on securities,
are not deemed to be a pledge of assets.

As a matter of practice, Fund does not pledge its assets except in the
course of portfolio trading.

17. Illiquid Securities (R)

Fund may not invest more than 15% of its net assets in securities for
which market quotations are not readily available, or in repurchase agreements
maturing in more than 7 days; except that this restriction shall not apply to
Fund's investments in one or more domestic or foreign wholly-owned subsidiaries,
and except also that Fund may write covered call options traded on the
over-the-counter market and purchase call options to close out existing
positions.

D-101

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Equity Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

STRATEGIC GROWTH FUND (K-2)

1. Diversification (S)

2. Concentration (S)

Fund may not invest more than 25% of its assets in the securities of
issuers in any single industry.

3. Issuing Senior Securities (S)

Fund will not issue senior securities, except as appropriate to
evidence indebtedness which Fund is permitted to incur pursuant to Fundamental
Restriction 4 below and except for shares of any additional series or portfolios
which may be established by the Trustees.

4. Borrowing (S)

Fund may not borrow money, except that Fund may (i) borrow money from
banks for temporary or emergency purposes in aggregate amounts up to 10% of the
value of Fund's net assets (computed at cost), or (ii) enter into reverse
repurchase agreements provided that bank borrowings and reverse repurchase
agreements, in aggregate, shall not exceed 10% of the value of Fund's assets.

Fund has no current intention of attempting to increase its net income by
borrowing and intends to repay any borrowings made in accordance with the
investment restriction enumerated above before it makes any additional
investments.

D-102

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

Fund may not purchase or sell real estate or interests in real estate,
except that it may purchase and sell securities secured by real estate and
securities of companies which invest in real estate.

7. Commodities (S)

Fund will not purchase or sell commodities or commodity contracts,
except that Fund may engage in currency or other financial futures contracts and
related options transactions.

8. Loans to Others (S)

Fund will not make loans, except that Fund may buy publicly and
privately distributed debt securities, provided that such securities purchases
are consistent with its investment objectives and policies, and except that Fund
may lend limited amounts of its portfolio securities to broker-dealers.

Fund will not lend securities to brokers and dealers if as a result the
aggregate of all outstanding securities loans exceeds 15% of the value of Fund's
total assets taken at their current value.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of the value of its total assets in
companies which have been in operation for less than 3 years.

D-103

<PAGE>

10. Control or Management (R)

Fund may not invest in a company for the purpose of control or
management.

11. Short Sales (R)

Fund may not make short sales of securities.

12. Margin Purchases (R)

Fund may not make margin purchases.

13. Other Investment Companies (R)

D-104

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Bond Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

HIGH INCOME BOND FUND (B-4)

1. Diversification (S)

2. Concentration (S)

Fund may not invest more than 25% of its assets in the securities of
issuers in any single industry, other than securities issued by banks and
savings and loan associations or securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

3. Issuing Senior Securities (S)

4. Borrowing (S)

Fund may not borrow money, except that Fund may (a) borrow money from
banks for temporary or emergency purposes in aggregate amounts up to 10% of the
value of Fund's net assets (computed at cost), or (b) enter into reverse
repurchase agreements (bank borrowings and reverse repurchase agreements, in
aggregate, shall not exceed 10% of the value of Fund's net assets).

D-105

<PAGE>

5. Underwriting Securities of Other Issuers (S)

Fund may not underwrite securities, except that Fund may purchase
securities from issuers thereof or others and dispose of such securities in a
manner consistent with its other investment policies; in the disposition of
restricted securities Fund may be deemed to be an underwriter, as defined in the
Securities Act of 1933.

6. Real Estate (S)

Fund may not purchase or sell real estate or interests in real estate,
except that it may purchase and sell securities secured by real estate and
securities of companies which invest in real estate.

7. Commodities (S)

Fund will not purchase or sell commodities or commodity contracts,
except that Fund may engage in currency or other financial futures contracts and
related options transactions.

8. Loans to Others (S)

Fund may not make loans, except that Fund may make, purchase or hold
debt securities and other debt investments, including loans, consistent with its
investment objective, lend portfolio securities valued at not more than 15% of
its total assets to broker-dealers, and enter into repurchase agreements.

Fund may lend securities to brokers and dealers, but such loans will not be made
with respect to Fund if, as a result, the aggregate of all outstanding
securities loans exceeds 15% of the value of Fund's total assets taken at their
current value.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of the value of its total assets in
companies which have been in operation for less than 3 years.

D-106

<PAGE>

10. Control or Management (R)

Fund may not invest for the primary purpose of exercising control over
or management of any issuer.

11. Short Sales (R)

Fund may not make short sales of securities.

12. Margin Purchases (R)

Fund may not make margin purchases.

13. Other Investment Companies (R)

D-107

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Bond Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

CAPITAL PRESERVATION AND INCOME FUND

1. Diversification (S)

With respect to 75% of the value of its assets, Fund will not purchase
securities of any one issuer (other than cash, cash items or securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities) if as a
result more than 5% of the value of its total assets would be invested in the
securities of the issuer.

2. Concentration (S)

N/A

3. Issuing Senior Securities (S)

Fund may not issue senior securities; the purchase or sale of
securities on a "when issued" basis or collateral arrangement with respect to
the writing of options on securities are not deemed to be the issuance of a
senior security.

4. Borrowing (S)

Fund will not borrow money or enter into reverse repurchase agreements,
except that Fund may enter into reverse repurchase agreements or borrow money
from banks for temporary or emergency purposes in aggregate amounts of up to 1/3
of the value of Fund's net assets; provided that, while borrowings from banks
(not including reverse repurchase agreements) exceed 5% of Fund's net assets,
any such excess borrowings will be repaid before additional investments are
made.

5. Underwriting Securities of Other Issuers (S)

Fund will not underwrite securities of other issuers, except that Fund
may purchase securities from the issuer or others and dispose of such securities
in a manner consistent with its investment objective.

D-108

<PAGE>

6. Real Estate (S)

Fund may not purchase or sell real estate, except that it may purchase
and sell securities secured by real estate and securities of companies which
invest in real estate.

7. Commodities (S)

Fund may not purchase or sell commodities or commodity contracts,
except that it may engage in financial futures contracts and related options
transactions.

8. Loans to Others (S)

Fund may not make loans, except that Fund may (a) purchase or hold debt
securities consistent with its investment objective, (b) lend portfolio
securities valued at not more than 15% of its total assets to broker-dealers,
and (c) enter into repurchase agreements.

In order to generate additional income, 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. Loans of securities by Fund are limited
to 15% of Fund's total assets.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of its total assets in securities of
unseasoned issuers that have been in continuous operation for less than 3 years,
including operating periods of their predecessors.

10. Short Sales (R)

Fund will not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or of securities which, without payment of any further
consideration are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.

11. Margin Purchases (R)

Fund will not purchase securities on margin, except that it may obtain
such short-term credits as may be necessary for the clearance of transactions.

12. Other Investment Companies (R)

Fund may not purchase securities of other investment companies, except
as part of a merger, consolidation, purchase of assets or similar transaction.

13. Pledges (R)

Fund will not mortgage, pledge or hypothecate any assets except to
secure permitted borrowings. Fund may not pledge more than 15% of its net assets
to secure indebtedness; the purchase or sale of securities on a "when issued"
basis or collateral arrangement with respect to the writing of options on
securities are not deemed to be a pledge of assets.

D-109

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Bond Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INSTITUTIONAL ADJUSTABLE RATE FUND

1. Diversification (S)

With respect to 75% of its total assets, Fund may not invest more than
5% of the value of its total assets in the securities of any one issuer; this
limitation does not apply to investments in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities.

2. Concentration (S)

N/A

3. Issuing Senior Securities (S)

Fund may not issue senior securities; the purchase or sale of
securities on a when issued basis is not deemed to be the issuance of a senior
security.

4. Borrowing (S)

Fund may not borrow money or enter into reverse repurchase agreements,
except that Fund may enter into reverse repurchase agreements or borrow money
from banks for temporary or emergency purposes in aggregate amounts up to 1/3 of
the value of Fund's net assets; provided that while borrowings from banks (not
including reverse repurchase agreements) exceed 5% of Fund's net assets, any
such excess borrowings will be repaid before additional investments are made.

5. Underwriting Securities of Other Issuers (S)

Fund may not underwrite securities of other issuers, except that Fund
may purchase securities from the issuer or others and dispose of such securities
in a manner consistent with its investment objective.

D-110

<PAGE>

6. Real Estate (S)

Fund may not purchase or sell real estate, except that it may purchase
and sell securities secured by real estate and securities of companies which
invest in real estate.

7. Commodities (S)

Fund may not purchase or sell commodities or commodity contracts,
except that it may engage in financial futures contracts and related options
transactions.

8. Loans to Others (S)

Fund may not make loans, except that Fund may purchase or hold debt
securities consistent with its investment objective, lend portfolio securities
valued at not more than 15% of its total assets to brokers, dealers and
financial institutions, and enter into repurchase agreements.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of its total assets in securities of
any company having a record, together with its predecessors, of less than 3
years of continuous operations.

10. Short Sales (R)

Fund may not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or of securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.

11. Margin Purchases (R)

Fund may not purchase securities on margin, except that it may obtain
such short-term credit as may be necessary for the clearance of purchases and
sales of securities.

12. Other Investment Companies (R)

Fund may not purchase more than 3% of the total outstanding voting
securities of any one investment company, invest more than 5% of its total
assets in any one investment company or invest more than 10% of its total assets
in investment companies in general, except as part of a merger, consolidation,
purchase of assets or similar transaction.

13. Pledges (R)

Fund may not pledge more than 15 % of its net assets to secure
indebtedness; the purchase or sale of securities on a when issued basis is not
deemed to be a pledge of assets.

D-111

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Bond Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

STRATEGIC INCOME FUND

1. Diversification (S)

Fund may not purchase any security (other than U.S. government
securities) of any issuer if as a result more than 5% of its total assets would
be invested in securities of the issuer, except that up to 25% of its total
assets may be invested without regard to this limit.

2. Concentration (S)

Fund may not purchase any security (other than U.S. government
securities) of any issuer if as a result more than 25% of its total assets would
be invested in a single industry; except that (a) there is no restriction with
respect to obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities; (b) wholly owned finance companies will be considered to
be in the industries of their parents if their activities are primarily related
to financing the activities of the parents; (c) the industry classification of
utilities will be determined according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (d) the industry classification of medically related industries
will be determined according to their services (for example, management,
hospital supply, medical equipment and pharmaceuticals will each be considered a
separate industry).

3. Issuing Senior Securities (S)

4. Borrowing (S)

Fund may not borrow money or enter into reverse repurchase agreements,
except that Fund may (a) enter into reverse repurchase agreements or (b) borrow
money from banks for temporary or emergency purposes in aggregate amounts up to
1/3 of the value of Fund's net assets; provided that while borrowings from banks
exceed 5% of Fund's net assets, any such borrowings will be repaid before
additional investments are made.

D-112

<PAGE>

5. Underwriting Securities of Other Issuers (S)

6. Real Estate (S)

Fund may not purchase or sell real estate, except that Fund may
purchase and sell securities secured by real estate and securities of companies
which invest in real estate.

7. Commodities (S)

Fund may not purchase or sell commodities or commodity contracts,
except that Fund may engage in currency or other financial futures contracts and
related options transactions.

8. Loans to Others (S)

In order to generate additional income, Fund may lend portfolio securities on a
short-term or long-term basis to broker/dealers, banks, or other institutional
borrowers of securities. Fund will not lend any of its assets except portfolio
securities up to 15% of the value of its total assets.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of its total assets in securities of
any company having a record, together with its predecessors, of less than 3
years of continuous operation.

D-113

<PAGE>

10. Short Sales (R)

11. Margin Purchases (R)

Fund may not purchase securities on margin except that it may obtain
such short term credit as may be necessary for the clearance of purchases and
sales of securities.

12. Other Investment Companies (R)

Fund may not purchase securities of other investment companies, except
as part of a merger, consolidation, purchase of assets or similar transaction.

13. Pledges (R)

Fund may not pledge more than 15% of its net assets to secure
indebtedness; the purchase or sale of securities on a "when issued" basis or
collateral arrangement with respect to the writing of options on securities are
not deemed to be a pledge of assets.

D-114

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Balanced Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

FUND FOR TOTAL RETURN

1. Diversification (S)

Fund may not invest more than 5% of its total assets, at the time of
the investment in question, in the securities of any one issuer other than the
U.S. government and its agencies or instrumentalities, except that up to 25% of
the value of Fund's total assets may be invested without regard to such 5%
limitation.

Fund may not purchase more than 10% of the voting securities of any one
issuer other than the U.S. government and its agencies and instrumentalities.

2. Concentration (S)

Fund will not purchase any security (other than U.S. government
securities) of any issuer if as a result more than 25% of its total assets would
be invested in a single industry; except that (a) there is no restriction with
respect to obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities; (b) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily related
to financing the activities of the parents; (c) the industry classification of
utilities will be determined according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (d) the industry classification of medically related industries
will be determined according to their services (for example, management,
hospital supply, medical equipment and pharmaceuticals will each be considered a
separate industry).

3. Issuing Senior Securities (S)

Fund will not issue senior securities; the purchase or sale of
securities on a "when issued" basis or collateral arrangement with respect to
the writing of options on securities are not deemed to be the issuance of a
senior security.

D-115

<PAGE>

4. Borrowing (S)

Fund will not borrow money or enter into reverse repurchase agreements,
except that Fund may enter into reverse repurchase agreements or borrow money
from banks for temporary or emergency purposes in aggregate amounts up to 1/3 of
the value of Fund's net assets; provided that while borrowings from banks (not
including reverse repurchase agreements) exceed 5% of Fund's net assets, any
such borrowings will be repaid before additional investments are made.

Fund may borrow in amounts up to 1/3 of its net assets as a temporary
measure or for extraordinary or emergency purposes, as well as for leverage.

5. Underwriting Securities of Other Issuers (S)

Fund will not underwrite any issue of securities except as it may be
deemed an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objectives, policies and
limitations.

6. Real Estate (S)

Fund will not purchase or sell real estate, except that it may purchase
and sell securities secured by real estate and securities of companies which
invest in real estate.

7. Commodities (S)

Fund will not purchase or sell commodities or commodity contracts;
however, Fund may enter into futures contracts on financial instruments or
currency and sell or buy options on such contracts.

8. Loans to Others (S)

Fund will not make loans, except that Fund may purchase or hold debt
securities consistent with its investment objective, lend portfolio securities
valued at not more than 15% of its total assets to broker-dealers and enter into
repurchase agreements.

In order to generate income and to offset expenses, Fund may lend portfolio
securities to brokers, dealers and other financial institutions. Loans of
securities by Fund, if and when made, may not exceed 15% of the value of the net
assets of Fund.

9. Unseasoned Issuers (R)

10. Control or Management (R)

Fund may not invest in companies for the purpose of exercising control
or management.

D-116

<PAGE>

11. Short Sales (R)

12. Margin Purchases (R)

Fund may not purchase securities on margin, except that Fund may obtain
such short-term credits as may be necessary for the clearance of transactions. A
deposit or payment by Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not considered
the purchase of a security on margin.

13. Other Investment Companies (R)

Fund may not purchase securities of other investment companies, except
as part of a merger, consolidation, purchase of assets or similar transaction.

14. Pledges (R)

Fund will not pledge more than 15% of its net assets to secure
indebtedness; the purchase or sale of securities on a "when issued" basis or
collateral arrangement with respect to the writing of options on securities are
not deemed to be a pledge of assets.

D-117

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

International / Global Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

EVERGREEN LATIN AMERICA FUND

1. Diversification (S)

Fund may not purchase securities of any one issuer if as a result more
than 10% of the outstanding voting securities of such issuer would be held by
Fund, or invest more than 5% of Fund's total assets (taken at market value) in
the securities of any one issuer, except securities issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities, provided that Fund
may invest up to 25% of its total assets in securities issued or guaranteed by
any single foreign government and up to 10% of its total assets in securities
issued or guaranteed by any single multinational agency limited in the aggregate
to 25% of its total assets.

2. Concentration (S)

Fund may not invest 25% or more of its total assets (taken at market
value) in securities of issuers in a particular industry or group of related
industries, including a foreign government, except U.S. government securities.

3. Issuing Senior Securities (S)

Fund may not issue senior securities, except as appropriate to evidence
indebtedness which Fund is permitted to incur pursuant to Fundamental
Restriction 4 below and except for shares of any additional series or portfolios
which may be established by the Trustees.

4. Borrowing (S)

Fund may not borrow money, except from a bank for temporary or
emergency purposes (not for leveraging or investment) and may not borrow money
in an amount exceeding 1/3 of the value of its total assets (less liabilities
other than borrowings); any borrowings that come to exceed 1/3 of Fund's total
assets by reason of a decline in net assets will be reduced within 3 days to the
extent necessary to comply with the 1/3 limitation; Fund will not purchase
securities while borrowings in excess of 5% of its total assets are outstanding.

D-118

<PAGE>

5. Underwriting Securities of Other Issuers (S)

Fund may not underwrite securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the disposition
of restricted securities.

6. Real Estate (S)

Fund may not invest in real estate or mortgages (but may invest in real
estate investment trusts or companies whose business involves the purchase or
sale of real estate or mortgages except real estate limited partnerships).

7. Commodities (S)

Fund may not invest in commodities or commodity contracts, except
futures contracts and options on futures contracts, including but not limited to
contracts for the future delivery of securities or currency, contracts based on
securities indices and forward foreign currency exchange contracts.

8. Loans to Others (S)

Fund may not make loans, except (a) through the purchase of a portion
of an issue of publicly distributed debt securities in accordance with its
investment objectives, policies and restrictions, and (b) by entering into; loan
transactions and; repurchase agreements with respect to its securities if, as a
result thereof, not more than 25% of Fund's total assets (taken at current
value) would be subject to loan transactions.

Fund may lend its securities to broker-dealers or other institutional borrowers
for use in connection with such borrowers' short sales, arbitrages or other
securities transactions. Such loans may not exceed 25% of Fund's total assets.
Shareholder approval is necessary to amend the following conditions which Fund
must meet in order to be permitted by the SEC to engage in loan transactions:
(1) Fund must receive 100% collateral in the form of cash or cash equivalents,
e.g., U. S. Treasury bills or notes, from the borrower; and (2) the borrower
must increase the collateral whenever the market value of the securities
(determined on a daily basis) exceeds the value of the collateral. Other such
conditions for the making of loans exist but do not require shareholder approval
before being amended from time to time by Fund's Board of Trustees.

9. Pledges (R)

Fund may not pledge, mortgage or hypothecate its assets, except that
Fund may pledge not more than 1/3 of its total assets (taken at current value)
to secure borrowings made in accordance with Fundamental Restriction 4 above,
and provided that Fund may make initial and variation margin payments in
connection with purchases or sales of futures contracts or of options on futures
contracts.

D-119

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

International / Global Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

GLOBAL OPPORTUNITIES FUND:
Global Opportunities Portfolio

1. Diversification (S)

Portfolio may not purchase any security of any issuer (other than any
security issued or guaranteed as to principal or interest by the U.S., its
agencies or instrumentalities) if as a result more than 5% of its total assets
would be invested in securities of the issuer, except that up to 25% of its
total assets may be invested without regard to this limit.

Portfolio may not purchase any security (other than U.S. government
securities) of any issuer if as a result Portfolio would hold more than 10% of
the voting securities of the issuer.

2. Concentration (S)

Portfolio may not purchase any security of any issuer if as a result
more than 25% of its total assets would be invested in a single industry; except
that (a) there is no restriction with respect to U.S. government securities; (b)
wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; (c) the industry classification of utilities will be
determined according to their services (for example, gas, gas transmission,
electric, and telephone will each be considered a separate industry) and (d) the
industry classification of medically related industries will be determined
according to their services (for example, management, hospital supply, medical
equipment and pharmaceuticals will each be considered a separate industry).

3. Issuing Senior Securities (S)

Portfolio may not issue senior securities; the purchase or sale of
securities on a "when issued" basis or collateral arrangement with respect to
the writing of options on securities are not deemed to be the issuance of a
senior security.

D-120

<PAGE>

4. Borrowing (S)

Portfolio may not borrow money, except that Portfolio may borrow money
from banks and/or enter into reverse repurchase agreements for temporary or
emergency purposes in aggregate amounts up to 1/3 of the value of Portfolio's
net assets provided that no additional investments shall be made at any time
that outstanding borrowings (including amounts payable under reverse repurchase
agreements) exceed 5% of Portfolio's assets.

5. Underwriting Securities of Other Issuers (S)

Portfolio may not underwrite securities of other issuers, except that
Portfolio may purchase securities from the issuer or others and dispose of such
securities in a manner consistent with its investment objectives.

6. Real Estate (S)

Portfolio may not purchase or sell real estate, except that it may
purchase and sell securities secured by real estate and securities of companies
which invest in real estate.

7. Commodities (S)

Portfolio may not purchase or sell commodities or commodity contracts,
except that it may engage in currency and other financial futures contracts and
related options transactions.

8. Loans to Others (S)

Portfolio may not make loans, except that Portfolio may purchase or
hold debt securities, including nonpublicly offered debt securities and
convertible debt securities, consistent with its investment objective, lend
portfolio securities valued at not more than 15% of its total assets to
broker-dealers, and enter into repurchase agreements.

Portfolio may lend securities to brokers or dealers, but such loans will not be
made with respect to Portfolio if, as a result, the aggregate of all outstanding
securities loans exceeds 15% of the value of Portfolio's total assets taken at
their current value.

9. Unseasoned Issuers (R)

Portfolio may not invest more than 5% of its total assets in securities
of any company having a record, together with its predecessors, of less than 3
years of continuous operation.

10. Control or Management (R)

Portfolio may not purchase any security for the purpose of control or
management.

D-121

<PAGE>

11. Short Sales (R)

Portfolio may not make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or of securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short.

12. Margin Purchases (R)

Portfolio may not purchase securities on margin except that it may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of securities.

13. Other Investment Companies (R)

Portfolio may not purchase securities of other investment companies,
except as part of a merger, consolidation, purchase of assets or similar
transaction.

14. Pledges (R)

Portfolio may not pledge more than 15% of its net assets to secure
indebtedness; the purchase or sale of securities on a "when issued" basis, or
collateral arrangement with respect to the writing of options on securities, are
not deemed to be a pledge of assets.

D-122

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

International / Global Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

INTERNATIONAL FUND INC.

1. Diversification (S)

Fund may not invest more than 5% of its total assets, computed at
market value, in the securities of any one issuer.

Fund may not invest in more than 10% of the outstanding voting
securities of any one issuer.

2. Concentration (S)

Fund may not invest more than 25% of its assets in the securities of
issuers in any single industry.

3. Issuing Senior Securities (S)

Fund will not issue senior securities, except as appropriate to
evidence indebtedness that the portfolio is permitted to incur pursuant to
Fundamental Restriction 4 below and except for shares of any additional series
or portfolios that may be established by the Directors.

4. Borrowing (S)

Fund may not borrow money, except that Fund may borrow money from banks
and/or enter into reverse repurchase agreements for emergency or extraordinary
purposes in aggregate amounts up to 10% of its gross assets, computed at the
lower of cost or current value, provided that no additional investments shall be
made at any time that outstanding borrowings (including amounts payable under
reverse repurchase agreements) exceed 5% of Fund's gross assets.

5. Underwriting Securities of Other Issuers (S)

Fund may not underwrite securities, except that Fund may purchase
securities from issuers thereof or others and dispose of such securities in a
manner consistent with its other investment policies; in the disposition of
restricted securities Fund may be deemed to be an underwriter, as defined in the
Securities Act of 1933.

D-123

<PAGE>

6. Real Estate (S)

Fund may not purchase real estate.

7. Commodities (S)

Fund may not purchase commodities or commodity contracts, except that
Fund may enter into currency or other financial futures contracts and engage in
related options transactions.

8. Loans to Others (S)

Fund may not lend any of its assets, except through the purchase of
debt securities of a type commonly distributed or sold publicly or privately to
financial institutions and except that Fund may lend limited amounts of its
portfolio securities to broker dealers.

Fund may lend securities to brokers or dealers, but such loans will not be made
with respect to Fund if, as a result, the aggregate of all outstanding
securities loans exceeds 15% of the value of Fund's total assets taken at their
current value.

9. Unseasoned Issuers (R)

Fund may not invest more than 5% of the value of its total assets in
companies that have been in operation for less than 3 years.

10. Control or Management (R)

Fund may not invest in a company for the purpose of exercising control
over or management of any issuer.

11. Short Sales (R)

Fund may not make short sales of securities.

12. Margin Purchases (R)

Fund may not make margin purchases.

13. Other Investment Companies (R)

D-124

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal (Tax Free) Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

STATE TAX FREE FUND:
Massachusetts Tax Free Fund, New York Tax Free Fund
and Pennsylvania Tax Free Fund

1. Diversification (S)

A Fund may not purchase a security if more than 25% of the Fund's total
assets would be invested in the securities of a single issuer (other than the
U.S. government, its agencies and instrumentalities); or, with respect to 50% of
the Fund's total assets, if more than 5% of such assets would be invested in the
securities of a single issuer (other than the U.S. government, its agencies and
instrumentalities).

The Funds are nondiversified under the federal securities laws. The
1940 Act does not restrict the percentage of a nondiversified fund's assets that
may be invested at any time in the securities of any one issuer. The Funds
intend to comply, however, with the Code's diversification requirements and
other requirements applicable to "regulated investment companies" so that they
will not be subject to U.S. federal income tax on income and capital gain
distributions to shareholders. For this reason, each Fund has adopted the
additional investment restriction enumerated above, which may not be changed
without the approval of shareholders.

2. Concentration (S)

Each Fund may not purchase any security of any issuer (other than
issues of the U.S. government, its agencies or instrumentalities) if as a result
more than 25% of its total assets would be invested in a single industry,
including industrial development bonds from the same facility or similar types
of facilities; governmental issuers of municipal bonds are not regarded as
members of an industry and a Fund may invest more than 25% of its assets in
industrial development bonds.

None of the Funds presently intends to invest more than 25% of its
total assets in municipal obligations the payment of which depends on revenues
derived from a single facility or similar types of facilities.

D-125

<PAGE>

For purposes of Fundamental Restriction 2, each Fund will treat (1)
each state, territory and possession of the U.S., the District of Columbia and,
if its assets and revenues are separate from those of the entity or entities
creating it, each political subdivision, agency and instrumentality of any one
(or more, as in the case of a multi state authority or agency) of the foregoing
as an issuer of all securities that are backed primarily by its assets or
revenues; (2) each company as an issuer of all securities that are backed
primarily by its assets or revenues; and (3) each of the foregoing entities as
an issuer of all securities that it guarantees; provided, however, that for the
purpose of Fundamental Restriction 2, no entity shall be deemed to be an issuer
of a security that it guarantees so long as no more than 10% of a Fund's total
assets (taken at current value) are invested in securities guaranteed by the
entity and securities of which it is otherwise deemed to be an issuer.

3. Issuing Senior Securities (S)

Each Fund may not issue senior securities; the purchase or sale of
securities on a "when issued" basis, or collateral arrangement with respect to
the writing of options on securities, are not deemed to be the issuance of a
senior security.

4. Borrowing (S)

Each Fund may not borrow money or enter into reverse repurchase
agreements, except that a Fund may enter into reverse repurchase agreements or
borrow money from banks for temporary or emergency purposes in aggregate amounts
up to 1/3 of the value of the Fund's net assets; provided that while borrowings
from banks (not including reverse repurchase agreements) exceed 5% of the Fund's
net assets, any such borrowings will be repaid before additional investments are
made.

As a matter of practice, each Fund permitted to enter into repurchase
agreements treats reverse repurchase agreements as borrowings for purposes of
compliance with the limitations of the 1940 Act.

5. Underwriting Securities of Other Issuers (S)

Each Fund may not underwrite securities of other issuers, except that
the Fund may purchase securities from the issuer or others and dispose of such
securities in a manner consistent with its investment objective.

For purposes of Fundamental Restriction 5, each Fund will treat (1) each state,
territory and possession of the U.S., the District of Columbia and, if its
assets and revenues are separate from those of the entity or entities creating
it, each political subdivision, agency and instrumentality of any one (or more,
as in the case of a multi state authority or agency) of the foregoing as an
issuer of all securities that are backed primarily by its assets or revenues;
(2) each company as an issuer of all securities that are backed primarily by its
assets or revenues; and (3) each of the foregoing entities as an issuer of all
securities that it guarantees.

D-126

<PAGE>

6. Real Estate (S)

Each Fund may not purchase or sell real estate, except that it may
purchase and sell securities secured by real estate and securities of companies
which invest in real estate.

7. Commodities (S)

Each Fund may not purchase or sell commodities or commodity contracts,
except that it may engage in currency or other financial futures contracts and
related options transactions.

8. Loans to Others (S)

Each Fund may not make loans, except that a Fund may purchase or hold
debt securities consistent with its investment objectives, lend portfolio
securities valued at not more than 15% of its total assets to broker-dealers and
enter into repurchase agreements.

Each Fund may lend securities to brokers and dealers. Such loans will
not be made with respect to a Fund if as a result the aggregate of all
outstanding securities loans exceeds 15% of the value of the Fund's total assets
taken at their current value.

9. Investment in Federally Tax Exempt Securities (S)

Each Fund is required to invest, under ordinary circumstances, at least
80% of its assets in federally tax-exempt municipal obligations.

10. Margin Purchases (R)

Each Fund may not purchase securities on margin except that it may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of securities.

11. Other Investment Companies (R)

Each Fund may not purchase securities of other investment companies
except as part of a merger, consolidation, purchase of assets or similar
transaction.

12. Illiquid Securities (R)

Each Fund may not invest more than 10% of its assets in securities with
legal or contractual restrictions on resale or in securities for which market
quotations are not readily available, or in repurchase agreements maturing in
more than 7 days.

13. Investment in State Tax Exempt Securities (R)

Under ordinary circumstances, at least 80% of the Fund's assets will be
invested in municipal obligations that are exempt from certain taxes in the
state for which the Fund is named.

D-127

<PAGE>

EVERGREEN FUNDS

CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS

Municipal (Tax Free) Funds

"S": Fundamental Restriction to be Standardized

"R": Fundamental Restriction to be Reclassified as Non-Fundamental

STATE TAX FREE FUND - SERIES II:
California Tax Free Fund and Missouri Tax Free Fund

1. Diversification (S)

2. Concentration (S)

D-128

<PAGE>

3. Issuing Senior Securities (S)

4. Borrowing (S)

As a matter of practice, each Fund permitted to enter into repurchase
agreements treats reverse repurchase agreements as borrowings for purposes of
compliance with the limitations of the 1940 Act.

5. Underwriting Securities of Other Issuers (S)

D-129

<PAGE>

6. Real Estate (S)

Each Fund may not purchase or sell real estate, except that it may
purchase and sell securities secured by real estate and securities of companies
which invest in real estate.

7. Commodities (S)

Each Fund may not purchase or sell commodities or commodity contracts,
except that it may engage in currency or other financial futures contracts and
related options transactions.

8. Loans to Others (S)

9. Investment in Federally Tax Exempt Securities (S)

Each Fund is required to invest, under ordinary circumstances, at least
80% of its assets in federally tax-exempt municipal obligations.

10. Margin Purchases (R)

Each Fund may not purchase securities on margin except that it may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of securities.

11. Other Investment Companies (R)

Each Fund may not purchase securities of other investment companies
except as part of a merger, consolidation, purchase of assets or similar
transaction.

12. Illiquid Securities (R)

13. Investment in State Tax Exempt Securities (R)

Under ordinary circumstances, at least 80% of the Fund's assets will be
invested in municipal obligations that are exempt from certain taxes in the
state for which the Fund is named.

D-130

<PAGE>

EXHIBIT E

NUMBER OF SHARES OF EACH FUND (OR CLASS)
OUTSTANDING AS OF THE CLOSE OF BUSINESS ON
OCTOBER 16, 1997

EVERGREEN FUNDS

I. Equity Funds

Evergreen Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen U.S. Real Estate Equity Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen MicroCap Fund, Inc.
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Aggressive Growth Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Growth and Income Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Utility Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Small Cap Equity Income Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

E-1

<PAGE>

Evergreen Income and Growth Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Value Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

II. Bond Funds

Evergreen U.S. Government Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Short-Intermediate Bond Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Intermediate-Term Government Securities Fund
Class A..................................
Class B..................................
Class C..................................
Class Y .................................

III. Balanced Funds

Evergreen Foundation Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Tax Strategic Foundation Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen American Retirement Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

IV. International / Global Funds

Evergreen Global Real Estate Equity Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

E-2

<PAGE>

Evergreen Emerging Markets Growth Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen International Equity Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Global Leaders Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

V. Money Market

Evergreen Money Market Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Tax Exempt Money Market Fund
Class A..................................
Class Y..................................

Evergreen Treasury Money Market Fund
Class A..................................
Class Y..................................

Evergreen Institutional Money Market Fund
Institutional Service Class .............
Institutional Class .....................

Evergreen Institutional Treasury Money Market Fund
Institutional Service Class .............
Institutional Class......................

Evergreen Institutional Tax Exempt Money Market Fund
Institutional Service Class .............
Institutional Class......................

Evergreen Pennsylvania Tax-Free Money Market Fund
Class A .................................
Class Y..................................

VI. Municipal (Tax Free) Funds

Evergreen Georgia Municipal Bond Fund
Class A..................................
Class B..................................
Class Y..................................

E-3

<PAGE>

Evergreen North Carolina Municipal Bond Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen South Carolina Municipal Bond Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen Virginia Municipal Bond Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen Florida High Income Municipal Bond Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen New Jersey Tax Free Income Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen Short-Intermediate Municipal Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen High Grade Tax Free Fund
Class A..................................
Class B..................................
Class Y..................................

E-4

<PAGE>

EVERGREEN (FORMERLY KEYSTONE) FUNDS

I. Equity Funds

Evergreen Natural Resources Fund (formerly
Keystone Global Resources and Development Fund)
Class A..................................
Class B..................................
Class C..................................

Keystone Growth and Income Fund
(S-1) ............................................

Evergreen Institutional Small Cap Growth Fund
(formerly Keystone Institutional Trust:
Institutional Small Capitalization Growth Fund)......

Evergreen (formerly Keystone)
Omega Fund
Class A..................................
Class B..................................
Class C..................................

Keystone Precious Metals Holdings, Inc.

Keystone Strategic Growth Fund (K-2)

II. Bond Funds

Keystone High Income Bond Fund (B-4)

Evergreen (formerly Keystone) Capital
Preservation and Income Fund
Class A..................................
Class B..................................
Class C..................................

Evergreen (formerly Keystone) Institutional
Adjustable Rate Fund
Institutional Service Class .............
Institutional Class .....................
Class Y..................................

Evergreen (formerly Keystone) Strategic
Income Fund
Class A..................................
Class B..................................
Class C..................................

III. Balanced Funds

Evergreen (formerly Keystone) Fund for Total Return
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

E-5

<PAGE>

IV. International / Global Funds

Evergreen Latin America Fund
(formerly Keystone Fund of the Americas)
Class A..................................
Class B..................................
Class C..................................

Evergreen (formerly Keystone) Global
Opportunities Fund: Global Opportunities Portfolio
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Keystone International Fund Inc.

V. Municipal (Tax Free) Funds

State Tax Free Fund:

Massachusetts
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

New York
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Pennsylvania
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

State Tax Free Fund - Series II:
California
Class A..................................
Class B..................................
Class Y..................................

Missouri
Class A.................................
Class B.................................
Class Y.................................

E-6

<PAGE>

EXHIBIT F

VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF

The only voting securities Fund are its shares of beneficial interest.
As of the Record Date, the Trustees and Officers of each Fund owned as a group
less than 1% of the outstanding voting securities of any Fund. As of the Record
Date, the following shareholders were known to the Registrants to own
beneficially 5% or more of the shares of a Fund:

<TABLE>
<CAPTION>
EVERGREEN FUNDS

I. Equity Funds Name/Address % Beneficial Ownership

<S> <C> <C>
Evergreen Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen U.S. Real Estate Equity
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

The Evergreen MicroCap Fund, Inc.
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Aggressive Growth
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Growth and Income
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Utility Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

F-1

<PAGE>

Evergreen Small Cap Equity
Income Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Income and Growth
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Value Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

II. Bond Funds

Evergreen U.S. Government Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Short-Intermediate Bond
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Intermediate-Term
Government Securities Fund
Class A..................................
Class B..................................
Class C..................................
Class Y .................................

III. Balanced Funds

Evergreen Foundation Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Tax Strategic Foundation
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

F-2

<PAGE>

IV. International / Global Funds

Evergreen Global Real Estate Equity
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Emerging Markets Growth
Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Global Leaders Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

V. Money Market

Evergreen Money Market Fund
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen Tax Exempt Money
Market Fund
Class A..................................
Class Y..................................

Evergreen Treasury Money
Market Fund
Class A..................................
Class Y..................................

Evergreen Institutional Money
Market Fund
Institutional Service Class .............
Institutional Class .....................

F-3

<PAGE>

Evergreen Institutional Treasury
Money Market Fund
Institutional Service Class .............
Institutional Class......................

Evergreen Institutional Tax Exempt
Money Market Fund
Institutional Service Class .............
Institutional Class......................

Evergreen Pennsylvania Tax Free
Money Market Fund
Class A .................................
Class Y..................................

VI. Municipal (Tax Free) Funds

Evergreen Georgia Municipal Bond
Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen North Carolina Municipal
Bond Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen South Carolina Municipal
Bond Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen Virginia Municipal Bond
Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen Florida High Income
Municipal Bond Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen New Jersey Tax Free
Income Fund
Class A..................................
Class B..................................
Class Y..................................

F-4

<PAGE>

Evergreen Short-Intermediate
Municipal Fund
Class A..................................
Class B..................................
Class Y..................................

Evergreen High Grade Tax Free
Fund
Class A..................................
Class B..................................
Class Y..................................
</TABLE>

F-5

<PAGE>

EVERGREEN (FORMERLY KEYSTONE) FUNDS

I. Equity Funds

Evergreen Natural Resources Fund (formerly Keystone
Global Resources and Development Fund)
Class A..................................
Class B..................................
Class C..................................

Keystone Growth and Income Fund
(S-1) ............................................

Evergreen Institutional Small Cap Growth Fund
(formerly Keystone Institutional Small
Capitalization Growth Fund)..........................

Evergreen (formerly Keystone) Omega Fund
Class A..................................
Class B..................................
Class C..................................

Keystone Precious Metals Holdings, Inc.

Keystone Strategic Growth
Fund (K-2)...........................................

II. Bond Funds

Keystone High Income Bond Fund
(B-4) ............................................

Evergreen (formerly Keystone) Capital
Preservation and Income Fund
Class A..................................
Class B..................................
Class C..................................

Evergreen (formerly Keystone) Institutional
Adjustable Rate Fund
Institutional Service Class .............
Institutional Class .....................
Class Y..................................

Evergreen (formerly Keystone) Strategic
Income Fund
Class A..................................
Class B..................................
Class C..................................

III. Balanced Funds

F-6

<PAGE>

IV. International / Global Funds

Evergreen Latin America Fund
(formerly Keystone Fund of the Americas)
Class A..................................
Class B..................................
Class C..................................

Evergreen (formerly Keystone) Global Opportunities Fund)
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Keystone International Fund Inc.

V. Municipal (Tax Free) Funds

Evergreen (formerly Keystone) State Tax Free Fund:
Massachusetts
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

New York
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Pennsylvania
Class A..................................
Class B..................................
Class C..................................
Class Y..................................

Evergreen (formerly Keystone) State Tax Free Fund - Series II:
California
Class A..................................
Class B..................................
Class Y..................................

Missouri
Class A.................................
Class B.................................
Class Y.................................

F-7

<PAGE>

EVERY SHAREHOLDER'S VOTE IS IMPORTANT!

VOTE THIS PROXY CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS

Please detach at perforation before mailing.

JOINT SPECIAL MEETING OF SHAREHOLDERS - DECEMBER 15, 1997

The undersigned hereby appoints ___________, ____________ and ___________ and
each of them, attorneys and proxies for the undersigned, with full powers of
substitution and revocation, to represent the undersigned and to vote on behalf
of the undersigned all shares of the Fund referenced below (the "Fund"), which
the undersigned is entitled to vote at a Meeting of Shareholders of the Fund to
be held at 200 Berkeley Street, 26th Floor, Boston, Massachusetts 02116 on
December 15, 1997, at 3:00 p.m. and any adjournments thereof (the "Meeting").
The undersigned hereby acknowledges receipt of the Notice of Meeting and Proxy
Statement, and hereby instructs said attorneys and proxies to vote said shares
as indicated hereon. Unless indicated to the contrary, this proxy shall be
deemed to grant authority to vote "FOR" all proposals relating to the Fund. In
their discretion, the proxies are authorized to vote upon such other matters as
may properly come before the Meeting. A majority of the proxies present and
acting at the meeting in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of the powers and
authority of said proxies hereunder. The undersigned hereby revokes any proxy
previously given.

NOTE: Please sign exactly as your name
appears on this Proxy. If joint owners,
EITHER may sign this Proxy. When signing
as attorney, executor, administrator,
trustee, guardian, or corporate officer,
please give your full title.

Date:__________________________, 1997

_______________________________
Signature(s)

_______________________________
Title(s), if applicable

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<PAGE>

EVERY SHAREHOLDERS VOTE IS IMPORTANT!

PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. PLEASE
INDICATE YOUR VOTE ANY AN "x" IN THE APPROPRIATE BOX BELOW. THIS PROXY
WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE TAKEN
ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY SPECIFICATION, THIS
PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS.

<TABLE>
<CAPTION>
For Against Abstain

<S> <C> <C> <C> <C>
1. To approve the proposed Agreement and Plan [ ] [ ] [ ]
of Reorganization with the Successor Fund of
the Successor Trust

2. To approve the proposed change of the Fund's [ ] [ ] [ ]
investment objective from fundamental to
nonfundamental

3. To approve the proposed changes to the Fund's [ ] [ ] [ ]
fundamental investment restrictions

[ ] To vote against the proposed changes to
one or more of the specific fundamental
investment restrictions, but to approve
the others, fill in the box at the left AND
indicate the number(s) of the
fundamental investment restrictions
you do not want to change on this
line: ___________________________

4. For Evergreen Institutional Tax Exempt Money [ ] [ ] [ ]
Market Fund, Evergreen Pennsylvania Tax-Free
Money Market Fund and Evergreen Tax Exempt Money Market Fund
only, to approve an amendment to the Fund's investment
objective to permit the Fund to invest without limit in
obligations subject to the Federal alternative minimum tax.

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<PAGE>

5. For Evergreen Latin America Fund only, to [ ] [ ] [ ]
approve an amendment to the Fund's investment
objective to permit the Fund to invest without
limit in securities of issuers located in
Latin America.

6. For Evergreen Latin America Fund only, to [ ] [ ] [ ]
approve an amendment to the Fund's
investment restriction relating to industry
concentration.

7. To transact any other business that may properly come before
the meeting or any adjournment thereof.
</TABLE>

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