1933 Act File No. 2-94560
1940 Act File No. 811-4154
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 40 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 40 X
EVERGREEN INVESTMENT TRUST
(formerly First Union Funds)
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(914) 694-2020
(Registrant's Telephone Number)
Joseph J. McBrien, Esquire,
2500 Westchester Avenue
Purchase, New York 10577
(Name and Address of Agent for Service)
Copies to:
John A. Dudley, Esquire
Sullivan & Worcester
1025 Connecticut Ave., N.W.
Washington, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
/ / Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/X/ 60 days after filing pursuant to paragraph (a)(i) or
/ / on (date) pursuant to paragraph (a)(i) or
/ / 75 days after filing pursuant to paragraph (a)(ii) or
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
/X/ filed the Notice required by that Rule on February 16, 1995; or
/ / intends to file the Notice required by that Rule on or about (date); or
/ / during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of EVERGREEN INVESTMENT
TRUST, formerly known as FIRST UNION FUNDS, which is comprised of fifteen
portfolios: (1) Evergreen Value Fund (formerly, First Union Value Portfolio),
(2) Evergreen Fixed Income Fund (formerly, First Union Fixed Income Portfolio),
(3) Evergreen High Grade Tax Free Fund (formerly, First Union High Grade Tax
Free Portfolio), (4) Evergreen Treasury Money Market Fund (formerly, First Union
Treasury Money Market Portfolio), (5) Evergreen Balanced Fund (formerly, First
Union Balanced Portfolio), (6) Evergreen Managed Bond Fund (formerly, First
Union Managed Bond Portfolio), (7) Evergreen North Carolina Municipal Bond Fund
(formerly, First Union North Carolina Municipal Bond Portfolio), (8) Evergreen
U.S. Government Fund (formerly, First Union U.S. Government Portfolio), (9)
Evergreen Florida Municipal Bond Fund (formerly, First Union Florida Municipal
Bond Portfolio), (10) Evergreen Georgia Municipal Bond Fund (formerly, First
Union Georgia Municipal Bond Portfolio), (11) Evergreen Virginia Municipal Bond
Fund (formerly, First Union Virginia Municipal Bond Portfolio), (12) Evergreen
Utility Fund (formerly, First Union Utility Portfolio), (13) Evergreen South
Carolina Municipal Bond Fund (formerly, First Union South Carolina Municipal
Bond Portfolio); (14) Evergreen Emerging Markets Growth Fund (formerly, First
Union Emerging Markets Growth Portfolio); and (15) Evergreen International
Equity Fund (formerly, First Union International Equity Portfolio). Each of the
portfolios consist of four separate classes of shares: (a) Y Shares, (b) Class A
Shares, (c) Class B Shares, and (d) Class C Shares, with the following
exceptions: Evergreen North Carolina Municipal Bond Fund, Evergreen Florida
Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund, Evergreen Virginia
Municipal Bond Fund, Evergreen South Carolina Municipal Bond Fund, which
consists of: (a) Y Shares, (b) Class A Shares, and (c) Class B Shares; Evergreen
Managed Bond Fund, which consists of: (a) Y Shares; Evergreen High Grade Tax
Free Fund, which consists of: (a) Y Shares, (b) Class A Shares (c) Class B
Shares; and Evergreen Treasury Money Market Fund, which consist of: (a) Y Shares
and (b) Class A Shares.
CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No. Location in Prospectus(es)
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Overview of the Fund(s);
Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of
the Funds; General
Information
Item 5. Management of the Fund Management of the Fund(s);
General Information
Item 5A. Management's Discussion Management's Discussion of
Fund Performance
Item 6. Capital Stock and Other Securities Dividends, Distributions and
Taxes; General
Information
Item 7. Purchase of Securities Being Offered Purchase and Redemption of
Shares
Item 8. Redemption or Repurchase Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and
Policies;Investment
Restrictions; Other
Restrictions and
Operating Policies
Item 14. Management of the Fund Management
Item 15. Control Persons and Principal Management
Holders of Securities
Item 16. Investment Advisory and Other Services Investment Adviser;
Purchase of Shares
Item 17. Brokerage Allocation Allocation of Brokerage
Item 18. Capital Stock and Other Securities Purchase of Shares
Item 19. Purchase, Redemption and Pricing of Distribution Plans; Purchase
Securities Being Offered of Shares; Net Asset Value
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Distribution Plans; Purchase
of Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
******************************************************************************
PROSPECTUS July 7, 1995
EVERGREEN(SM) GROWTH AND INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN BALANCED FUND
EVERGREEN GROWTH AND INCOME FUND
EVERGREEN VALUE FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN FOUNDATION FUND
EVERGREEN TOTAL RETURN FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Growth and Income Funds (the "Funds") are designed
to provide investors with a selection of investment alternatives which seek
to provide capital growth, income and diversification. This Prospectus
provides information regarding the Class A, Class B and Class C shares
offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 807-2940. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 14
Investment Practices and Restrictions 18
MANAGEMENT OF THE FUNDS
Investment Advisers 23
Sub-Adviser 24
Distribution Plans and Agreements 25
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 26
How to Redeem Shares 28
Exchange Privilege 29
Shareholder Services 30
Effect of Banking Laws 30
OTHER INFORMATION
Dividends, Distributions and Taxes 31
Management's Discussion of Fund Performance 32
General Information 35
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND, and EVERGREEN TOTAL RETURN
FUND is Evergreen Asset Management Corp. ("Evergreen Asset") which, with its
predecessors, has served as an investment adviser to the Evergreen Funds since
1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank
of North Carolina ("FUNB"), which in turn is a subsidiary of First Union
Corporation, one of the ten largest bank holding companies in the United States.
The Capital Management Group of FUNB ("CMG") serves as investment adviser to
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND.
EVERGREEN BALANCED FUND (formerly First Union Balanced Portfolio) seeks
to produce long-term total return through capital appreciation, dividends, and
interest income.
EVERGREEN GROWTH AND INCOME FUND seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
EVERGREEN VALUE FUND (formerly First Union Value Portfolio) seeks
long-term capital growth, with current income as a secondary objective.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities.
EVERGREEN TOTAL RETURN FUND attempts to maximize the "total return" on
its portfolio of investments. It invests primarily in common and preferred
stocks, securities convertible into or exchangeable for common stocks and fixed
income securities.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C Shares of the
Fund. For further information see "Purchase and Redemption of Fund Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the 1% during the
original purchase price or redemption second year, 3% during the third and fourth first year and
proceeds, whichever is lower) years, 2% during the fifth year, 1% during 0% thereafter
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B and C, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares and Class C Shares assume deduction at the time of
redemption (if applicable) of the maximum contingent deferred sales charge
applicable for that time period, and (iii) the expenses for Class B Shares
reflects the conversion to Class A Shares eight years after purchase (years
eight through ten, therefore, reflect Class A expenses).
EVERGREEN BALANCED FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50% After 1 Year $ 56 $ 66 $ 26 $ 16
Administrative Fees .06% .06% .06% After 3 Years $ 74 $ 81 $ 51 $ 81
12b-1 Fees* .25% .75% .75% After 5 Years $ 93 $ 108 $ 88 $ 88
Shareholder Service Fees -- .25% .25% After 10 Years $ 150 $ 163 $ 192 $ 163
Other Expenses .06% .06% .06%
Total .87% 1.62% 1.62%
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 16
Administrative Fees $ 51
12b-1 Fees* $ 88
Shareholder Service Fees $ 192
Other Expenses
Total
</TABLE>
EVERGREEN GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00% After 1 Year $ 63 $ 74 $ 34 $ 24
12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 95 $ 103 $ 73 $ 73
Other Expenses .33% .33% .33% After 5 Years $ 129 $ 145 $ 125 $ 125
Total 1.58% 2.33% 2.33% After 10 Years $ 226 $ 239 $ 267 $ 239
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 24
12b-1 Fees* $ 73
Other Expenses $ 125
Total $ 267
</TABLE>
EVERGREEN VALUE FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50% After 1 Year $ 56 $ 67 $ 27 $ 17
Administrative Fees .06% .06% .06% After 3 Years $ 75 $ 82 $ 52 $ 52
12b-1 Fees* .25% .75% .75% After 5 Years $ 95 $ 110 $ 90 $ 90
Shareholder Service Fees -- .25% .25% After 10 Years $ 154 $ 167 $ 197 $ 167
Other Expenses .10% .10% .10%
Total .91% 1.66% 1.66%
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 17
Administrative Fees $ 52
12b-1 Fees* $ 90
Shareholder Service Fees $ 197
Other Expenses
Total
</TABLE>
3
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of No
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .75% .75% .75% After 1 Year $ 62 $ 73 $ 33 $ 23
12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 94 $ 101 $ 71 $ 71
Other Expenses .53% .53% .53% After 5 Years $ 127 $ 142 $ 122 $ 122
Total 1.53% 2.28% 2.28% After 10 Years $ 221 $ 234 $ 262 $ 234
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 23
12b-1 Fees* $ 71
Other Expenses $ 122
Total $ 262
</TABLE>
EVERGREEN FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of No
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .875% .875% .875% After 1 Year $ 61 $ 72 $ 32 $ 22
12b-1 Fees* .250% 1.000% 1.000% After 3 Years $ 89 $ 97 $ 67 $ 67
Other Expenses .265% .265% .265% After 5 Years $ 120 $ 135 $ 115 $ 115
Total 1.390% 2.140% 2.140% After 10 Years $ 206 $ 219 $ 247 $ 219
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 22
12b-1 Fees* $ 67
Other Expenses $ 115
Total $ 247
</TABLE>
EVERGREEN TOTAL RETURN FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of No
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00% After 1 Year $ 62 $ 73 $ 33 $ 23
12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 92 $ 100 $ 70 $ 70
Other Expenses .24% .24% .24% After 5 Years $ 125 $ 140 $ 120 $ 120
Total 1.49% 2.24% 2.24% After 10 Years $ 217 $ 230 $ 257 $ 230
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 23
12b-1 Fees* $ 70
Other Expenses $ 120
Total $ 257
</TABLE>
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the forseeable future, the Class A 12b-1 Fees will be limited to .25 of 1%
of average net assets. For Class B and Class C Shares of EVERGREEN GROWTH AND
INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND and
EVERGREEN TOTAL RETURN FUND, a portion of the 12b-1 Fees equivalent to .25 of 1%
of average net assets will be shareholder servicing-related.
Distribution-related 12b-1 Fees will be limited to .75 of 1% of average net
assets as permitted under the rules of the National Association of Securities
Dealers, Inc.
From time to time, each Fund's investment adviser may, at its
descretion, reduce or waive its fees or reimburse the Funds for certain of their
expenses in order to reduce their expense ratios. Each Fund's investment adviser
may cease these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds". As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the maximum front-end charges permitted under the rules
of the National Association of Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND has
been audited by KPMG Peat Marwick LLP, each Fund's independent auditors, for
EVERGREEN FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's
independent auditors and for EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN
GROWTH AND INCOME FUND and EVERGREEN TOTAL RETURN FUND has been audited by Ernst
& Young LLP, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP, Price Waterhouse LLP, or Ernst & Young LLP, as the case may be, on the
audited information with respect to each Fund is incorporated by reference in
the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
No financial highlights are shown for Class A, B or C Shares of EVERGREEN
GROWTH and INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND or EVERGREEN
FOUNDATION FUND, since these classes did not have any operations prior to
December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN BALANCED FUND -- CLASS A, B, C AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS C CLASS Y SHARES
CLASS B SHARES SHARES
JUNE 10, JANUARY 26, SEPTEMBER 2,
1991* 1993* 1994*
YEAR ENDED THROUGH YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1994 1993 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $12.07 $11.41 $11.02 $10.00 $12.08 $11.54 $12.00 $12.07 $11.41 $11.02
Income (loss) from
investment
operations:
Net investment
income............. .43 .42 .42 .30 .36 .34 .18 .46 .45 .46
Net realized and
unrealized gain
(loss) on
investments........ (.71) .75 .43 1.08 (.71) .65 (.61) (.71) .75 .42
Total from
investment
operations....... (.28) 1.17 .85 1.38 (.35) .99 (.43) (.25) 1.20 .88
Less distributions
to shareholders
from:
Net investment
income............. (.43) (.42) (.42) (.35) (.36) (.34) (.21) (.46) (.45) (.45)
Net realized
gains.............. (.19) (.09) (.04) (.01) (.19) (.09) (.19) (.19) (.09) (.04)
In excess of net
investment
income............. -- -- -- -- -- (.02)(a) -- -- -- --
Total
distributions.... (.62) (.51) (.46) (.36) (.55) (.45) (.40) (.65) (.54) (.49)
Net asset value, end
of period.......... $11.17 $12.07 $11.41 $11.02 $11.18 $12.08 $11.17 $11.17 $12.07 $11.41
TOTAL RETURN+....... (2.4%) 10.4% 7.9% 11.8% (3.0%) 8.7% (3.6%) (2.2%) 10.7% 8.2%
RATIOS &
SUPPLEMENTAL
DATA
Net assets, end of
period
(000's omitted).... $41,010 $35,032 $17,408 $334 $100,052 $ 65,475 $195 $778,657 $760,147 $520,232
Ratios to average
net assets:
Expenses........... .89% .91% .91% .92%++ 1.48% 1.41%++ 1.64%++ .64% .66% .66%
Net investment
income............. 3.69% 3.61% 3.93% 4.38%++ 3.12% 3.09%++ 3.23%++ 3.93% 3.86% 4.20%
Portfolio turnover
rate............... 35% 19% 12% 19% 35% 19% 35% 35% 19% 12%
<CAPTION>
APRIL 1,
1991*
THROUGH
DECEMBER 31,
1991
<S> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $10.00
Income (loss) from
investment
operations:
Net investment
income............. .36
Net realized and
unrealized gain
(loss) on
investments........ 1.03
Total from
investment
operations....... 1.39
Less distributions
to shareholders
from:
Net investment
income............. (.36)
Net realized
gains.............. (.01)
In excess of net
investment
income............. --
Total
distributions.... (.37)
Net asset value, end
of period.......... $11.02
TOTAL RETURN+....... 15.0%
RATIOS &
SUPPLEMENTAL
DATA
Net assets, end of
period
(000's omitted).... $247,472
Ratios to average
net assets:
Expenses........... .68%++
Net investment
income............. 4.86%++
Portfolio turnover
rate............... 19%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Distributions in excess of net investment income for the year ended December
31, 1993 were the result of certain book and tax differences. These
differences did not represent a return of capital for federal income tax
purposes for the year ended December 31, 1993.
5
<PAGE>
EVERGREEN GROWTH AND INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988**
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................. $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38
Income (loss) from
investment operations:
Net investment income....... .14 .14 .15 .19 .30 .52 .19
Net realized and unrealized
gain (loss) on
investments............... .12 1.91 1.65 2.58 (.84) 2.17 2.10
Total from investment
operations.............. .26 2.05 1.80 2.77 (.54) 2.69 2.29
Less distributions to
shareholders from:
Net investment income....... (.14) (.14) (.15) (.19) (.30) (.52) (.19)
Net realized gains.......... (1.01) (.68) (.46) (.31) (.47) (.76) (.86)
Total distributions....... (1.15) (.82) (.61) (.50) (.77) (1.28) (1.05)
Net asset value, end of
period.................... $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62
TOTAL RETURN+............... 1.7% 14.4% 13.8% 25.8% (4.5%) 25.4% 24.6%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)........... $73,457 $77,062 $63,841 $47,763 $36,222 $31,540 $24,399
Ratios to average net
assets:
Expenses.................. 1.33% 1.26% 1.33% 1.41% 1.50% 1.54% 1.56%
Net investment income..... .96% .99% 1.18% 1.55% 2.62% 4.13% 1.70%
Portfolio turnover rate..... 29% 28% 30% 23% 41% 53% 41%
<CAPTION>
OCTOBER 15,
1986* THROUGH
DECEMBER 31,
1987** 1986**
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................. $10.05 $10.00
Income (loss) from
investment operations:
Net investment income....... .20 .07
Net realized and unrealized
gain (loss) on
investments............... (.63) (.02)
Total from investment
operations.............. (.43) .05
Less distributions to
shareholders from:
Net investment income....... (.24) --
Net realized gains.......... -- --
Total distributions....... (.24) --
Net asset value, end of
period.................... $9.38 $10.05
TOTAL RETURN+............... (4.3%) .5%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)........... $21,471 $20,696
Ratios to average net
assets:
Expenses.................. 1.76% 1.73%++
Net investment income..... 1.90% 3.23%++
Portfolio turnover rate..... 48% 4%
</TABLE>
* Commencement of operations.
** Net investment income is based on the average monthly shares outstanding for
the periods indicated.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
6
<PAGE>
EVERGREEN VALUE FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 3, 1991*
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period...................................... $17.63 $17.11 $17.08 $14.28
Income from investment operations:
Net investment income..................................................... .56 .52 .49 .47
Net realized and unrealized gain (loss) on investments.................... (.20) 1.12 .90 3.53
Total from investment operations........................................ .36 1.64 1.39 4.00
Less distributions to shareholders from:
Net investment income..................................................... (.56) (.52) (.49) (.47)
Net realized gains........................................................ (.82) (.58) (.87) (.73)
In excess of net investment income........................................ -- (.02)(b) -- --
Total distributions..................................................... (1.38) (1.12) (1.36) (1.20)
Net asset value, end of period............................................ $16.61 $17.63 $17.11 $17.08
TOTAL RETURN+............................................................. 2.1% 9.7% 8.3% 25.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................. $507,028 $463,087 $326,154 $271,391
Ratios to average net assets:
Expenses................................................................ .68% .65% .68%(a) .69%++(a)
Net investment income................................................... 3.21% 2.98% 2.90%(a) 3.04%++(a)
Portfolio turnover rate................................................... 70% 46% 56% 69%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 3, 1991
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
<S> <C> <C>
Expenses.................................................. .69% .77%
Net investment income..................................... 2.89% 2.96%
</TABLE>
(b) Distributions in excess of net investment income for the period ended
December 31, 1993 were the result of certain book and tax timing
differences. These distributions did not represent a return of capital for
federal income tax purposes for the year ended December 31, 1993.
7
<PAGE>
EVERGREEN VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990* 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83 $14.66
Income (loss) from investment
operations......................
Net investment income............ .52 .47 .44 .46 .36 .54 .36 .26
Net realized and unrealized gain
(loss) on investments........... (.20) 1.10 .89 3.17 (.44) 1.70 2.11 (1.30)
Total from investment
operations.................... .32 1.57 1.33 3.63 (.08) 2.24 2.47 (1.04)
Less distributions to
shareholders from:
Net investment income............ (.51) (.47) (.43) (.43) (.36) (.57) (.38) (.26)
Net realized gains............... (.82) (.58) (.87) (.73) (.02) (1.00) (.47) (.53)
In excess of net investment
income.......................... -- -- -- -- (.05)(c) -- -- --
Total distributions............. (1.33) (1.05) (1.30) (1.16) (.43) (1.57) (.85) (.79)
Net asset value, end of
period.......................... $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83
TOTAL RETURN+.................... 1.9% 9.3% 8.0% 25.1% (.5%) 15.5% 19.7% (7.1%)
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $188,807 $189,983 $169,310 $135,565 $104,637 $95,995 $83,121 $21,914
Ratios to average net assets:
Expenses........................ .93% .99% 1.01%(a) .96%(a) 1.39%++ 1.55% 1.71% 1.74%
Net investment
income........................ 2.96% 2.63% 2.37%(a) 2.78%(a) 3.28%++ 3.42% 2.72% 1.92%
Portfolio turnover
rate (b)........................ 70% 46% 56% 69% 13% 11% 24% 24%
<CAPTION>
1987 1986
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $12.35 $10.04
Income (loss) from investment
operations......................
Net investment income............ .15 .19
Net realized and unrealized gain
(loss) on investments........... 2.38 2.32
Total from investment
operations.................... 2.53 2.51
Less distributions to
shareholders from:
Net investment income............ (.13) (.20)
Net realized gains............... (.09) --
In excess of net investment
income.......................... -- --
Total distributions............. (.22) (.20)
Net asset value, end of
period.......................... $14.66 $12.35
TOTAL RETURN+.................... 20.8% 25.3%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $23,221 $5,595
Ratios to average net assets:
Expenses........................ 1.97% 2.00%
Net investment
income........................ 1.41% 2.34%
Portfolio turnover
rate (b)........................ 20% 20%
</TABLE>
* The Fund changed its fiscal year end to December 31.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991
<S> <C> <C>
Expenses........................................................................... 1.02% 1.05%
Net investment income.............................................................. 2.36% 2.69%
</TABLE>
(b) Portfolio turnover rate for periods ending on or after March 31, 1986
include certain U.S. government obligations.
(c) Distributions in excess of net investment income for the period ended
December 31, 1990 were a result of certain book and tax timing differences.
These distributions did not represent a return of capital for federal
income tax purposes for the year ended December 31, 1990.
8
<PAGE>
EVERGREEN VALUE FUND -- CLASS B AND C SHARES
<TABLE>
<CAPTION>
CLASS C
CLASS B SHARES SHARES
FEBRUARY 2, SEPTEMBER 2,
1993* 1994*
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................................... $17.63 $17.24 $18.28
Income (loss) from investment operations:
Net investment income......................................................... .42 .35 .19
Net realized and unrealized gain (loss) on investments........................ (.20) 1.01 (.81)
Total from investment operations............................................ .22 1.36 (.62)
Less distributions to shareholders from:
Net investment income......................................................... (.41) (.35) (.19)
Net realized gains............................................................ (.82) (.58) (.82)
In excess of net investment income............................................ -- (.04)(a) (.04)(a)
Total distributions......................................................... (1.23) (.97) (1.05)
Net asset value, end of period................................................ $16.62 $17.63 $16.61
TOTAL RETURN+................................................................. 1.3% 8.0% (3.4%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................................... $104,297 $ 59,953 $485
Ratios to average net assets:
Expenses.................................................................... 1.53% 1.48%++ 1.68%++
Net investment income....................................................... 2.36% 2.09%++ 2.16%++
Portfolio turnover rate....................................................... 70% 46% 70%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
(a) Distributions in excess of net investment income, for the Class B Shares,
for the period ended December 31, 1993 and for the Class C Shares, for the
period ended December 31, 1994, were the result of certain book and tax
timing differences. These distributions did not represent a return of
capital for federal income tax purposes for the year ended December 31, 1993
and December 31, 1994.
9
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........... $11.60 $10.95 $10.52 $9.59 $10.41 $10.09
Income (loss) from investment operations:
Net investment income.......................... .60 .56 .66 .60 .60 .57
Net realized and unrealized gain (loss) on
investments.................................. (.93) .96 .55 1.15 (.66) .76
Total from investment operations............. (.33) 1.52 1.21 1.75 (.06) 1.33
Less distributions to shareholders from:
Net investment income.......................... (.60) (.60) (.61) (.60) (.60) ) (.59
Net realized gains............................. -- (.24) (.17) (.22) (.16) ) (.42
In excess of net realized gains................ -- (.03)(b) -- -- -- --
Total distributions.......................... (.60) (.87) (.78) (.82) (.76) )(1.01
Net asset value, end of period................. $10.67 $11.60 $10.95 $10.52 $9.59 $10.41
TOTAL RETURN+.................................. (2.9%) 14.1% 11.8% 18.8% (.5%) 13.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...... $37,176 $37,336 $23,781 $15,632 $12,351 $ 11,610
Ratios to average net assets:
Expenses..................................... 1.28% 1.36% 1.51%(a) 1.50%(a) 1.50%(a) (1.88%a)
Net investment income........................ 5.40% 5.13% 6.23%(a) 5.91%(a) 6.04%(a) (5.49%a)
Portfolio turnover rate........................ 136% 92% 151% 97% 33% 152%
<CAPTION>
MARCH 14,
1988*
THROUGH
DECEMBER 31,
1988**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period........... $10.00
Income (loss) from investment operations:
Net investment income.......................... .39
Net realized and unrealized gain (loss) on
investments.................................. .18
Total from investment operations............. .57
Less distributions to shareholders from:
Net investment income.......................... (.36)
Net realized gains............................. (.12)
In excess of net realized gains................ --
Total distributions.......................... (.48)
Net asset value, end of period................. $10.09
TOTAL RETURN+.................................. 5.8%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...... $9,449
Ratios to average net assets:
Expenses..................................... 2.00%++
Net investment income........................ 5.01%++
Portfolio turnover rate........................ 52%
</TABLE>
* Commencement of operations.
** Investment income, expenses and net investment income are based upon the
average monthly shares outstanding for the period indicated.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992 1991 1990 1989
<S> <C> <C> <C> <C>
Expenses.................................................... 1.59% 1.82% 1.95% 2.03%
Net investment income....................................... 6.15% 5.59% 5.59% 5.34%
</TABLE>
(b) Distributions in excess of net realized gains were the result of certain
book and tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
10
<PAGE>
EVERGREEN FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 2, 1990*
YEAR ENDED DECEMBER 31, THROUGH
1994 1993 1992 1991 DECEMBER 31, 1990
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................. $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income................................................ .42 .31 .27 .33 1.23(b)
Net realized and unrealized gain (loss) on investments............... (.57) 1.55 1.83 2.77 (.59)
Total from investment operations................................... (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income................................................ (.42) (.31) (.24) (.33) (1.17)
Net realized gains................................................... (.28) (.41) (.63) (.97) (.52)
Total distributions................................................ (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period....................................... $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+........................................................ (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in millions).............................. $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses........................................................... 1.14% 1.20% 1.40%(a) 1.20%(a) 0%(a)++
Net investment income.............................................. 3.51% 2.81% 2.93%(a) 2.86%(a) 15.07%(a,b)++
Portfolio turnover rate.............................................. 33% 60% 127% 178% 131%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized
(a) Net of expense waivers and reimbursements by the Adviser. If the Fund had
borne all expenses that were assumed or waived by the investment adviser,
the annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 2, 1990
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1992 1991 1990
<S> <C> <C> <C>
Expenses................................................... 1.43% 2.58% 3.64%
Net investment income...................................... 2.90% 1.48% 11.43%
</TABLE>
(b) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.
11
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
JANUARY 3, 1995*
THROUGH JANUARY 31, 1995
PER SHARE DATA
Net asset value, beginning of period........................................................ $17.09 $17.09 $17.09
Income from investment operations:
Net investment income....................................................................... .02 .02 .01
Net realized and unrealized gain on investments............................................. .17 .17 .17
Total from investment operations.......................................................... .19 .19 .18
Net asset value, end of period.............................................................. $17.28 $17.28 $17.27
TOTAL RETURN+............................................................................... 1.1% 1.1% 1.1%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................................... $119 $599 $24
Ratios to average net assets:
Expenses.................................................................................. 1.45% ++ 2.23% ++ 2.22% ++
Net investment income..................................................................... 4.09% ++ 3.23% ++ 2.68% ++
Portfolio turnover rate**................................................................... 151% 151% 151%
</TABLE>
* Commencement of class operations.
** Portfolio turnover rate is calculated for the ten month period ended January
31, 1995.
+ Total return calculated is for the period indicated and is not annualized.
Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
12
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
JANUARY YEAR ENDED MARCH 31,
31, 1995* 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period........................... $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37 $19.72
Income (loss) from investment
operations:
Net investment income................. 87 1.08 1.11 1.08 1.02 1.07 1.12 1.06 1.14
Net realized and unrealized gain
(loss) on investments............... (.55) (1.41) 2.51 .70 (.08) .36 .79 (2.64) 1.76
Total from investment
operations........................ .32 (.33) 3.62 1.78 .94 1.43 1.91 (1.58) 2.90
Less distributions to shareholders
from:
Net investment income................. (1.08) (1.08) (1.08) (1.08) (1.08) (1.09) (1.08) (.80) (1.14)
Net realized gains.................... (.25) (1.20) (.46) -- -- -- (.02) (.88) (1.11)
Total distributions................. (1.33) (2.28) (1.54) (1.08) (1.08) (1.09) (1.10) (1.68) (2.25)
Net asset value, end of period........ $17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37
TOTAL RETURN+......................... 1.9% (2.1%) 20.2% 10.2% 5.8% 7.9% 1.3% (7.8%) 15.7%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(in millions)....................... $942 $1,065 $1,142 $1,032 $1,151 $1,292 $1,312 $1,346 $1,636
Ratios to average net assets:
Expenses............................ 1.24%++ 1.18% 1.18% 1.21% 1.23% 1.18% 1.02%** 1.01%** 1.02%**
Net investment income............... 5.70%++ 5.29% 5.65% 5.73% 5.90% 5.64% 6.36%** 5.80%** 5.68%**
Portfolio turnover rate............... 151% 106% 164% 137% 137% 89% 86% 81% 44%
<CAPTION>
1986
<S> <C>
PER SHARE DATA
Net asset value, beginning
of period........................... $16.63
Income (loss) from investment
operations:
Net investment income................. 1.03
Net realized and unrealized gain
(loss) on investments............... 4.26
Total from investment
operations........................ 5.29
Less distributions to shareholders
from:
Net investment income................. (1.22)
Net realized gains.................... (.98)
Total distributions................. (2.20)
Net asset value, end of period........ $19.72
TOTAL RETURN+......................... 35.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(in millions)....................... $408
Ratios to average net assets:
Expenses............................ 1.11%**
Net investment income............... 6.06%**
Portfolio turnover rate............... 65%
</TABLE>
* On September 21, 1994, the Fund changed its fiscal year end to January 31.
** Net of expense limitation in fiscal years 1986, 1987, 1988 and 1989.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
13
14
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Balanced Fund
The investment objective of the Evergreen Balanced Fund (formerly First
Union Balanced Portfolio) is to achieve a long-term total return through capital
appreciation, dividends and interest income. This objective is a fundamental
policy and may not be changed without shareholder approval. The Fund invests in
common and preferred stocks for growth and fixed income securities to provide a
stable income flow. There can be no assurance that the Fund's investment
objective will be achieved.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% fixed income securities (including some
convertible securities) and 0-25% cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk.
The Funds invest in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection includes a
company's financial strength (such as cash flow and low debt-to-equity ratio),
earnings growth and price in relation to current earnings, dividends and book
value to identify growth opportunities. The Fund may also invest in American
Depositary Receipts ("ADRs") of foreign companies which are traded on the New
York or American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO"), or which, if unrated, are considered to be of comparable quality by the
Fund's investment adviser. Bonds are selected based upon the outlook for
interest rates and their yield in relation to other bonds of similar quality and
maturity. The maturities of these bonds may be medium (i.e., from five to ten
years) to long-term (i.e., over ten years), but in no event will they be longer
than twenty years.
The Fund also invests in securities which are either issued or
guaranteed by the U.S. government, its agencies or instrumentalities. These
securities include direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds; and notes, bonds and discount notes of U.S.
government agencies or instrumentalities, such as the Farm Credit System,
including the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal National Mortgage Association, Government
National Mortgage Association, Student Loan Marketing Association, Tennessee
Valley Authority, Export-Import Bank of the United State, Commodity Credit
Corporation, Federal Financing Bank and National Credit Union Administration.
Some of these securities are supported by the full faith and credit of the U.S.
government, and others are supported only by the credit of the agency or
instrumentality.
The Fund may also invest short-term in cash equivalents for defensive
purposes; securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities, and repurchase agreements collateralized by
eligible investments.
As of December 31, 1992, 1993 and 1994, approximately 59%, 63% and 55%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen Growth and Income Fund
The investment objective of Evergreen Growth and Income Fund (formerly
known as the Evergreen Value Timing Fund) is to achieve a return composed of
capital appreciation in the value of its shares and current income. (The Fund's
investment objective is a fundamental policy.) There can be no assurance that
the Fund's investment objective will be achieved.
The Fund seeks to achieve its investment objective by investing in the
securities of companies which are undervalued in the marketplace relative to
those companies' assets, breakup value, earnings or potential earnings growth.
These companies are often found among those which have had a record of financial
success but are currently in disfavor in the marketplace for reasons the Fund's
investment adviser perceives as temporary or erroneous. Such investments when
successfully timed are expected to be the means for achieving the Fund's
investment objective. This inherently contrarian approach may require greater
reliance upon the analytical and research capabilities of the Fund's investment
adviser than an investment in certain other equity funds. Consequently, an
investment in the Fund may involve more risk than other equity funds. The Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss inherent in such a program. Nor should the Fund be
considered a balanced or complete investment program.
The Fund will use the "value timing" approach as a process for
purchasing securities when events indicate that fundamental investment values
are being ignored in the marketplace. Fundamental investment value is based on
one or more of the following: assets -- tangible and intangible (examples of the
latter include brand names or licenses), capitalization of earnings, cash flow
or potential earnings growth. A discrepancy between market valuation and
fundamental value often arises due to the presence of unrecognized assets or
business opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary shifts and
legal action (including the initiation of bankruptcy proceedings) are some of
the factors that create these capital appreciation opportunities. If the
securities in which the Fund invests never reach their perceived potential or
the valuation of such securities in the marketplace does not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such securities.
The Fund will invest primarily in common stocks and securities
convertible into or exchangeable for common stock. It is anticipated that the
Fund's investments in these securities will contribute to the Fund's return
primarily through capital appreciation. In addition, the Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated that the
Fund's investments in these securities will also produce capital appreciation
but the current income component of return will be a more significant factor in
their selection. However, the Fund will invest in nonconvertible preferred stock
and debt securities only if the anticipated capital appreciation plus income
from such investments is equivalent to that anticipated from investments in
equity or equity-related securities. The Fund may invest up to 5% of its total
assets in debt securities which are rated below investment grade, commonly known
as "junk bonds". Investments of this type are subject to greater risk of loss of
principal and interest.
It is anticipated that the annual portfolio turnover rate for the Fund
will not exceed 100%. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Value Fund
The investment objective of the Evergreen Value Fund (formerly the
First Union Value Portfolio) is long-term capital appreciation with current
income as a secondary objective. The Fund's objective is a fundamental policy
and may not be changed without shareholder approval. Normally, at least 75% of
the Fund's assets will be invested in equity securities of U.S. companies with
prospects for earnings growth and dividends. There can be no assurance that the
Fund's investment objective will be achieved.
The Fund's investments, in order of priority, consist of:
common and preferred stocks, bonds and convertible preferred
stock of U.S. companies with a minimum market capitalization of $100
million which are listed on the New York or American Stock Exchanges or
traded in over-the-counter markets. The primary consideration is for
those industries and companies with the potential for capital
appreciation; income is a secondary consideration;
ADRs of foreign companies traded on the New York or American
Stock Exchanges or the over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation implications and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions Special Risk Considerations");
convertible bonds rated no lower than BBB by S&P or Baa by
Moody's or, if not rated, determined to be of comparable quality by the
Fund's investment adviser;
money market instruments;
fixed rate notes and bonds and adjustable and variable rate
notes of companies whose common stock the Fund may acquire rated no
lower than BBB by S&P or Baa by Moody's or which, if not rated,
determined to be of comparable quality by the Fund's investment adviser
(up to 5% of total assets);
zero coupon bonds issued or guaranteed by the U.S. government,
its agencies or instrumentalities (up to 5% of total assets);
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
prime commercial paper, including master demand notes rated no
lower than A-1 by S&P or Prime 1 by Moody's.
Bonds rated BBB by S&P or Baa by Moody's may have speculative
characteristics. Changes in economic conditions or other circumstances
are more likely to weaken such bonds' prospects for principal and
interests payments than higher rated bonds. However, like the higher
rated bonds, these securities are considered investment grade.
As of December 31, 1992, 1993 and 1994, approximately 92%, 95% and 97%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen American Retirement Fund
The investment objectives of Evergreen American Retirement Fund in
order of priority are conservation of capital, reasonable income and capital
growth. The Fund offers a structured investment approach designed specifically
for retirees and persons contemplating retirement which may also be appropriate
for the qualified retirement plans of smaller companies. There can be no
assurance that the Fund's investment objectives will be achieved. The Fund's
objective is a fundamental policy and may not be changed without shareholder
approval.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. The balance will be invested in
corporate obligations rated no lower than A by Moody's or S&P.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Foundation Fund
The investment objectives of Evergreen Foundation Fund, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. Government debt obligations,
and short-term debt instruments, such as commercial paper. Additionally, income
from time to time may be generated by the lending of securities. The Fund's
common stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or
not such securities are traded on a national securities exchange. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions. Accordingly, there
can be no assurance that the Fund's investment objectives will be achieved. The
Fund's objective is a fundamental policy and may not be changed without
shareholder approval.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market value of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the value of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities, including issues of the U.S. Treasury, such
as bills, certificates of indebtedness, notes and bonds, and issues of agencies
and instrumentalities established under the authority of an act of Congress.
Some of these securities are supported by the full faith and credit of the U.S.
Government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's or S&P.
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's).
Certain obligations may be entitled to the benefit of standby letters of credit
or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Total Return Fund
The investment objective of Evergreen Total Return Fund is to achieve a
return consisting of current income and capital appreciation in the value of its
shares. The emphasis on current income and capital appreciation will be
relatively equal although, over time, changes in the outlook for market
conditions and the level of interest rates will cause the Fund to vary its
emphasis between these two elements in its search for the optimum return for its
shareholders. The Fund seeks to achieve its investment objective through
investments in common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities. The Fund may invest
up to 20% of its total assets in the securities of foreign issuers either
directly or in the form of ADRs, European Depository Receipts ("EDRs") or other
securities convertible into securities of foreign issuers. The Fund may also
write covered call options. The Fund's investment objective is a fundamental
policy. There can be no assurance that the Fund's investment objective will be
achieved.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders.
The Fund may make investments in securities (other than options)
regardless of whether or not such securities are traded on a national securities
exchange. The value of portfolio securities and their yields, as well as
opportunities to realize net gains from a covered call options writing program,
are expected to fluctuate over time because of varying general economic and
market conditions.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Ordinarily, the Fund anticipates that approximately 75% of its portfolio will
consist of equity securities and the other 25% of debt securities (including
convertible debt securities). As of March 31, 1993 and 1994 and January 31,
1995, approximately 88%, 96% and 91%, respectively, of the Fund's portfolio
consisted of equity securities. The balance of the Fund's portfolio consisted of
debt securities (including convertible debt securities). If, in the judgment of
the Fund's investment adviser, the appreciation potential for equity securities
exceeds the return available from debt securities or government securities,
investments in equity securities could exceed 75% of the Fund's portfolio. Most
equity investments, however, will be income producing. The quality standards for
debt securities include: Obligations of banks having total assets of at least
one billion dollars which are members of the FDIC; commercial paper rated no
lower than P-2 by Moody's or A-2 by S&P; and non-convertible debt securities
rated no lower than Baa by Moody's or BBB by Standard & Poor's. Securities rated
Baa or BBB may have speculative characteristics. See the discussion above with
respect to Evergreen Value Fund.
It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Total Return Fund, Evergreen Growth and
Income Fund, Evergreen American Retirement Fund and Evergreen Foundation Fund on
those exchanges. The portfolio turnover rate for each Fund is set forth in the
tables contained in the section entitled "Financial Highlights". See the
Statement of Additional Information for further information regarding the
brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy, the Funds, except Evergreen
American Retirement Fund, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes.
Evergreen American Retirement Fund may borrow for purposes of leverage. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. The
specific limits applicable to borrowing by each Fund are set forth in the
Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the net assets of the Evergreen
Total Return Fund, Evergreen Growth and Income Fund and Evergreen American
Retirement Fund, 30% of the net assets of the Evergreen Foundation Fund, and 5%
of the value of the total assets of Evergreen Balanced Fund and Evergreen Value
Fund, and must be collateralized by cash or U.S. Government securities that are
maintained at all times in an amount equal to at least 100% of the current
market value of the securities loaned, including accrued interest. While such
securities are on loan, the borrower will pay a Fund any income accruing
thereon, and the Fund may invest the cash collateral in portfolio securities,
thereby increasing its return. Any gain or loss in the market price of the
loaned securities which occurs during the term of the loan would affect a Fund
and its investors. A Fund has the right to call a loan and obtain the securities
loaned at any time on notice of not more than five business days. A Fund may pay
reasonable fees in connection with such loans.
There is the risk that when lending portfolio securities, the
securities may not be available to a Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.
Short Sales. The Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen Balanced Fund, Evergreen American Retirement Fund and Evergreen
Foundation Fund may, as a defensive strategy, make short sales of securities. A
short sale occurs when a seller sells a security and makes delivery to the buyer
by borrowing the security. Short sales of a security are generally made in cases
where the seller expects the market value of the security to decline. To
complete a short sale, the seller must replace the security borrowed by
purchasing it at the market price at the time of replacement, or by delivering
securities from the seller's own position to the lender. In the event the market
value of a security sold short were to increase, the seller would realize a loss
to the extent that the cost of purchasing the security for delivery to the
lender were greater than the proceeds from the short sale. In the event a short
sale is completed by delivery of securities to the lender from the seller's own
position, the seller would forego any gain that would otherwise be realized on
such securities. The Evergreen American Retirement Fund and Evergreen Foundation
Fund may only make short sales "against the box" which means it must own the
securities sold short, or other securities convertible into, or which carry
rights to acquire, such securities.
Illiquid or Restricted Securities. Evergreen Growth and Income Fund, Evergreen
American Retirement Fund, Evergreen Foundation Fund and Evergreen Total Return
Fund may invest up to 15% of their net assets, and Evergreen Balanced Fund and
Evergreen Value Fund may invest up to 10% of their net assets, in illiquid
securities and other securities which are not readily marketable, including
non-negotiable time deposits, certain restricted securities not deemed by the
Trustees to be liquid and repurchase agreements with maturities longer than
seven days. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10 %
limits. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Funds' investment advisers on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in a Fund having more than 15%, or with respect to Evergreen Value Fund 10%, of
its assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. Evergreen Growth and
Income Fund, Evergreen Balanced Fund, Evergreen Value Fund and Evergreen Total
Return Fund may enter into repurchase agreements with member banks of the
Federal Reserve System, including the Custodian or primary dealers in U.S.
Government securities. A repurchase agreement is an arrangement pursuant to
which a buyer purchases a security and simultaneously agrees to resell it to the
vendor at a price that results in an agreed-upon market rate of return which is
effective for the period of time (which is normally one to seven days, but may
be longer) the buyer's money is invested in the security. The arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the holding period. A Fund requires continued maintenance of collateral
with its Custodian in an amount at least equal to the repurchase price
(including accrued interest). In the event a vendor defaults on its repurchase
obligation, a Fund might suffer a loss to the extent that the proceeds from the
sale of the collateral were less than the repurchase price. If the vendor
becomes the subject of bankruptcy proceedings, a Fund might be delayed in
selling the collateral. The Funds' investment advisers will review and
continually monitor the creditworthiness of each institution with which a Fund
enters into a repurchase agreement to evaluate these risks.
Evergreen Balanced Fund and Evergreen Value Fund may borrow money by
entering into a "reverse repurchase agreement" by which it agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers,
and to repurchase them at a mutually agreed upon date and price, for temporary
or emergency purposes. At the time the Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account cash, U.S. government
securities or liquid high grade debt obligations having a value at least 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 the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Each Fund will not enter into reverse repurchase agreements exceeding 5% of the
value of its total assets.
When-Issued and Delayed Delivery Transactions. Evergreen Balanced Fund and
Evergreen Value Fund may purchase securities on a when-issued or delayed
delivery basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more or
less than the market value of the securities on the settlement date. The Funds
may dispose of a commitment prior to settlement if the Funds investment adviser
deems it appropriate to do so. In addition, the Funds may enter into
transactions to sell their purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or losses
upon the sale of such commitments.
Fixed Income Securities - Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Options and Futures. Each of Evergreen Total Return Fund, Evergreen Growth and
Income Fund and Evergreen American Retirement Fund may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Funds
if, afterwards, securities comprising more than 25% of the market value of the
equity securities of Evergreen Growth and Income Fund and Evergreen Total Return
Fund, or 15% of the market value of the equity securities of Evergreen American
Retirement Fund would be subject to call options. A Fund realizes income from
the premium paid to it in exchange for writing the call option. Once it has
written a call option on a portfolio security and until the expiration of such
option, a Fund forgoes the opportunity to profit from increases in the market
price of such security in excess of the exercise price of the call option.
Should the price of the security on which a call has been written decline, a
Fund retains the risk of loss, which would be offset to the extent the Fund has
received premium income. A Fund will only write "covered" call options traded on
U.S. national securities exchanges. An option will be deemed covered when a Fund
either (i) owns the security (or securities convertible into such security) on
which the option has been written in an amount sufficient to satisfy the
obligations arising under the option; or (ii) a Fund's Custodian maintains cash
or high-grade liquid debt securities belonging to the Fund in an amount not less
that the amount needed to satisfy the Fund's obligations with respect to options
written on securities it does not own. A "closing purchase transaction" may be
entered into with respect to a call option written by a Fund for the purpose of
closing its position.
Evergreen Balanced Fund and Evergreen Value Fund may engage in options
and futures transactions. Options and futures transactions are intended to
enable a Fund to manage market, interest rate or exchange rate risk, and the
Funds do not use these transactions for speculation or leverage.
Evergreen Balanced Fund and Evergreen Value Fund may attempt to hedge
all or a portion of their portfolios through the purchase of both put and call
options on their portfolio securities and listed put options on financial
futures contracts for portfolio securities. The Funds may also write covered
call options on their portfolio securities to attempt to increase their current
income. The Funds will maintain their positions in securities, option rights and
segregated cash subject to puts and calls until the options are exercised,
closed or have expired. An option position may be closed out only on an exchange
which provides a secondary market for an option of the same series. The Funds
may purchase listed put options on financial futures contracts. These options
will be used only to protect portfolio securities against decreases in value
resulting from market factors such as an anticipated increase in interest rates.
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
Evergreen Balanced Fund and Evergreen Value Fund may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
Evergreen Balanced Fund and Evergreen Value Fund may also, as stated
previously, purchase futures contracts and options thereon. A futures contract
is a firm commitment by two parties: the seller, who agrees to make delivery of
the specific type of instrument called for in the contract ("going short"), and
the buyer, who agrees to take delivery of the instrument ("going long") at a
certain time in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specific agencies or instrumentalities of the U.S. government. If a Fund would
enter into financial futures contracts directly to hedge its holdings of fixed
income securities, it would enter into contracts to deliver securities at an
undetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. A Fund would "go long" (agree to purchase securities
in the future at a predetermined price) to hedge against a decline in market
interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies or index-based futures contracts in order
to hedge against changes in interest or exchange rates or securities prices. A
futures contract on securities or currencies is an agreement to buy or sell
securities or currencies during a designated month at whatever price exists at
that time. A futures contact on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Funds do not make payment or
deliver securities upon entering into a futures contract. Instead, they put down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in
order to terminate a futures contract and may buy or sell put and call options
for the purpose of closing out their options positions. The Funds ability to
enter into closing transactions depends on the development and maintenance of a
liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. As a result,
there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case the
Funds would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them can result in poorer performance (i.e., the Funds return may
be reduced). The Funds attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contract and
options on financial futures contract as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Funds investment adviser could
be incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements and other
economic factors. Even if the Funds investment adviser correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds ability to establish and close out financial futures contracts and options
on financial futures contract positions depends on this secondary market. If a
Fund is unable to close out its position due to disruptions in the market or
lack of liquidity, the Fund may lose money on the futures contract or option,
and the losses to the Fund could be significant.
Special Risk Considerations
Investment in Foreign Securities. Evergreen Total Return Fund, Evergreen
Balanced Fund and Evergreen Value Fund may invest in foreign securities.
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. For example,
a change in the value of any foreign currency relative to the U.S. dollar will
result in a corresponding change in the U.S. dollar value of securities
denominated in that currency. Accordingly, a change in the value of any foreign
currency relative to the U.S. dollar will result in a corresponding change in
the U.S. dollar value of the assets of the Fund denominated or traded in that
currency. If the value of a particular foreign currency falls relative to the
U.S. dollar, the U.S. dollar value of the assets of a Fund denominated in such
currency will also fall. The performance of a Fund will be measured in U.S.
dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by each Fund's investment adviser before making any of these types of
investments.
ADRs and EDRs and other securities convertible into securities of
foreign issuers may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally ADRs, in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by Evergreen Total Return
Fund, Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund as investment adviser. Evergreen Asset succeeded on
June 30, 1994 to the advisory business of the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), one of the ten largest bank holding companies in
the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Funds. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to Evergreen Balanced Fund and Evergreen Value Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds) . First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Total Return Fund, Evergreen Growth
and Income Fund, Evergreen American Retirement Fund and Evergreen Foundation
Fund, Evergreen Asset manages each Fund's investments, provides various
administrative services and supervises each Fund's daily business affairs,
subject to the authority of the Trustees. Evergreen Asset is entitled to receive
a from each of Evergreen Total Return Fund and Evergreen Growth and Income Fund
fee equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. Evergreen Asset is entitled to receive
from Evergreen Foundation Fund a fee equal to .875 of 1% of average daily net
assets on an annual basis on the first $750 million in assets, .75 of 1% of
average daily net assets on an annual basis on the next $250 million in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion, and from Evergreen American Retirement Fund a fee equal to .75 of 1% of
average daily net assets on an annual basis on the first $1 billion in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion. The fee paid by Evergreen Total Return Fund and Evergreen Growth and
Income Fund is higher than the rate paid by most other investment companies. The
total expenses of each Fund for the fiscal year ended December 31, 1994,
expressed as a percentage of average daily net assets on an annual basis are set
forth in the section entitled "Financial Highlights".
CMG manages investments and supervises the daily business affairs of
Evergreen Balanced Fund and Evergreen Value Fund and, as compensation therefor,
is entitled to receive an annual fee equal to .50 of 1% of average daily net
assets of each Fund. The total annualized operating expenses of Evergreen
Balanced Fund and Evergreen Value Fund for their most recent fiscal year ended
December 31, 1994, are set forth in the section entitled "Financial Highlights".
Evergreen Asset serves as administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee based on the average daily net
assets of these Funds at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .050%
of the first $7 billion; .035% on the next $3 billion; .030% on the next $5
billion; .020% on the next $10 billion; .015% on the next $5 billion; and .010%
on assets in excess of $30 billion. Furman Selz Incorporated, the parent of
Evergreen Funds Distributor, Inc., distributor for the Evergreen group of mutual
funds, serves as sub-administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee from each Fund calculated on the
average daily net assets of each Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Total Return Fund is Nola Maddox
Falcone, C.F.A., who is President and Co-Chief Executive Officer of Evergreen
Asset. Ms. Falcone has served as the principal manager of Evergreen Total Return
Fund since 1985. The portfolio manager for Evergreen Foundation Fund is Stephen
A. Lieber, who is Chairman and Co-Chief Executive Officer of the Evergreen
Asset. Mr. Lieber has served as such Fund's principal manager since its
inception. The portfolio manager for Evergreen Growth and Income Fund is Edmund
H. Nicklin, Jr. C.F.A. Mr. Nicklin has served as the Fund's principal manager
since its inception. The portfolio manager for Evergreen American Retirement
Fund is Irene D. O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal
manager since its inception. Each of the aforementioned individuals has been
associated with the Evergreen Asset and its predecessor since prior to 1989.
The portfolio manager for Evergreen Balanced Fund since its inception
in January 1991 is R. Dean Hawes, who is a Vice President of FUNB and is the
Director of Employee Benefit Portfolio Management. Mr. Hawes joined FUNB in 1981
after spending five years with Merrill Lynch, Pierce, Fenner, & Smith and
Townsend Investments. William T. Davis, Jr., the portfolio manager of Evergreen
Value Fund since March, 1991, is a Vice President of FUNB and has been with
First Union since 1986. Prior to that, Mr. Davis served as a securities analyst
for Seibels Bruce (Insurance) Group.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen American Retirement Fund and Evergreen Foundation Fund. Lieber &
Company will be reimbursed by Evergreen Asset in connection with the rendering
of services on the basis of the direct and indirect costs of performing such
services. There is no additional charge to Evergreen Total Return Fund,
Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund for the services provided by Lieber & Company. The
address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A, Class B and Class C shares a Rule 12b-1 plan (each, a "Plan" or
collectively the "Plans"). Under the Plans, each Fund may incur
distribution-related and shareholder servicing-related expenses which may not
exceed an annual rate of .75 of 1% of the aggregate average daily net assets
attributable to each Fund's Class A shares, 1.00% of the aggregate average daily
net assets attributable to the Class B and Class C shares of Evergreen Total
Return Fund, Evergreen Growth and Income Fund, Evergreen American Retirement
Fund and Evergreen Foundation Fund, and .75 of 1% of the aggregate average daily
net assets attributable to the Class B and Class C shares of Evergreen Balanced
Fund and Evergreen Value Fund. Payments under the Plans adopted with respect to
Class A shares are currently voluntarily limited to .25 of 1% of each Fund's
aggregate average daily net assets attributable to Class A shares. The Plans
provide that a portion of the fee payable thereunder may constitute a service
fee to be used for providing ongoing personal services and/or the maintenance of
shareholder accounts. Evergreen Balanced Fund and Evergreen Value Fund have
each, in addition to the Plans adopted with respect to their Class B and Class C
shares, adopted shareholder service plans ("Service Plans") relating to the
Class B and Class C shares which permit each Fund to incur a fee of up to .25 of
1% of the aggregate average daily net assets attributable to the Class B and
Class C shares for ongoing personal services and/or the maintenance of
shareholder accounts. Such service fee payments to financial intermediaries for
such purposes, whether pursuant to a Plan or Service Plan, will not to exceed
.25% of the aggregate average daily net assets attributable to each Class of
shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, .75 of 1% of a Fund's
aggregate average daily net assets attributable to the Class B shares and .75 of
1% of a Fund's aggregate average daily net assets attributable to the Class C
shares. The Distribution Agreements provide that EFD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans ( and in the case
of Evergreen Balanced Fund and Evergreen Value Fund, the Service Plans), in
amounts up to .25 of 1% of a Fund's aggregate average daily net assets on an
annual basis attributable to Class B and Class C shares, to compensate
organizations, which may include EFD and each Fund's investment adviser or their
affiliates, for personal services rendered to shareholders and/or the
maintenance of shareholder accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment program. Share certificates are not issued for
Class A, Class B and Class C shares. In states where EFD is not registered as a
broker-dealer shares of a Fund will only be sold through other broker-dealers or
other financial institutions that are registered. See the Share Purchase
Application and Statement of Additional Information for more information. Only
Class A, Class B and Class C shares are offered through this Prospectus (See
"General Information" - "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transactions in shares of a Fund.
Class A shares may also be purchased at net asset value by qualified
and non-qualified employee benefit and savings plans which make shares of the
Funds and the other Evergreen mutual funds available to their participants, and
which: (a) are employee benefit plans having at least $1,000,000 in investable
assets, or 250 or more eligible participants; or (b) are non-qualified benefit
or profit sharing plans which are sponsored by an organization which also makes
the Evergreen mutual funds available through a qualified plan meeting the
criteria specified under (a). In connection with sales made to plans of the type
described in the preceeding sentence that are clients of broker-dealers, and
which do not qualify for sales at net asset value under the conditions set forth
in the paragraph above, payments may be made in an amount equal to .50 of 1% of
the net asset value of shares purchased. These payments are subject to reclaim
in the event shares are redeemed within 12 months after purchase.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
average daily value on an annual basis of Class A shares held by their clients.
Certain purchases of Class A shares may qualify for reduced sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans and
Reinstatement Privilege. Consult the Share Purchase Application and Statement of
Additional Information for additional information concerning these reduced sales
charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which it is expected that they will convert to Class A
shares) . The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
Class C Shares--Level-Load Alternative. You can purchase Class C shares without
any initial sales charge and, therefore, the full amount of your investment will
be used to purchase Fund shares. However, you will pay a 1.0% CDSC if you redeem
shares during the first year after purchase. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of the Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. Shares
obtained from dividend or distribution reinvestment are not subject to the CDSC.
No contingent deferred sales charge will be imposed on Class C shares
purchased by institutional investors, and through employee benefit and savings
plans eligible for the exemption from front-end sales charges described under
"Class A Shares-Front End Sales Charge Alternative", above. Broker-dealers and
other financial intermediaries whose clients have purchased Class C shares may
receive a trailing commission equal to .75 of 1% of the average daily value of
such shares on an annual basis held by their clients more than one year from the
date of purchase. The payment of trailing commissions will commence immediately
with respect to shares eligible for exemption from the contingent deferred sales
charge normally applicable to Class C shares.
With respect to Class B Shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per Share, (2) Shares acquired
through reinvestment of dividends and capital gains, (3) Shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution charges and/or shareholder service fees, after
seven years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or its investment adviser
incurs. If such investor is an existing shareholder, a Fund may redeem shares
from an investor's account to reimburse the Fund or its investment adviser for
any loss. In addition, such investors may be prohibited or restricted from
making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B or Class C shares) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 10 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
or C shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The redemption of shares is a taxable transaction for Federal tax
purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for 30 days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which each Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the Fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B or Class C
shares of the Evergreen mutual fund originally purchased for cash is applied.
Also, Class B shares will continue to age following an exchange for purposes of
conversion to Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the phone number on the front page of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number on the front page of this Prospectus.
Some services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Each Fund's investment adviser may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Internal
Revenue Code of 1986, as amended (the "Code"). Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in December of the previous year. Income dividends and capital
gain distributions are automatically reinvested in additional shares of the Fund
making the distribution at the net asset value per share at the close of
business on the record date, unless the shareholder has made a written request
for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund for their most recent fiscal year is set forth below. A
similar discussion relating to Evergreen Balanced Fund and Evergreen Value Fund
is contained in the annual report of each Fund for the fiscal year ended
December 31, 1994.
Evergreen Growth and Income Fund
The total return of the Class Y no-load shares of the Evergreen Growth
and Income Fund was +1.69% for the year ended December 31, 1994. This return
compared favorably with the +1.31% return of the Standard and Poor's 500
Reinvested Index (the "S&P 500 Index") and the -0.94% return from the Lipper
Growth and Income Fund Average. This performance was achieved through the
implementation of the "value timing" strategy which focuses on undervalued
securities. At year-end 1994, the majority of the portfolio was comprised of
out-of-favor growth companies, restructured companies and other companies which
the Fund's investment adviser believes are substantially undervalued.
While the domestic economy's rate of growth accelerated dramatically in
1994, the Federal Reserve's more stringent monetary policy resulted in a less
hospitable environment for financial assets. The Fund performed well relative to
its competition and the S&P 500 Index in 1994, but the Fed's tightening of
monetary policy kept the absolute return low, in keeping with the depressing
influence on financial assets generally. The principal contributors to the
Fund's positive performance during 1994 were the following industries: (1)
business equipment and services which facilitated the productivity enhancing
efforts of their customers; (2) chemical issues which benefited from the robust
economic growth and previous restructuring efforts that lowered cost structures;
and (3) shares of healthcare companies which continued their rebound from the
market's adverse reaction to the perceived impact of the healthcare program
proposed by the Clinton Administration in 1993. The industry groups which had
the largest negative impact on the Fund's performance were the following: (i)
banks and thrifts, insurance and utilities, all of which suffered from the
Federal Reserve's more stringent monetary policy; (ii) retail which suffered
from lack of pricing flexibility and excess capacity; and (iii) energy which was
negatively impacted by lower prices for natural gas and declining refining
margins.
[CHART]
Evergreen American Retirement Fund
The total return of the Class Y no-load shares of the Evergreen
American Retirement Fund for the fiscal year ended December 31, 1994, was
- -2.86%. This performance lagged the Wilshire 5000 Index which returned -.06% and
exceeded the Lehman General Bond Mutual Fund Index which returned -3.51% for the
year. The Fund concentrated the equity portion of its portfolio in high
dividend-paying common stocks, convertible bonds and convertible preferreds.
Fixed-income issues were represented by investments in U.S. Treasury and agency
obligations and high quality corporate bonds and notes.
Interest rates rose through much of 1994 as the Federal Reserve moved
to slow the rapid and potentially inflationary pace of U.S. economic growth.
Over the course of the year, the Federal Fund's rate was increased from 3.0% to
5.5%, and market forces lifted interest rates on 30 year U.S. Treasury bonds
from 6.35% to 7.88%. This rising interest rate environment was negative for the
bond market and produced mixed results for the stock market. Because of the
Fund's income-oriented style of investing, this period of rising interest rates
negatively affected performance.
The industry groups which had the largest positive impact on the Fund's
performance included the chemicals and metals industries which benefited from
rising demand and product prices, and bank stocks which rose in response to
stronger loan growth and reduced loan loss provisions. The Fund was negatively
impacted by its holdings in the automotive industry and related suppliers, and
utility stocks which declined in response to higher interest rates. The Fund's
exposure to utilities was reduced in early 1994 to a group of special situation
companies. But even the improving fundamentals of these companies could not
overcome the impact of rising rates. Despite strong earnings for the auto
industry and suppliers, these stocks declined as the market anticipated slower
consumer spending in response to higher rates.
The Fund's practice has been to provide a stable quarterly income
dividend. During the past fiscal year, the Fund distributed a dividend of $0.15
per quarter. These distributions were funded entirely from net investment
income. None represented a return of capital. To maintain the dividend rate the
Fund purchased issues which had dividend increases, and frequently repositioned
the portfolio in order to assure participation in large dividends (particularly
from utility stocks or special dividends announced by other types of companies).
The repositioning of the portfolio resulted in higher brokerage commissions.
As noted above, the Fund's investment objectives in order of priority
are conservation of capital, reasonable income and capital growth. To the extent
that the Fund sought to maintain a stable dividend during the past fiscal year
and therefore emphasized current income over capital growth, the Fund's overall
return may have been reduced. Beginning in the first quarter of 1995, the Fund
changed its dividend strategy. The Fund's income dividend distribution will move
toward a fluctuating dividend and away from the stable dividend pattern of the
past.
[CHART]
Evergreen Foundation Fund.
The total return of the Class Y no-load shares of the Evergreen
Foundation Fund for the almost five years since inception on January 2, 1990 to
December 31, 1994 was +99.57%, which calculated to an average annual compounded
return of +14.83%. This compared favorably with the return of the Standard &
Poor's 500 Reinvested Index (+51.45%) and the Lipper Balanced Fund Average
(+44.03%) for the same time period. For the fiscal year ended 1994, the Fund
produced a total return of -1.12% versus returns of +1.31% for the Standard &
Poor's 500 Reinvested Index and -2.52% for the Lipper Balanced Fund Average.
Asset allocation was a primary determinant of performance. Consistent
with the Fund's investment objectives of reasonable income, conservation of
capital and capital appreciation, Evergreen Asset sought to strategically
position the Fund to maximize opportunities in each asset class. The average
allocation during 1994 was 62% equities, 28% fixed-income and 10% short-term
cash equivalents. The equity portion of the portfolio had a return of +4.91% for
1994. The fixed-income segment of the portfolio, whose primary focus is income
and preservation of capital, was comprised on average of three-quarters
long-term U.S. government obligations and one-quarter short-term cash
equivalents. It generated a return of -11.06%, which was in line with its
benchmarks, when assessed in terms of credit quality, liquidity and overall
weighted maturity.
The equity segment of the portfolio was largely responsible for the
capital appreciation during 1994. Stock selection focused on issues believed to
be conservatively valued and financially strong. Concentration on health care
issues provided relative outperformance as these issues benefited from renewed
confidence in the growth of pharmaceutical and medical services industries. A
secondary focus on technological issues (semi-conductors and electronic
components) also provided excellent relative performance, as these sectors
benefited from a resurgence in the U.S. economy. The portfolio was negatively
impacted by its investments in real estate companies, utilities and banks.
Evergreen Total Return Fund.
Steady income flow has been an important goal since the inception of
the Fund. The Fund continued its annual $1.08 per share income dividend. The
dividend was maintained for the seventh successive year. The portfolio of the
Evergreen Total Return Fund, although primarily equities and convertibles, has a
high level of interest rate sensitivity. Since the Fund seeks to pay a
substantial dividend, Evergreen Asset looked toward the utility sector,
financial issues, real estate investment trusts, convertible preferreds and
convertible debentures to provide high yields. The sharp downward swing in the
1994 bond market had a deleterious effect on the interest sensitive sectors of
the equity and convertible markets, particularly impacting utilities, financial
and convertible issues. During the period from March 31, 1994 through January
31, 1995, the Dow Jones Utility Average was down -6.23%, the New York Stock
Exchange Financial Index was down -3.00%, the Merrill Lynch Convertible Index
was down -4.85%, and the Wilshire Real Estate Securities Index was down -3.80%.
The performance of the Class Y no-load shares of the Fund for the same period
was up +1.86%. This compares also with the performance of the Wilshire 5000 of
+6.04% and +3.01% for the Lipper Equity Income Average. One of the best groups
in the portfolio was the health sector which rebounded when the Clinton Health
Care Plan ran into trouble. Restructured companies as well as selected
cyclicals, such as banks and thrift issues and chemicals and energy issues, also
helped the portfolio. Five bank and thrift mergers produced gains.
During the year, the portfolio was restructured to reduce the utility
sector especially electric utilities. Evergreen Asset decided to reduce
dependence on this sector as it faces deregulation and resulting competitive
pressures. Currently, the Fund's focus is on special situations resulting from
such events as rate relief or corporate changes. Evergreen Asset also switched
into international issues in order to diversify risk across country lines and to
reduce the portfolio's sensitivity to changes in U.S. interest rates. Toward the
end of the year, Evergreen Asset added to the portfolio's holdings in the retail
sector as it saw a number of these companies at attractive valuation levels.
Many of these issues were in the process of restructuring, thereby providing the
possibility of improved margins in the near future.
The Fund's dividend was funded entirely from net investment income. It
did not represent a return of capital. To maintain the dividend rate the Fund
purchased issues which had dividend increases, and frequently repositioned the
portfolio in order to assure participation in large dividends, particularly from
utility stocks or special dividends announced by other types of companies. The
repositioning of the portfolio resulted in higher brokerage commissions. As
noted above, the Fund's investment objective is to achieve a return consisting
of current income and capital appreciation. To the extent that the Fund sought
to maintain a stable dividend during the past fiscal year and therefore
emphasized current income over capital appreciation, the Fund's overall return
may have been reduced.
On January 3, 1995, the Fund introduced a multiple class distribution
structure. The Fund's total return for the period 1/3/95 to 1/31/95 for the A,
B, C and Y Class of Shares was -3.45% (reflects maximum front end sales charge
of 4.75%), -3.53% (reflects maximum contingent deferred sales charge of 5%),
- -0.41% (reflects 1% contingent deferred sales charge within first year of
purchase), and 1.47% (no-load), respectively.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Total Return Fund is a Massachusetts business trust
organized in 1986, and was originally organized as Maryland corporation in 1978.
Evergreen Growth and Income Fund is a Massachusetts business trust organized in
1986. The Evergreen American Retirement Fund is a separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust organized in
1987. Evergreen Foundation Fund is a separate series of the Evergreen Foundation
Trust, a Massachusetts business trust organized in 1989. Evergreen Balanced Fund
and Evergreen Value Fund are separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Balanced Fund and Evergreen Value Fund and which
provides certain sub-administrative services to Evergreen Asset in connection
with its role as investment adviser to Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund, including providing personnel to serve as officers of the
Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and distribution and shareholder
servicing related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND, EVERGREEN TOTAL RETURN FUND
Capital Management Group of First Union National Bank, 210 South College
Street, Charlotte, North Carolina, 28228
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
<PAGE>
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) GROWTH AND INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN BALANCED FUND
EVERGREEN GROWTH AND INCOME FUND
EVERGREEN VALUE FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN FOUNDATION FUND
EVERGREEN TOTAL RETURN FUND
CLASS Y SHARES
The Evergreen Growth and Income Funds (the "Funds") are designed
to provide investors with a selection of investment alternatives which seek
to provide capital growth, income and diversification. This Prospectus
provides information regarding the Class Y shares offered by the Funds.
Each Fund is, or is a series of, an open-end, diversified, management
investment company. This Prospectus sets forth concise information about
the Funds that a prospective investor should know before investing. The
address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 235-0064. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Advisers
Sub-Adviser
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND, and EVERGREEN TOTAL RETURN
FUND is Evergreen Asset Management Corp. ("Evergreen Asset") which, with its
predecessors, has served as an investment adviser to the Evergreen Funds since
1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank
of North Carolina ("FUNB"), which in turn is a subsidiary of First Union
Corporation, one of the ten largest bank holding companies in the United States.
The Capital Management Group of FUNB ("CMG") serves as investment adviser to
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND.
EVERGREEN BALANCED FUND (formerly First Union Balanced Portfolio) seeks
to produce long-term total return through capital appreciation, dividends, and
interest income.
EVERGREEN GROWTH AND INCOME FUND seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
EVERGREEN VALUE FUND (formerly First Union Value Portfolio) seeks
long-term capital growth, with current income as a secondary objective.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities.
EVERGREEN TOTAL RETURN FUND attempts to maximize the "total return" on
its portfolio of investments. It invests primarily in common and preferred
stocks, securities convertible into or exchangeable for common stocks and fixed
income securities.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per year) $5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN BALANCED FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 6
Administrative Fees .06%
After 3 Years $ 20
12b-1 Fees --
After 5 Years $ 35
Other Expenses .06%
After 10 Years $ 77
Total .62%
</TABLE>
EVERGREEN GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.00%
After 1 Year $ 14
12b-1 Fees --
After 3 Years $ 42
Other Expenses .33%
After 5 Years $ 73
After 10 Years $ 160
Total 1.33%
</TABLE>
EVERGREEN VALUE FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 7
Administrative Fees .06%
After 3 Years $ 21
12b-1 Fees --
After 5 Years $ 37
Other Expenses .10%
After 10 Years $ 82
Total .66%
</TABLE>
EVERGREEN AMERICAN RETIREMENT FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .75%
After 1 Year $ 13
12b-1 Fees --
After 3 Years $ 41
Other Expenses .53%
After 5 Years $ 70
After 10 Years $ 155
Total 1.28%
</TABLE>
3
<PAGE>
EVERGREEN FOUNDATION FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .875%
After 1 Year $ 12
12b-1 Fees --
After 3 Years $ 36
Other Expenses .265%
After 5 Years $ 63
After 10 Years $ 139
Total 1.14%
</TABLE>
EVERGREEN TOTAL RETURN FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.00%
After 1 Year $ 13
12b-1 Fees --
After 3 Years $ 39
Other Expenses .24%
After 5 Years $ 68
After 10 Years $ 150
Total 1.24%
</TABLE>
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund's Y Class for the most recent fiscal period. Such expenses have
been restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds". As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent years or the life of the Fund
if shorter for EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND has been audited
by KPMG Peat Marwick LLP, each Fund's independent auditors, for EVERGREEN
FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's independent
auditors and for EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN GROWTH AND INCOME
FUND and EVERGREEN TOTAL RETURN FUND has been audited by Ernst & Young LLP, each
Fund's independent auditors. A report of KPMG Peat Marwick LLP, Price Waterhouse
LLP, or Ernst & Young LLP, as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
No financial highlights are shown for Class A, B or C shares of EVERGREEN
GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND or EVERGREEN
FOUNDATION FUND, since these classes did not have any operations prior to
December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN BALANCED FUND -- CLASS A, B, C AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS Y
SHARES CLASS B CLASS C SHARES
SHARES SHARES
JUNE 10, JANUARY 26, SEPTEMBER 2,
1991* 1993* 1994*
YEAR ENDED THROUGH YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991 1994 1993 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $12.07 $11.41 $11.02 $10.00 $12.08 $11.54 $12.00 $12.07 $11.41 $11.02
Income (loss) from
investment
operations:
Net investment
income............. .43 .42 .42 .30 .36 .34 .18 .46 .45 .46
Net realized and
unrealized gain
(loss) on
investments........ (.71) .75 .43 1.08 (.71) .65 (.61) (.71) .75 .42
Total from
investment
operations....... (.28) 1.17 .85 1.38 (.35) .99 (.43) (.25) 1.20 .88
Less distributions
to shareholders
from:
Net investment
income............. (.43) (.42) (.42) (.35) (.36) (.34) (.21) (.46) (.45) (.45)
Net realized
gains.............. (.19) (.09) (.04) (.01) (.19) (.09) (.19) (.19) (.09) (.04)
In excess of net
investment
income............. -- -- -- -- -- (.02)(a) -- -- -- --
Total
distributions..... (.62) (.51) (.46) (.36) (.55) (.45) (.40) (.65) (.54) (.49)
Net asset value, end
of period.......... $11.17 $12.07 $11.41 $11.02 $11.18 $12.08 $11.17 $11.17 $12.07 $11.41
TOTAL RETURN+....... (2.4%) 10.4% 7.9% 11.8% (3.0%) 8.7% (3.6%) (2.2%) 10.7% 8.2%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of
period
(000's omitted).... $41,010 $35,032 $17,408 $334 $100,052 $65,475 $195 $778,657 $760,147 $520,232
Ratios to average
net assets:
Expenses........... .89% .91% .91% .92%++ 1.48% 1.41%++ 1.64%++ .64% .66% .66%
Net investment
income............. 3.69% 3.61% 3.93% 4.38%++ 3.12% 3.09%++ 3.23%++ 3.93% 3.86% 4.20%
Portfolio turnover
rate............... 35% 19% 12% 19% 35% 19% 35% 35% 19% 12%
<CAPTION>
APRIL 1,
1991*
THROUGH
DECEMBER 31,
1991
<S> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $10.00
Income (loss) from
investment
operations:
Net investment
income............. .36
Net realized and
unrealized gain
(loss) on
investments........ 1.03
Total from
investment
operations....... 1.39
Less distributions
to shareholders
from:
Net investment
income............. (.36)
Net realized
gains.............. (.01)
In excess of net
investment
income............. --
Total
distributions..... (.37)
Net asset value, end
of period.......... $11.02
TOTAL RETURN+....... 15.0%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of
period
(000's omitted).... $247,472
Ratios to average
net assets:
Expenses........... .68%++
Net investment
income............. 4.86%++
Portfolio turnover
rate............... 19%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Distributions in excess of net investment income for the year ended
December 31, 1993 were the result of certain book and tax differences.
These differences did not represent a return of capital for federal income
tax purposes for the year ended December 31, 1993.
5
<PAGE>
EVERGREEN GROWTH AND INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988** 1987**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period...... $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38 $10.05
Income (loss) from investment operations:
Net investment income..................... .14 .14 .15 .19 .30 .52 .19 .20
Net realized and unrealized gain (loss) on
investments............................. .12 1.91 1.65 2.58 (.84) 2.17 2.10 (.63)
Total from investment operations........ .26 2.05 1.80 2.77 (.54) 2.69 2.29 (.43)
Less distributions to shareholders from:
Net investment income..................... (.14) (.14) (.15) (.19) (.30) (.52) (.19) (.24)
Net realized gains........................ (1.01) (.68) (.46) (.31) (.47) (.76) (.86) --
Total distributions..................... (1.15) (.82) (.61) (.50) (.77) (1.28) (1.05) (.24)
Net asset value, end of period............ $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38
TOTAL RETURN+............................. 1.7% 14.4% 13.8% 25.8% (4.5%) 25.4% 24.6% (4.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)................................ $73,457 $77,062 $63,841 $47,763 $36,222 $31,540 $24,399 $21,471
Ratios to average net assets:
Expenses................................ 1.33% 1.26% 1.33% 1.41% 1.50% 1.54% 1.56% 1.76%
Net investment income................... .96% .99% 1.18% 1.55% 2.62% 4.13% 1.70% 1.90%
Portfolio turnover rate................... 29% 28% 30% 23% 41% 53% 41% 48%
<CAPTION>
OCTOBER 15, 1986*
THROUGH
DECEMBER 31, 1986**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period...... $10.00
Income (loss) from investment operations:
Net investment income..................... .07
Net realized and unrealized gain (loss) on
investments............................. (.02)
Total from investment operations........ .05
Less distributions to shareholders from:
Net investment income..................... --
Net realized gains........................ --
Total distributions..................... --
Net asset value, end of period............ $10.05
TOTAL RETURN+............................. .5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)................................ $20,696
Ratios to average net assets:
Expenses................................ 1.73%++
Net investment income................... 3.23%++
Portfolio turnover rate................... 4%
</TABLE>
* Commencement of operations.
** Net investment income is based on the average monthly shares outstanding for
the periods indicated.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
6
<PAGE>
EVERGREEN VALUE FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 3, 1991*
YEAR ENDED DECEMBER 31, THROUGH DECEMBER
1994 1993 1992 31, 1991
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period...................................... $17.63 $17.11 $17.08 $14.28
Income from investment operations:
Net investment income..................................................... .56 .52 .49 .47
Net realized and unrealized gain (loss) on investments.................... (.20) 1.12 .90 3.53
Total from investment operations........................................ .36 1.64 1.39 4.00
Less distributions to shareholders from:
Net investment income..................................................... (.56) (.52) (.49) (.47)
Net realized gains........................................................ (.82) (.58) (.87) (.73)
In excess of net investment income........................................ -- (.02)(b) -- --
Total distributions..................................................... (1.38) (1.12) (1.36) (1.20)
Net asset value, end of period............................................ $16.61 $17.63 $17.11 $17.08
TOTAL RETURN+............................................................. 2.1% 9.7% 8.3% 25.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................. $507,028 $463,087 $326,154 $271,391
Ratios to average net assets:
Expenses................................................................ .68% .65% .68%(a) .69%++(a)
Net investment income................................................... 3.21% 2.98% 2.90%(a) 3.04%++(a)
Portfolio turnover rate................................................... 70% 46% 56% 69%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 3, 1991
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
<S> <C> <C>
Expenses.................................................. .69% .77%
Net investment income..................................... 2.89% 2.96%
</TABLE>
(b) Distributions in excess of net investment income for the period ended
December 31, 1993 were the result of certain book and tax timing
differences. These distributions did not represent a return of capital for
federal income tax purposes for the year ended December 31, 1993.
7
<PAGE>
EVERGREEN VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990* 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83 $14.66
Income (loss) from investment
operations:
Net investment income............ .52 .47 .44 .46 .36 .54 .36 .26
Net realized and unrealized gain
(loss) on investments........... (.20) 1.10 .89 3.17 (.44) 1.70 2.11 (1.30)
Total from investment
operations.................... .32 1.57 1.33 3.63 (.08) 2.24 2.47 (1.04)
Less distributions to
shareholders from:
Net investment
income.......................... (.51) (.47) (.43) (.43) (.36) (.57) (.38) (.26)
Net realized gains............... (.82) (.58) (.87) (.73) (.02) (1.00) (.47) (.53)
In excess of net investment
income.......................... -- -- -- -- (.05)(c) -- -- --
Total distributions............. (1.33) (1.05) (1.30) (1.16) (.43) (1.57) (.85) (.79)
Net asset value, end of period... $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83
TOTAL RETURN+.................... 1.9% 9.3% 8.0% 25.1% (.5%) 15.5% 19.7% (7.1%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $188,807 $189,983 $169,310 $135,565 $104,637 $95,995 $83,121 $21,914
Ratios to average net assets:
Expenses........................ .93% .99% 1.01%(a) .96%(a) 1.39%++ 1.55% 1.71% 1.74%
Net investment income........... 2.96% 2.63% 2.37%(a) 2.78%(a) 3.28%++ 3.42% 2.72% 1.92%
Portfolio turnover rate (b)...... 70% 46% 56% 69% 13% 11% 24% 24%
<CAPTION>
1987 1986
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $12.35 $10.04
Income (loss) from investment
operations:
Net investment income............ .15 .19
Net realized and unrealized gain
(loss) on investments........... 2.38 2.32
Total from investment
operations.................... 2.53 2.51
Less distributions to
shareholders from:
Net investment
income.......................... (.13) (.20)
Net realized gains............... (.09) --
In excess of net investment
income.......................... -- --
Total distributions............. (.22) (.20)
Net asset value, end of period... $14.66 $12.35
TOTAL RETURN+.................... 20.8% 25.3%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $23,221 $5,595
Ratios to average net assets:
Expenses........................ 1.97% 2.00%
Net investment income........... 1.41% 2.34%
Portfolio turnover rate (b)...... 20% 20%
</TABLE>
* The Fund changed its fiscal year end to December 31.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991
<S> <C> <C>
Expenses........................................................................... 1.02% 1.05%
Net investment income.............................................................. 2.36% 2.69%
</TABLE>
(b) Portfolio turnover rate for periods ended on or after March 31, 1986 include
certain U.S. government obligations.
(c) Distributions in excess of net investment income for the period ended
December 31, 1990 were a result of certain book and tax timing differences.
These distributions did not represent a return of capital for federal
income tax purposes for the year ended December 31, 1990.
8
<PAGE>
EVERGREEN VALUE FUND -- CLASS B AND C SHARES
<TABLE>
<CAPTION>
CLASS B CLASS C
SHARES SHARES
FEBRUARY 2, SEPTEMBER 2,
1993* 1994*
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................................... $17.63 $17.24 $18.28
Income (loss) from investment operations:
Net investment income......................................................... .42 .35 .19
Net realized and unrealized gain (loss) on investments........................ (.20) 1.01 (.81)
Total from investment operations............................................ .22 1.36 (.62)
Less distributions to shareholders from:
Net investment income......................................................... (.41) (.35) (.19)
Net realized gains............................................................ (.82) (.58) (.82)
In excess of net investment income............................................ -- (.04)(a) (.04)(a)
Total distributions......................................................... (1.23) (.97) (1.05)
Net asset value, end of period................................................ $16.62 $17.63 $16.61
TOTAL RETURN+................................................................. 1.3% 8.0% (3.4%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................................... $104,297 $ 59,953 $485
Ratios to average net assets:
Expenses.................................................................... 1.53% 1.48%++ 1.68%++
Net investment income....................................................... 2.36% 2.09%++ 2.16%++
Portfolio turnover rate....................................................... 70% 46% 70%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
(a) Distributions in excess of net investment income, for the Class B Shares,
for the period ended December 31, 1993 and for the Class C Shares, for the
period ended December 31, 1994, were the result of certain book and tax
timing differences. These distributions did not represent a return of
capital for federal income tax purposes for the year ended December 31, 1993
and December 31, 1994.
9
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period..... $11.60 $10.95 $10.52 $9.59 $10.41 $ 10.09
Income (loss) from investment operations:
Net investment income.................... .60 .56 .66 .60 .60 .57
Net realized and unrealized gain (loss)
on investments......................... (.93) .96 .55 1.15 (.66) .76
Total from investment operations....... (.33) 1.52 1.21 1.75 (.06) 1.33
Less distributions to shareholders from:
Net investment income.................... (.60) (.60) (.61) (.60) (.60) (.59)
Net realized gains....................... -- (.24) (.17) (.22) (.16) (.42)
In excess of net realized gains.......... -- (.03)(b) -- -- -- --
Total distributions.................... (.60) (.87) (.78) (.82) (.76) (1.01)
Net asset value, end of period........... $10.67 $11.60 $10.95 $10.52 $9.59 $ 10.41
TOTAL RETURN+............................ (2.9%) 14.1% 11.8% 18.8% (.5%) 13.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $37,176 $37,336 $23,781 $15,632 $12,351 $11,610
Ratios to average net assets:
Expenses............................... 1.28% 1.36% 1.51%(a) 1.50%(a) 1.50%(a) 1.88%(a)
Net investment income.................. 5.40% 5.13% 6.23%(a) 5.91%(a) 6.04%(a) 5.49%(a)
Portfolio turnover rate.................. 136% 92% 151% 97% 33% 152%
<CAPTION>
MARCH 14, 1988*
THROUGH
DECEMBER 31, 1988**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period..... $ 10.00
Income (loss) from investment operations:
Net investment income.................... .39
Net realized and unrealized gain (loss)
on investments......................... .18
Total from investment operations....... .57
Less distributions to shareholders from:
Net investment income.................... (.36)
Net realized gains....................... (.12)
In excess of net realized gains.......... --
Total distributions.................... (.48)
Net asset value, end of period........... $ 10.09
TOTAL RETURN+............................ 5.8%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $9,449
Ratios to average net assets:
Expenses............................... 2.00%++
Net investment income.................. 5.01%++
Portfolio turnover rate.................. 52%
</TABLE>
* Commencement of operations.
** Investment income, expenses and net investment income are based upon the
average monthly shares outstanding for the period indicated.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991 1990 1989
<S> <C> <C> <C> <C>
Expenses...................................................... 1.59% 1.82% 1.95% 2.03%
Net investment income......................................... 6.15% 5.59% 5.59% 5.34%
</TABLE>
(b) Distributions in excess of net realized gains were the result of certain
book and tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
10
<PAGE>
EVERGREEN FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 2, 1990*
YEAR ENDED DECEMBER 31, THROUGH
1994 1993 1992 1991 DECEMBER 31, 1990
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................. $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income................................................ .42 .31 .27 .33 1.23(b)
Net realized and unrealized gain (loss) on investments............... (.57) 1.55 1.83 2.77 (.59)
Total from investment operations................................... (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income................................................ (.42) (.31) (.24) (.33) (1.17)
Net realized gains................................................... (.28) (.41) (.63) (.97) (.52)
Total distributions................................................ (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period....................................... $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+........................................................ (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in millions).............................. $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses........................................................... 1.14% 1.20% 1.40%(a) 1.20%(a) 0%(a)++
Net investment income.............................................. 3.51% 2.81% 2.93%(a) 2.86%(a) 15.07%(a,b)++
Portfolio turnover rate.............................................. 33% 60% 127% 178% 131%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 2, 1990
DECEMBER 31, THROUGH DECEMBER 31,
1992 1991 1990
<S> <C> <C> <C>
Expenses.............................................. 1.43% 2.58% 3.64%
Net investment income................................. 2.90% 1.48% 11.43%
</TABLE>
(b) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.
11
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
JANUARY YEAR ENDED MARCH 31,
31, 1995* 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.............................. $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37 $19.72
Income (loss) from investment
operations:
Net investment income................. .87 1.08 1.11 1.08 1.02 1.07 1.12 1.06 1.14
Net realized and unrealized gain
(loss) on investments............... (.55) (1.41) 2.51 .70 (.08) .36 .79 (2.64) 1.76
Total from investment operations.... .32 (.33) 3.62 1.78 .94 1.43 1.91 (1.58) 2.90
Less distributions to shareholders
from:
Net investment income................. (1.08) (1.08) (1.08) (1.08) (1.08) (1.09) (1.08) (.80) (1.14)
Net realized gains.................... (.25) (1.20) (.46) -- -- -- (.02) (.88) (1.11)
Total distributions................. (1.33) (2.28) (1.54) (1.08) (1.08) (1.09) (1.10) (1.68) (2.25)
Net asset value, end of period........ $17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37
TOTAL RETURN+......................... 1.9% (2.1%) 20.2% 10.2% 5.8% 7.9% 1.3% (7.8%) 15.7%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in
millions)........................... $942 $1,065 $1,142 $1,032 $1,151 $1,292 $1,312 $1,346 $1,636
Ratios to average net assets:
Expenses............................ 1.24%++ 1.18% 1.18% 1.21% 1.23% 1.18% 1.02%** 1.01%** 1.02%**
Net investment income............... 5.70%++ 5.29% 5.65% 5.73% 5.90% 5.64% 6.36%** 5.80%** 5.68%**
Portfolio turnover rate............... 151% 106% 164% 137% 137% 89% 86% 81% 44%
<CAPTION>
1986
<S> <C>
PER SHARE DATA
Net asset value, beginning of
period.............................. $16.63
Income (loss) from investment
operations:
Net investment income................. 1.03
Net realized and unrealized gain
(loss) on investments............... 4.26
Total from investment operations.... 5.29
Less distributions to shareholders
from:
Net investment income................. (1.22)
Net realized gains.................... (.98)
Total distributions................. (2.20)
Net asset value, end of period........ $19.72
TOTAL RETURN+......................... 35.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in
millions)........................... $408
Ratios to average net assets:
Expenses............................ 1.11%**
Net investment income............... 6.06%**
Portfolio turnover rate............... 65%
</TABLE>
* On September 21, 1994, the Fund changed its fiscal year end to January 31.
** Net of expense limitation in fiscal years 1986, 1987, 1988 and 1989.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
12
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
JANUARY 3, 1995*
THROUGH JANUARY 31, 1995
PER SHARE DATA
Net asset value, beginning of period........................................................ $17.09 $17.09 $17.09
Income from investment operations:
Net investment income....................................................................... .02 .02 .01
Net realized and unrealized gain on investments............................................. .17 .17 .17
Total from investment operations.......................................................... .19 .19 .18
Net asset value, end of period.............................................................. $17.28 $17.28 $17.27
TOTAL RETURN+............................................................................... 1.1% 1.1% 1.1%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................................... $119 $599 $24
Ratios to average net assets:
Expenses.................................................................................. 1.45% ++ 2.23% ++ 2.22% ++
Net investment income..................................................................... 4.09% ++ 3.23% ++ 2.68% ++
Portfolio turnover rate**................................................................... 151% 151% 151%
</TABLE>
* Commencement of class operations.
** Portfolio turnover rate is calculated for the ten month period ended January
31, 1995.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
13
<PAGE>
14
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Balanced Fund
The investment objective of the Evergreen Balanced Fund (formerly First
Union Balanced Portfolio) is to achieve a long-term total return through capital
appreciation, dividends and interest income. This objective is a fundamental
policy and may not be changed without shareholder approval. The Fund invests in
common and preferred stocks for growth and fixed income securities to provide a
stable income flow. There can be no assurance that the Fund's investment
objective will be achieved.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% fixed income securities (including some
convertible securities) and 0-25% cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk.
The Funds invest in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection includes a
company's financial strength (such as cash flow and low debt-to-equity ratio),
earnings growth and price in relation to current earnings, dividends and book
value to identify growth opportunities. The Fund may also invest in American
Depositary Receipts ("ADRs") of foreign companies which are traded on the New
York or American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO"), or which, if unrated, are considered to be of comparable quality by the
Fund's investment adviser. Bonds are selected based upon the outlook for
interest rates and their yield in relation to other bonds of similar quality and
maturity. The maturities of these bonds may be medium (i.e., from five to ten
years) to long-term (i.e., over ten years), but in no event will they be longer
than twenty years.
The Fund also invests in securities which are either issued or
guaranteed by the U.S. government, its agencies or instrumentalities. These
securities include direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds; and notes, bonds and discount notes of U.S.
government agencies or instrumentalities, such as the Farm Credit System,
including the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal National Mortgage Association, Government
National Mortgage Association, Student Loan Marketing Association, Tennessee
Valley Authority, Export-Import Bank of the United State, Commodity Credit
Corporation, Federal Financing Bank and National Credit Union Administration.
Some of these securities are supported by the full faith and credit of the U.S.
government, and others are supported only by the credit of the agency or
instrumentality.
The Fund may also invest short-term in cash equivalents for defensive
purposes; securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities, and repurchase agreements collateralized by
eligible investments.
As of December 31, 1992, 1993 and 1994, approximately 59%, 63% and 55%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen Growth and Income Fund
The investment objective of Evergreen Growth and Income Fund (formerly
known as the Evergreen Value Timing Fund) is to achieve a return composed of
capital appreciation in the value of its shares and current income. (The Fund's
investment objective is a fundamental policy.) There can be no assurance that
the Fund's investment objective will be achieved.
The Fund seeks to achieve its investment objective by investing in the
securities of companies which are undervalued in the marketplace relative to
those companies' assets, breakup value, earnings or potential earnings growth.
These companies are often found among those which have had a record of financial
success but are currently in disfavor in the marketplace for reasons the Fund's
investment adviser perceives as temporary or erroneous. Such investments when
successfully timed are expected to be the means for achieving the Fund's
investment objective. This inherently contrarian approach may require greater
reliance upon the analytical and research capabilities of the Fund's investment
adviser than an investment in certain other equity funds. Consequently, an
investment in the Fund may involve more risk than other equity funds. The Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss inherent in such a program. Nor should the Fund be
considered a balanced or complete investment program.
The Fund will use the "value timing" approach as a process for
purchasing securities when events indicate that fundamental investment values
are being ignored in the marketplace. Fundamental investment value is based on
one or more of the following: assets -- tangible and intangible (examples of the
latter include brand names or licenses), capitalization of earnings, cash flow
or potential earnings growth. A discrepancy between market valuation and
fundamental value often arises due to the presence of unrecognized assets or
business opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary shifts and
legal action (including the initiation of bankruptcy proceedings) are some of
the factors that create these capital appreciation opportunities. If the
securities in which the Fund invests never reach their perceived potential or
the valuation of such securities in the marketplace does not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such securities.
The Fund will invest primarily in common stocks and securities
convertible into or exchangeable for common stock. It is anticipated that the
Fund's investments in these securities will contribute to the Fund's return
primarily through capital appreciation. In addition, the Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated that the
Fund's investments in these securities will also produce capital appreciation
but the current income component of return will be a more significant factor in
their selection. However, the Fund will invest in nonconvertible preferred stock
and debt securities only if the anticipated capital appreciation plus income
from such investments is equivalent to that anticipated from investments in
equity or equity-related securities. The Fund may invest up to 5% of its total
assets in debt securities which are rated below investment grade, commonly known
as "junk bonds". Investments of this type are subject to greater risk of loss of
principal and interest.
It is anticipated that the annual portfolio turnover rate for the Fund
will not exceed 100%. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Value Fund
The investment objective of the Evergreen Value Fund (formerly the
First Union Value Portfolio) is long-term capital appreciation with current
income as a secondary objective. The Fund's objective is a fundamental policy
and may not be changed without shareholder approval. Normally, at least 75% of
the Fund's assets will be invested in equity securities of U.S. companies with
prospects for earnings growth and dividends. There can be no assurance that the
Fund's investment objective will be achieved.
The Fund's investments, in order of priority, consist of:
common and preferred stocks, bonds and convertible preferred
stock of U.S. companies with a minimum market capitalization of $100
million which are listed on the New York or American Stock Exchanges or
traded in over-the-counter markets. The primary consideration is for
those industries and companies with the potential for capital
appreciation; income is a secondary consideration;
ADRs of foreign companies traded on the New York or American
Stock Exchanges or the over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation implications and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions Special Risk Considerations");
convertible bonds rated no lower than BBB by S&P or Baa by
Moody's or, if not rated, determined to be of comparable quality by the
Fund's investment adviser;
money market instruments;
fixed rate notes and bonds and adjustable and variable rate
notes of companies whose common stock the Fund may acquire rated no
lower than BBB by S&P or Baa by Moody's or which, if not rated,
determined to be of comparable quality by the Fund's investment adviser
(up to 5% of total assets);
zero coupon bonds issued or guaranteed by the U.S. government,
its agencies or instrumentalities (up to 5% of total assets);
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
prime commercial paper, including master demand notes rated no
lower than A-1 by S&P or Prime 1 by Moody's.
Bonds rated BBB by S&P or Baa by Moody's may have speculative
characteristics. Changes in economic conditions or other circumstances
are more likely to weaken such bonds' prospects for principal and
interests payments than higher rated bonds. However, like the higher
rated bonds, these securities are considered investment grade.
As of December 31, 1992, 1993 and 1994, approximately 92%, 95% and 97%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen American Retirement Fund
The investment objectives of Evergreen American Retirement Fund in
order of priority are conservation of capital, reasonable income and capital
growth. The Fund offers a structured investment approach designed specifically
for retirees and persons contemplating retirement which may also be appropriate
for the qualified retirement plans of smaller companies. There can be no
assurance that the Fund's investment objectives will be achieved. The Fund's
objective is a fundamental policy and may not be changed without shareholder
approval.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. The balance will be invested in
corporate obligations rated no lower than A by Moody's or S&P.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Foundation Fund
The investment objectives of Evergreen Foundation Fund, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. Government debt obligations,
and short-term debt instruments, such as commercial paper. Additionally, income
from time to time may be generated by the lending of securities. The Fund's
common stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or
not such securities are traded on a national securities exchange. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions. Accordingly, there
can be no assurance that the Fund's investment objectives will be achieved. The
Fund's objective is a fundamental policy and may not be changed without
shareholder approval.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market value of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the value of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities, including issues of the U.S. Treasury, such
as bills, certificates of indebtedness, notes and bonds, and issues of agencies
and instrumentalities established under the authority of an act of Congress.
Some of these securities are supported by the full faith and credit of the U.S.
Government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's or S&P.
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's).
Certain obligations may be entitled to the benefit of standby letters of credit
or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Total Return Fund
The investment objective of Evergreen Total Return Fund is to achieve a
return consisting of current income and capital appreciation in the value of its
shares. The emphasis on current income and capital appreciation will be
relatively equal although, over time, changes in the outlook for market
conditions and the level of interest rates will cause the Fund to vary its
emphasis between these two elements in its search for the optimum return for its
shareholders. The Fund seeks to achieve its investment objective through
investments in common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities. The Fund may invest
up to 20% of its total assets in the securities of foreign issuers either
directly or in the form of ADRs, European Depository Receipts ("EDRs") or other
securities convertible into securities of foreign issuers. The Fund may also
write covered call options. The Fund's investment objective is a fundamental
policy. There can be no assurance that the Fund's investment objective will be
achieved.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders.
The Fund may make investments in securities (other than options)
regardless of whether or not such securities are traded on a national securities
exchange. The value of portfolio securities and their yields, as well as
opportunities to realize net gains from a covered call options writing program,
are expected to fluctuate over time because of varying general economic and
market conditions.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Ordinarily, the Fund anticipates that approximately 75% of its portfolio will
consist of equity securities and the other 25% of debt securities (including
convertible debt securities). As of March 31, 1993 and 1994 and January 31,
1995, approximately 88%, 96% and 91%, respectively, of the Fund's portfolio
consisted of equity securities. The balance of the Fund's portfolio consisted of
debt securities (including convertible debt securities). If, in the judgment of
the Fund's investment adviser, the appreciation potential for equity securities
exceeds the return available from debt securities or government securities,
investments in equity securities could exceed 75% of the Fund's portfolio. Most
equity investments, however, will be income producing. The quality standards for
debt securities include: Obligations of banks having total assets of at least
one billion dollars which are members of the FDIC; commercial paper rated no
lower than P-2 by Moody's or A-2 by S&P; and non-convertible debt securities
rated no lower than Baa by Moody's or BBB by Standard & Poor's. Securities rated
Baa or BBB may have speculative characteristics. See the discussion above with
respect to Evergreen Value Fund.
It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Total Return Fund, Evergreen Growth and
Income Fund, Evergreen American Retirement Fund and Evergreen Foundation Fund on
those exchanges. The portfolio turnover rate for each Fund is set forth in the
tables contained in the section entitled "Financial Highlights". See the
Statement of Additional Information for further information regarding the
brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy, the Funds, except Evergreen
American Retirement Fund, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes.
Evergreen American Retirement Fund may borrow for purposes of leverage. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. The
specific limits applicable to borrowing by each Fund are set forth in the
Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the net assets of the Evergreen
Total Return Fund, Evergreen Growth and Income Fund and Evergreen American
Retirement Fund, 30% of the net assets of the Evergreen Foundation Fund, and 5%
of the value of the total assets of Evergreen Balanced Fund and Evergreen Value
Fund, and must be collateralized by cash or U.S. Government securities that are
maintained at all times in an amount equal to at least 100% of the current
market value of the securities loaned, including accrued interest. While such
securities are on loan, the borrower will pay a Fund any income accruing
thereon, and the Fund may invest the cash collateral in portfolio securities,
thereby increasing its return. Any gain or loss in the market price of the
loaned securities which occurs during the term of the loan would affect a Fund
and its investors. A Fund has the right to call a loan and obtain the securities
loaned at any time on notice of not more than five business days. A Fund may pay
reasonable fees in connection with such loans.
There is the risk that when lending portfolio securities, the
securities may not be available to a Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.
Short Sales. The Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen Balanced Fund, Evergreen American Retirement Fund and Evergreen
Foundation Fund may, as a defensive strategy, make short sales of securities. A
short sale occurs when a seller sells a security and makes delivery to the buyer
by borrowing the security. Short sales of a security are generally made in cases
where the seller expects the market value of the security to decline. To
complete a short sale, the seller must replace the security borrowed by
purchasing it at the market price at the time of replacement, or by delivering
securities from the seller's own position to the lender. In the event the market
value of a security sold short were to increase, the seller would realize a loss
to the extent that the cost of purchasing the security for delivery to the
lender were greater than the proceeds from the short sale. In the event a short
sale is completed by delivery of securities to the lender from the seller's own
position, the seller would forego any gain that would otherwise be realized on
such securities. The Evergreen American Retirement Fund and Evergreen Foundation
Fund may only make short sales "against the box" which means it must own the
securities sold short, or other securities convertible into, or which carry
rights to acquire, such securities.
Illiquid or Restricted Securities. Evergreen Growth and Income Fund, Evergreen
American Retirement Fund, Evergreen Foundation Fund and Evergreen Total Return
Fund may invest up to 15% of their net assets, and Evergreen Balanced Fund and
Evergreen Value Fund may invest up to 10% of their net assets, in illiquid
securities and other securities which are not readily marketable, including
non-negotiable time deposits, certain restricted securities not deemed by the
Trustees to be liquid and repurchase agreements with maturities longer than
seven days. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10 %
limits. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Funds' investment advisers on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in a Fund having more than 15%, or with respect to Evergreen Value Fund 10%, of
its assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. Evergreen Growth and
Income Fund, Evergreen Balanced Fund, Evergreen Value Fund and Evergreen Total
Return Fund may enter into repurchase agreements with member banks of the
Federal Reserve System, including the Custodian or primary dealers in U.S.
Government securities. A repurchase agreement is an arrangement pursuant to
which a buyer purchases a security and simultaneously agrees to resell it to the
vendor at a price that results in an agreed-upon market rate of return which is
effective for the period of time (which is normally one to seven days, but may
be longer) the buyer's money is invested in the security. The arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the holding period. A Fund requires continued maintenance of collateral
with its Custodian in an amount at least equal to the repurchase price
(including accrued interest). In the event a vendor defaults on its repurchase
obligation, a Fund might suffer a loss to the extent that the proceeds from the
sale of the collateral were less than the repurchase price. If the vendor
becomes the subject of bankruptcy proceedings, a Fund might be delayed in
selling the collateral. The Funds' investment advisers will review and
continually monitor the creditworthiness of each institution with which a Fund
enters into a repurchase agreement to evaluate these risks.
Evergreen Balanced Fund and Evergreen Value Fund may borrow money by
entering into a "reverse repurchase agreement" by which it agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers,
and to repurchase them at a mutually agreed upon date and price, for temporary
or emergency purposes. At the time the Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account cash, U.S. government
securities or liquid high grade debt obligations having a value at least 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 the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Each Fund will not enter into reverse repurchase agreements exceeding 5% of the
value of its total assets.
When-Issued and Delayed Delivery Transactions. Evergreen Balanced Fund and
Evergreen Value Fund may purchase securities on a when-issued or delayed
delivery basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more or
less than the market value of the securities on the settlement date. The Funds
may dispose of a commitment prior to settlement if the Funds investment adviser
deems it appropriate to do so. In addition, the Funds may enter into
transactions to sell their purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or losses
upon the sale of such commitments.
Fixed Income Securities - Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Options and Futures. Each of Evergreen Total Return Fund, Evergreen Growth and
Income Fund and Evergreen American Retirement Fund may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Funds
if, afterwards, securities comprising more than 25% of the market value of the
equity securities of Evergreen Growth and Income Fund and Evergreen Total Return
Fund, or 15% of the market value of the equity securities of Evergreen American
Retirement Fund would be subject to call options. A Fund realizes income from
the premium paid to it in exchange for writing the call option. Once it has
written a call option on a portfolio security and until the expiration of such
option, a Fund forgoes the opportunity to profit from increases in the market
price of such security in excess of the exercise price of the call option.
Should the price of the security on which a call has been written decline, a
Fund retains the risk of loss, which would be offset to the extent the Fund has
received premium income. A Fund will only write "covered" call options traded on
U.S. national securities exchanges. An option will be deemed covered when a Fund
either (i) owns the security (or securities convertible into such security) on
which the option has been written in an amount sufficient to satisfy the
obligations arising under the option; or (ii) a Fund's Custodian maintains cash
or high-grade liquid debt securities belonging to the Fund in an amount not less
that the amount needed to satisfy the Fund's obligations with respect to options
written on securities it does not own. A "closing purchase transaction" may be
entered into with respect to a call option written by a Fund for the purpose of
closing its position.
Evergreen Balanced Fund and Evergreen Value Fund may engage in options
and futures transactions. Options and futures transactions are intended to
enable a Fund to manage market, interest rate or exchange rate risk, and the
Funds do not use these transactions for speculation or leverage.
Evergreen Balanced Fund and Evergreen Value Fund may attempt to hedge
all or a portion of their portfolios through the purchase of both put and call
options on their portfolio securities and listed put options on financial
futures contracts for portfolio securities. The Funds may also write covered
call options on their portfolio securities to attempt to increase their current
income. The Funds will maintain their positions in securities, option rights and
segregated cash subject to puts and calls until the options are exercised,
closed or have expired. An option position may be closed out only on an exchange
which provides a secondary market for an option of the same series. The Funds
may purchase listed put options on financial futures contracts. These options
will be used only to protect portfolio securities against decreases in value
resulting from market factors such as an anticipated increase in interest rates.
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
Evergreen Balanced Fund and Evergreen Value Fund may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
Evergreen Balanced Fund and Evergreen Value Fund may also, as stated
previously, purchase futures contracts and options thereon. A futures contract
is a firm commitment by two parties: the seller, who agrees to make delivery of
the specific type of instrument called for in the contract ("going short"), and
the buyer, who agrees to take delivery of the instrument ("going long") at a
certain time in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specific agencies or instrumentalities of the U.S. government. If a Fund would
enter into financial futures contracts directly to hedge its holdings of fixed
income securities, it would enter into contracts to deliver securities at an
undetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. A Fund would "go long" (agree to purchase securities
in the future at a predetermined price) to hedge against a decline in market
interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies or index-based futures contracts in order
to hedge against changes in interest or exchange rates or securities prices. A
futures contract on securities or currencies is an agreement to buy or sell
securities or currencies during a designated month at whatever price exists at
that time. A futures contact on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Funds do not make payment or
deliver securities upon entering into a futures contract. Instead, they put down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in
order to terminate a futures contract and may buy or sell put and call options
for the purpose of closing out their options positions. The Funds ability to
enter into closing transactions depends on the development and maintenance of a
liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. As a result,
there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case the
Funds would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them can result in poorer performance (i.e., the Funds return may
be reduced). The Funds attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contract and
options on financial futures contract as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Funds investment adviser could
be incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements and other
economic factors. Even if the Funds investment adviser correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds ability to establish and close out financial futures contracts and options
on financial futures contract positions depends on this secondary market. If a
Fund is unable to close out its position due to disruptions in the market or
lack of liquidity, the Fund may lose money on the futures contract or option,
and the losses to the Fund could be significant.
Special Risk Considerations
Investment in Foreign Securities. Evergreen Total Return Fund, Evergreen
Balanced Fund and Evergreen Value Fund may invest in foreign securities.
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. For example,
a change in the value of any foreign currency relative to the U.S. dollar will
result in a corresponding change in the U.S. dollar value of securities
denominated in that currency. Accordingly, a change in the value of any foreign
currency relative to the U.S. dollar will result in a corresponding change in
the U.S. dollar value of the assets of the Fund denominated or traded in that
currency. If the value of a particular foreign currency falls relative to the
U.S. dollar, the U.S. dollar value of the assets of a Fund denominated in such
currency will also fall. The performance of a Fund will be measured in U.S.
dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by each Fund's investment adviser before making any of these types of
investments.
ADRs and EDRs and other securities convertible into securities of
foreign issuers may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally ADRs, in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by Evergreen Total Return
Fund, Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund as investment adviser. Evergreen Asset succeeded on
June 30, 1994 to the advisory business of the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), one of the ten largest bank holding companies in
the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Funds. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to Evergreen Balanced Fund and Evergreen Value Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds) . First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Total Return Fund, Evergreen Growth
and Income Fund, Evergreen American Retirement Fund and Evergreen Foundation
Fund, Evergreen Asset manages each Fund's investments, provides various
administrative services and supervises each Fund's daily business affairs,
subject to the authority of the Trustees. Evergreen Asset is entitled to receive
a from each of Evergreen Total Return Fund and Evergreen Growth and Income Fund
fee equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. Evergreen Asset is entitled to receive
from Evergreen Foundation Fund a fee equal to .875 of 1% of average daily net
assets on an annual basis on the first $750 million in assets, .75 of 1% of
average daily net assets on an annual basis on the next $250 million in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion, and from Evergreen American Retirement Fund a fee equal to .75 of 1% of
average daily net assets on an annual basis on the first $1 billion in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion. The fee paid by Evergreen Total Return Fund and Evergreen Growth and
Income Fund is higher than the rate paid by most other investment companies. The
total expenses of each Fund for the fiscal year ended December 31, 1994,
expressed as a percentage of average daily net assets on an annual basis are set
forth in the section entitled "Financial Highlights".
CMG manages investments and supervises the daily business affairs of
Evergreen Balanced Fund and Evergreen Value Fund and, as compensation therefor,
is entitled to receive an annual fee equal to .50 of 1% of average daily net
assets of each Fund. The total annualized operating expenses of Evergreen
Balanced Fund and Evergreen Value Fund for their most recent fiscal year ended
December 31, 1994, are set forth in the section entitled "Financial Highlights".
Evergreen Asset serves as administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee based on the average daily net
assets of these Funds at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .050%
of the first $7 billion; .035% on the next $3 billion; .030% on the next $5
billion; .020% on the next $10 billion; .015% on the next $5 billion; and .010%
on assets in excess of $30 billion. Furman Selz Incorporated, the parent of
Evergreen Funds Distributor, Inc., distributor for the Evergreen group of mutual
funds, serves as sub-administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee from each Fund calculated on the
average daily net assets of each Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Total Return Fund is Nola Maddox
Falcone, C.F.A., who is President and Co-Chief Executive Officer of Evergreen
Asset. Ms. Falcone has served as the principal manager of Evergreen Total Return
Fund since 1985. The portfolio manager for Evergreen Foundation Fund is Stephen
A. Lieber, who is Chairman and Co-Chief Executive Officer of the Evergreen
Asset. Mr. Lieber has served as such Fund's principal manager since its
inception. The portfolio manager for Evergreen Growth and Income Fund is Edmund
H. Nicklin, Jr. C.F.A. Mr. Nicklin has served as the Fund's principal manager
since its inception. The portfolio manager for Evergreen American Retirement
Fund is Irene D. O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal
manager since its inception. Each of the aforementioned individuals has been
associated with the Evergreen Asset and its predecessor since prior to 1989.
The portfolio manager for Evergreen Balanced Fund since its inception
in January 1991 is R. Dean Hawes, who is a Vice President of FUNB and is the
Director of Employee Benefit Portfolio Management. Mr. Hawes joined FUNB in 1981
after spending five years with Merrill Lynch, Pierce, Fenner, & Smith and
Townsend Investments. William T. Davis, Jr., the portfolio manager of Evergreen
Value Fund since March, 1991, is a Vice President of FUNB and has been with
First Union since 1986. Prior to that, Mr. Davis served as a securities analyst
for Seibels Bruce (Insurance) Group.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen American Retirement Fund and Evergreen Foundation Fund. Lieber &
Company will be reimbursed by Evergreen Asset in connection with the rendering
of services on the basis of the direct and indirect costs of performing such
services. There is no additional charge to Evergreen Total Return Fund,
Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund for the services provided by Lieber & Company. The
address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible Investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
market value. Non-dollar denominated securities will be valued as of the close
of the Exchange at the closing price of such securities in their principal
trading market.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from an investor's
account to reimburse the Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Funds are an available investment. For
information about the requirements to make such investments, including copies of
the necessary application forms, please call the telephone number set forth on
the cover page of this Prospectus. A Fund cannot accept investments specifying a
certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
Funds. Although not currently anticipated, each Fund reserves the right to
suspend the offer of shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the enclosed Application and choose how the redemption proceeds
are to be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in a Fund
at a designated commercial bank. State Street currently deducts a $5 wire charge
from all redemption proceeds wired. This charge is subject to change without
notice. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Funds will employ reasonable procedures to verify that telephone requests
are genuine. These procedures include requiring some form of personal
identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Internal
Revenue Code of 1986, as amended (the "Code"). Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in December of the previous year. Income dividends and capital
gain distributions are automatically reinvested in additional shares of the Fund
making the distribution at the net asset value per share at the close of
business on the record date, unless the shareholder has made a written request
for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund for their most recent fiscal year is set forth below. A
similar discussion relating to Evergreen Balanced Fund and Evergreen Value Fund
is contained in the annual report of each Fund for the fiscal year ended
December 31, 1994.
Evergreen Growth and Income Fund
The total return of the Class Y no-load shares of the Evergreen Growth
and Income Fund was +1.69% for the year ended December 31, 1994. This return
compared favorably with the +1.31% return of the Standard and Poor's 500
Reinvested Index (the "S&P 500 Index") and the -0.94% return from the Lipper
Growth and Income Fund Average. This performance was achieved through the
implementation of the "value timing" strategy which focuses on undervalued
securities. At year-end 1994, the majority of the portfolio was comprised of
out-of-favor growth companies, restructured companies and other companies which
the Fund's investment adviser believes are substantially undervalued.
[CHART]
While the domestic economy's rate of growth accelerated dramatically in
1994, the Federal Reserve's more stringent monetary policy resulted in a less
hospitable environment for financial assets. The Fund performed well relative to
its competition and the S&P 500 Index in 1994, but the Fed's tightening of
monetary policy kept the absolute return low, in keeping with the depressing
influence on financial assets generally. The principal contributors to the
Fund's positive performance during 1994 were the following industries: (1)
business equipment and services which facilitated the productivity enhancing
efforts of their customers; (2) chemical issues which benefited from the robust
economic growth and previous restructuring efforts that lowered cost structures;
and (3) shares of healthcare companies which continued their rebound from the
market's adverse reaction to the perceived impact of the healthcare program
proposed by the Clinton Administration in 1993. The industry groups which had
the largest negative impact on the Fund's performance were the following: (i)
banks and thrifts, insurance and utilities, all of which suffered from the
Federal Reserve's more stringent monetary policy; (ii) retail which suffered
from lack of pricing flexibility and excess capacity; and (iii) energy which was
negatively impacted by lower prices for natural gas and declining refining
margins.
Evergreen American Retirement Fund
The total return of the Class Y no-load shares of the Evergreen
American Retirement Fund for the fiscal year ended December 31, 1994, was
- -2.86%. This performance lagged the Wilshire 5000 Index which returned -.06% and
exceeded the Lehman General Bond Mutual Fund Index which returned -3.51% for the
year. The Fund concentrated the equity portion of its portfolio in high
dividend-paying common stocks, convertible bonds and convertible preferreds.
Fixed-income issues were represented by investments in U.S. Treasury and agency
obligations and high quality corporate bonds and notes.
Interest rates rose through much of 1994 as the Federal Reserve moved
to slow the rapid and potentially inflationary pace of U.S. economic growth.
Over the course of the year, the Federal Fund's rate was increased from 3.0% to
5.5%, and market forces lifted interest rates on 30 year U.S. Treasury bonds
from 6.35% to 7.88%. This rising interest rate environment was negative for the
bond market and produced mixed results for the stock market. Because of the
Fund's income-oriented style of investing, this period of rising interest rates
negatively affected performance.
The industry groups which had the largest positive impact on the Fund's
performance included the chemicals and metals industries which benefited from
rising demand and product prices, and bank stocks which rose in response to
stronger loan growth and reduced loan loss provisions. The Fund was negatively
impacted by its holdings in the automotive industry and related suppliers, and
utility stocks which declined in response to higher interest rates. The Fund's
exposure to utilities was reduced in early 1994 to a group of special situation
companies. But even the improving fundamentals of these companies could not
overcome the impact of rising rates. Despite strong earnings for the auto
industry and suppliers, these stocks declined as the market anticipated slower
consumer spending in response to higher rates.
[CHART]
The Fund's practice has been to provide a stable quarterly income
dividend. During the past fiscal year, the Fund distributed a dividend of $0.15
per quarter. These distributions were funded entirely from net investment
income. None represented a return of capital. To maintain the dividend rate the
Fund purchased issues which had dividend increases, and frequently repositioned
the portfolio in order to assure participation in large dividends (particularly
from utility stocks or special dividends announced by other types of companies).
The repositioning of the portfolio resulted in higher brokerage commissions.
As noted above, the Fund's investment objectives in order of priority
are conservation of capital, reasonable income and capital growth. To the extent
that the Fund sought to maintain a stable dividend during the past fiscal year
and therefore emphasized current income over capital growth, the Fund's overall
return may have been reduced. Beginning in the first quarter of 1995, the Fund
changed its dividend strategy. The Fund's income dividend distribution will move
toward a fluctuating dividend and away from the stable dividend pattern of the
past.
Evergreen Foundation Fund.
The total return of the Class Y no-load shares of the Evergreen
Foundation Fund for the almost five years since inception on January 2, 1990 to
December 31, 1994 was +99.57%, which calculated to an average annual compounded
return of +14.83%. This compared favorably with the return of the Standard &
Poor's 500 Reinvested Index (+51.45%) and the Lipper Balanced Fund Average
(+44.03%) for the same time period. For the fiscal year ended 1994, the Fund
produced a total return of -1.12% versus returns of +1.31% for the Standard &
Poor's 500 Reinvested Index and -2.52% for the Lipper Balanced Fund Average.
Asset allocation was a primary determinant of performance. Consistent
with the Fund's investment objectives of reasonable income, conservation of
capital and capital appreciation, Evergreen Asset sought to strategically
position the Fund to maximize opportunities in each asset class. The average
allocation during 1994 was 62% equities, 28% fixed-income and 10% short-term
cash equivalents. The equity portion of the portfolio had a return of +4.91% for
1994. The fixed-income segment of the portfolio, whose primary focus is income
and preservation of capital, was comprised on average of three-quarters
long-term U.S. government obligations and one-quarter short-term cash
equivalents. It generated a return of -11.06%, which was in line with its
benchmarks, when assessed in terms of credit quality, liquidity and overall
weighted maturity.
The equity segment of the portfolio was largely responsible for the
capital appreciation during 1994. Stock selection focused on issues believed to
be conservatively valued and financially strong. Concentration on health care
issues provided relative outperformance as these issues benefited from renewed
confidence in the growth of pharmaceutical and medical services industries. A
secondary focus on technological issues (semi-conductors and electronic
components) also provided excellent relative performance, as these sectors
benefited from a resurgence in the U.S. economy. The portfolio was negatively
impacted by its investments in real estate companies, utilities and banks.
Evergreen Total Return Fund.
Steady income flow has been an important goal since the inception of
the Fund. The Fund continued its annual $1.08 per share income dividend. The
dividend was maintained for the seventh successive year. The portfolio of the
Evergreen Total Return Fund, although primarily equities and convertibles, has a
high level of interest rate sensitivity. Since the Fund seeks to pay a
substantial dividend, Evergreen Asset looked toward the utility sector,
financial issues, real estate investment trusts, convertible preferreds and
convertible debentures to provide high yields. The sharp downward swing in the
1994 bond market had a deleterious effect on the interest sensitive sectors of
the equity and convertible markets, particularly impacting utilities, financial
and convertible issues. During the period from March 31, 1994 through January
31, 1995, the Dow Jones Utility Average was down -6.23%, the New York Stock
Exchange Financial Index was down -3.00%, the Merrill Lynch Convertible Index
was down -4.85%, and the Wilshire Real Estate Securities Index was down -3.80%.
The performance of the Class Y no-load shares of the Fund for the same period
was up +1.86%. This compares also with the performance of the Wilshire 5000 of
+6.04% and +3.01% for the Lipper Equity Income Average. One of the best groups
in the portfolio was the health sector which rebounded when the Clinton Health
Care Plan ran into trouble. Restructured companies as well as selected
cyclicals, such as banks and thrift issues and chemicals and energy issues, also
helped the portfolio. Five bank and thrift mergers produced gains.
During the year, the portfolio was restructured to reduce the utility
sector especially electric utilities. Evergreen Asset decided to reduce
dependence on this sector as it faces deregulation and resulting competitive
pressures. Currently, the Fund's focus is on special situations resulting from
such events as rate relief or corporate changes. Evergreen Asset also switched
into international issues in order to diversify risk across country lines and to
reduce the portfolio's sensitivity to changes in U.S. interest rates. Toward the
end of the year, Evergreen Asset added to the portfolio's holdings in the retail
sector as it saw a number of these companies at attractive valuation levels.
Many of these issues were in the process of restructuring, thereby providing the
possibility of improved margins in the near future.
The Fund's dividend was funded entirely from net investment income. It
did not represent a return of capital. To maintain the dividend rate the Fund
purchased issues which had dividend increases, and frequently repositioned the
portfolio in order to assure participation in large dividends, particularly from
utility stocks or special dividends announced by other types of companies. The
repositioning of the portfolio resulted in higher brokerage commissions. As
noted above, the Fund's investment objective is to achieve a return consisting
of current income and capital appreciation. To the extent that the Fund sought
to maintain a stable dividend during the past fiscal year and therefore
emphasized current income over capital appreciation, the Fund's overall return
may have been reduced.
On January 3, 1995, the Fund introduced a multiple class distribution
structure. The Fund's total return for the period 1/3/95 to 1/31/95 for the A,
B, C and Y Class of Shares was -3.45% (reflects maximum front end sales charge
of 4.75%), -3.53% (reflects maximum contingent deferred sales charge of 5%),
- -0.41% (reflects 1% contingent deferred sales charge within first year of
purchase), and 1.47% (no-load), respectively.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Total Return Fund is a Massachusetts business trust
organized in 1986, and was originally organized as Maryland corporation in 1978.
Evergreen Growth and Income Fund is a Massachusetts business trust organized in
1986. The Evergreen American Retirement Fund is a separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust organized in
1987. Evergreen Foundation Fund is a separate series of the Evergreen Foundation
Trust, a Massachusetts business trust organized in 1989. Evergreen Balanced Fund
and Evergreen Value Fund are separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Balanced Fund and Evergreen Value Fund and which
provides certain sub-administrative services to Evergreen Asset in connection
with its role as investment adviser to Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund, including providing personnel to serve as officers of the
Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) all shareholders of record in one or more of the
Funds for which Evergreen Asset serves as investment adviser as of December 30,
1994, (ii) certain institutional investors and (iii) investment advisory clients
of CMG, Evergreen Asset or their affiliates. The dividends payable with respect
to Class A, Class B and Class C shares will be less than those payable with
respect to Class Y shares due to the distribution and distribution and
shareholder servicing related expenses borne by Class A, Class B and Class C
shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND, EVERGREEN TOTAL RETURN FUND
Capital Management Group of First Union National Bank, 210 South College
Street, Charlotte, North Carolina, 28228
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536123
PROSPECTUS July 7, 1995
EVERGREEN(SM) SPECIALTY GROWTH AND INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN UTILITY FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN SMALL CAP EQUITY INCOME FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Specialty Growth and Income Funds (the "Funds") are
designed to provide investors with a selection of investment alternatives
which seek to provide current income, capital appreciation or after-tax
"total return". This Prospectus provides information regarding the Class A,
Class B and Class C shares offered by the Funds. Each Fund is, or is a
series of, an open-end, diversified, management investment company. This
Prospectus sets forth concise information about the Funds that a
prospective investor should know before investing. The address of the Funds
is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 807-2940. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 8
Investment Practices and Restrictions 10
MANAGEMENT OF THE FUNDS
Investment Advisers 15
Sub-Adviser 16
Distribution Plans and Agreements 17
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 18
How to Redeem Shares 20
Exchange Privilege 21
Shareholder Services 22
Effect of Banking Laws 23
OTHER INFORMATION
Dividends, Distributions and Taxes 23
Management's Discussion of Fund Performance 24
General Information 25
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN SMALL CAP EQUITY INCOME FUND is Evergreen Asset Management Corp.
("Evergreen Asset") which, with its predecessors, has served as an investment
adviser to the Evergreen Funds since 1971. Evergreen Asset is a wholly-owned
subsidiary of First Union National Bank of North Carolina ("FUNB"), which in
turn is a subsidiary of First Union Corporation, one of the ten largest bank
holding companies in the United States. The Capital Management Group of FUNB
("CMG") serves as investment adviser to EVERGREEN UTILITY FUND.
EVERGREEN UTILITY FUND (formerly First Union Utility Portfolio) seeks
high current income and moderate capital appreciation.
EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.
EVERGREEN SMALL CAP EQUITY INCOME FUND attempts to maximize the "total
return" on its portfolio of investments. The Fund invests in common and
preferred stocks, securities convertible into or exchangeable for common stocks
and fixed income securities. In attempting to achieve its objective, the Fund
invests primarily in companies with total market capitalization of less than
$500 million.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C Shares of the
Fund. For further information see "Purchase and Redemption of Fund Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the 1% during the
original purchase price or redemption second year, 3% during the third and fourth first year and
proceeds, whichever is lower) years, 2% during the fifth year, 1% during 0% thereafter
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B and C, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares and Class C Shares assume deduction at the time of
redemption (if applicable) of the maximum contingent deferred sales charge
applicable for that time period, and (iii) the expenses for Class B Shares
reflects the conversion to Class A Shares eight years after purchase (years
eight through ten, therefore, reflect Class A expenses).
EVERGREEN UTILITY FUND (A)
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class B
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50%
After 1 Year $ 57 $ 68 $ 28 $ 18
Administrative Fees .06% .06% .06%
After 3 Years $ 78 $ 85 $ 55 $ 55
12b-1 Fees* .25% .75% .75%
After 5 Years $ 100 $ 114 $ 94 $ 94
Shareholder Service Fees -- .25% .25%
After 10 Years $ 163 $ 176 $ 205 $ 176
Other Expenses .18% .18% .18%
Total .99% 1.74% 1.74%
<CAPTION>
Class C
<S> <C> <C>
After 1 Year $ 18
Administrative Fees
After 3 Years $ 55
12b-1 Fees*
After 5 Years $ 94
Shareholder Service Fees
After 10 Years $ 205
Other Expenses
Total
<CAPTION>
Advisory Fees
</TABLE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class B
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .875% .875% .875%
After 1 Year $ 64 $ 75 $ 35 $ 25
12b-1 Fees* .250% 1.000% 1.000%
After 3 Years $ 100 $ 108 $ 78 $ 78
Other Expenses .625% .625% .625%
After 5 Years $ 138 $ 153 $ 133 $ 133
(after reimbursement)**
After 10 Years $ 244 $ 257 $ 284 $ 257
Total 1.750% 2.500% 2.500%
<CAPTION>
Class C
<S> <C> <C>
After 1 Year $ 25
12b-1 Fees*
After 3 Years $ 78
Other Expenses
After 5 Years $ 133
(after reimbursement)**
After 10 Years $ 284
Total
<CAPTION>
Advisory Fees
</TABLE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class B
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00%
After 1 Year $ 64 $ 75 $ 35 $ 25
12b-1 Fees* .25% 1.00% 1.00%
After 3 Years $ 100 $ 108 $ 78 $ 78
Other Expenses
After 5 Years $ 138 $ 153 $ 133 $ 133
(after reimbursement)** .50% .50% .50%
After 10 Years $ 244 $ 257 $ 284 $ 257
Total 1.75% 2.50% 2.50%
<CAPTION>
Class C
<S> <C> <C>
After 1 Year $ 25
12b-1 Fees*
After 3 Years $ 78
Other Expenses
After 5 Years $ 133
(after reimbursement)**
After 10 Years $ 284
Total
<CAPTION>
Advisory Fees
</TABLE>
3
<PAGE>
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the forseeable future, the Class A Shares 12b-1 Fees will be limited to .25
of 1% of average net assets. For Class B and Class C Shares of Evergreen Small
Cap Equity Income Fund and Evergreen Tax Strategic Foundation Fund, a portion of
the 12b-1 Fees equivalent to .25 of 1% of average net assets will be shareholder
servicing-related. Distribution-related 12b-1 Fees will be limited to .75 of 1%
of average net assets as permitted under the rules of the National Association
of Securities Dealers, Inc.
**Reflects agreements by Evergreen Asset to limit aggregate operating expenses
(including the Advisory Fees, but excluding interest, taxes, brokerage
commissions, Rule 12b-1 distribution fees and shareholder servicing fees and
extraordinary expenses) of Evergreen Small Cap Equity Income Fund and Evergreen
Tax Strategic Foundation Fund to 1.50% of average net assets until net assets
reach $15 million. Absent such agreements, the estimated annual operating
expenses for each Fund would be 2.75% for Class A and 3.50% for Class B and C
Shares.
(a) Estimated annual operating expenses reflect the combination of First Union
Utility Portfolio and ABT Utility Income Fund.
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the year ended December 31, 1994. Such amounts have been
restated to reflect current fee arrangements and in the case of Funds that did
not offer all of the above-referenced Classes of shares during such periods, the
amounts set forth in the tables are based on the expenses incurred by the
Classes which were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Funds see "Management
of the Funds". As a result of asset-based sales charges, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities Dealers,
Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN UTILITY FUND has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, for EVERGREEN TAX STRATEGIC
FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's independent
auditors and for EVERGREEN SMALL CAP EQUITY INCOME FUND has been audited by
Ernst & Young LLP, the Fund's independent auditors. A report of KPMG Peat
Marwick LLP, Price Waterhouse LLP, or Ernst & Young LLP, as the case may be, on
the audited information with respect to each Fund is incorporated by reference
in the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
No financial highlights are shown for Class A, B or C Shares of Evergreen
Tax Strategic Foundation Fund and Evergreen Small Cap Equity Income Fund since
these classes did not have any operations prior to December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN UTILITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994* 1994* 1994* 1994*
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $10.00 $10.00 $9.33 $9.51
Income (loss) from investment operations:
Net investment income......................................... .45 .39 .12 .37
Net realized and unrealized loss on investments............... (1.01) (1.01) (.33) (.50)
Total from investment operations............................ (.56) (.62) (.21) (.13)
Less distributions to shareholders from:
Net investment income......................................... (.44) (.38) (.11) (.37)
In excess of net investment income............................ -- -- -- (.01)(b)
Total distributions......................................... (.44) (.38) (.11) (.38)
Net asset value, end of period................................ $9.00 $9.00 $9.01 $9.00
TOTAL RETURN+................................................. (5.6%) (6.2%) (2.2%) (1.6%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................... $4,190 $28,792 $128 $5,201
Ratios to average net assets:
Expenses (a)................................................ .53%++ 1.27%++ 1.94%++ .40%++
Net investment income (a)................................... 5.07%++ 4.19%++ 3.96%++ 4.93%++
Portfolio turnover rate....................................... 23% 23% 23% 23%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994 1994 1994 1994
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
<S> <C> <C> <C> <C>
1994 1994 1994 1994
Expenses............................ 1.43% 2.11% 2.78% 1.24%
Net investment income............... 4.17% 3.35% 3.12% 4.09%
</TABLE>
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
5
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 2, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $ 10.31 $ 10.00
Income from investment operations:
Net investment income............................................................... .27 .05
Net realized and unrealized gain on investments..................................... .08 .31
Total from investment operations.................................................. .35 .36
Less distributions to shareholders from:
Net investment income............................................................... (.27) (.05)
Net realized gains.................................................................. (.12) --
Total distributions............................................................... (.39) (.05)
Net asset value, end of period...................................................... $ 10.27 $ 10.31
TOTAL RETURN+....................................................................... 3.4% 3.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $10,575 $5,424
Ratios to average net assets:
Expenses (a)...................................................................... 1.49% 0%++
Net investment income (a)......................................................... 2.87% 3.65%++
Portfolio turnover rate............................................................. 245% 25%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share and for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
NOVEMBER 2, 1993
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 2.41% 3.10%
Net investment income..................................... 1.95% .54%
</TABLE>
6
<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
OCTOBER 1, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $ 10.15 $ 10.00
Income (loss) from investment operations:
Net investment income............................................................... .34 .10
Net realized and unrealized gain (loss) on investments.............................. (.41) .15
Total from investment operations.................................................. (.07) .25
Less distributions to shareholders from:
Net investment income............................................................... (.33) (.10)
Net realized gains.................................................................. (.05) --
Total distributions............................................................. (.38) (.10)
Net asset value, end of period...................................................... $ 9.70 $ 10.15
TOTAL RETURN+....................................................................... (.7%) 2.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $3,613 $2,236
Ratios to average net assets:
Expenses (a)...................................................................... 1.48% 0%++
Net investment income (a)......................................................... 3.72% 4.07%++
Portfolio turnover rate............................................................. 9% 15%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 4.68% 4.39%
Net investment income (loss).............................. .53% (.33%)
</TABLE>
7
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Small Cap Equity Income Fund
The investment objective of Evergreen Small Cap Equity Income Fund is
to achieve a return consisting of current income and capital appreciation in the
value of its shares. The emphasis on current income and capital appreciation
will be relatively equal although, over time, changes in market conditions and
the level of interest rates may cause the Fund to vary its emphasis between
these two elements in its search for the optimum return for its shareholders.
The Fund seeks to achieve its investment objective through investments in common
stocks, preferred stocks, securities convertible into or exchangeable for common
stocks and fixed income securities. Under normal conditions, the Fund will
invest at least 65% of its total assets in equity securities (including
convertible debt securities) of companies that, at the time of purchase, have
"total market capitalization" -- present market value per share multiplied by
the total number of shares outstanding -- of less than $500 million. The Fund's
investment objective is a fundamental policy.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved. The Fund may invest up to 35% of
its total assets in equity securities of companies that at the time of purchase
have a total market capitalization of $500 million or more, and in excess of
that percentage during temporary defensive periods.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be subject
to the discretion of the Fund's investment adviser. Ordinarily, the Fund
anticipates that most of its portfolio will consist of equity securities and
convertible debt securities. A significant portion of the equity investments,
however, will be income producing. If in the judgment of the Fund's investment
adviser a defensive position is appropriate, the Fund may take a defensive
position and invest without limit in debt securities or government securities or
hold its assets in cash or cash equivalents. The quality standards for debt
securities include: Obligations of banks and commercial paper rated no lower
than P-2 by Moody's Investor's Service ("Moody's"), A-2 by Standard and Poor's
Ratings Group ("S&P") or having a comparable rating from another nationally
recognized statistical rating organization ("SRO"); and non-convertible debt
securities rated no lower than Baa by Moody's or BBB by S&P.
Securities rated Baa or BBB may have speculative characteristics.
The Fund may invest in real estate investment trusts ("Reits"). Equity
Reits invest directly in real property while mortgage Reits invest in mortgages
on real property. The Fund does not intend to invest in Reits that are primarily
mortgage Reits. Equity Reits usually provide a high current yield plus the
opportunity of long-term price appreciation of real estate values. Reits may be
subject to certain risks associated with the direct ownership of real estate.
See "Investment Practices and Restrictions - Special Risk Considerations",
below.
It is anticipated that the annual portfolio turnover rate for the Fund
will not generally exceed 100%. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", and "Special Risk Considerations", below.
Evergreen Tax Strategic Foundation Fund
The investment objective of Evergreen Tax Strategic Foundation Fund is
to maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from Federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
""Investment Practices and Restrictions - "Municipal Securities and Taxable
Investments). There can be no assurance that the Funds investment objective
will be achieved. The objective is fundamental and may not be changed without
shareholder approval.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities).
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market value of the
Municipal Securities in the Fund's portfolio can be expected to vary inversely
to changes in prevailing interest rates. The Fund may at times emphasize the
generation of interest income by investing in high-yielding debt securities,
with short, medium or long-term maturities. Investment in medium (i.e., with
maturities from five to ten years) to long-term (i.e., with maturities over ten
years) debt securities may also be made with a view to realizing capital
appreciation when the Fund's investment adviser believes that interest rates on
such investments may decline, thereby increasing their market value.
In general, the Fund will invest in Municipal Securities only if they
are determined to be of high or upper medium quality. These include bonds rated
BBB or higher by S&P or Baa by Moody's or another SRO. For a description of such
ratings see the Statement of Additional Information. The Fund may purchase
Municipal Securities which are unrated at the time of purchase, if such
securities are determined by the Fund's investment adviser to be of comparable
quality. Certain Municipal Securities (primarily variable rate demand notes) may
be entitled to the benefit of standby letters of credit or similar commitments
issued by banks and, in such instances, the Fund's investment adviser will take
into account the obligation of the bank in assessing the quality of such
security. Medium grade bonds are more susceptible to adverse economic conditions
or changing circumstances than higher grade bonds.
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 the 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, 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.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Utility Fund
The investment objective of Evergreen Utility Fund is to achieve a
return consisting of high current income and moderate capital appreciation. The
Fund invests primarily in a diversified portfolio of equity and debt securities
of utility companies that produce, transmit or distribute gas or electrical
energy, as well as those companies which provide communications facilities, such
as telephone and telegraph companies. As a matter of investment policy, the Fund
will invest at least 65% of the value of its total assets in utility companies
that derive 50% of their revenues from utilities or assets relating to utility
industries. In addition, the Fund may invest up to 35% of its assets in common
stock of non-utility companies. There can be no assurance that the Fund's
investment objective will be achieved.
<PAGE>
The Fund may invest in:
common and preferred stocks, bonds and convertible preferred
stocks of utility companies selected by the Fund's investment adviser
on the basis of traditional research techniques, including assessment
of earnings and dividend growth prospects and of the risk and
volatility of the individual company's industry. However, other
factors, such as product position, market share or profitability may
also be considered by the Fund's investment adviser. The Fund will only
invest its assets in debt securities rated Baa or higher by Moody's or
BBB or higher by S&P or which, if unrated, are considered to be of
comparable quality by the Fund's investment adviser;
securities which are either issued or guaranteed by the U.S.
government, its agencies or instrumentalities. These securities include
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government
agencies or instrumentaltiies such as the Farm Credit System, including
the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association, Government National Mortgage Association, Student Loan
Marketing Association, Tennessee Valley Authority, Export-Import Bank
of the United State, Commodity Credit Corporation, Federal Financing
Bank and National Credit Union Administration. Some of these securities
are supported by the full faith and credit of the U.S. government, and
others are supported only by the full faith and credit of the agency or
instrumentality;
commercial paper, including master demand notes;
American Depositary Receipts ("ADRs") of foreign companies
traded on the New York or American Stock Exchanges or the
over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in other obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation considerations and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions" - "Other Investment Policies" and "Foreign Investments".)
The Fund will not invest more than 10% of its assets in foreign
securities;
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Mortagage Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
securities of other investment companies.
Bonds rated Baa by Moody's or BBB by S&P may have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken such bonds' prospects for principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered investment grade.
As of December 31, 1994 approximately 88% of the Fund's portfolio
consisted of equity securities. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Small Cap Equity Income Fund and
Evergreen Tax Strategic Foundation Fund on those exchanges. See the Statement of
Additional Information for further information regarding the brokerage
allocation practices of these Funds.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except from banks as a temporary measure to facilitate redemption requests or
for extraordinary or emergency purposes. The proceeds from borrowings may be
used to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio securities. The specific limits applicable to
borrowing by each Fund are set forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the total assets of the Evergreen
Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation Fund, and
15% of the value of the total assets of Evergreen Utility Fund, and must be
collateralized by cash or U.S. Government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
securities loaned, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby increasing its
return. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
has the right to call a loan and obtain the securities loaned at any time on
notice of not more than five business days. A Fund may pay reasonable fees in
connection with such loans.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities files for bankruptcy or becomes insolvent,
dispostion of the securities may be delayed pending court action.
Illiquid or Restricted Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities and other securities which are not readily
marketable, except that Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund may only invest up to 10% of their assets in
repurchase agreements with maturities longer than seven days. Illiquid
securities include certain restricted securities not determined by the Trustees
to be liquid, non-negotiable time deposits and repurchase agreements providing
for settlement in more than seven days after notice. Securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds' investment
advisers to be illiquid or not readily marketable and, therefore, are not
subject to the aforementioned 15% limit. The inability of a Fund to dispose of
illiquid or not readily marketable investments readily or at a reasonable price
could impair the Fund's ability to raise cash for redemptions or other purposes.
The liquidity of securities purchased by a Fund which are eligible for resale
pursuant to Rule 144A will be monitored by each Fund's investment adviser on an
ongoing basis, subject to the oversight of the Trustees. In the event that such
a security is deemed to be no longer liquid, a Fund's holdings will be reviewed
to determine what action, if any, is required to ensure that the retention of
such security does not result in a Fund having more than 15% of its assets
invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. The Funds may enter
into repurchase agreements may be entered into with member banks of the Federal
Reserve System, including the Custodian or primary dealers in U.S. Government
securities. A repurchase agreement is an arrangement pursuant to which a buyer
purchases a security and simultaneously agrees to resell it to the vendor at a
price that results in an agreed-upon market rate of return which is effective
for the period of time (which is normally one to seven days, but may be longer)
the buyer's money is invested in the security. The arrangement results in a
fixed rate of return that is not subject to market fluctuations during the
holding period. A Fund requires continued maintenance of collateral with its
Custodian in an amount at least equal to the repurchase price (including accrued
interest). In the event a vendor defaults on its repurchase obligation, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If the vendor becomes the
subject of bankruptcy proceedings, a Fund might be delayed in selling the
collateral. The Funds' investment advisers will review and continually monitor
the creditworthiness of each institution with which a Fund enters into a
repurchase agreement to evaluate these risks.
The Funds may borrow money by entering into a "reverse repurchase
agreement" by which a Fund may agree to sell portfolio securities to financial
institutions such as banks and broker-dealers, and to repurchase them at a
mutually agreed upon date and price, for temporary or emergency purposes. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, U.S. government securities or liquid high
grade debt obligations having a value at least 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
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. A Fund will not enter into
reverse repurchase agreements exceeding 5% of the value of its total assets.
Futures and Related Options. Evergreen Small Cap Equity Income Fund and
Evergreen Utility Fund may, to a limited extent, enter into financial futures
contracts, including futures contracts based on securities indices, purchase and
sell options on such futures contracts, and engage in related closing
transactions to the extent available to hedge all or a portion of its portfolio,
or as an efficient means of regulating its exposure to the equity markets. The
Funds will only use futures instruments for hedging, not speculative, purposes.
The Funds may not enter into futures contracts or related options if,
immediately thereafter, more than 30% of a Fund's total assets would be hedged
thereby or the amounts committed to margin and premiums paid for unexpired
options would exceed 5% of a Fund's total assets. These transactions include
brokerage costs and require each Fund to segregate liquid high grade debt or
cash to cover contracts which would require them to purchase securities. The
Funds may lose the expected benefit of the transactions if securities prices or
interest rates move in an unanticipated manner. In addition, if a Fund purchases
futures contract on indices of securities, their value may not fluctuate in
proportion to the value of the Fund's securities, limiting its ability to hedge
effectively.
While the Evergreen Small Cap Equity Income Fund and Evergreen Utility
Fund will enter into futures contracts only if there appears to be a liquid
secondary market for such contracts, there can be no assurance that the Funds
will be able to close out positions in a specific contract at a specific time.
Each Fund will not enter into a particular index-based futures contract unless
the Fund's investment adviser determines that a correlation exists between price
movements in the index-based futures contract and in securities in a Fund's
portfolio. Such correlation is not likely to be perfect, since each Fund's
portfolio is not likely to contain the same securities used in the index.
Evergreen Small Cap Equity Income Fund and Evergreen Utility Fund may
attempt to earn income from selling (writing) call options on futures contracts
in instances where each Fund's investment adviser believes that the long-term
investments held by the Fund which are the subjects of such contracts will
remain stable or experience a decline with respect to the U.S. dollar during the
term of the option. By selling such an option, a Fund forgoes all or part of the
appreciation potential involved in holding investments that are the subject of
the futures contract on which an option was written and may be forced to make
untimely liquidations of its investments to meet its obligations under the
option contract.
Options And Futures. Evergreen Utility Fund may deal in put and call options. A
call option gives the purchaser the right to buy, and the writer the obligation
to sell, the underlying asset at the exercise price during the option period. A
put option gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by a Fund is exercised, the Fund forgoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that a Fund may be
required to take delivery of the underlying asset at a disadvantageous price.
Municipal Securities. As noted above, Evergreen Tax Strategic Foundation Fund
may invest in Municipal Securities, which include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed. The
term "municipal bonds" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in municipal bonds, including IDBs and PABs, and floating and variable
rate obligations that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature is
backed by an irrevocable letter of credit or guarantee of the bank. A put bond
is a municipal bond which gives the holder the unconditional right to sell the
bond back to the issuer at a specified price and exercise date, which is
typically well in advance of the bond's maturity date. "Short-term municipal
notes" and "tax exempt commercial paper" include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. The Municipal Securities in which
Evergreen Tax Strategic Foundation Fund may invest also include certain variable
rate and floating rate municipal obligations with or without demand features.
These variable rate securities do not have fixed interest rates; rather, those
rates fluctuate based upon changes in specified market rates, such as the prime
rate, or are adjusted at predesignated periodic intervals. Certain of these
obligations may carry a demand feature that gives the Evergreen Tax Strategic
Foundation Fund the right to demand prepayment of the principal amount of the
security prior to its maturity date. The demand obligation may or may not be
backed by letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. The
Evergreen Tax Strategic Foundation 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 5% or less of its total
assets.
When-Issued Securities. Evergreen Utility Fund and Evergreen Tax Strategic
Foundation Fund may purchase securities on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price and yield). The
Funds generally would not pay for such securities or start earning interest on
them until they are received. However, when the Funds purchase securities on a
when-issued basis, they assume the risks of ownership at the time of purchase,
not at the time of receipt. Failure of the issuer to deliver a security
purchased by a Fund on a when-issued basis may result in the Fund incurring a
loss or missing an opportunity to make an alternative investment. Commitments to
purchase when-issued securities will not exceed 25% of the total assets of
Evergreen Tax Strategic Foundation Fund and 20% of the total assets of Evergreen
Utility Fund. The Evergreen Tax Strategic Foundation Fund will maintain cash or
high quality short-term securities in a segregated account with its custodian in
an amount equal to such commitments. The Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.
Stand-by Commitments. Evergreen Tax Strategic Foundation Fund may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in a Fund incurring
a loss or missing an opportunity to make an alternative investment. The
Evergreen Tax Strategic Foundation Fund expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Evergreen Tax Strategic Foundation Fund's portfolio will not exceed 10% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality short-term
securities in a segregated account with its Custodian in an amount equal to such
commitments. The Fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Fund's investment adviser, present
minimal credit risks.
Taxable Fixed Income Investments. Evergreen Tax Strategic Foundation Fund may,
however, temporarily invest up to 20% of its total assets in taxable securities
under any one or more of the following circumstances: (a) pending investment of
proceeds of sale of Fund shares or of portfolio securities, (b) pending
settlement of purchases of portfolio securities, and (c) to maintain liquidity
for the purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% of its total assets in taxable securities for
defensive purposes. The Fund may invest for defensive purposes during periods
when the Fund's assets available for investment exceed the available Municipal
Securities that meet the Fund's quality and other investment criteria. Taxable
securities in which the Fund may invest on a short-term basis include
obligations of the U.S. government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of U.S. banks with
assets of $1 billion or more.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Special Risk Considerations
Investments in the Utility Industry. In view of the Evergreen Utility Fund's
investment concentration, investors should be aware of certain risks associated
with the utility industry in general. These include difficulties in earning
adequate returns on investments despite frequent rate increases, restrictions on
operations and increased costs and delays due to governmental regulations,
building or construction delays, environmental regulations, difficulty of the
capital markets in absorbing utility debt and equity securities, and
difficulties in obtaining fuel at reasonable prices.
The Fund's investment adviser believes that the risks of investing in
utility securities can be reduced. The professional portfolio management
techniques used by the Fund's investment adviser to attempt to reduce these
risks include credit research. The Fund's investment adviser will perform its
own credit analysis, in addition to using recognized rating agencies and other
sources, including discussions with an issuer's management, the judgment of
other investment analysts, and its own informed judgment. The credit analysis of
the Fund's investment adviser will consider an issuer's financial soundness, its
responsiveness to changes in interest rates and business conditions, its
anticipated cash flow, interest or dividend coverage, and earnings. In
evaluating an issuer, the Fund's investment adviser places special emphasis on
the estimated current value of the issuer's assets rather than historical costs.
Bond prices move inversely to interest rates, i.e., as interest rates
decline the value of the bonds increase and vice versa. The longer the maturity
of a bond, the greater the exposure to market price fluctuations. The same
market factors are reflected in the share price or net asset value of bond funds
which will vary with interest rates. There is no limit on the maturity of the
fixed income securities purchased by the Fund.
Investment in Foreign Securities. Investments by Evergreen Utility Fund in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of a Fund denominated in such currency will
also fall. The performance of a Fund will be measured in U.S. dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
ADRs and European Depositary Receipts ("EDRs") and other securities
convertible into securities of foreign issuers may not necessarily be
denominated in the same currency as the securities into which they may be
converted but rather in the currency of the market in which they are traded.
ADRs are receipts typically issued by an American bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe by banks or depositories which evidence a
similar ownership arrangement. Generally ADRs, in registered form, are designed
for use in United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Investments in Small Companies. Investment in the securities of small or newly
formed companies involves greater risk than investments in larger, more
established issuers. The Evergreen Small Cap Equity Income Fund may invest to a
large extent in small or newly formed companies which have limited product
lines, markets or financial resources and may lack management depth. The
securities of such companies may have limited marketability and may be subject
to more abrupt or erratic movements in price than securities of larger, more
established companies, or equity securities in general.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which it has been established ("Trustees"). Evergreen Asset Management
Corp. ( "Evergreen Asset") has been retained by Evergreen Tax Strategic
Foundation Fund and Evergreen Small Cap Equity Income Fund as investment
adviser. Evergreen Asset succeeded on June 30, 1994 to the advisory business of
the same name, but under different ownership, which was organized in 1971.
Evergreen Asset, with its predecessors, has served as investment adviser to the
Evergreen mutual funds since 1971. Evergreen Asset is a wholly-owned subsidiary
of First Union National Bank of North Carolina ("FUNB"). The address of
Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a
subsidiary of First Union Corporation ("First Union"), one of the ten largest
bank holding companies in the United States. Stephen A. Lieber and Nola Maddox
Falcone serve as the chief investment officers of Evergreen Asset and, along
with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor
and the former general partners of Lieber & Company, which, as described below,
provides certain subadvisory services to Evergreen Asset in connection with its
duties as investment adviser to the Funds. The Capital Management Group of FUNB
("CMG") serves as investment adviser to Evergreen Utility Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Tax Strategic Foundation Fund and
Evergreen Small Cap Equity Income Fund, Evergreen Asset manages each Fund's
investments, provides various administrative services and supervises each Fund's
daily business affairs, subject to the authority of the Trustees. Evergreen
Asset is entitled to receive from Evergreen Small Cap Equity Income Fund a fee
equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. With respect to Evergreen Tax Strategic
Foundation Fund, Evergreen Asset is entitled to receive a fee equal to .875 of
1% of average daily net assets on an annual basis on the first $750 million in
assets, .75 of 1% of average daily net assets on an annual basis on the next
$250 million in assets, and .7 of 1% of average daily net assets on an annual
basis on assets over $1 billion. The fee paid by Evergreen Small Cap Equity
Income Fund and Evergreen Tax Strategic Foundation Fund is higher than the rate
paid by most other investment companies. Until Evergreen Small Cap Equity Income
Fund and Evergreen Tax Strategic Foundation Fund reach $15 million in net
assets, Evergreen Asset has agreed to reimburse such Funds to the extent that
their aggregate operating expenses exceed 1.50% of its average daily net assets
for any fiscal year. Any reimbursement pursuant to the foregoing will be
exclusive of interest, taxes, brokerage commissions, Rule 12b-1 distribution
fees and shareholder servicing fees and extraordinary expenses. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation
Fund for the fiscal year ended December 31, 1994 are set forth in the section
entitled "Financial Highlights". The above-mentioned expense ratios for
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Retirement
Fund are net of voluntary advisory fee waivers and expense reimbursements by
Evergreen Asset which may, at its discretion, revise or cease this voluntary
waiver at any time.
CMG manages investments and supervises the daily business affairs of
Evergreen Utility Fund and, as compensation therefor, is entitled to receive an
annual fee equal to .50 of 1% of average daily net assets of the Fund. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Utility Fund for the fiscal year ended December 31, 1994 are set forth
in the section entitled "Financial Highlights". Evergreen Asset serves as
administrator to Evergreen Utility Fund and is entitled to receive a fee based
on the average daily net assets of the Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .050% of the first $7 billion; .035% on the next $3 billion;
.030% on the next $5 billion; .020% on the next $10 billion; .015% on the next
$5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
Utility Fund and is entitled to receive a fee from the Fund calculated on the
average daily net assets of the Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Small Cap Equity Income Fund is
Nola Maddox Falcone, C.F.A., who is President and Co-Chief Executive Officer of
Evergreen Asset. Ms. Falcone has served as the principal manager of the Fund
since 1993. Stephen A. Lieber, who is Chairman and Co-Chief Executive Officer of
Evergreen Asset, together with James T. Colby, III, serve as the portfolio
managers for Evergreen Tax Strategic Foundation Fund. Mr. Lieber makes all
allocation decisions and investment decisions for the equity portion of the
portfolio and Mr. Colby manages the fixed-income portion. Mr. Colby has served
as a fixed-income portfolio manager with Evergreen Asset since 1992. Prior to
that, Mr. Colby served as Vice President-Investments at American Express Company
from 1987 to 1992. Both have served as the Fund's principal managers since
inception. The portfolio manager of Evergreen Utility Fund since its inception
is H. Bradley Donovan, who is an Assistant Vice President of FUNB, and has been
with First Union since 1992. Prior to that, Mr. Donovan had served as a
portfolio manager and equity analyst at The Bank of Boston.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap
Equity Income Fund. Lieber & Company will be reimbursed by Evergreen Asset in
connection with the rendering of services on the basis of the direct and
indirect costs of performing such services. There is no additional charge to
Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap Equity Income
Fund for the services provided by Lieber & Company. The address of Lieber &
Company is 2500 Westchester Avenue, Purchase, New York 10577.
Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A, Class B and Class C shares a Rule 12b-1 plan (each, a "Plan" or
collectively the "Plans"). Under the Plans, each Fund may incur
distribution-related and shareholder servicing-related expenses which may not
exceed an annual rate of .75 of 1% of the aggregate average daily net assets
attributable to each Fund's Class A shares, 1.00% of the aggregate average daily
net assets attributable to the Class B and Class C shares of Evergreen Tax
Strategic Foundation Fund and Evergreen Small Cap Equity Income Fund, and .75 of
1% of the aggregate average daily net assets attributable to the Class B and
Class C shares of Evergreen Utility Fund. Payments under the Plans adopted with
respect to Class A shares are currently voluntarily limited to .25 of 1% of each
Fund's aggregate average daily net assets attributable to Class A shares. The
Plans provide that a portion of the fee payable thereunder may constitute a
service fee to be used for providing ongoing personal services and/or the
maintenance of shareholder accounts. Evergreen Utility Fund has, in addition to
the Plans adopted with respect to its Class B and Class C shares, adopted
shareholder service plans ("Service Plans") relating to the Class B and Class C
shares which permit the Fund to incur a fee of up to .25 of 1% of the aggregate
average daily net assets attributable to the Class B and Class C shares for
ongoing personal services and/or the maintenance of shareholder accounts. Such
service fee payments to financial intermediaries for such purposes, whether
pursuant to a Plan or Service Plan, will not to exceed .25% of the aggregate
average daily net assets attributable to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, .75 of 1% of a Fund's
aggregate average daily net assets attributable to the Class B shares and .75 of
1% of a Fund's aggregate average daily net assets attributable to the Class C
shares. The Distribution Agreements provide that EFD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans ( and in the case
of Evergreen Utility Fund, the Service Plan), in amounts up to .25 of 1% of a
Fund's aggregate average daily net assets on an annual basis attributable to
Class B and Class C shares, to compensate organizations, which may include EFD
and each Fund's investment adviser or their affiliates, for personal services
rendered to shareholders and/or the maintenance of shareholder accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
<PAGE>
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment program. Share certificates are not issued for
Class A, Class B and Class C shares. In states where EFD is not registered as a
broker-dealer shares of a Fund will only be sold through other broker-dealers or
other financial institutions that are registered. See the Share Purchase
Application and Statement of Additional Information for more information. Only
Class A, Class B and Class C shares are offered through this Prospectus (See
"General Information" - "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transaction in shares of the Funds.
Class A shares may also be purchased at net asset value by qualified
and non-qualified employee benefit and savings plans which make shares of the
Funds and the other Evergreen mutual funds available to their participants, and
which: (a) are employee benefit plans having at least $1,000,000 in investable
assets, or 250 or more eligible participants; or (b) are non-qualified benefit
or profit sharing plans which are sponsored by an organization which also makes
the Evergreen mutual funds available through a qualified plan meeting the
criteria specified under (a). In connection with sales made to plans of the type
described in the preceeding sentence that are clients of broker-dealers, and
which do not qualify for sales at net asset value under the conditions set forth
in the paragraph above, payments may be made in an amount equal to .50 of 1% of
the net asset value of shares purchased. These payments are subject to reclaim
in the event shares are redeemed within 12 months after purchase.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
average daily value on an annual basis of Class A shares held by their clients.
Certain purchases of Class A shares may qualify for reduced sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans and
Reinstatement Privilege. Consult the Share Purchase Application and Statement of
Additional Information for additional information concerning these reduced sales
charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which it is expected that they will convert to Class A
shares) . The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
Class C Shares--Level-Load Alternative. You can purchase Class C shares without
any initial sales charge and, therefore, the full amount of your investment will
be used to purchase Fund shares. However, you will pay a 1.0% CDSC if you redeem
shares during the first year after purchase. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of the Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. Shares
obtained from dividend or distribution reinvestment are not subject to the CDSC.
No contingent deferred sales charge will be imposed on Class C shares
purchased by institutional investors, and through employee benefit and savings
plans eligible for the exemption from front-end sales charges described under
"Class A Shares-Front End Sales Charge Alternative", above. Broker-dealers and
other financial intermediaries whose clients have purchased Class C shares may
receive a trailing commission equal to .75 of 1% of the average daily value of
such shares on an annual basis held by their clients more than one year from the
date of purchase. The payment of trailing commissions will commence immediately
with respect to shares eligible for exemption from the contingent deferred sales
charge normally applicable to Class C shares.
With respect to Class B Shares and Class C Shares, no CDSC will be
imposed on: (1) the portion of redemption proceeds attributable to increases in
the value of the account due to increases in the net asset value per Share, (2)
Shares acquired through reinvestment of dividends and capital gains, (3) Shares
held for more than seven years (in the case of Class B Shares) or one year (in
the case of Class C Shares) after the end of the calendar month of acquisition,
(4) accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or its investment adviser
incurs. If such investor is an existing shareholder, a Fund may redeem shares
from an investor's account to reimburse the Fund or or its investment adviser
for any loss. In addition, such investors may be prohibited or restricted from
making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B or Class C shares) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 10 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
or C shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The redemption of shares is a taxable transaction for Federal tax
purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for 30 days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the Act
pursuant to which each Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the Fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B or Class C
shares of the Evergreen mutual fund originally purchased for cash is applied.
Also, Class B shares will continue to age following an exchange for purposes of
conversion to Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number on the front page of this Prospectus.
Some services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Each Fund's investment adviser may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Tax Strategic Foundation
Fund and Evergreen Small Cap Equity Income Fund for their most recent fiscal
year is set forth below. A similar discussion relating to Evergreen Utility Fund
is contained in the annual report of the Fund for the fiscal year ended December
31, 1994.
Evergreen Small Cap Equity Income Fund.
The Fund's one year performance through December 31, 1994, of -.65% on
the Class Y no-load shares compared favorably with the performance of the NASDAQ
OTC Composite Index (unreinvested) of -3.20% and the Russell 2000 Index of
- -1.82%. The Fund invests in the shares of higher yielding entrepreneurial
companies of smaller size which the Adviser believes will provide faster growth
than the U.S. economy as a whole. The average market capitalization of the
Fund's portfolio holdings on December 31, 1994, was $160 million.
[CHART]
The Fund's portfolio at year-end was composed of 64.5% common stocks,
4.2% convertible preferreds, 19.5% convertible debentures, and 11.8% in cash
equivalents. Sharp downward swings in the 1994 bond market had a deleterious
effect on the interest sensitive sectors of the equity and convertible market.
The largest sector in the portfolio was in banking where Evergreen Asset
believes there are opportunities for gains from mergers and acquisitions.
However, the short-term performance of banks, finance and other interest
sensitive issues was a drag on the performance during the year. Convertible
bonds and preferred stocks which averaged between a 20-30% weighting in the
portfolio were especially hard hit in this rising interest rate environment.
Evergreen Asset maintained the Fund's holdings because it believed the equities
underlying the convertibles represented strong potential growth values. The
positive results in the portfolio were from gains from takeovers and in health
related issues and restructured companies. The Fund also benefited from gains in
companies that provide productivity enhancing services in computerization.
Evergreen Tax Strategic Foundation Fund
The Fund's total return of its Class Y no-load shares for the fiscal
year ended December 31, 1994, was +3.44%, which compared favorably with the S&P
500 Reinvested Index at +1.31% for the same period. Since inception, the Fund's
return has been +7.12% versus the S & P 500 Reinvested Index at +1.14%.
As described in the Fund's objective, the equity portion of the Fund
focused on specific undervalued sectors (including the health care sector),
producing a return of 12.60% during 1994. And since the Fund's investment policy
seeks to minimize taxable gains, the fixed income portion (which is invested in
municipal bonds) initiated year end swaps during the bond market's decline to
offset gains realized from equity sales. This strategy is central to the concept
of the Fund which is to produce significant after-tax returns to shareholders.
Even had Evergreen Asset not done the swaps, the objective of producing tax
advantaged returns would have been realized since the municipal bond portion of
the Fund yielded high current tax-free income. The fixed income portion of the
portfolio returned -7.20% during the fiscal year, reflecting the dramatic
decline in the fixed income markets. The Federal Reserve tightened short-term
rates several times in 1994 which set off a ripple effect in worldwide bond
markets. In addition, tax loss selling drove prices dramatically lower at year
end. The Lehman Municipal Bond Index was -5.14% for 1994.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund. and
Organization. The Evergreen Small Cap Equity Income Fund is a separate series of
The Evergreen American Retirement Trust, a Massachusetts business trust
organized in 1987. Evergreen Tax Strategic Foundation Fund is a separate series
of the Evergreen Foundation Trust, a Massachusetts business trust organized in
1989. Evergreen Utility Fund is a separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Utility Fund and which provides certain
sub-administrative services to Evergreen Asset in connection with its role as
investment adviser to Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund, including providing personnel to serve as officers of
the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and distribution and shareholder
servicing-related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission, the average annual compounded rate of return
over the period that would equate an assumed initial amount invested to the
value of the investment at the end of the period. For purposes of computing
total return, dividends and capital gains distributions paid on shares of a Fund
are assumed to have been reinvested when paid and the maximum sales charges
applicable to purchases of a Fund's shares are assumed to have been paid. Yield
is a way of showing the rate of income the Fund earns on its investments as a
percentage of the Fund's share price. The Fund's yield is calculated according
to accounting methods that are standardized by the SEC for all stock and bond
funds. Because yield accounting methods differ from the method used for other
accounting purposes, the Fund's yield may not equal its distribution rate, the
income paid to your account or the net investment income reported in the Fund's
financial statements. To calculate yield, the Fund takes the interest income it
earned from its portfolio of investments (as defined by the SEC formula) for a
30-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of the 30-day period.
This yield does not reflect gains or losses from selling securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN TAX STRATEGIC FOUNDATION FUND, EVERGREEN SMALL CAP EQUITY INCOME
FUND
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN UTILITY FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Plaza, Pittsburgh, Pennsylvania 15219
EVERGREEN UTILITY FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN TAX STRATEGIC FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN SMALL CAP INCOME EQUITY FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536116
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) SPECIALTY GROWTH AND INCOME FUNDS (Evergreen logo appears here)
EVERGREEN UTILITY FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN SMALL CAP EQUITY INCOME FUND
CLASS Y SHARES
The Evergreen Specialty Growth and Income Funds (the "Funds") are
designed to provide investors with a selection of investment alternatives
which seek to provide current income, capital appreciation or after-tax
"total return". This Prospectus provides information regarding the Class Y
shares offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 235-0064. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Advisers
Sub-Adviser
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN SMALL CAP EQUITY INCOME FUND is Evergreen Asset Management Corp.
("Evergreen Asset") which, with its predecessors, has served as an investment
adviser to the Evergreen Funds since 1971. Evergreen Asset is a wholly-owned
subsidiary of First Union National Bank of North Carolina ("FUNB"), which in
turn is a subsidiary of First Union Corporation, one of the ten largest bank
holding companies in the United States. The Capital Management Group of FUNB
("CMG") serves as investment adviser to EVERGREEN UTILITY FUND.
EVERGREEN UTILITY FUND (formerly First Union Utility Portfolio) seeks
high current income and moderate capital appreciation.
EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.
EVERGREEN SMALL CAP EQUITY INCOME FUND attempts to maximize the "total
return" on its portfolio of investments. The Fund invests in common and
preferred stocks, securities convertible into or exchangeable for common stocks
and fixed income securities. In attempting to achieve its objective, the Fund
invests primarily in companies with total market capitalization of less than
$500 million.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN UTILITY FUND (A)
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 8
Administrative Fees .06%
After 3 Years $ 24
12b-1 Fees --
After 5 Years $ 41
Other Expenses .18%
After 10 Years $ 92
Total .74%
</TABLE>
EVERGREEN TAX STRATEGIC FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .875%
After 1 Year $ 15
12b-1 Fees --
After 3 Years $ 47
Other Expenses (after reimbursement)* .625%
After 5 Years $ 82
After 10 Years $ 179
Total 1.500%
</TABLE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.00%
After 1 Year $ 15
12b-1 Fees --
After 3 Years $ 47
Other Expenses (after reimbursement)* .50%
After 5 Years $ 82
After 10 Years $ 179
Total 1.50%
</TABLE>
3
<PAGE>
(a) Estimated annual operating expenses reflect the combination of First Union
Utility Portfolio and ABT Utility Income Fund.
*Reflects agreements by Evergreen Asset to limit aggregate operating expenses
(including the Advisory Fees, but excluding interest, taxes, brokerage
commissions, Rule 12b-1 distribution fees and shareholder servicing fees and
extraordinary expenses) of EVERGREEN SMALL CAP EQUITY INCOME FUND and EVERGREEN
TAX STRATEGIC FOUNDATION FUND to 1.50% of average net assets until net assets
reach $15 million. Absent such agreements, the estimated annual operating
expenses for each Fund would be 2.50% of average net assets.
From time to time each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these voluntary waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the year ended December 31, 1994. Such amounts have been
restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds". As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN UTILITY FUND has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, for EVERGREEN TAX STRATEGIC
FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's independent
auditors and for EVERGREEN SMALL CAP EQUITY INCOME FUND has been audited by
Ernst & Young LLP, the Fund's independent auditors. A report of KPMG Peat
Marwick LLP, Price Waterhouse LLP, or Ernst & Young LLP, as the case may be, on
the audited information with respect to each Fund is incorporated by reference
in the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
No financial highlights are shown for Class A, B or C Shares of EVERGREEN
TAX STRATEGIC FOUNDATION FUND and EVERGREEN SMALL CAP EQUITY INCOME FUND since
these classes did not have any operations prior to December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN UTILITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994* 1994* 1994* 1994*
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $10.00 $10.00 $9.33 $9.51
Income (loss) from investment operations:
Net investment income......................................... .45 .39 .12 .37
Net realized and unrealized loss on investments............... (1.01) (1.01) (.33) (.50)
Total from investment operations............................ (.56) (.62) (.21) (.13)
Less distributions to shareholders from:
Net investment income......................................... (.44) (.38) (.11) (.37)
In excess of net investment income............................ -- -- -- (.01)(b)
Total distributions......................................... (.44) (.38) (.11) (.38)
Net asset value, end of period................................ $9.00 $9.00 $9.01 $9.00
TOTAL RETURN+................................................. (5.6%) (6.2%) (2.2%) (1.6%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................... $4,190 $28,792 $128 $5,201
Ratios to average net assets:
Expenses(a)................................................. .53%++ 1.27%++ 1.94%++ .40%++
Net investment income(a).................................... 5.07%++ 4.19%++ 3.96%++ 4.93%++
Portfolio turnover rate....................................... 23% 23% 23% 23%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994 1994 1994 1994
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
Expenses............................ 1.43% 2.11% 2.78% 1.24%
Net investment income............... 4.17% 3.35% 3.12% 4.09%
</TABLE>
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
5
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 2, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $10.31 $ 10.00
Income from investment operations:
Net investment income............................................................... .27 .05
Net realized and unrealized gain on investments..................................... .08 .31
Total from investment operations.................................................. .35 .36
Less distributions to shareholders from:
Net investment income............................................................... (.27) (.05)
Net realized gains.................................................................. (.12) --
Total distributions............................................................... (.39) (.05)
Net asset value, end of period...................................................... $10.27 $ 10.31
TOTAL RETURN+....................................................................... 3.4% 3.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $10,575 $5,424
Ratios to average net assets:
Expenses(a)....................................................................... 1.49% 0%++
Net investment income(a).......................................................... 2.87% 3.65%++
Portfolio turnover rate............................................................. 245% 25%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 2, 1993
DECEMBER 31, THROUGH
1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 2.41% 3.10%
Net investment income..................................... 1.95% .54%
</TABLE>
6
<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
OCTOBER 1, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $ 10.15 $ 10.00
Income (loss) from investment operations:
Net investment income............................................................... .34 .10
Net realized and unrealized gain (loss) on investments.............................. (.41) .15
Total from investment operations.................................................. (.07) .25
Less distributions to shareholders from:
Net investment income............................................................... (.33) (.10)
Net realized gains.................................................................. (.05) --
Total distributions............................................................. (.38) (.10)
Net asset value, end of period...................................................... $ 9.70 $ 10.15
TOTAL RETURN+....................................................................... (.7%) 2.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $3,613 $2,236
Ratios to average net assets:
Expenses(a)....................................................................... 1.48% 0%++
Net investment income(a).......................................................... 3.72% 4.07%++
Portfolio turnover rate............................................................. 9% 15%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 4.68% 4.39%
Net investment income (loss).............................. .53% (.33%)
</TABLE>
7
<PAGE>
8
23
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Small Cap Equity Income Fund
The investment objective of Evergreen Small Cap Equity Income Fund is
to achieve a return consisting of current income and capital appreciation in the
value of its shares. The emphasis on current income and capital appreciation
will be relatively equal although, over time, changes in market conditions and
the level of interest rates may cause the Fund to vary its emphasis between
these two elements in its search for the optimum return for its shareholders.
The Fund seeks to achieve its investment objective through investments in common
stocks, preferred stocks, securities convertible into or exchangeable for common
stocks and fixed income securities. Under normal conditions, the Fund will
invest at least 65% of its total assets in equity securities (including
convertible debt securities) of companies that, at the time of purchase, have
"total market capitalization" -- present market value per share multiplied by
the total number of shares outstanding -- of less than $500 million. The Fund's
investment objective is a fundamental policy.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved. The Fund may invest up to 35% of
its total assets in equity securities of companies that at the time of purchase
have a total market capitalization of $500 million or more, and in excess of
that percentage during temporary defensive periods.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be subject
to the discretion of the Fund's investment adviser. Ordinarily, the Fund
anticipates that most of its portfolio will consist of equity securities and
convertible debt securities. A significant portion of the equity investments,
however, will be income producing. If in the judgment of the Fund's investment
adviser a defensive position is appropriate, the Fund may take a defensive
position and invest without limit in debt securities or government securities or
hold its assets in cash or cash equivalents. The quality standards for debt
securities include: Obligations of banks and commercial paper rated no lower
than P-2 by Moody's Investor's Service ("Moody's"), A-2 by Standard and Poor's
Ratings Group ("S&P") or having a comparable rating from another nationally
recognized statistical rating organization ("SRO"); and non-convertible debt
securities rated no lower than Baa by Moody's or BBB by S&P. Securities rated
Baa or BBB may have speculative characteristics.
The Fund may invest in real estate investment trusts ("Reits"). Equity
Reits invest directly in real property while mortgage Reits invest in mortgages
on real property. The Fund does not intend to invest in Reits that are primarily
mortgage Reits. Equity Reits usually provide a high current yield plus the
opportunity of long-term price appreciation of real estate values. Reits may be
subject to certain risks associated with the direct ownership of real estate.
See "Investment Practices and Restrictions - Special Risk Considerations",
below.
It is anticipated that the annual portfolio turnover rate for the Fund
will not generally exceed 100%. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", and "Special Risk Considerations", below.
Evergreen Tax Strategic Foundation Fund
The investment objective of Evergreen Tax Strategic Foundation Fund is
to maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from Federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
""Investment Practices and Restrictions - "Municipal Securities" and "Taxable
Investments"). There can be no assurance that the Fund's investment objective
will be achieved. The objective is fundamental and may not be changed without
shareholder approval.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities).
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market value of the
Municipal Securities in the Fund's portfolio can be expected to vary inversely
to changes in prevailing interest rates. The Fund may at times emphasize the
generation of interest income by investing in high-yielding debt securities,
with short, medium or long-term maturities. Investment in medium (i.e., with
maturities from five to ten years) to long-term (i.e., with maturities over ten
years) debt securities may also be made with a view to realizing capital
appreciation when the Fund's investment adviser believes that interest rates on
such investments may decline, thereby increasing their market value.
In general, the Fund will invest in Municipal Securities only if they
are determined to be of high or upper medium quality. These include bonds rated
BBB or higher by S&P or Baa by Moody's or another SRO. For a description of such
ratings see the Statement of Additional Information. The Fund may purchase
Municipal Securities which are unrated at the time of purchase, if such
securities are determined by the Fund's investment adviser to be of comparable
quality. Certain Municipal Securities (primarily variable rate demand notes) may
be entitled to the benefit of standby letters of credit or similar commitments
issued by banks and, in such instances, the Fund's investment adviser will take
into account the obligation of the bank in assessing the quality of such
security. Medium grade bonds are more susceptible to adverse economic conditions
or changing circumstances than higher grade bonds.
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 the 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, 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.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Utility Fund
The investment objective of Evergreen Utility Fund is to achieve a
return consisting of high current income and moderate capital appreciation. The
Fund invests primarily in a diversified portfolio of equity and debt securities
of utility companies that produce, transmit or distribute gas or electrical
energy, as well as those companies which provide communications facilities, such
as telephone and telegraph companies. As a matter of investment policy, the Fund
will invest at least 65% of the value of its total assets in utility companies
that derive 50% of their revenues from utilities or assets relating to utility
industries. In addition, the Fund may invest up to 35% of its assets in common
stock of non-utility companies. There can be no assurance that the Fund's
investment objective will be achieved.
<PAGE>
The Fund may invest in:
common and preferred stocks, bonds and convertible preferred
stocks of utility companies selected by the Fund's investment adviser
on the basis of traditional research techniques, including assessment
of earnings and dividend growth prospects and of the risk and
volatility of the individual company's industry. However, other
factors, such as product position, market share or profitability may
also be considered by the Fund's investment adviser. The Fund will only
invest its assets in debt securities rated Baa or higher by Moody's or
BBB or higher by S&P or which, if unrated, are considered to be of
comparable quality by the Fund's investment adviser;
securities which are either issued or guaranteed by the U.S.
government, its agencies or instrumentalities. These securities include
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government
agencies or instrumentaltiies such as the Farm Credit System, including
the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association, Government National Mortgage Association, Student Loan
Marketing Association, Tennessee Valley Authority, Export-Import Bank
of the United State, Commodity Credit Corporation, Federal Financing
Bank and National Credit Union Administration. Some of these securities
are supported by the full faith and credit of the U.S. government, and
others are supported only by the full faith and credit of the agency or
instrumentality;
commercial paper, including master demand notes;
American Depositary Receipts ("ADRs") of foreign companies
traded on the New York or American Stock Exchanges or the
over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in other obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation considerations and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions" - "Other Investment Policies" and "Foreign Investments".)
The Fund will not invest more than 10% of its assets in foreign
securities;
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Mortagage Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
securities of other investment companies.
Bonds rated Baa by Moody's or BBB by S&P may have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken such bonds' prospects for principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered investment grade.
As of December 31, 1994 approximately 88% of the Fund's portfolio
consisted of equity securities. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Small Cap Equity Income Fund and
Evergreen Tax Strategic Foundation Fund on those exchanges. See the Statement of
Additional Information for further information regarding the brokerage
allocation practices of these Funds.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except from banks as a temporary measure to facilitate redemption requests or
for extraordinary or emergency purposes. The proceeds from borrowings may be
used to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio securities. The specific limits applicable to
borrowing by each Fund are set forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the total assets of the Evergreen
Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation Fund, and
15% of the value of the total assets of Evergreen Utility Fund, and must be
collateralized by cash or U.S. Government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
securities loaned, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby increasing its
return. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
has the right to call a loan and obtain the securities loaned at any time on
notice of not more than five business days. A Fund may pay reasonable fees in
connection with such loans.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities files for bankruptcy or becomes insolvent,
dispostion of the securities may be delayed pending court action.
Illiquid or Restricted Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities and other securities which are not readily
marketable, except that Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund may only invest up to 10% of their assets in
repurchase agreements with maturities longer than seven days. Illiquid
securities include certain restricted securities not determined by the Trustees
to be liquid, non-negotiable time deposits and repurchase agreements providing
for settlement in more than seven days after notice. Securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds' investment
advisers to be illiquid or not readily marketable and, therefore, are not
subject to the aforementioned 15% limit. The inability of a Fund to dispose of
illiquid or not readily marketable investments readily or at a reasonable price
could impair the Fund's ability to raise cash for redemptions or other purposes.
The liquidity of securities purchased by a Fund which are eligible for resale
pursuant to Rule 144A will be monitored by each Fund's investment adviser on an
ongoing basis, subject to the oversight of the Trustees. In the event that such
a security is deemed to be no longer liquid, a Fund's holdings will be reviewed
to determine what action, if any, is required to ensure that the retention of
such security does not result in a Fund having more than 15% of its assets
invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. The Funds may enter
into repurchase agreements may be entered into with member banks of the Federal
Reserve System, including the Custodian or primary dealers in U.S. Government
securities. A repurchase agreement is an arrangement pursuant to which a buyer
purchases a security and simultaneously agrees to resell it to the vendor at a
price that results in an agreed-upon market rate of return which is effective
for the period of time (which is normally one to seven days, but may be longer)
the buyer's money is invested in the security. The arrangement results in a
fixed rate of return that is not subject to market fluctuations during the
holding period. A Fund requires continued maintenance of collateral with its
Custodian in an amount at least equal to the repurchase price (including accrued
interest). In the event a vendor defaults on its repurchase obligation, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If the vendor becomes the
subject of bankruptcy proceedings, a Fund might be delayed in selling the
collateral. The Funds' investment advisers will review and continually monitor
the creditworthiness of each institution with which a Fund enters into a
repurchase agreement to evaluate these risks.
The Funds may borrow money by entering into a "reverse repurchase
agreement" by which a Fund may agree to sell portfolio securities to financial
institutions such as banks and broker-dealers, and to repurchase them at a
mutually agreed upon date and price, for temporary or emergency purposes. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, U.S. government securities or liquid high
grade debt obligations having a value at least 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
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. A Fund will not enter into
reverse repurchase agreements exceeding 5% of the value of its total assets.
Futures and Related Options. Evergreen Small Cap Equity Income Fund and
Evergreen Utility Fund may, to a limited extent, enter into financial futures
contracts, including futures contracts based on securities indices, purchase and
sell options on such futures contracts, and engage in related closing
transactions to the extent available to hedge all or a portion of its portfolio,
or as an efficient means of regulating its exposure to the equity markets. The
Funds will only use futures instruments for hedging, not speculative, purposes.
The Funds may not enter into futures contracts or related options if,
immediately thereafter, more than 30% of a Fund's total assets would be hedged
thereby or the amounts committed to margin and premiums paid for unexpired
options would exceed 5% of a Fund's total assets. These transactions include
brokerage costs and require each Fund to segregate liquid high grade debt or
cash to cover contracts which would require them to purchase securities. The
Funds may lose the expected benefit of the transactions if securities prices or
interest rates move in an unanticipated manner. In addition, if a Fund purchases
futures contract on indices of securities, their value may not fluctuate in
proportion to the value of the Fund's securities, limiting its ability to hedge
effectively.
While the Evergreen Small Cap Equity Income Fund and Evergreen Utility
Fund will enter into futures contracts only if there appears to be a liquid
secondary market for such contracts, there can be no assurance that the Funds
will be able to close out positions in a specific contract at a specific time.
Each Fund will not enter into a particular index-based futures contract unless
the Fund's investment adviser determines that a correlation exists between price
movements in the index-based futures contract and in securities in a Fund's
portfolio. Such correlation is not likely to be perfect, since each Fund's
portfolio is not likely to contain the same securities used in the index.
Evergreen Small Cap Equity Income Fund and Evergreen Utility Fund may
attempt to earn income from selling (writing) call options on futures contracts
in instances where each Fund's investment adviser believes that the long-term
investments held by the Fund which are the subjects of such contracts will
remain stable or experience a decline with respect to the U.S. dollar during the
term of the option. By selling such an option, a Fund forgoes all or part of the
appreciation potential involved in holding investments that are the subject of
the futures contract on which an option was written and may be forced to make
untimely liquidations of its investments to meet its obligations under the
option contract.
Options And Futures. Evergreen Utility Fund may deal in put and call options. A
call option gives the purchaser the right to buy, and the writer the obligation
to sell, the underlying asset at the exercise price during the option period. A
put option gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by a Fund is exercised, the Fund forgoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that a Fund may be
required to take delivery of the underlying asset at a disadvantageous price.
Municipal Securities. As noted above, Evergreen Tax Strategic Foundation Fund
may invest in Municipal Securities, which include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed. The
term "municipal bonds" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in municipal bonds, including IDBs and PABs, and floating and variable
rate obligations that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature is
backed by an irrevocable letter of credit or guarantee of the bank. A put bond
is a municipal bond which gives the holder the unconditional right to sell the
bond back to the issuer at a specified price and exercise date, which is
typically well in advance of the bond's maturity date. "Short-term municipal
notes" and "tax exempt commercial paper" include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. The Municipal Securities in which
Evergreen Tax Strategic Foundation Fund may invest also include certain variable
rate and floating rate municipal obligations with or without demand features.
These variable rate securities do not have fixed interest rates; rather, those
rates fluctuate based upon changes in specified market rates, such as the prime
rate, or are adjusted at predesignated periodic intervals. Certain of these
obligations may carry a demand feature that gives the Evergreen Tax Strategic
Foundation Fund the right to demand prepayment of the principal amount of the
security prior to its maturity date. The demand obligation may or may not be
backed by letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. The
Evergreen Tax Strategic Foundation 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 5% or less of its total
assets.
When-Issued Securities. Evergreen Utility Fund and Evergreen Tax Strategic
Foundation Fund may purchase securities on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price and yield). The
Funds generally would not pay for such securities or start earning interest on
them until they are received. However, when the Funds purchase securities on a
when-issued basis, they assume the risks of ownership at the time of purchase,
not at the time of receipt. Failure of the issuer to deliver a security
purchased by a Fund on a when-issued basis may result in the Fund incurring a
loss or missing an opportunity to make an alternative investment. Commitments to
purchase when-issued securities will not exceed 25% of the total assets of
Evergreen Tax Strategic Foundation Fund and 20% of the total assets of Evergreen
Utility Fund. The Evergreen Tax Strategic Foundation Fund will maintain cash or
high quality short-term securities in a segregated account with its custodian in
an amount equal to such commitments. The Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.
Stand-by Commitments. Evergreen Tax Strategic Foundation Fund may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in a Fund incurring
a loss or missing an opportunity to make an alternative investment. The
Evergreen Tax Strategic Foundation Fund expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Evergreen Tax Strategic Foundation Fund's portfolio will not exceed 10% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality short-term
securities in a segregated account with its Custodian in an amount equal to such
commitments. The Fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Fund's investment adviser, present
minimal credit risks.
Taxable Fixed Income Investments. Evergreen Tax Strategic Foundation Fund may,
however, temporarily invest up to 20% of its total assets in taxable securities
under any one or more of the following circumstances: (a) pending investment of
proceeds of sale of Fund shares or of portfolio securities, (b) pending
settlement of purchases of portfolio securities, and (c) to maintain liquidity
for the purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% of its total assets in taxable securities for
defensive purposes. The Fund may invest for defensive purposes during periods
when the Fund's assets available for investment exceed the available Municipal
Securities that meet the Fund's quality and other investment criteria. Taxable
securities in which the Fund may invest on a short-term basis include
obligations of the U.S. government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of U.S. banks with
assets of $1 billion or more.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Special Risk Considerations
Investments in the Utility Industry. In view of the Evergreen Utility Fund's
investment concentration, investors should be aware of certain risks associated
with the utility industry in general. These include difficulties in earning
adequate returns on investments despite frequent rate increases, restrictions on
operations and increased costs and delays due to governmental regulations,
building or construction delays, environmental regulations, difficulty of the
capital markets in absorbing utility debt and equity securities, and
difficulties in obtaining fuel at reasonable prices.
The Fund's investment adviser believes that the risks of investing in
utility securities can be reduced. The professional portfolio management
techniques used by the Fund's investment adviser to attempt to reduce these
risks include credit research. The Fund's investment adviser will perform its
own credit analysis, in addition to using recognized rating agencies and other
sources, including discussions with an issuer's management, the judgment of
other investment analysts, and its own informed judgment. The credit analysis of
the Fund's investment adviser will consider an issuer's financial soundness, its
responsiveness to changes in interest rates and business conditions, its
anticipated cash flow, interest or dividend coverage, and earnings. In
evaluating an issuer, the Fund's investment adviser places special emphasis on
the estimated current value of the issuer's assets rather than historical costs.
Bond prices move inversely to interest rates, i.e., as interest rates
decline the value of the bonds increase and vice versa. The longer the maturity
of a bond, the greater the exposure to market price fluctuations. The same
market factors are reflected in the share price or net asset value of bond funds
which will vary with interest rates. There is no limit on the maturity of the
fixed income securities purchased by the Fund.
Investment in Foreign Securities. Investments by Evergreen Utility Fund in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of a Fund denominated in such currency will
also fall. The performance of a Fund will be measured in U.S. dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
ADRs and European Depositary Receipts ("EDRs") and other securities
convertible into securities of foreign issuers may not necessarily be
denominated in the same currency as the securities into which they may be
converted but rather in the currency of the market in which they are traded.
ADRs are receipts typically issued by an American bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe by banks or depositories which evidence a
similar ownership arrangement. Generally ADRs, in registered form, are designed
for use in United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Investments in Small Companies. Investment in the securities of small or newly
formed companies involves greater risk than investments in larger, more
established issuers. The Evergreen Small Cap Equity Income Fund may invest to a
large extent in small or newly formed companies which have limited product
lines, markets or financial resources and may lack management depth. The
securities of such companies may have limited marketability and may be subject
to more abrupt or erratic movements in price than securities of larger, more
established companies, or equity securities in general.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which it has been established ("Trustees"). Evergreen Asset Management
Corp. ( "Evergreen Asset") has been retained by Evergreen Tax Strategic
Foundation Fund and Evergreen Small Cap Equity Income Fund as investment
adviser. Evergreen Asset succeeded on June 30, 1994 to the advisory business of
the same name, but under different ownership, which was organized in 1971.
Evergreen Asset, with its predecessors, has served as investment adviser to the
Evergreen mutual funds since 1971. Evergreen Asset is a wholly-owned subsidiary
of First Union National Bank of North Carolina ("FUNB"). The address of
Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a
subsidiary of First Union Corporation ("First Union"), one of the ten largest
bank holding companies in the United States. Stephen A. Lieber and Nola Maddox
Falcone serve as the chief investment officers of Evergreen Asset and, along
with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor
and the former general partners of Lieber & Company, which, as described below,
provides certain subadvisory services to Evergreen Asset in connection with its
duties as investment adviser to the Funds. The Capital Management Group of FUNB
("CMG") serves as investment adviser to Evergreen Utility Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Tax Strategic Foundation Fund and
Evergreen Small Cap Equity Income Fund, Evergreen Asset manages each Fund's
investments, provides various administrative services and supervises each Fund's
daily business affairs, subject to the authority of the Trustees. Evergreen
Asset is entitled to receive from Evergreen Small Cap Equity Income Fund a fee
equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. With respect to Evergreen Tax Strategic
Foundation Fund, Evergreen Asset is entitled to receive a fee equal to .875 of
1% of average daily net assets on an annual basis on the first $750 million in
assets, .75 of 1% of average daily net assets on an annual basis on the next
$250 million in assets, and .7 of 1% of average daily net assets on an annual
basis on assets over $1 billion. The fee paid by Evergreen Small Cap Equity
Income Fund and Evergreen Tax Strategic Foundation Fund is higher than the rate
paid by most other investment companies. Until Evergreen Small Cap Equity Income
Fund and Evergreen Tax Strategic Foundation Fund reach $15 million in net
assets, Evergreen Asset has agreed to reimburse such Funds to the extent that
their aggregate operating expenses exceed 1.50% of its average daily net assets
for any fiscal year. Any reimbursement pursuant to the foregoing will be
exclusive of interest, taxes, brokerage commissions, Rule 12b-1 distribution
fees and shareholder servicing fees and extraordinary expenses. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation
Fund for the fiscal year ended December 31, 1994 are set forth in the section
entitled "Financial Highlights". The above-mentioned expense ratios for
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Retirement
Fund are net of voluntary advisory fee waivers and expense reimbursements by
Evergreen Asset which may, at its discretion, revise or cease this voluntary
waiver at any time.
CMG manages investments and supervises the daily business affairs of
Evergreen Utility Fund and, as compensation therefor, is entitled to receive an
annual fee equal to .50 of 1% of average daily net assets of the Fund. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Utility Fund for the fiscal year ended December 31, 1994 are set forth
in the section entitled "Financial Highlights". Evergreen Asset serves as
administrator to Evergreen Utility Fund and is entitled to receive a fee based
on the average daily net assets of the Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .050% of the first $7 billion; .035% on the next $3 billion;
.030% on the next $5 billion; .020% on the next $10 billion; .015% on the next
$5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
Utility Fund and is entitled to receive a fee from the Fund calculated on the
average daily net assets of the Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Small Cap Equity Income Fund is
Nola Maddox Falcone, C.F.A., who is President and Co-Chief Executive Officer of
Evergreen Asset. Ms. Falcone has served as the principal manager of the Fund
since 1993. Stephen A. Lieber, who is Chairman and Co-Chief Executive Officer of
Evergreen Asset, together with James T. Colby, III, serve as the portfolio
managers for Evergreen Tax Strategic Foundation Fund. Mr. Lieber makes all
allocation decisions and investment decisions for the equity portion of the
portfolio and Mr. Colby manages the fixed-income portion. Mr. Colby has served
as a fixed-income portfolio manager with Evergreen Asset since 1992. Prior to
that, Mr. Colby served as Vice President-Investments at American Express Company
from 1987 to 1992. Both have served as the Fund's principal managers since
inception. The portfolio manager of Evergreen Utility Fund since its inception
is H. Bradley Donovan, who is an Assistant Vice President of FUNB, and has been
with First Union since 1992. Prior to that, Mr. Donovan had served as a
portfolio manager and equity analyst at The Bank of Boston.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap
Equity Income Fund. Lieber & Company will be reimbursed by Evergreen Asset in
connection with the rendering of services on the basis of the direct and
indirect costs of performing such services. There is no additional charge to
Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap Equity Income
Fund for the services provided by Lieber & Company. The address of Lieber &
Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber & Company
is an indirect, wholly-owned, subsidiary of First Union.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
market value. Non-dollar denominated securities will be valued as of the close
of the Exchange at the closing price of such securities in their principal
trading market.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from an investor's
account to reimburse the Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Funds are an available investment. For
information about the requirements to make such investments, including copies of
the necessary application forms, please call the telephone number set forth on
the cover page of this Prospectus. A Fund cannot accept investments specifying a
certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
Funds. Although not currently anticipated, each Fund reserves the right to
suspend the offer of shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the enclosed Application and choose how the redemption proceeds
are to be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in a Fund
at a designated commercial bank. State Street currently deducts a $5 wire charge
from all redemption proceeds wired. This charge is subject to change without
notice. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Funds will employ reasonable procedures to verify that telephone requests
are genuine. These procedures include requiring some form of personal
identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Retirement Plans. Eligible investors may invest in each Fund under the following
prototype retirement plans: (i) Individual Retirement Account (IRA); (ii)
Simplified Employee Pension (SEP) for sole proprietors, partnerships and
corporations; and (iii) Profit-Sharing and Money Purchase Pension Plans for
corporations and their employees.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus,and is subject
to change by legislative or administrative action. As the foregoing discussion
is for general information only, you should also review the discussion of
"Additional Tax Information" contained in the Statement of Additional
Information. In addition, you should consult your own tax adviser as to the tax
consequences of investments in the Funds, including the application of state and
local taxes which may be different from Federal income tax consequences
described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Tax Strategic Foundation
Fund and Evergreen Small Cap Equity Income Fund for their most recent fiscal
year is set forth below. A similar discussion relating to Evergreen Utility Fund
is contained in the annual report of the Fund for the fiscal year ended December
31, 1994.
Evergreen Small Cap Equity Income Fund.
The Fund's one year performance through December 31, 1994, of -.65% on
the Class Y no-load shares compared favorably with the performance of the NASDAQ
OTC Composite Index (unreinvested) of -3.20% and the Russell 2000 Index of
- -1.82%. The Fund invests in the shares of higher yielding entrepreneurial
companies of smaller size which the Adviser believes will provide faster growth
than the U.S. economy as a whole. The average market capitalization of the
Fund's portfolio holdings on December 31, 1994, was $160 million.
The Fund's portfolio at year-end was composed of 64.5% common stocks,
4.2% convertible preferreds, 19.5% convertible debentures, and 11.8% in cash
equivalents. Sharp downward swings in the 1994 bond market had a deleterious
effect on the interest sensitive sectors of the equity and convertible market.
The largest sector in the portfolio was in banking where Evergreen Asset
believes there are opportunities for gains from mergers and acquisitions.
However, the short-term performance of banks, finance and other interest
sensitive issues was a drag on the performance during the year. Convertible
bonds and preferred stocks which averaged between a 20-30% weighting in the
portfolio were especially hard hit in this rising interest rate environment.
Evergreen Assetr maintained the Fund's holdings because it believed the equities
underlying the convertibles represented strong potential growth values. The
positive results in the portfolio were from gains from takeovers and in health
related issues and restructured companies. The Fund also benefitted from gains
in companies that provide productivity enhancing services in computerization.
[CHART]
Evergreen Tax Strategic Foundation Fund
The Fund's total return of its Class Y no-load shares for the fiscal
year ended December 31, 1994, was +3.44%, which compared favorably with the S&P
500 Reinvested Index at +1.31% for the same period. Since inception, the Fund's
return has been +7.12% versus the S & P 500 Reinvested Index at +1.14%.
As described in the Fund's objective, the equity portion of the Fund
focused on specific undervalued sectors (including the health care sector),
producing a return of 12.60% during 1994. And since the Fund's investment policy
seeks to minimize taxable gains, the fixed income portion (which is invested in
municipal bonds) initiated year end swaps during the bond market's decline to
offset gains realized from equity sales. This strategy is central to the concept
of the Fund which is to produce significant after-tax returns to shareholders.
Even had Evergreen Asset not done the swaps, the objective of producing tax
advantaged returns would have been realized since the municipal bond portion of
the Fund yielded high current tax-free income. The fixed income portion of the
portfolio returned -7.20% during the fiscal year, reflecting the dramatic
decline in the fixed income markets. The Federal Reserve tightened short-term
rates several times in 1994 which set off a ripple effect in worldwide bond
markets. In addition, tax loss selling drove prices dramatically lower at year
end. The Lehman Municipal Bond Index was -5.14% for 1994.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund. and
Organization. The Evergreen Small Cap Equity Income Fund is a separate series of
The Evergreen American Retirement Trust, a Massachusetts business trust
organized in 1987. Evergreen Tax Strategic Foundation Fund is a separate series
of the Evergreen Foundation Trust, a Massachusetts business trust organized in
1989. Evergreen Utility Fund is a separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Utility Fund and which provides certain
sub-administrative services to Evergreen Asset in connection with its role as
investment adviser to Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund, including providing personnel to serve as officers of
the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) all shareholders of record in one or more of the
Funds for which Evergreen Asset serves as investment adviser as of December 30,
1994, (ii) certain institutional investors and (iii) investment advisory clients
of CMG, Evergreen Asset or their affiliates. The dividends payable with respect
to Class A, Class B and Class C shares will be less than those payable with
respect to Class Y shares due to the distribution and distribution and
shareholder servicing-related expenses borne by Class A, Class B and Class C
shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission, the average annual compounded rate of return
over the period that would equate an assumed initial amount invested to the
value of the investment at the end of the period. For purposes of computing
total return, dividends and capital gains distributions paid on shares of a Fund
are assumed to have been reinvested when paid and the maximum sales charges
applicable to purchases of a Fund's shares are assumed to have been paid. Yield
is a way of showing the rate of income the Fund earns on its investments as a
percentage of the Fund's share price. The Fund's yield is calculated according
to accounting methods that are standardized by the SEC for all stock and bond
funds. Because yield accounting methods differ from the method used for other
accounting purposes, the Fund's yield may not equal its distribution rate, the
income paid to your account or the net investment income reported in the Fund's
financial statements. To calculate yield, the Fund takes the interest income it
earned from its portfolio of investments (as defined by the SEC formula) for a
30-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of the 30-day period.
This yield does not reflect gains or losses from selling securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN TAX STRATEGIC FOUNDATION FUND, EVERGREEN SMALL CAP EQUITY INCOME
FUND
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN UTILITY FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Plaza, Pittsburgh, Pennsylvania 15219
EVERGREEN UTILITY FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN TAX STRATEGIC FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN SMALL CAP INCOME EQUITY FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536124
STATEMENT OF ADDITIONAL INFORMATION
July 7, 1995
THE EVERGREEN GROWTH AND INCOME FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen Balanced Fund (formerly First Union Balanced Portfolio) ("Balanced")
Evergreen Growth and Income Fund ("Growth and Income")
The Evergreen Total Return Fund ("Total Return")
The Evergreen American Retirement Fund ("American Retirement")
Evergreen Small Cap Equity Income Fund ("Small Cap")
Evergreen Foundation Fund ("Foundation")
Evergreen Tax Strategic Foundation Fund ("Tax Strategic")
Evergreen Utility Fund (formerly First Union Utility Portfolio) ("Utility")
Evergreen Value Fund (formerly First Union Value Portfolio) ("Value")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed below. It is not a prospectus and should be read in conjunction
with the Prospectus dated July 7, 1995 for the Fund in which you are making or
contemplating an investment. The Evergreen Growth and Income Funds are offered
through four separate prospectuses: one offering Class A, Class B and Class C
shares, and a separate prospectus offering Class Y shares of Balanced, Growth
and Income, Total Return, American Retirement, Foundation and Value; and one
offering Class A, Class B and Class C shares and a separate prospectus offering
Class Y shares of Small Cap, Tax Strategic and Utility. Copies of each
Prospectus may be obtained without charge by calling the number listed above.
TABLE OF CONTENTS
Page
Investment Objectives and Policies................................
Investment Restrictions...........................................
Non-Fundamental Operating Policies................................
Certain Risk Considerations.......................................
Management........................................................
Investment Adviser................................................
Distribution Plans................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Purchase of Shares................................................
Performance Information...........................................
Financial Statements..............................................
Appendix A - Note, Bond And Commercial Paper Ratings
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objective
and Policies" in each Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds -
"Investment Objective and Policies" in the relevant Prospectus. The investment
objectives of Balanced, Utility and Value are fundamental and cannot be changed
without the approval of shareholders. The following expands upon the discussion
in the Prospectus regarding certain investments of each Fund.
U.S. Government Securities
The types of U.S. government securities in which the Funds may invest
generally include direct obligations of the U.S. Treasury such as U. S. Treasury
bills, notes and bonds and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
(i) the full faith and credit of the U.S. Treasury;
(ii) the issuer's right to borrow from the U.S. Treasury;
(iii) the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
(iv) the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities that may not always receive
financial support from the U.S. government are:
(i) Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association;
(vi) Government National Mortgage Association; and
(vii) Student Loan Marketing Association
Restricted and Illiquid Securities
Each Fund may invest in restricted and illiquid securities. The ability of
the Board of Trustees ("Trustees") to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange Commission
("SEC") Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for sale under the
Rule. The Funds which invest in Rule 144A Securities believe 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 Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
(i) the frequency of trades and quotes for the security;
(ii) the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
(iii) dealer undertakings to make a market in the security; and
<PAGE>
(iv) the nature of the security and the nature of the marketplace trades.
Restricted securities would generally be acquired either from institutional
investors who originally acquired the securities in private placements or
directly from the issuers of the securities in private placements. Restricted
securities and securities that are not readily marketable may sell at a discount
from the price they would bring if freely marketable.
When-Issued and Delayed Delivery Securities
Balanced, Tax Strategic, Utility and Value may purchase securities on a
when-issued or delayed delivery basis. These transactions are made to secure
what is considered to be an advantageous price or yield for a Fund. No fees or
other expenses, other than normal transaction costs, are incurred. However,
liquid assets of a Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date. These assets
are marked to market daily and are maintained until the transaction has been
settled. Balanced, Utility and Value do not intend to engage in when- issued and
delayed delivery transactions to an extent that would cause the segregation of
more than 20% of the total value of their assets and Tax Strategic's commitment
to purchase when-issued securities will not exceed 25% of the Fund's total
assets.
Lending of Portfolio Securities
Each Fund may lend its portfolio securities to generate income and to
offset expenses. 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.
Reverse Repurchase Agreements
The Funds other than American Retirement, Foundation, Total Return and
Growth and Income may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Fund transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
Options and Futures Transactions
Options which Balanced, Utility and Value trade must be listed on national
securities exchanges.
.........Purchasing Put and Call Options on Financial Futures Contracts
Balanced, Utility and Value may purchase put and call options on financial
futures contracts (in the case of Utility and Value limited to options on
financial futures contracts for U.S. government securities). Unlike entering
directly into a futures contract, which requires the purchaser to buy a
financial instrument on a set date at an
3
<PAGE>
undetermined price, the purchase of a put option on a futures contract entitles
(but does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.
The Fund may purchase put and call options on futures to protect portfolio
securities against decreases in value resulting from an anticipated increase in
market interest rates. Generally, if the hedged portfolio securities decrease in
value during the term of an option, the related futures contracts will also
decrease in value and the put option will increase in value. In such an event, a
Fund will normally close out its option by selling an identical put option. If
the hedge is successful, the proceeds received by the Fund upon the sale of the
put option plus the realized decrease in value of the hedged securities.
Alternately, a Fund may exercise its put option to close out the position.
To do so, it would enter into a futures contract of the type underlying the
option. If the Fund neither closes out nor exercises an option, the option will
expire on the date provided in the option contract, and only the premium paid
for the contract will be lost.
.........Purchasing Options
Balanced, Utility and Value may purchase both put and call options on their
portfolio securities. These options will be used as a hedge to attempt to
protect securities which a Fund holds or will be purchasing against decreases or
increases in value. A Fund may purchase call and put options for the purpose of
offsetting previously written call and put options of the same series. If the
Fund is unable to effect a closing purchase transaction with respect to covered
options it has written, the Fund will not be able to sell the underlying
securities or dispose of assets held in a segregated account until the options
expire or are exercised.
Balanced, Utility and Value intend to purchase put and call options on
currency and other financial futures contracts for hedging purposes. A put
option purchased by a Fund would give it the right to assume a position as the
seller of a futures contract. A call option purchased by the Fund would give it
the right to assume a position as the purchaser of a futures contract. The
purchase of an option on a futures contract requires the Fund to pay a premium.
In exchange for the premium, the Fund becomes entitled to exercise the benefits,
if any, provided by the futures contract, but is not required to take any action
under the contract. If the option cannot be exercised profitably before it
expires, the Fund's loss will be limited to the amount of the premium and any
transaction costs.
Utility and Value currently do not intend to invest more than 5% of their
net assets in options transactions.
Balanced, Utility, Value and Small Cap, may not purchase or sell futures
contracts or related options if immediately thereafter the sum of the amount of
margin deposits on the Fund's existing futures positions and premiums paid for
related options would exceed 5% of the market value of the Fund's total assets.
When the Fund purchases futures contracts, an amount of cash and cash
equivalents, equal to the underlying commodity value of the futures contracts
(less any related margin deposits), will be deposited in a segregated account
with the Fund's custodian (or the broker, if legally permitted) to collateralize
the position and thereby insure that the sue of such futures contracts is
unleveraged.
........."Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
4
<PAGE>
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Balanced will not maintain open positions in futures contracts it has sold
or call options it has written on futures contracts if, in the aggregate, the
value of the open positions (marked to market) exceeds the current market value
of its securities portfolio plus or minus the unrealized gain or loss on those
open positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
.........Total Return and Growth and Income may write covered call options to a
limited extent on their portfolio securities ("covered options") in an attempt
to earn additional income. The Fund will write only covered call option
contracts and will receive premium income from the writing of such contracts.
Total Return and Growth and Income may purchase call options to close out a
previously written call option. In order to do so, the Fund will make a "closing
purchase transaction" -- the purchase of a call option on the same security with
the same exercise price and expiration date as the call option which it has
previously written. A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. If an option is exercised, a Fund
realizes a long-term or short-term gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
Junk Bonds
.........Consistent with its strategy of investing in "undervalued" securities,
Growth and Income may invest in lower medium and low-quality bonds also known as
"junk bonds" and may also purchase bonds in default if, in the opinion of the
Adviser, there is significant potential for capital appreciation. Growth and
Income, however, will not invest more than 5% of its total assets in debt
securities which are rated below investment grade. These bonds are regarded as
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. High yield bonds may be more susceptible to real or
perceived adverse economic and competitive industry conditions than investment
grade bonds. A projection of an economic downturn, or higher interest rates, for
example, could cause a decline in high yield bond prices because such events
could lessen the ability of highly leveraged companies to make principal and
interest payments on their debt securities. In addition, the secondary trading
market for high yield bonds may be less liquid than the market for higher grade
bonds, which can adversely affect the ability to dispose of such securities.
Variable and Floating Rate Securities
.........Foundation may invest no more than 5% of its total assets, at the time
of the investment in question, in variable and floating rate securities. The
terms of variable and floating rate instruments provide for the interest rate to
be adjusted according to a formula on certain predetermined dates. Variable and
floating rate instruments that are repayable on demand at a future date are
deemed to have a maturity equal to the time remaining until the principal will
be received on the assumption that the demand feature is exercised on the
earliest possible date. For the purposes of evaluating the interest-rate
sensitivity of the Fund, variable and floating rate instruments are deemed to
have a maturity equal to the period remaining until the next interest-rate
readjustment. For the purposes of evaluating the credit risks of variable and
floating rate instruments, these instruments are deemed to have a maturity equal
to the time remaining until the earliest date the Fund is entitled to demand
repayment of principal.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
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affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........Neither Growth and Income nor Total Return 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.
.........American Retirement 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.
........None of Balanced, Foundation, Small Cap, Utility or Value may 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.
.........Tax Strategic 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 each 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.
2........Ten Percent Limitation on Securities of Any One Issuer
.........None of American Retirement, Foundation, Small Cap, Growth and Income
or Total Return may purchase more than 10% of any class of securities of any one
issuer other than the U.S. government and its agencies or instrumentalities.
.........Neither Value nor Utility may purchase more than 10% of the outstanding
voting securities of any one issuer.
.........Tax Strategic* may not purchase more than 10% of the voting securities
of any one issuer other than the U.S. government and its agencies or
instrumentalities.
3........Investment for Purposes of Control or Management
.........None of American Retirement, Foundation, Growth and Income, Small Cap*,
Tax Strategic*, Total Return, Utility* or Value may invest in companies for the
purpose of exercising control or management.
4........Purchase of Securities on Margin
.........None of American Retirement, Balanced, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Total Return, Utility or Value may 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.
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5........Unseasoned Issuers
.........Neither American Retirement nor Foundation may invest in the securities
of unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of their predecessors.
.........None of Total Return, Value* or Utility* may 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.
.........None of Growth and Income, Small Cap* and Tax Strategic* may invest
more than 15% of its total assets (10% of total net assets in the case of Growth
and Income) in securities of unseasoned issuers that have been in continuous
operation for less than three years, including operating periods of their
predecessors.
6........Underwriting
.........American Retirement, Foundation, Growth and Income, Small Cap,* Tax
Strategic*, Total Return, Balanced, Utility and Value 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 objectives, policies and limitations.
7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
......... None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Total Return may purchase, sell or invest in interests in oil,
gas or other mineral exploration or development programs.
.........Neither Balanced* nor Utility* will 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.
.........Value 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.
8........Concentration in Any One Industry
.........Neither Growth and Income nor Total Return may 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.
.........None of American Retirement, Foundation, Small Cap and Tax Strategic
may 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) with respect to Tax Strategic, to municipal
securities. For purposes of this restriction, utility companies, gas, electric,
water and telephone companies will be considered separate industries.
.........Balanced and Value will not invest 25% or more of the value of their
total assets in any one industry except Balanced may invest more than 25% and
Value may invest 25% or more of its total assets in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
.........Utility 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.
9........Warrants
.........None of American Retirement, Growth and Income, Small Cap,* or Total
Return may invest more than 5% of its net assets in warrants, and, of this
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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.
.........Neither Foundation nor Tax Strategic* may 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 Exchanges.
.........Utility* and Value* will not invest more than 5% of their net assets in
warrants, including those acquired in units or attached to other securities. To
comply with certain state restrictions, Utility and Value will limit their
investment in such warrants not listed on the New York Stock Exchange or the
American Stock Exchange to 2% of their net assets. (If state restrictions
change, this latter restriction may be changed without notice to shareholders).
For purposes of this restriction, warrants acquired by the Funds' in units or
attached to securities may be deemed to be without value.
10.......Ownership by Trustees/Officers
.........None of American Retirement, Balanced*, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Total Return, Utility* or Value* may 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.
11.......Short Sales
.........Neither American Retirement nor Foundation may make short sales of
securities unless, at the time of each such sale and thereafter while a short
position exists, each Fund owns the securities sold or securities convertible
into or carrying rights to acquire such securities.
.........None of Growth and Income, Tax Strategic* and Total Return may make
short sales of securities unless, at the time of each such sale and thereafter
while a short position exists, each 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.
.........Small Cap,* may not make short sales of securities unless, at the time
of each such sale and thereafter while a short position exists, each 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).
.........Balanced 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 the 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.
.........Utility and Value will not sell any securities short.
12.......Lending of Funds and Securities
.........Neither Small Cap nor Tax Strategic may 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.
.........None of American Retirement, Foundation, Growth and Income and Total
Return may lend its funds to other persons, except through the purchase of a
portion of an issue of debt securities publicly distributed.
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.........None of Foundation, Small Cap or Tax Strategic, may 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.
.........Neither American Retirement or Growth and Income may 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 value of the loaned securities (100% of the
current market value for American Retirement), provided that the aggregate
amount of such loans shall not exceed 30% of the Fund's net assets.
.........Total Return 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 (100% of the
value of the loaned securities for Total Return), including accrued interest,
provided that the aggregate amount of such loans shall not exceed 30% of the
Fund's net assets.
.........Balanced will not lend any of its assets except portfolio securities in
accordance with its investment objective, policies and limitations.
.........Utility 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,
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.
.........Value will not lend any of its assets except that it may purchase or
hold 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 by which the Fund is governed or lend
portfolio securities valued at not more than 5% of its total assets to
broker-dealers.
13.......Commodities
.........Tax Strategic may not purchase, sell or invest in commodities,
commodity contracts or financial futures contracts.
.........Small Cap 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).
.........None of American Retirement, Foundation, Growth and Income, Total
Return may purchase, sell or invest in commodities or commodity contracts.
.........None of Balanced, Utility or Value will 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.
14.......Real Estate
.........Small Cap may not purchase or invest in real estate or interests in
real estate (but this shall not prevent either Fund from investing in marketable
securities issued by companies such as real estate investment trusts which deal
in real estate or interests therein).
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.............None of American Retirement, Foundation, Growth and Income, Tax
Strategic or Total Return may purchase, sell or invest in real estate or
interests in real estate, except that (i) each 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) Tax Strategic may
purchase, sell or invest in municipal securities or other debt securities
secured by real estate or interests therein.
.........None of Balanced, Utility or Value will 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. Neither Utility nor Value will invest in
limited partnership interests in real estate.
15.......Borrowing, Senior Securities, Repurchase Agreements and Reverse
Repurchase Agreements
.........None of American Retirement, Foundation or Total Return may 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, with respect to American
Retirement only, for leverage), provided that the aggregate amount of such
borrowings shall not exceed 5% of the value of the Fund's total net assets (5%
of total assets for American Retirement and Foundation) at the time of any such
borrowing, or mortgage, pledge or hypothecate its assets, except in an amount
sufficient to secure any such borrowing. Neither American Retirement nor
Foundation may issue senior securities, except as permitted by the Investment
Company Act of 1940. Neither Foundation nor American Retirement may enter into
repurchase agreements or reverse repurchase agreements.
.........Neither Small Cap nor Tax Strategic, may 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 each 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, provided that each of Small Cap, Tax Strategic, will not purchase any
securities at any time when borrowings, including reverse repurchase agreements,
exceed 5% of the value of its total assets. No Fund will enter into reverse
repurchase agreements exceeding 5% of the value of its total assets.
........Growth and Income 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. Growth and Income 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.
.........Balanced and Utility will not issue senior securities except that each
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. A Fund will not purchase any securities while
any borrowings are outstanding. Utility will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. Neither
Balanced, nor Utility will mortgage, pledge or hypothecate any assets except to
secure permitted borrowings. In these cases, Balanced and Utility 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.
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.........Value 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. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes. Value will not mortgage, pledge or hypothecate any
assets except to secure permitted borrowings. In these cases, Value 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.
16.......Joint Trading
.........None of American Retirement, Foundation, Growth and Income, Small
Cap,* Tax Strategic,* or Total Return may 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
.........Foundation and Tax Strategic* may not write, purchase or sell put or
call options, or combinations thereof.
.........Neither Growth and Income nor Total Return may write, purchase or sell
put or call options, or combinations thereof, except that each 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.
.........American Retirement 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.
.........Utility* will not purchase put options on securities unless the
securities are held in the Fund's portfolio and not more than 5% of the Fund's
total assets would be invested in premiums on open put options. Utility* will
not write call options on securities unless securities are held in the Fund's
portfolio or unless the Fund is entitled to them in deliverable form without
further payment or after segregating cash in the amount of any further payment.
18.......Investment in Equity Securities
.........American Retirement may not invest more than 75% of the value of its
total assets in equity securities (including securities convertible into equity
securities).
19.......Investing in Securities of Other Investment Companies
.........Balanced*, Utility and Value 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
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such as management fees and therefore any investment by a Fund in shares of
another investment company would be subject to such duplicate expenses.
.........Each other Fund may purchase the securities of other investment
companies, except to the extent such purchases are not permitted by applicable
law.
20.......Restricted Securities
.........Balanced and Value will not invest more than 10% of their net assets in
securities subject to restrictions on resale under the Securities Act of 1933
(except for, in the case of Balanced, certain restricted securities which meet
criteria for liquidity established by the Trustees).
.........Utility* will not invest more than 10% of the value of its net assets
in securities subject to restrictions on resale under the Securities Act of
1933, except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees. To comply with certain state
restrictions, the Fund will limit these transactions to 5% of its total assets.
(If state restrictions change this latter restriction may be revised without
shareholder approval or notification).
NON FUNDAMENTAL OPERATING POLICIES
.........Certain Funds have adopted additional non-fundamental operating
policies. Operating policies may be changed by the Board of Trustees without a
shareholder vote.
1........Futures and Options Transactions
.........Small Cap* will not: (i) sell futures contracts, purchase put options
or write call options if, as a result, more than 30% of the Fund's total assets
would be hedged with futures and options under normal conditions; (ii) purchase
futures contracts or write put options if, as a result, the Fund's total
obligations upon settlement or exercise of purchased futures contracts and
written put options would exceed 30% of its total assets; or (iii) purchase call
options if, as a result, the current value of option premiums for options
purchased by the Fund would exceed 5% of the Fund's total assets. These
limitations do not apply to options attached to, or acquired or traded together
with their underlying securities, and do not apply to securities that
incorporate features similar to options.
2........Illiquid Securities.
.........None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Total Return may invest more than 15% of its net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements which have a maturity of longer than seven days,
but excluding securities eligible for resale under Rule 144A of the Securities
Act of 1933, as amended, which the Trustees have determined to be liquid.
.........Balanced* and Utility* will not invest more than 10% (in the case of
Balanced) or 15% (in the case of Utility) of its 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 and, in the case of Utility, in non-negotiable time deposits.
3........Other. In order to comply with certain state blue sky limitations:
-----
...........Each of American Retirement, Foundation, Growth and Income, Small
Cap, Tax Strategic and Total Return interprets fundamental investment
restriction 7 to prohibit investments in oil, gas and mineral leases.
...........Each of American Retirement, Foundation, Growth and Income, Small
Cap, Tax Strategic and Total Return interprets fundamental investment
restriction 14 to prohibit investment in real estate limited partnerships which
are not readily marketable.
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...........Foundation interprets fundamental investment restriction 11 to permit
short sales only where the Fund owns the securities sold or securities
convertible into or carrying rights to acquire such securities without payment
of any additional consideration therefor.
...........Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
CERTAIN RISK CONSIDERATIONS
...........There can be no assurance that a Fund will achieve its investment
objective and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objective and Policies"
in the Prospectus.
......... In addition, the ability of Tax Strategic to achieve its investment
objective is dependent on the continuing ability of the issuers of Municipal
Bonds in which the Fund invests -- and of banks issuing letters of credit
backing such securities -- to meet their obligations with respect to the payment
of interest and principal when due. The ratings of Moody's Investors Service,
Inc., Standard & Poor's Ratings Group and other nationally recognized rating
organizations represent their opinions as to the quality of Municipal Bonds
which they undertake to rate. Ratings are not absolute standards of quality;
consequently, Municipal Bonds with the same maturity, coupon, and rating may
have different yields. There are variations in Municipal Bonds, both within a
particular classification and between classifications, resulting from numerous
factors.
......... Unlike other types of investments, Municipal Bonds have traditionally
not been subject to regulation by, or registration with, the Securities and
Exchange Commission, although there have been proposals which would provide for
regulation in the future.
......... The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in the rights of
holders of their obligations. In addition, there have been lawsuits challenging
the issuance of pollution control revenue bonds or the validity of their
issuance under state or Federal law which could ultimately affect the validity
of those Municipal Bonds or the tax-free nature of the interest thereon.
MANAGEMENT
The Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
Laurence B. Ashkin (67), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam*(68), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (70), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Robert J. Jeffries (72), 2118 New Bedford Drive, Sun City Center, FL-Trustee.
Corporate consultant since 1967.
Gerald M. McDonnell (55), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
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Thomas L. McVerry (56), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
William Walt Pettit*(39), Holcomb and Pettit, P.A., 207 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990; Attorney, Clontz and Clontz from 1980 to 1990.
Russell A. Salton, III, M.D. (47), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (35), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
Except for Messrs. Ashkin, Bam and Jeffries, who are not Trustees of
Evergreen Investment Trust, the Trustees and officers listed above hold the same
positions with a total of ten registered investment companies offering a total
of thirty-one investment funds within the Evergreen mutual fund complex.
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* Mr. Bam and Mr. Pettit may each be deemed to be an "interested person"
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act").
The officers of the Trusts are all officers and/or employees of Furman Selz
Incorporated. Furman Selz Incorporated is the parent of Evergreen Funds
Distributor, Inc., the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee who
is an "affiliated person" of either First Union National Bank of North Carolina
or Evergreen Asset Management Corp. or their affiliates. See "Investment
Adviser." Currently, none of the Trustees is an "affiliated person" as defined
in the 1940 Act. The Trusts pay each Trustee who is not an "affiliated person"
an annual retainer and a fee per meeting attended, plus expenses (and $50 for
each telephone conference meeting) as follows:
Name of Trust/Fund Annual Retainer Meeting Fee
Total Return 5,500 300
Growth and Income 500 100
The Evergreen American Retirement Trust 1,000
American Retirement 100
Small Cap 100
Evergreen Foundation Trust 500
Foundation 100
Tax Strategic 100
Evergreen Investment Trust 9,000** 1,500**
Balanced
Utility
Value
- --------------------
** Evergreen Investment Trust pays an annual retainer to each trustee and a
per-meeting fee that are allocated among its fifteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
14
<PAGE>
Set forth below for each of the Trustees is the aggregate compensation
paid to such Trustees by each Trust for the fiscal year ended December 31, 1994
(fiscal year ended January 31, 1995 for Total Return)
Total
Compensation
Aggregate Compensation From Trust From Trusts &
Fund Complex
Name of Total Growth Retirement Foundation Investment Paid
Person Return* & Income Trust Trust Trust** to Trustees
- ------ ------ -------- ---------- ---------- ---------- -----------
Laurence Ashkin 7,150 1,050 1,569 1,137 29,800
Foster Bam 7,150 1,050 1,569 1,137 29,850
James S. Howell 3,150 400 660 444 14,900 26,900
Robert J.
Jeffries 7,150 1,050 1,569 1,137 29,800
Gerald M.
McDonnell 3,450 500 760 544 11,900 26,100
Thomas L.
McVerry 3,450 500 760 544 11,900 26,150
William Walt
Pettit 3,450 500 760 544 11,900 26,100
Russell A.
Salton, III, M.D. 3,450 500 760 544 11,900 26,100
Michael S.
Scofield 3,400 500 710 494 11,700 25,650
* Total Return changed its fiscal year end during the period covered by the
foregoing table from March 31 to January 31. Accordingly, the Trustees fees
reported in the foregoing table reflect, for Total Return, the period from April
1, 1994 to January 31, 1995.
** Formerly known as First Union Funds.
No officer or Trustee of the Trusts owned B or C shares of any Fund as
of the date hereof. The number and percent of outstanding shares of each Fund
owned by officers and Trustees as a group on June 15, 1995, is as follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of Class Y
Name of Fund as a Group Shares Outstanding
Balanced -0- -0-
Total Return 31,953 .06%
Growth and Income 116,111 2.08%
American Retirement 63,016 1.93%
Small Cap -0- -0-
Foundation 213,803 .74%
Tax Strategic -0- -0-
Utility -0- -0-
Value -0- -0-
Set forth below is information with respect to each person, who, to
each Fund's knowledge, owned beneficially or of record more than 5% of a class
15
<PAGE>
of each Fund's total outstanding shares and their aggregate ownership of the
Fund's total outstanding shares as of June 15, 1995.
Name of % of
Name and Address Fund/Class No. of Shares Class/Fund
- ---------------- ---------- ------------- ---------------
Fubs & Co. Febo Balanced/C 9,013 45.90%/.01%
Naomi Hamuy
Benjamin Hamyu Poa
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Balanced/C 1,847 9.41%/0%
Leroy Selby, Jr.
Leroy Selby, III
C/O First Union National Bank
301 S. Tron Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Balanced/C 1,330 6.77%/0%
Mary Martha McBee Summerour
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Balanced/Y 67,402,700 98.22%/42.98%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/A 6,946 9.36%/.01%
Addice Denham and
Lucretia Young
C/O First Union National Bank
301 S. Tryon Street
Charlotee, NC 28288-0001
Fubs & Co. Febo Total Return/A 4,167 5.62%/.01%
Janet P. Lipov and
Larry A. Lipov
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 693 13.53%/0%
Emmett L. Howell
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 691 13.53%/0%
Emmett L. Howell
1221 W. Broad Street
Griffin, GA 30223-2154
Fubs & Co. Febo Total Return/C 579 11.35%/0%
Grace L. Nielsen Trust
Grace L. Nielsen TTEE
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 1,153 22.57%/0%
F. C. Tyler and
Lisette W. Tyler
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 284 5.57%/0%
Richard D. Dresdner
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 532 10.43%/0%
John P. Kolb
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
16
<PAGE>
Fubs & Co. Febo Total Return/C 545 10.88%/0%
Wanda L. Cardin
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Total Return/C 538 10.53%/0%
Betty C. Starrett
Willis M. Callaway, Jr.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank-NC Total Return/C 537 10.53%/0%
C/F, Inc.
Marsha Marie Berls IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
John Hancock Clearing Corp. Growth & Income/C 3,079 5.34%/.04%
1 World Financial Center
200 Liberty Street
New York, NY 10281-1003
Fubs & Co. Febo Growth & Income/C 29,868 51.78%/.42%
Clara Caudill
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Charles Schwab & Co. Inc. Growth & Income/Y 792,727 14.17%/11.11%
Reinvest Account
Attn. Mutual Funds Dept.
101 Mongomery Street
San Francisco, CA 94104-4122
First Union National Bank/EB/INT Growth & Income/Y 485,404 8.67%/6.80%
Reinvest Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911
Stephen A. Lieber Growth & Income/Y 498,119 8.90%/6.98%
C/O Lieber & Co.
Purchase, NY 10577
Fubs & Co. Febo American Retirement/A 1,704 13.14%/.05%
Theodora H. Wendler
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/A 2,248 17.33%/.07%
Walter E. Gilbert
Alice J. Gilbert
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- American Retirement/A 1,796 13.84%/.05%
VA C/F
Ruth L. Harris IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- American Retirement/A 1,696 13.07%/.05%
VA C/F
William P. Clements IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- American Retirement/A 1,926 14.84%/.06%
FL C/F
Audrey F. Newell IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
17
<PAGE>
First Union National Bank- American Retirement/A 1,571 12.11%/.05%
GA C/F
William Lee Barker IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/B 3,801 5.65%/.11%
Walter E. Vermilya
506 Pleasant Hill Drive
Richmond, VA 23236
First Union National Bank Cust American Retirement/B 5,414 8.04%/.16%
Fredric C. Porton
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo American Retirement/B 4,645 6.90%/.14%
Edyth E. Brigham Rev. Liv.
Trust
Edyth E. Brigham TTEE
U/A/D 04/03/76
C/O First Union National Bank
301 S Tryon Street Charlotte, NC
28288-0001
First Union National Bank- American Retirement/C 751 97.45%/.02%
VA C/F
James L. Wilkinson Rollover IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Charles Schwab & Co. Inc. American Retirement/Y 183,524 5.63%/5.48%
Cash Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
Charles Schwab & Co. Inc.
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122 American Retirement/Y 689,073 21.12%/20.58%
Stephen A. Lieber American Retirement/Y 166,600 5.11%/4.98%
C/O Lieber & Co.
Purchase, NY 10577
Fubs & Co. Febo Small Cap/A 8,158 48.96%/1.44%
Elizabeth M. Screven
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/A 1,038 8.26%/.24%
FL C/F
Aura Dominguez
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Small Cap/A 2,484 19.75%/.58%
Dorothy Friedland
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/B 824 6.59%/.19%
NC C/F
Harold T. Brooks IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Small Cap/B 727 5.82%/.17%
Manuel A. Barrios DDS
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
18
<PAGE>
Fubs & Co. Febo Small Cap/B 632 5.05%/.15%
Silvia M. Tamayo
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/B 681 5.45%/.16%
VA C/F
Wayne H. Sherman IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/B 1,253 10.02%/.29%
NC C/F
J. Kevin Moore IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/B 1,439 11.51%/.34%
FL C/F
Robert H. Carr IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/B 1,317 10.53%/.31%
NC C/F
Eric W. Johnson IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 104 5.38%/.02%
FL C/F, Inc.
Michael A. Sorg IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 104 5.38%/.02%
FL C/F, Inc.
Matthew R. Sorg IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 1,289 66.75%/.30%
VA C/F, Inc.
Bruce S. Barker SEP
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Small Cap/C 412 21.36%/.10%
VA C/F
Brenton S. Farmer SEP
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
Nola Maddox Falcone Small Cap/Y 53,272 13.31%/12.46%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Stephen A. Lieber Small Cap/Y 106,548 26.62%/24.95%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Charles Schwab & Co. Inc. Small Cap/Y 26,816 6.70%/6.27%
Reinvest Account
101 Montgomery Street
Mutual Fund Dept.
San Francisco, CA 94104-4122
First Union National Bank/EB Small Cap/Y 87,728 18.92%/20.53%
Cash Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911
19
<PAGE>
North Carolina Trust Co. Foundation/A 178,455 7.25%/.46%
FBO Miller Clinic
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Foundation/C 18,070 5.45%/.05%
Holmes Drug Co. Inc.
Employees Pension Plan
U/A/D 01/02/69
F/B/O William J. Miller
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Foundation/C 28,715 8.86%/.07%
Clara Caudill
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Charles Schwab & Co. Inc. Foundation/Y 4,943 17.13%/12.69%
101 Montgomery Street
San Francisco, CA 94104-4122
Mac & Co. Foundation/Y 3,862,477 13.38%/9.92%
A/C 195-643
C/O Mellon Bank NA
Mutual Funds
P.O. Box 320
Pittsburgh, PA 15230-0320
Eleanor C. McCallum TR Tax Strategic /A 5,577 10.47%/.42%
Eleanor C. McCallum Living
Trust U/A 1/14/93
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC
28288-0001
Eleanor C. McCallum TTEE Tax Strategic /A 3,601 7.14%/.27%
McCallum Family Trust
U/A/D 2/9/94
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC
28288-0001
Fubs & Co. Febo Tax Strategic /A 4,576 8.59%/.35%
Curtis J. Morris
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /A 3,542 6.65%/.27%
Judy A. Smith
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /A 4,269 8.02%/.32%
Dr. Thomas E. Baily, Sr.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /A 4,441 8.34%/.34%
Norman N. Dorosin
Harriette H. Dorosin
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. FBO Tax Strategic /A 4,226 7.94%/.32%
Lie Lin
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /B 11,791 5.26%/.89%
Dr. Charles Wm. Kepner
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
20
<PAGE>
Fubs & Co. Febo Tax Strategic /B 12,378 5.52%/.94%
Susan Hooper
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /C 4,758 37.31%/.36%
Harry A. Edwards Jr.
Linda R. Edwards
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /C 675 5.30%/.07%
Evie Kontos
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Strategic /C 782 6.14%/.06%
Pearl L. Holland Trustee
Pearl L. Holland Rev. Trust
U/A/D 12/04/89
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC
28288-0001
Fubs & Co. Febo Tax Strategic /C 6,516 51.09%/.49%
Wade H. Moser, Jr. M.D.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Nola Maddox Falcone Tax Strategic /Y 95,494 9.24%/7.22%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Constance E. Lieber Tax Strategic /Y 55,928 5.41%/4.23%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Stephen A. Lieber Tax Strategic/Y 484,652 46.89%/36.65%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Fubs & Co. Febo Utility/C 5,556 35.50%/.13%
Elsie B. Strom
Lewis F. Strom
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Utility/C 3,020 19.30%/.07%
Laura Alyce Hulbert
Ronald F. Hulbert
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Utility/C 1,107 7.07%/.03%
Evelyn L. Smith
Greg Smith
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Utility/C 1,086 6.94%/.03%
Max Ray
Jeralyne Ray
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Utility/Y 567,133 83.92%/13.18%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
21
<PAGE>
First Union National Bank Utility/Y 108,640 18.08%/12.52%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Value/C 6,055 18.68%/.14%
Benjamin Hamuy
Naomi Hamuy POA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Value/C 4,307 13.29%/.10
C. Wilson Construction Company
Profit Sharing Plan
U/A/D 7-1-87
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC
28288-0001
Fubs & Co. Febo Value/C 1,826 5.63%/.04%
William H. Smith
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Value/C 1,716 5.30%/.04%
FL C/F
St. Elmo Dowling IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Value/Y 31,721,695 90.20%/60.43%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Value/Y 3,442,203 9.79%/6.56%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
- ---------------------------------
*As a result of his ownership of 36.65%, of the shares of Tax
Strategic, respectively, on June 15, 1995, Mr. Lieber may be deemed to "control"
the Fund, as that term is defined in the 1940 Act. As a result of its
beneficial ownership of 26.63% of the shares of American Retirement on June 15,
1995, Charles Schwab & Co., Inc. may be deemed to "control" the Fund, as that
term is defined in the 1940 Act.
**First Union National Bank of North Carolina and its affiliates act in
various capacities for numerous accounts. As a result of its ownership of
42.98%, 66.99% and 25.7% of Balanced, Value and Utility, respectively, on June
15, 1995, First Union National Bank of North Carolina may be deemed to "control"
each Fund as that term is defined in the 1940 Act.
INVESTMENT ADVISER
(See also "Management of the Fund" in each Fund's Prospectus)
The investment adviser of Total Return, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York or ("Evergreen Asset" or the "Adviser."). Evergreen
Asset is owned by First Union National Bank of North Carolina ("FUNB" or the
"Adviser") which, in turn, is a subsidiary of First Union Corporation ("First
Union"), a bank holding company headquartered in Charlotte, North Carolina. The
investment adviser of Balanced, Utility and Value is FUNB which provides
investment advisory services through its Capital Management Group. The Directors
of Evergreen Asset are Richard K. Wagoner and Barbara I. Colvin. The executive
officers of Evergreen Asset are Stephen A. Lieber, Chairman and Co-Chief
Executive Officer, Nola Maddox Falcone, President and Co-Chief Executive
Officer, Theodore J. Israel, Jr., Executive Vice President, Joseph J. McBrien,
Senior Vice President and General Counsel, and George R. Gaspari, Senior Vice
President and Chief Financial Officer.
On June 30, 1994, Evergreen Asset and Lieber and Company ("Lieber")
were acquired by First Union through certain of its subsidiaries. Evergreen
Asset was acquired by FUNB, a wholly-owned subsidiary (except for directors'
qualifying shares) of First Union, by merger into EAMC Corporation ("EAMC") a
wholly-owned subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset
Management Corp." and succeeded to the business of Evergreen Asset.
Contemporaneously with the succession of EAMC to the business of Evergreen Asset
and its assumption of the name "Evergreen Asset Management Corp.", Total Return,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
entered into a new investment advisory agreement with EAMC and into a
distribution agreement with Evergreen Funds Distributor, Inc. (the
"Distributor"), a subsidiary of Furman Selz Incorporated. At that time, EAMC
also entered into a new sub-advisory agreement with Lieber pursuant to which
Lieber provides certain services to Evergreen Asset in connection with its
duties as investment adviser.
The partnership interests in Lieber, a New York general partnership, were
acquired by Lieber I Corp. and Lieber II Corp., which are both wholly-owned
subsidiaries of FUNB. The
23
<PAGE>
business of Lieber is being continued. The new advisory and sub-advisory
agreements were approved by the shareholders of Total Return, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic at their meeting
held on June 23, 1994, and became effective on June 30, 1994.
Under its Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registration under the Securities Act of 1933,
as amended, and the 1940 Act, printing prospectuses (for existing shareholders)
as they are updated, state qualifications, share certificates, mailings,
brokerage, custodian and stock transfer charges, printing, legal and auditing
expenses, expenses of shareholder meetings and reports to shareholders.
Notwithstanding the foregoing, each Adviser will pay the costs of printing and
distributing prospectuses used for prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
BALANCED Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $4,621,512 $3,425,786 $2,319,251
========== ========== ==========
TOTAL RETURN Year Ended Year Ended Year Ended
1/31/95 3/31/94 3/31/93
Advisory Fee $8,542,289 $11,613,964 $10,671,425
========== =========== ===========
Expense
FOUNDATION Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $2,551,768 $1,290,748 $257,141
========== ========== ========
Expense
Reimbursement $ 7,926
--------
SMALL CAP Year Ended Year Ended
12/31/94 12/31/93
Advisory Fee $ 29,075 $ 4,929
-------- --------
Waiver ($29,075) ($ 4,929)
Net Advisory Fee $ 0 $ 0
========= =========
Expense
Reimbursement $63,704 $16,800
------- -------
UTILITY Year Ended
12/31/94
Advisory Fee $153,458
---------
Waiver ($152,038)
Net Advisory Fee $1,420
=========
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $684,891 $722,166 $528,190
======== ======== ========
AMERICAN Year Ended Year Ended Year Ended
RETIREMENT 12/31/94 12/31/93 12/31/92
Advisory Fee $292,628 $226,080 $152,055
======== ======== ========
Reimbursement $ 16,093
--------
TAX STRATEGIC Year Ended Year Ended
12/31/94 12/31/93
Advisory Fee $ 65,915 $ 4,989
-------- -------
Waiver ($65,915) ($4,989)
Net Advisory Fee $ 0 $ 0
========== =========
Expense
Reimbursement $ 3,777 $ 12,700
--------- ---------
VALUE Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $3,850,673 $3,016,457 $2,208,618
Total Return changed its fiscal year end from March 31 to January 31
during the periods covered by the foregoing table. Accordingly, the investment
advisory fees reported in the foregoing table reflect for Total Return, the
period from April 1, 1994 to January 31, 1995. In addition, Small Cap, Tax
Strategic and Utility commenced operations on October 1, 1993, November 2, 1993
and January 4, 1994, respectively, and, therefore, the first year's figures set
forth in the table above reflect for Small Cap and Tax Strategic investment
advisory fees paid for the period from commencement of operations through
December 31, 1993 and, with respect to Utility, December 31, 1994.
Expense Limitations
Each Adviser's fee will be reduced by, or the Adviser will reimburse
the Funds for any amount necessary to prevent such expenses (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, but inclusive of the
Adviser's fee) from exceeding the most restrictive of the expense limitations
imposed by state securities commissions
24
<PAGE>
of the states in which the Funds' shares are then registered or qualified for
sale. Reimbursement, when necessary, will be made monthly in the same manner in
which the advisory fee is paid. Currently the most restrictive state expense
limitation is 2.5% of the first $30,000,000 of the Fund's average daily net
assets, 2% of the next $70,000,000 of such assets and 1.5% of such assets in
excess of $100,000,000.
In addition, each Adviser has in some instances voluntarily limited
(and may in the future limit) expenses of certain of the Funds. For the four
month period January 1, 1992 to April 30, 1992, Evergreen Asset voluntarily
limited the expenses of American Retirement to 1.50% of average net assets.
Evergreen Asset has voluntarily agreed to reimburse Small Cap and Tax
Strategic to the extent that any of these Funds' aggregate operating expenses
(including the Adviser's fee but excluding interest, taxes, brokerage
commissions, Rule 12b-1 distribution fees and shareholder servicing fees and
extraordinary expenses) exceed 1.50% of their average net assets until such time
as said Funds' net assets reach $15 million.
During the fiscal year ended December 31, 1992, Evergreen Asset
voluntarily absorbed a portion of Foundation's expenses and reimbursed the Fund
for expenses in excess of the voluntary expense limitation in an amount equal to
.03% of its average daily net assets. The voluntary expense limitation and the
absorption of Fund expenses ceased on May 1, 1992.
The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignment. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder. The Investment Advisory Agreements with respect to Total Return,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
were approved by each Fund's shareholders on June 23, 1994, became effective on
June 30, 1994, and will continue in effect until June 30, 1996, and thereafter
from year to year provided that their continuance is approved annually by a vote
of a majority of the Trustees of each Trust including a majority of those
Trustees who are not parties thereto or "interested persons" (as defined in the
1940 Act) of any such party, cast in person at a meeting duly called for the
purpose of voting on such approval or a majority of the outstanding voting
shares of each Fund. With respect to Balanced, Utility and Value, the Investment
Advisory Agreement dated February 28, 1985 and amended from time to time
thereafter was last approved by the Trustees of Evergreen Investment Trust
(formerly, First Union Funds) on April 20, 1995 and it will continue from year
to year with respect to each Fund provided that such continuance is approved
annually by a vote of a majority of the Trustees of Evergreen Investment Trust
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of each Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.
Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions
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occur, the Adviser attempts to allocate the securities, both as to price and
quantity, in accordance with a method deemed equitable to each Fund and
consistent with their different investment objectives. In some cases,
simultaneous purchases or sales could have a beneficial effect, in that the
ability of one Fund to participate in volume transactions may produce better
executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to permit
purchase and sales transactions to be effected between each Fund and the other
registered investment companies for which either Evergreen Asset or FUNB acts as
investment adviser or between the Fund and any advisory clients of Evergreen
Asset, FUNB or Lieber & Company. Each Fund may from time to time engage in such
transactions but only in accordance with these procedures and if they are
equitable to each participant and consistent with each participant's investment
objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the fiscal years ended December 31, 1994, 1993 and 1992,
Balanced incurred $779,584, $597,752 and $427,255, respectively, in
administrative service costs. For the period from January 4, 1994 (commencement
of operations) to December 31, 1994, Utility incurred $104,384 in administrative
service costs, all of which was voluntarily waived. For the fiscal years ended
December 31, 1994, 1993 and 1992, Value incurred $649,487, $526,836 and $407,134
in administrative service costs, of which $17,263 were voluntarily waived in
1992.
Commencing July 1, 1995, Evergreen Asset will provide administrative
services to each of the portfolios of Evergreen Investment Trust for a fee based
on the average daily net assets of each fund administered by Evergreen Asset for
which Evergreen Asset or FUNB also serves as investment adviser, calculated
daily and payable monthly at the following annual rates: .050% on the first $7
billion; .035% on the next $3 billion; .030% on the next $5 billion; .020% on
the next $10 billion; .015% on the next $5 billion; and .010% on assets in
excess of $30 billion. Furman Selz Incorporated, the parent of the Distributor,
serves as sub-administrator to Balanced, Utility and Value and is entitled to
receive a fee from each Fund calculated on the average daily net assets of each
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which FUNB or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .0100% of the
first $7 billion; .0075% on the next $3 billion; .0050% on the next $15 billion;
and .0040% on assets in excess of $25 billion. The total assets of mutual funds
administered by Evergreen Asset for which Evergreen Asset or FUNB serves as
investment adviser as of March 31, 1995 were approximately $7.95 billion.
DISTRIBUTION PLANS
Reference is made to "Management of the Fund - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, B and C shares and are charged as class expenses,
as accrued. The distribution fees attributable to the Class B shares and Class C
shares are designed to permit an investor to purchase such shares through
broker-dealers without the assessment of a front-end sales charge, and, in the
case of Class C shares, without the assessment of a contingent deferred sales
charge after the first year following purchase, while at the same time
permitting the Distributor to compensate broker-dealers in connection with the
sale of such shares. In this regard the purpose and function of the combined
contingent deferred sales charge and distribution services fee on the Class B
shares and the Class C shares, are the same as those of the front-end sales
charge and distribution fee with respect to the Class A shares in that in each
case the sales charge and/or distribution fee provide for the financing of the
distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plan and the purposes for which such expenditures
were made to the Trustees of each Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of
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Trustees who are not "interested persons" of each Trust (as defined in the 1940
Act) are committed to the discretion of such disinterested Trustees then in
office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Growth and Income, Total Return, American Retirement, Small Cap,
Foundation and Tax Strategic commenced offering Class A, B or C shares on
January 3, 1995. Each Plan with respect to such Funds became effective on
December 30, 1994 and was initially approved by the sole shareholder of each
Class of shares of each Fund with respect to which a Plan was adopted on that
date and by the unanimous vote of the Trustees of each Trust, including the
disinterested Trustees voting separately, at a meeting called for that purpose
and held on December 13, 1994. The Distribution Agreements between each Fund and
the Distributor pursuant to which distribution fees are paid under the Plans by
each Fund with respect to its Class A, Class B and Class C shares were also
approved at the December 13, 1994 meeting by the unanimous vote of the Trustees,
including the disinterested Trustees voting separately. Each Plan and
Distribution Agreement will continue in effect for successive twelve-month
periods provided, however, that such continuance is specifically approved at
least annually by the Trustees of each Trust or by vote of the holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
that Class, and, in either case, by a majority of the Trustees of the Trust who
are not parties to the Agreement or interested persons, as defined in the 1940
Act, of any such party (other than as Trustees of the Trust) and who have no
direct or indirect financial interest in the operation of the Plan or any
agreement related thereto.
Prior to July 8, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for Balanced, Utility and Value
as well as other portfolios of Evergreen Investment Trust. The Distribution
Agreements between each Fund and the Distributor pursuant to which distribution
fees are paid under the Plans by each Fund with respect to its Class A, Class B
and Class C shares were approved on June 15, 1995 by the unanimous vote of the
Trustees including the disinterested Trustees voting separately.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to each Fund and holders of Class A, Class B
and Class C shares and (ii) stimulate administrators to render administrative
support services to the Fund and holders of Class A, Class B and Class C shares.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to providing office space, equipment, telephone facilities, and
various personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B and Class C shares; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Fund reasonably requests for its Class A, Class B and Class C shares.
In addition to the Plans, Balanced, Utility and Value have each adopted
a Shareholder Services Plan whereby shareholder servicing agents may receive
fees from the Fund for providing services which include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance, and communicating or facilitating purchases and redemptions of Class
B and Class C shares of the Fund.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities,
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voting separately by Class, and in either case, by a majority of the
disinterested Trustees, cast in person at a meeting called for the purpose of
voting on such approval; and any Plan or Distribution Agreement may not be
amended in order to increase materially the costs that a particular Class of
shares of a Fund may bear pursuant to the Plan or Distribution Agreement without
the approval of a majority of the holders of the outstanding voting shares of
the Class affected. With respect to Balanced, Utility, and Value, amendments to
the Shareholder Services Plan require a majority vote of the disinterested
Trustees but do not require a shareholders vote. Any Plan, Shareholder Services
Plan or Distribution Agreement may be terminated (a) by a Fund without penalty
at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by Class or by a majority vote of the
Trustees who are not "interested persons" as defined in the 1940 Act, or (b) by
the Distributor. To terminate any Distribution Agreement, any party must give
the other parties 60 days' written notice; to terminate a Plan only, the Fund
need give no notice to the Distributor. Any Distribution Agreement will
terminate automatically in the event of its assignment.
For the fiscal year ended December 31, 1994, Balanced incurred $102,621
and Value incurred $473,347 in distribution services fees on behalf of Class A
shares. For the period from January 4, 1994 (commencement of operations) to
December 31, 1994, Utility incurred $9,658 in distribution services fees on
behalf of Class A shares.
For the fiscal year ended December 31, 1994, Balanced incurred $670,202
and Value incurred $621,330 in distribution services fees of Class B shares. For
the period from January 4, 1994 (commencement of operations) to December 31,
1994, Utility incurred $169,007 in distribution services fees on behalf of Class
B shares.
For the period from September 2, 1994 (commencement of operations) to
December 31, 1994, Balanced incurred $310, Value incurred $716 and Utility
incurred $232 in distribution services fees on behalf of Class C shares.
Shareholder Services Plans - Balanced, Utility and Value
For the period ended December 31, 1994, Balanced incurred shareholder
services fees of $83,641 and $103 on behalf of Class B shares and Class C
shares, respectively; Utility incurred shareholder services fees of $24,141 and
$77 on behalf of Class B shares and Class C shares, respectively; and Value
incurred shareholder services fees of $83,225 and $239 on behalf of Class B
shares and Class C shares, respectively.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser,
subject to the supervision and control of the Trustees. Orders for the purchase
and sale of securities and other investments are placed by employees of the
Adviser, all of whom, in the case of Evergreen Asset, are associated with
Lieber. In general, the same individuals perform the same functions for the
other funds managed by the Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
A substantial portion of the transactions in equity securities for each
Fund will occur on domestic stock exchanges. Transactions on stock exchanges
involve the payment of brokerage commissions. In transactions on stock exchanges
in the United States, these commissions are negotiated, whereas on many foreign
stock exchanges these commissions are fixed. In the case of securities traded in
the foreign and domestic over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup.
Over-the-counter transactions will generally be placed directly with a principal
market maker, although the Fund may place an over-the-counter order with a
broker-dealer if a better price (including commission) and execution are
available.
It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased
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from an underwriter usually includes a commission paid by the issuer to the
underwriter. Purchases or sales from dealers will normally reflect the spread
between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. A Fund will also consider such factors as the price of the securities and
the size and difficulty of execution of the order. If these objectives may be
met with more than one firm, the Fund will also consider the availability of
statistical and investment data and economic facts and opinions helpful to the
Fund. To the extent that receipt of these services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the Securities and Exchange Commission,
Lieber may be compensated for effecting transactions in portfolio securities for
a Fund on a national securities exchange provided the conditions of the rules
are met. Each Fund advised by Evergreen Asset has entered into an agreement with
Lieber authorizing Lieber to retain compensation for brokerage services. In
accordance with such agreement, it is contemplated that Lieber, a member of the
New York and American Stock Exchanges, will, to the extent practicable, provide
brokerage services to the Fund with respect to substantially all securities
transactions effected on the New York and American Stock Exchanges. In such
transactions, a Fund will seek the best execution at the most favorable price
while paying a commission rate no higher than that offered to other clients of
Lieber or that which can be reasonably expected to be offered by an unaffiliated
broker-dealer having comparable execution capability in a similar transaction.
However, no Fund will engage in transactions in which Lieber would be a
principal. While no Fund advised by Evergreen Asset contemplates any ongoing
arrangements with other brokerage firms, brokerage business may be given from
time to time to other firms. In addition, the Trustees have adopted procedures
pursuant to Rule 17e-1 under the 1940 Act to ensure that all brokerage
transactions with Lieber, as an affiliated broker-dealer, are fair and
reasonable.
Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements does not provide for a
reduction of the Adviser's fee with respect to any fund by the amount of any
profits earned by Lieber from brokerage commissions generated by portfolio
transactions of the Fund.
The following chart shows: (1) the brokerage commissions paid by each
Fund advised by Evergreen Asset during their last three fiscal years; (2) the
amount and percentage thereof paid to Lieber; and (3) the percentage of the
total dollar amount of all portfolio transactions with respect to which
commissions have been paid which were effected by Lieber:
TOTAL RETURN Period Ended Year Ended Year Ended
1/31/95 3/31/94 3/31/93
Total Brokerage $3,755,606 $3,234,684 $4,873,169
Commissions
Dollar Amount and % $3,465,900 $3,199,114 $4,842,437
paid to Lieber 92% 99% 99%
% of Transactions
Effected by Lieber 97% 99% 99%
FOUNDATION Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Total Brokerage $282,250 $291,295 $128,811
Commissions
Dollar Amount and % $276,985 $284,864 $124,801
paid to Lieber 98% 98% 97%
% of Transactions
Effected by Lieber 98% 98% 96%
SMALL CAP Year Ended Period Ended
12/31/94 12/31/93
Total Brokerage $3,998 $2,091
Commissions
Dollar Amount and % $3,618 $1,729
paid to Lieber 90% 83%
% of Transactions
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Effected by Lieber 90% 73%
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Total Brokerage $80,871 $76,427 $66,266
Commissions
Dollar Amount and % $71,721 $66,670 $57,686
paid to Lieber 89% 87% 87%
% of Transactions
Effected by Lieber 88% 84% 86%
AMERICAN RETIREMENT Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Total Brokerage $203,922 $99,435 $99,293
Commissions
Dollar Amount and % $202,838 $96,950 $98,793
paid to Lieber 99% 98% 99%
% of Transactions
Effected by Lieber 99% 98% 99%
TAX STRATEGIC Year Ended Period Ended
12/31/94 12/31/93
Total Brokerage $24,872 $3,260
Commissions
Dollar Amount and % $24,072 $3,210
paid to Lieber 97% 98%
% of Transactions
Effected by Lieber 98% 98%
Total Return changed its fiscal year end from March 31 to January 31
during the periods covered by the foregoing table. Accordingly, the commissions
reported in the foregoing table reflect for Total Return the period from April
1, 1994 to January 31, 1995. In addition, Small Cap and Tax Strategic commenced
operations on October 1, 1993 and November 2, 1993, respectively, and,
therefore, the first year's figures set forth in the table above reflect
commissions paid for the period from commencement of operations through December
31, 1993.
Balanced, Value and Utility did not pay any commissions to Lieber. For
the fiscal years ended December 31, 1994, 1993 and 1992, Balanced paid $450,569,
$389,044 and $152,802, respectively, in commissions on brokerage transactions.
For the period from January 4, 1994 (commencement of operations) to December 31,
1994, Utility paid $66,294 in commissions on brokerage transactions. For the
fiscal years ended December 31, 1994, 1993 and 1992, Value paid $1,437,338,
$894,400 and $642,338, respectively, in commissions on brokerage transactions.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities and other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in such securities; (b) derive less than 30% of its gross income from the sale
or other disposition of securities, options, futures or forward contracts (other
than those on foreign currencies), or foreign currencies (or options, futures or
forward contracts thereon) that are not directly related to the RIC's principal
business of investing in securities (or options and futures with respect
thereto) held for less than three months; and (c) diversify its holdings so
that, at the end of each quarter of its taxable year, (i) at least 50% of the
market value of the Fund's total assets is represented by cash, U.S. government
securities and other securities limited in respect of any one issuer, to an
amount not greater than 5% of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies).
By so qualifying, a Fund is not subject to Federal income tax if it timely
distributes its investment company taxable income and any net realized capital
gains. A 4% nondeductible excise tax will be imposed on a Fund to the extent it
does not meet certain distribution requirements by the end of each calendar
year. Each Fund anticipates meeting such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
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Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.
Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the
forthcoming distribution. Those purchasing just prior to a distribution will
then receive what is in effect a return of capital upon the distribution which
will nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% Federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Strategic
With respect to Tax Strategic, to the extent that the Fund distributes
exempt interest dividends to a shareholder, interest on indebtedness incurred or
continued by such shareholder to purchase or carry shares of the Fund is not
deductible. Furthermore, entities or persons who are "substantial users" (or
related persons) of facilities financed by "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds) should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is defined generally as including a "non-exempt
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person" who regularly uses in its trade or business a part of a facility
financed from the proceeds of industrial development bonds.
The percentage of the total dividends paid by a Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
The following information supplements that set forth in each Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value,
plus, in the case of Class A shares, a sales charge which will vary depending on
the purchase alternative chosen by the investor, as more fully described in the
Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales Charge
Alternative. " On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in which a Fund
invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any weekday,
exclusive of national holidays on which the Exchange is closed and Good Friday.
For each Fund, securities for which the primary market is on a domestic or
foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked prices and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
The respective per share net asset values of the Class A, Class B,
Class C and Class Y shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of the Class B
and Class C shares may be lower than the per share net asset value of the Class
A shares (and, in turn, that of Class A shares may be lower than Class Y shares)
as a result of the greater daily expense accruals, relative to Class A and Class
Y shares, of Class B and Class C shares relating to distribution services fees
(and, with respect to Balanced, Utility and Value, shareholder service fee) and,
to the extent applicable, transfer agency fees and the fact that Class Y shares
bear no additional distribution, shareholder service or transfer agency related
fees. While it is expected that, in the event each Class of shares of a Fund
realizes net investment income or does not realize a net operating loss for a
period, the per share net asset values of the four classes will tend to converge
immediately after the payment of dividends, which dividends will differ by
approximately the amount of the expense accrual differential among the Classes,
there is no assurance that this will be the case. In the event one or more
Classes of a Fund experiences a net operating loss for any fiscal period, the
net asset value per share of such Class or Classes will remain lower than that
of Classes that incurred lower expenses for the period.
To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York.
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Furthermore, trading takes place in various foreign markets on days which are
not business days in New York and on which the Fund's net asset value is not
calculated. Such calculation does not take place contemporaneously with the
determination of the prices of the majority of the portfolio securities used in
such calculation. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of the Exchange will
not be reflected in a Fund's calculation of net asset value unless the Trustees
deem that the particular event would materially affect net asset value, in which
case an adjustment will be made. Securities transactions are accounted for on
the trade date, the date the order to buy or sell is executed. Dividend income
and other distributions are recorded on the ex-dividend date, except certain
dividends and distributions from foreign securities which are recorded as soon
as the Fund is informed after the ex-dividend date.
PURCHASE OF SHARES
The following information supplements that set forth in each Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares."
General
Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value plus an initial sales charge at the time of
purchase (the "front-end sales charge alternative"), with a contingent deferred
sales charge (the deferred sales charge alternative"), or without any front-end
sales charge, but with a contingent deferred sales charge imposed only during
the first year after purchase (the "level-load alternative"), as described
below. Class Y shares which, as described below, are not offered to the general
public, are offered without any front-end or contingent sales charges. Shares of
each Fund are offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Distributor ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with the
Distributor ("selected agents"), or (iii) the Distributor. The minimum for
initial investments is $1,000; there is no minimum for subsequent investments.
The subscriber may use the Share Purchase Application available from the
Distributor for his or her initial investment. Sales personnel of selected
dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A, Class B or Class C shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a
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<PAGE>
Fund business day, the order to purchase shares is automatically placed the same
Fund business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing Class Y shares of a Fund are not issued except upon written request
to the Fund by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen certificates. No
certificates are issued for fractional shares, although such shares remain in
the shareholder's account on the records of a Fund, or for Class A, B or C
shares of any Fund.
Alternative Purchase Arrangements
Each Fund issues four classes of shares: (i) Class A shares, which are
sold to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; (iii) Class C shares, which are sold to investors choosing the
level-load sales charge alternative; and (iv) Class Y shares, which are offered
only to (a) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (b) certain investment advisory clients
of the Advisers and their affiliates, and (c) institutional investors. The four
classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (I) only Class A, Class B and Class C shares are subject to a Rule
12b-1 distribution fee, (II) Class B and Class C shares of Balanced, Utility and
Value are subject to a shareholder service fee, (III) Class A shares bear the
expense of the front-end sales charge and Class B and Class C shares bear the
expense of the deferred sales charge, (IV) Class B shares and Class C shares
each bear the expense of a higher Rule 12b-1 distribution services fee and
shareholder service fee than Class A shares and, in the case of Class B shares,
higher transfer agency costs, (V) with the exception of Class Y shares, each
Class of each Fund has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services (and, to the extent
applicable, shareholder service) fee is paid which relates to a specific Class
and other matters for which separate Class voting is appropriate under
applicable law, provided that, if the Fund submits to a simultaneous vote of
Class A, Class B and Class C shareholders an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder with respect to
the Class A shares, the Class A shareholders and the Class B and Class C
shareholders will vote separately by Class, and (VI) only the Class B shares are
subject to a conversion feature. Each Class has different exchange privileges
and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, shareholder service) fee and contingent deferred sales
charges on Class B shares prior to conversion, or the accumulated distribution
services (and, to the extent applicable, shareholder service) fee on Class C
shares, would be less than the front-end sales charge and accumulated
distribution services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher return of Class A
shares. Class B and Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at the lowest applicable sales
charge. For this reason, the Distributor will reject any order (except orders
for Class B shares from certain retirement plans) for more than $2,500,000 for
Class B or Class C shares.
Class A shares are subject to a lower distribution services fee and no
shareholder service fee and, accordingly, pay correspondingly higher dividends
per share than Class B shares or Class C shares. However, because front-end
sales charges are deducted at the time of purchase, investors purchasing Class A
shares would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced front-end sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A shares because the accumulated continuing
distribution (and, to the extent applicable, shareholder service) charges on
Class B shares or Class C shares may exceed the front-end sales charge on Class
A
34
<PAGE>
shares during the life of the investment. Again, however, such investors must
weigh this consideration against the fact that, because of such front-end sales
charges, not all their funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution services (and, to the extent applicable, shareholder service) fees
and, in the case of Class B shares, being subject to a contingent deferred sales
charge for a seven-year period. For example, based on current fees and expenses,
an investor subject to the 4.75% front-end sales charge would have to hold his
or her investment approximately seven years for the Class B and Class C
distribution services (and, to the extent applicable, shareholders service)
fees, to exceed the front-end sales charge plus the accumulated distribution
services fee of Class A shares. In this example, an investor intending to
maintain his or her investment for a longer period might consider purchasing
Class A shares. This example does not take into account the time value of money,
which further reduces the impact of the Class B and Class C distribution
services (and, to the extent applicable, shareholder service) fees on the
investment, fluctuations in net asset value or the effect of different
performance assumptions.
Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the seven year period
during which Class B shares are subject to a contingent deferred sales charge
may find it more advantageous to purchase Class C shares.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B, Class C
and Class Y shares. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
Front-end Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing the
front-end sales charge alternative is the net asset value plus a sales charge as
set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
<TABLE>
<CAPTION>
Net Per Share
Asset Sales
Value Charge Date
<S> <C> <C> <C>
Balanced $11.17 $.56 12/31/94
Growth and
35
<PAGE>
Income $14.52 $.72 12/31/94 $15.24
Total Return $17.28 $.86 1/31/95 $18.14
American
Retirement $10.67 $.53 12/31/94 $11.20
Small Cap $9.70 $.48 12/31/94 $10.18
Offering Net Per Share Offering
Price Asset Sales Price Per
Per Share Value Charge Date Share
<C> <C> <C> <C> <C> <C>
Foundation $12.27 $.61 12/31/94 $12.88
Tax Strategic $10.27 $.51 12/31/94 $10.78
Utility $ 9.00 $.45 12/31/94 $ 9.45
$11.73 Value $16.62 $.83 12/31/94 $17.45
Prior to January 3, 1995, shares of the Funds other than Balanced,
Utility and Value were offered exclusively on a no-load basis and, accordingly,
no underwriting commissions were paid in respect of sales of shares of the Funds
or retained by the Distributor. In addition, since Class B and Class C shares
were not offered prior to January 3, 1995, contingent deferred sales charges
have been paid to the distributor with respect to Class B or Class C shares only
since January 3, 1995.
With respect to Balanced, Utility and Value for the periods indicated,
the following commissions were paid to and amounts were retained by Federated
Securities Corp., which, prior to July 8, 1995, was the principal underwriter of
portfolios of Evergreen Investment Trust:
Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
BALANCED:
Commissions Received $605,000 $283,000 $360,000
Commissions Retained 12,000 42,000 55,000
VALUE:
Commissions Received $1,003,000 $392,000 $713,000
Commissions Retained 36,000 59,000 107,000
Period From
January 4, 1994
UTILITY: to December 31, 1994
Commissions Received $243,000
Commissions Retained 10,000
With respect to Total Return for the period indicated, the following
commissions were paid to and amounts were retained by Evergreen Funds
Distributor Inc:
Period from January 3, 1995
TOTAL RETURN to January 31, 1995
Commissions Received
Commissions Retained
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
mutual funds other than the money market funds into a single "purchase", if the
resulting "purchase" totals at least $100,000. The term "purchase" refers to:
(i) a single purchase by an individual, or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his or
her spouse and their children under the age of 21 years purchasing shares for
his, her or their own account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company which has not
been in existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
36
<PAGE>
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen mutual fund. Currently, the
Evergreen mutual funds include:
Evergreen Fund
Evergreen Global Real Estate Equity Fund Evergreen U.S. Real Estate Equity Fund
The Evergreen Limited Market Fund, Inc. Evergreen Growth and Income Fund
Evergreen Total Return Fund Evergreen American Retirement Fund Evergreen Small
Cap Equity Income Fund Evergreen Tax Strategic Foundation Fund Evergreen
Short-Intermediate Municipal Fund Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Tax Exempt Money Market Fund Evergreen Money Market Fund Evergreen
U.S. Government Fund* Evergreen Foundation Fund Evergreen Florida High Income
Fund Evergreen Aggressive Growth Fund Evergreen Balanced Fund* Evergreen Utility
Fund* Evergreen Value Fund* Evergreen Fixed Income Fund* Evergreen Managed Bond
Fund* Evergreen Emerging Markets Growth Fund* Evergreen International Equity
Fund* Evergreen Treasury Money Market Fund* Evergreen Florida Municipal Bond
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*
* Prior to July 7, 1995, each Fund was named "First Union" instead of "Evergreen."
Prospectuses for the Evergreen Mutual Funds may be obtained without
charge by contacting the Distributor or the Advisers at the address or
telephone number shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the
previous day) of (a) all Class A, Class B and Class C shares
of the Fund held by the investor and (b) all such shares of
any other Evergreen Mutual Fund held by the investor; and
(iii) the net asset value of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned Class A, B or C shares of an
Evergreen mutual fund worth $200,000 at their then current net asset value and,
subsequently, purchased Class A shares of a Fund worth an additional $100,000,
the sales charge for the $100,000 purchase would be at the 3.00% rate applicable
to a single $300,000 purchase of shares of the Fund, rather than the 3.75% rate.
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<PAGE>
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Statement of Intention. Class A investors may also obtain the reduced
sales charges shown in the Prospectus by means of a written Statement of
Intention, which expresses the investor's intention to invest not less than
$100,000 within a period of 13 months in Class A shares (or Class A, Class B
and/or Class C shares) of the Fund or any other Evergreen mutual fund. Each
purchase of shares under a Statement of Intention will be made at the public
offering price or prices applicable at the time of such purchase to a single
transaction of the dollar amount indicated in the Statement of Intention. At the
investor's option, a Statement of Intention may include purchases of Class A, B
or C shares of the Fund or any other Evergreen mutual fund made not more than 90
days prior to the date that the investor signs a Statement of Intention;
however, the 13-month period during which the Statement of Intention is in
effect will begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen mutual funds under a single Statement
of Intention. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in shares of the Fund or any other
Evergreen mutual fund, to qualify for the 3.75% sales charge on the total amount
being invested (the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Statement of Intention is 5% of such amount. Shares purchased with the first 5%
of such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released. To the extent
that an investor purchases more than the dollar amount indicated on the
Statement of Intention and qualifies for a further reduced sales charge, the
sales charge will be adjusted for the entire amount purchased at the end of the
13-month period. The difference in sales charge will be used to purchase
additional shares of the Fund subject to the rate of sales charge applicable to
the actual amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in Class A shares of the Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting a Fund at the address or telephone number
shown on the cover of this Statement of Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain
qualified and non-qualified benefit and savings plans may make shares of the
Evergreen mutual funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative". The Advisers may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen mutual funds available to
their participants.
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except that no loss will
be recognized to the extent that the proceeds are reinvested in shares of the
Fund. The reinstatement
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<PAGE>
privilege may be used by the shareholder only once, irrespective of the number
of shares redeemed or repurchased, except that the privilege may be used without
limit in connection with transactions whose sole purpose is to transfer a
shareholder's interest in the Fund to his or her individual retirement account
or other qualified retirement plan account. Investors may exercise the
reinstatement privilege by written request sent to the Fund at the address
shown on the cover of this Statement of Additional Information.
Sales at Net Asset Value. In addition to the categories of investors
set forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trust; present or former trustees of other investment companies
managed by the Adviser; present or retired full-time employees of the Adviser;
officers, directors and present or retired full-time employees of the Adviser,
the Distributor, and their affiliates; officers, directors and present and
full-time employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives") of any such
person; or any trust, individual retirement account or retirement plan account
for the benefit of any such person or relative; or the estate of any such person
or relative, if such shares are purchased for investment purposes (such shares
may not be resold except to the Fund); (iii) certain employee benefit plans for
employees of the Adviser, the Distributor and their affiliates; (iv) persons
participating in a fee-based program, sponsored and maintained by a registered
broker-dealer and approved by the Distributor, pursuant to which such persons
pay an asset-based fee to such broker-dealer, or its affiliate or agent, for
service in the nature of investment advisory or administrative services. These
provisions are intended to provide additional job-related incentives to persons
who serve the Funds or work for companies associated with the Funds and selected
dealers and agents of the Funds. Since these persons are in a position to have a
basic understanding of the nature of an investment company as well as a general
familiarity with the Fund, sales to these persons, as compared to sales in the
normal channels of distribution, require substantially less sales effort.
Similarly, these provisions extend the privilege of purchasing shares at net
asset value to certain classes of institutional investors who, because of their
investment sophistication, can be expected to require significantly less than
normal sales effort on the part of the Funds and the Distributor.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee (and, with respect to Balanced, Utility and Value, the shareholder
service fee) enables the Fund to sell the Class B shares without a sales charge
being deducted at the time of purchase. The higher distribution services fee
(and, with respect to Balanced, Utility and Value, the shareholder service fee)
incurred by Class B shares will cause such shares to have a higher expense ratio
and to pay lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within seven years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
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<PAGE>
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed, that the redemption is first of any Class A
shares or Class C shares in the shareholder's Fund account, second of Class B
shares held for over eight years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B shares held
longest during the eight-year period.
To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 50 Class B shares, 10
Class B shares will not be subject to charge because of dividend reinvestment.
With respect to the remaining 40 Class B shares, the charge is applied only to
the original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, of the $600 of the shares redeemed $400 of the
redemption proceeds (40 shares x $10 original purchase price) will be charged at
a rate of 4.0% (the applicable rate in the second year after purchase for a
contingent deferred sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee (and, with respect to
Balanced, Utility and Value, the shareholder service fee) imposed on Class B
shares. Such conversion will be on the basis of the relative net asset values of
the two classes, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee (and, with respect to
Balanced, Utility and Value, shareholder service fee) and transfer agency costs
with respect to Class B shares does not result in the dividends or distributions
payable with respect to other Classes of a Fund's shares being deemed
"preferential dividends" under the Code, and (ii) the conversion of Class B
shares to Class A shares does not constitute a taxable event under Federal
income tax law. The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution
services fee for an indefinite period which may extend beyond the period ending
eight years after the end of the calendar month in which the shareholder's
purchase order was accepted.
Level-Load Alternative--Class C Shares
Investors choosing the level load sales charge alternative purchase
Class C shares at the public offering price equal to the net asset value per
share of the Class C shares on the date of purchase without the imposition of a
front-end sales charge. However, you will pay a 1.0% contingent deferred sales
charge if you redeem shares during the first year after purchase. No charge is
imposed in connection with redemptions made more than one year from the date of
purchase. Class C shares are sold without a front-end sales charge so that the
Fund will receive the full amount of the investor's purchase payment and after
the first year without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset value of his or
her Class C shares. The Class C distribution services fee (and, with respect to
Balanced, Utility and Value, shareholder service fee)
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enables the Fund to sell Class C shares without either a front-end or contingent
deferred sales charge. However, unlike Class B shares, Class C shares do not
convert to any other class shares of the Fund. Class C shares incur higher
distribution services fees (and, with respect to Balanced, Utility and Value,
shareholder service fees) than Class A shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class A shares.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
GENERAL INFORMATION ABOUT THE FUNDS (See also "Other
Information - General Information"
in each Fund's Prospectus)
Capitalization and Organization
Each of the Evergreen Growth and Income Fund and Evergreen Total Return
Fund is a Massachusetts business trust. The Evergreen American Retirement Fund
and Evergreen Small Cap Equity Income Fund are each separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust. The
Evergreen Foundation Fund and Evergreen Tax Strategic Foundation Fund are each
separate series of the Evergreen Foundation Trust, a Massachusetts business
trust. The Evergreen Balanced Fund, Evergreen Utility Fund and Evergreen Value
Fund, which prior to July 7, 1995 were known as the First Union Balanced
Portfolio, First Union Utility Portfolio and First Union Value Portfolio,
respectively, are each separate series of Evergreen Investment Trust, a
Massachusetts business trust. On July 7, 1995, First Union Funds changed its
name to Evergreen Investment Trust. On December 14, 1992, The Salem Funds
changed its name to First Union Funds. The above-named Trusts are individually
referred to in this Statement of Additional Information as the "Trust" and
collectively as the "Trusts." Each Trust is governed by a board of trustees.
Unless otherwise stated, references to the "Board of Trustees" or "Trustees" in
this Statement of Additional Information refer to the Trustees of all the
Trusts.
Total Return and Growth and Income may issue an unlimited number of
shares of beneficial interest with a $0.001 par value. American Retirement,
Small Cap, Foundation and Tax Strategic may issue an unlimited number of shares
of beneficial interest with a $0.0001 par value. Balanced, Value and Utility may
issue an unlimited number of shares of beneficial interest without par value.
All shares of these Funds have equal rights and privileges. Each share is
entitled to one vote, to participate equally in dividends and distributions
declared by the Funds and on liquidation to their proportionate share of the
assets remaining after satisfaction of outstanding liabilities. Shares of these
Funds are fully paid, nonassessable and fully transferable when issued and have
no pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Fund or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the
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future, for reasons such as the desire to establish one or more additional
portfolios of a Trust with different investment objectives, policies or
restrictions, additional series of shares may be created by one or more Funds.
Any issuance of shares of another series or class would be governed by the 1940
Act and the law of the State of Massachusetts. If shares of another series of a
Trust were issued in connection with the creation of additional investment
portfolios, each share of the newly created portfolio would normally be entitled
to one vote for all purposes. Generally, shares of all portfolios would vote as
a single series on matters, such as the election of Trustees, that affected all
portfolios in substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Investment Advisory Agreement and
changes in investment policy, shares of each portfolio would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related an other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of each Fund. The rights of the holders of
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of shares representing
interests in each Fund. In the event a Fund were to issue additional Classes of
shares other than those described herein, no further relief from the Securities
and Exchange Commission would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue,
New York, New York 10169, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the Agreement
between the Fund and the Distributor, the Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester, Washington, D.C., serves as counsel to the Funds.
Independent Auditors
Ernst & Young LLP has been selected to be the independent auditors of
Total Return, Growth and Income, American Retirement and Small Cap.
Price Waterhouse LLP has been selected to be the independent auditors
of Foundation and Tax Strategic.
KPMG Peat Marwick LLP has been selected to be the independent auditors
of Balanced, Utility and Value.
PERFORMANCE INFORMATION
Total Return
From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for recent one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by the Securities
and Exchange Commission, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of such
investment at the end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales charge
applicable to purchases of
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<PAGE>
Fund shares is assumed to have been paid. The Fund will include performance data
for Class A, Class B, Class C and Class Y shares in any advertisement or
information including performance data of the Fund.
With respect to Total Return, Growth and Income, American Retirement,
Small Cap, Foundation and Tax Strategic, the shares of each Fund outstanding
prior to January 3, 1995 have been reclassified as Class Y shares. The average
annual compounded total return for each Class of shares offered by the Funds for
the most recently completed one, five and ten year fiscal periods is set forth
in the table below.
TOTAL RETURN 1 Year 5 Years 10 Years
Ended Ended Ended
1/31/95 1/31/95 1/31/95
Class A -9.79% 6.34% 9.06%
Class B -9.68% 7.08% 9.59%
Class C -6.22% 7.36% 9.58%
Class Y -5.29% 7.37% 9.59%
From
GROWTH AND 1 Year 5 Years 10/15/86
INCOME Ended Ended (inception)
12/31/94 12/31/94 to 12/31/94
Class A -3.14% 8.69% 10.53%
Class B -3.02% 9.47% 11.19%
Class C .75% 9.75% 11.19%
Class Y 1.69% 9.75% 11.19%
From
AMERICAN 1 Year 5 Years 3/14/88
RETIREMENT Ended Ended (inception)
12/31/94 12/31/94 to 12/31/94
Class A -7.47% 6.89% 7.86%
Class B -7.46% 7.64% 8.55%
Class C -3.78% 7.93% 8.64%
Class Y -2.86% 7.93% 8.64%
From
SMALL CAP 1 Year 10/1/93
Ended (inception)
12/31/94 to 12/31/94
Class A -5.37% -2.41%
Class B -5.43% -1.67%
Class C -1.61% 1.44%
Class Y -0.65% 1.44%
FOUNDATION 1 Year From 1/2/90
Ended (inception)
12/31/94 to 12/31/94
Class A -5.82% 13.72%
Class B -5.80% 14.60%
Class C -2.06% 14.83%
Class Y -1.12% 14.83%
TAX STRATEGIC 1 Year From 11/02/93
Ended (inception) to
12/31/94 12/31/94
Class A -1.47% 1.74%
Class B -1.54% 2.67%
Class C 2.44% 6.06%
Class Y 3.44% 6.06%
BALANCED 1 Year
Ended From inception*
12/31/94 to 12/31/94
Class A -7.03% 6.05%
Class B -7.85% 0.64%
Class C -- -4.53%
Class Y -2.15% 8.30%
UTILITY From inception**
to 12/31/94
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<PAGE>
Class A -10.10%
Class B -10.93%
Class C - 3.20%
Class Y - 1.55%
VALUE 1 Year 5 Years
Ended Ended From inception***
12/31/94 12/31/94 to 12/31/94
Class A -2.98% 6.71% 11.06%
Class B -3.80% -- 3.15%
Class C -- -- -4.40%
Class Y 2.07% -- 11.06%
* Inception date: Class A - June 6, 1991; Class B - January 25, 1993; Class C -
September 2, 1994; Class Y - April 1, 1991.
** Inception date: Class A - January 4, 1994; Class B - January 4, 1994; Class C
- - September 2, 1994; Class Y - February 28, 1994.
*** Inception date: Class A - April 12, 1985; Class B - January 25, 1993; Class
C - September 2, 1994; Class Y - December 31, 1990.
The performance numbers for Growth and Income, American Retirement,
Small Cap, Foundation and Tax Strategic for the Class A, Class B and Class C
shares are hypothetical numbers based on the performance for Class Y shares as
adjusted for any applicable front-end sales charge or contingent deferred sales
charge. For Total Return the performance numbers for the Class A, Class B and
Class C shares are hypothetical numbers based upon the performance for the Class
Y shares as adjusted for any applicable front-end sales charges or contingent
deferred sales charge through January 3, 1995 (commencement of class operations)
and the actual performance of each class subsequent to January 3, 1995. The
performance data calculated prior to January 3, 1995, does not reflect any Rule
12b-1 fees. If such fees were reflected the returns would be lower.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal invested in a Fund is
not fixed and will fluctuate in response to prevailing market conditions.
YIELD CALCULATIONS
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where a = Interest earned during the period
b = Expenses accrued for the period (net of reimbursements) c = The
average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond funds. Gains and
losses generally are excluded from the calculation. Income calculated for
purposes of determining a Fund's yield differs from income as determined for
other accounting purposes. Because of the
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<PAGE>
different accounting methods used, and because of the compounding assumed in
yield calculations, the yields quoted for a Fund may differ from the rate of
distributions a Fund paid over the same period, or the net investment income
reported in a Fund's financial statements.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The yield of each Fund for the thirty-day period ended December 31,
1994 (May 31, 1995 with respect to Tax Strategic, Growth & Income, American
Retirement, Small Cap, Total Return and Foundation) for each Class of shares
offered by the Funds is set forth in the table
below:
Total Return Tax Strategic
Class A 4.14% Class A 2.59%
Class B 3.62% Class B 2.00%
Class C 3.62% Class C 1.99%
Class Y 4.44% Class Y 2.97%
Growth and Income Balanced
Class A .69% Class A - 4.36%
Class B 0% Class B - 3.82%
Class C .01% Class C - 3.82%
Class Y .92% Class Y - 4.84%
American Retirement Utility
Class A 3.24% Class A - 4.67%
Class B 2.68% Class B - 4.14%
Class C 2.67% Class C - 4.14%
Class Y 3.52% Class Y - 5.16%
Small Cap Value
Class A 3.17% Class A - 3.04%
Class B 2.59% Class B - 2.42%
Class C 2.68% Class C - 2.42%
Class Y 3.57% Class Y - 3.45%
Foundation
Class A 3.41%
Class B 2.90%
Class C 2.47%
Class Y 3.76%
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
GENERAL
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From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, Russell 2000
Index, or any other commonly quoted index of common stock prices. The Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average and the
Russell 2000 Index are unmanaged indices of selected common stock prices. A
Fund's performance may also be compared to those of other mutual funds having
similar objectives. This comparative performance would be expressed as a ranking
prepared by Lipper Analytical Services, Inc. or similar independent services
monitoring mutual fund performance. A Fund's performance will be calculated by
assuming, to the extent applicable, reinvestment of all capital gains
distributions and income dividends paid. Any such comparisons may be useful to
investors who wish to compare a Fund's past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statement filed by the Trusts with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely Ernst & Young, LLP (in the case of Total
Return, Growth and Income, American Retirement and Small Cap), Price Waterhouse
LLP (in the case of Foundation and Tax Strategic) or KPMG Peat Marwick LLP (in
the case of Balanced, Utility and Value) are incorporated by reference in this
Statement of Additional Information. The Annual Reports to Shareholders for each
Fund, which contain the referenced statements, are available upon request and
without charge.
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APPENDIX A - NOTE, BOND AND COMMERCIAL PAPER RATINGS
NOTE RATINGS
Moody's Investors Service, Inc.: MIG-1 -- the best quality. MIG-2 --
high quality, with margins of protection ample though not so large as in the
preceding group. MIG-3 -- favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less well
established.
Standard & Poor's Ratings Group, Inc.: SP-1 -- Very strong or strong
capacity to pay principal and interest. SP-2 -- Satisfactory capacity to pay
principal and interest.
BOND RATINGS
Moody's Investors Service: Aaa -- judged to be the best quality, carry
the smallest degree of investment risk; Aa -- judged to be of high quality by
all standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as medium grade
obligations which are neither highly protected nor poorly secured. Moody's
Investors Service also applies numerical indicators, 1, 2 and 3, to rating
categories Aa through Baa. The modifier 1 indicates that the security is in the
higher end of its rating category; the modifier 2 indicates a mid-range ranking;
and 3 indicates a ranking toward the lower end of the category.
Standard & Poor's Ratings Group: AAA -- highest grade obligations,
possesses the ultimate degree of protection as to principal and interest; AA --
also qualify as high grade obligations, and in the majority of instances differ
from AAA issues only in small degree; A -- regarded as upper medium grade, have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions, interest and principal are regarded
as safe; BBB -- regarded as having adequate capacity to pay interest and repay
principal but are more susceptible than higher rated obligations to the adverse
effects of changes in economic and trade conditions. Standard & Poor's Ratings
Group applies indicators "+", no character, and "-" to the above rating
categories AA through BBB. The indicators show relative standing within the
major rating categories.
Duff & Phelps: AAA - highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which may vary very slightly from time to time because of economic
conditions; A -- average credit quality with adequate protection factors, but
with greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch Investor Service: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with a very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions; and BBB -- satisfactory credit quality with adequate ability with
regard to interest and principal, and likely to be affected by adverse changes
in economic conditions and circumstances. The indicators "+" and "-" to the AA,
A and BBB categories indicate the relative position of a credit within those
rating categories.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries
the smallest degree of investment risk. The modifiers 1, 2 and 3 are used to
denote relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
minimal risk factors. Duff 3
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represents satisfactory protection factors, with risk factors larger and subject
to more variation.
Fitch Investor Service: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1 -- very strong credit quality, with only slightly less
degree of assurance for timely payment than F-1+; F-2 -- good credit quality,
carrying a satisfactory degree of assurance for timely payment.
PROSPECTUS July 7, 1995
EVERGREEN(SM) INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN U.S. GOVERNMENT FUND
EVERGREEN FIXED INCOME FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Income Funds (the "Funds") are designed to provide
investors with a selection of investment alternatives which seek to provide
a high level of current income. This Prospectus provides information
regarding the Class A, Class B and Class C shares offered by the Funds.
Each Fund is, or is a series of, an open-end, diversified, management
investment company. This Prospectus sets forth concise information about
the Funds that a prospective investor should know before investing. The
address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds dated July
7, 1995 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 807-2940. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
</TABLE>
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 9
Investment Practices and Restrictions 11
MANAGEMENT OF THE FUNDS
Investment Adviser 14
Distribution Plans and Agreements 15
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 16
How to Redeem Shares 18
Exchange Privilege 20
Shareholder Services 20
Effect of Banking Laws 21
OTHER INFORMATION
Dividends, Distributions and Taxes 21
Management's Discussion of Fund Performance 22
General Information 22
</TABLE>
OVERVIEW OF THE FUNDS
The following is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank ("CMG") serves
as investment adviser to Evergreen Income Funds which include: EVERGREEN FIXED
INCOME FUND and EVERGREEN U.S. GOVERNMENT FUND. First Union National Bank of
North Carolina ("FUNB"), is a subsidiary of First Union Corporation, one of the
ten largest bank holding companies in the United States.
EVERGREEN FIXED INCOME FUND (formerly First Union Fixed Income Portfolio)
seeks to provide a high level of current income by investing in a broad range of
investment grade debt securities, with capital growth as a secondary objective.
EVERGREEN U.S. GOVERNMENT FUND (formerly First Union U.S. Government
Portfolio) seeks a high level of current income consistent with stability of
principal.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
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EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C Shares of a
Fund. For further information see "Purchase and Redemption of Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as 4.75% None
a % of offering price)
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the second
original purchase price or redemption year, 3% during the third and fourth year, 2%
proceeds, whichever is lower) during the fifth year, 1% during the sixth and
seventh years and 0% after the seventh year
Redemption Fee None None
Exchange Fee None None
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class C Shares
<S> <C>
Maximum Sales Charge Imposed on Purchases (as None
a % of offering price)
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge (as a % of 1% during the
original purchase price or redemption first year and 0%
proceeds, whichever is lower) thereafter
Redemption Fee None
Exchange Fee None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B and C, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares and Class C Shares assume deduction at the time of
redemption (if applicable) of the maximum contingent deferred sales charge
applicable for that time period, and (iii) the expenses for Class B Shares
reflect the conversion to Class A Shares eight years after purchase (years eight
through ten, therefore, reflect Class A expenses).
EVERGREEN U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption no
ANNUAL OPERATING EXPENSES** at End of Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50% After 1 Year $ 57 $ 68 $ 28 $ 18
Administrative Fees .06% .06% .06% After 3 Years $ 78 $ 85 $ 55 $ 55
12b-1 Fees* .25% .75% .75% After 5 Years $ 100 $ 115 $ 95 $ 95
Shareholder Service Fees -- .25% .25% After 10 Years $ 164 $ 177 $ 206 $ 177
Other Expenses .19% .19% .19%
Total 1.00% 1.75% 1.75%
<CAPTION>
Class C
<S> <C> <C>
Advisory Fees After 1 Year $ 18
Administrative Fees After 3 Years $ 55
12b-1 Fees* After 5 Years $ 95
Shareholder Service Fees After 10 Years $ 206
Other Expenses
Total
</TABLE>
EVERGREEN FIXED INCOME FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES** at End of Period Redemption
Class B Class C Class A Class B Class C Class B Class C
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50% After 1 Year $ 55 $ 67 $ 27 $ 17 $ 17
Administrative Fees .06% .06% .06% After 3 Years $ 70 $ 81 $ 51 $ 51 $ 51
12b-1 Fees* .10% .75% .75% After 5 Years $ 86 $ 109 $ 89 $ 89 $ 89
Shareholder Service Fees -- .25% .25% After 10 Years $ 134 $ 158 $ 193 $ 158 $ 193
Other Expenses .07% .07% .07%
Total .73% 1.63% 1.63%
</TABLE>
*Class A Shares can pay up to .75 of 1% of average assets as a 12b-1 fee. For
the forseeable future, the Class A Shares 12b-1 fees will be limited to .25 of
1% of average net assets.
**The estimated annual operating expenses and examples do not reflect fee
waivers and expense reimbursements for the year ended December 31, 1994. Actual
expenses for Class A, B and C Shares net of fee waivers and expense
reimbursements for the year ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EVERGREEN U.S. GOVERNMENT FUND .96% 1.54% 1.71%
EVERGREEN FIXED INCOME FUND .75% 1.50% 1.65%
</TABLE>
3
<PAGE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the year ended December 31, 1994. Such expenses have been
restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds". As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN FIXED INCOME FUND, AND EVERGREEN U.S.
GOVERNMENT FUND has been audited by KPMG Peat Marwick LLP, each Fund's
independent auditors. A report of KPMG Peat Marwick LLP on the audited
information with respect to each Fund is incorporated by reference in the Fund's
Statement of Additional Information. The following information for each Fund
should be read in conjunction with the financial statements and related notes
which are incorporated by reference in the Fund's Statement of Additional
Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS
SHARES SHARES SHARES Y SHARES
JANUARY 11, JANUARY 11, SEPTEMBER 2, SEPTEMBER 2,
YEAR ENDED 1993* THROUGH YEAR ENDED 1993* THROUGH 1994* THROUGH YEAR ENDED 1993* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value,
beginning of
period............... $10.05 $10.00 $10.05 $10.00 $9.39 $10.05 $10.25
Income (loss) from
investment
operations:
Net investment
income............... .66 .68 .61 .63 .20 .69 .25
Net realized and
unrealized gain
(loss) on
investments.......... (.98) .05 (.98) .05 (.32) (.98) (.20)
Total from investment
operations......... (.32) .73 (.37) .68 (.12) (.29) .05
Less distributions to
shareholders from:
Net investment
income............... (.66) (.68) (.61) (.63) (.20) (.69) (.25)
Net asset value, end of
period............... $ 9.07 $10.05 $ 9.07 $10.05 $9.07 $ 9.07 $10.05
TOTAL RETURN+.......... (3.2%) 7.4% (3.8%) 6.9% (1.3%) (2.9%) .5%
RATIOS & SUPPLEMENTAL
DATA
Net assets, end of
period (000's
omitted)............. $23,706 $38,851 $195,571 $ 236,696 $266 $15,595 $14,486
Ratios to average net
assets:
Expenses (a)......... .96% .68%++ 1.54% 1.19%++ 1.71%++ .71% .48%++
Net investment
income (a)......... 6.97% 6.93%++ 6.42% 6.44%++ 6.70%++ 7.27% 7.20%++
Portfolio turnover
rate................. 19% 39% 19% 39% 19% 19% 39%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES CLASS Y SHARES
JANUARY 11, JANUARY 11, SEPTEMBER 2, SEPTEMBER 2,
YEAR ENDED 1993 THROUGH YEAR ENDED 1993 THROUGH 1994 THROUGH YEAR ENDED 1993 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses....... 1.00% .99% 1.58% 1.50% 1.75% .75% .79%
Net investment
income....... 6.93% 6.62% 6.38% 6.13% 6.66% 7.23% 6.89%
</TABLE>
5
<PAGE>
EVERGREEN FIXED INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 4, 1991*
YEAR ENDED DECEMBER 31, THROUGH
1994 1993 1992 DECEMBER 31, 1991
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................... $10.43 $10.41 $10.54 $10.06
Income (loss) from investment operations:
Net investment income.................................................. .65 .69 .70 .71
Net realized and unrealized gain (loss) on investments................. (.91) .19 (.02) .56
Total from investment operations..................................... (.26) .88 .68 1.27
Less distributions to shareholders from:
Net investment income.................................................. (.65) (.68) (.70) (.71)
Net realized gains..................................................... -- (.18) (.11) (.07)
In excess of net investment income..................................... -- -- -- (.01)(b)
Total distributions.................................................. (.65) (.86) (.81) (.79)
Net asset value, end of period......................................... $9.52 $10.43 $10.41 $10.54
TOTAL RETURN +......................................................... (2.6%) 8.7% 6.6% 13.8%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).............................. $345,025 $376,445 $324,068 $ 256,254
Ratios to average net assets:
Expenses............................................................. .65% .66% .69% .69%++(a)
Net investment income................................................ 6.56% 6.41% 6.67% 7.12%++(a)
Portfolio turnover rate................................................ 48% 73% 66% 55%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period and is
not annualized.
++ Annualized
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 4, 1991
THROUGH
DECEMBER 31, 1991
<S> <C>
Expenses....................................................................... .76%
Net investment income.......................................................... 7.05%
</TABLE>
(b) Distributions in excess of net investment income for the year ended December
31, 1991 were a result of certain book and tax timing differences. These
distributions did not represent a return of capital for federal income tax
purposes for the year ended December 31, 1991.
6
<PAGE>
EVERGREEN FIXED INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 28,
NINE MONTHS YEAR 1989*
ENDED ENDED THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1993 1992 1991 1990** 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period....... $10.42 $10.41 $10.54 $9.99 $9.72 $9.50 $9.70
Income (loss) from investment operations:
Net investment income...................... .65 .65 .71 .73 .55 .79 .10
Net realized and unrealized gain (loss) on
investments.............................. (.91) .19 (.06) .60 .24 .20 (.14)
Total from investment operations......... (.26) .84 .65 1.33 .79 .99 (.04)
Less distributions to shareholders from:
Net investment income...................... (.64) (.65) (.67) (.70) (.52) (.77) (.16)
Net realized gains......................... -- (.18) (.11) (.07) -- -- --
In excess of net investment income......... -- -- -- (.01)(b) -- -- --
Total distributions...................... (.64) (.83) (.78) (.78) (.52) (.77) (.16)
Net asset value, end of period............. $9.52 $10.42 $10.41 $10.54 $9.99 $9.72 $9.50
TOTAL RETURN+.............................. (2.6%) 8.3% 6.4% 13.7% 8.3% 10.5% (.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)................................. $19,127 $22,865 $21,488 $17,680 $ 11,765 $6,496 $11,580
Ratios to average net assets:
Expenses................................. .75% .93% .90% .80%(a) 1.01%++(a) 1.00%(a) 1.78%++
Net investment income.................... 6.46% 6.15% 6.79% 7.30%(a) 7.53%++(a) 7.57%(a) 6.10%++
Portfolio turnover rate.................... 48% 73% 66% 53% 27% 32% 18%
</TABLE>
* Commencement of operations.
** The Fund changed its fiscal year end to December 31.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
(a) Net of voluntary expense waivers and reimbursements. If the Fund had borne
all expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1991 DECEMBER 31, 1990 MARCH 31, 1990
<S> <C> <C> <C>
Expenses............................ .89% 1.82% 1.50%
Net investment income............... 7.21% 6.72% 7.07%
</TABLE>
(b) Distributions in excess of net investment income for the year ended December
31, 1991 were a result of certain book and tax timing differences. These
distributions did not represent a return of capital for federal income tax
purposes for the year ended December 31, 1991.
7
<PAGE>
EVERGREEN FIXED INCOME FUND -- CLASS B AND CLASS C SHARES
<TABLE>
<CAPTION>
CLASS B SHARES
JANUARY 25, CLASS C SHARES
1993* SEPTEMBER 2,
YEAR ENDED THROUGH 1993* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................................... $10.44 $10.57 $9.85
Income (loss) from investment operations:
Net investment income......................................................... .58 .58 .18
Net realized and unrealized gain (loss) on investments........................ (.92) .05 (.30)
Total from investment operations............................................ (.34) .63 (.12)
Less distributions to shareholders from:
Net investment income......................................................... (.56) (.58) (.18)
Net realized gains............................................................ -- (.18) --
Total distributions......................................................... (.56) (.76) (.18)
Net asset value, end of period................................................ $9.54 $10.44 $9.55
TOTAL RETURN+................................................................. (3.3%) 6.1% (1.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................................... $ 17,625 $8,876 $512
Ratios to average net assets:
Expenses.................................................................... 1.50% 1.57%++ 1.65%++
Net investment income....................................................... 5.75% 5.42%++ 5.87%++
Portfolio turnover rate....................................................... 48% 73% 48%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
8
9
- --------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Fund are stated below. Each
Fund's investment objective cannot be changed without shareholder approval.
While there is no assurance that each objective will be achieved, the Funds will
endeavor to do so by following the investment policies detailed below. Unless
otherwise indicated, the investment policies of a Fund may be changed by the
Trust's Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
Evergreen Fixed Income Fund
The objective of Evergreen Fixed Income Fund is to attain a high level
of current income, with capital growth as a secondary objective, through
investment in a broad range of investment grade debt securities. The Fund is
suitable for conservative investors who want attractive income and permits them
to participate in a broad portfolio of fixed income securities rather than
purchasing a single issue. While the Fund may invest in securities rated BBB by
Standard & Poor's Ratings Group ("S&P") or Baa by Moody's Investors Service,
Inc. ("Moody's"), the investment adviser currently intends to limit the Fund's
investments to securities rated A or higher by Moody's or S&P, or which, if
unrated, are considered to be of comparable quality by the investment adviser. A
description of the rating categories is contained in an Appendix to the
Statement of Additional Information.
Debt securities may include fixed, adjustable rate, zero coupon, or
stripped securities, debentures, notes, U.S. government securities, and debt
securities convertible into, or exchangeable for, preferred or common stock.
Debt securities may also include mortgage-backed and asset-backed securities
(see "Investment Practices and Restrictions, below)." Stated final maturity for
these securities may range up to 30 years. The duration of the securities will
not exceed 10 years. The Fund intends to maintain a dollar-weighted average
maturity of 5 years or less. Market-expected average life will be used for
certain types of issues in computing the average maturity.
In normal market conditions the Fund may invest up to 20% of its assets
in money market instruments consisting of: (1) high grade commercial paper,
including master demand notes; (2) obligations of banks or savings and loan
associations having at least $1 billion in deposits, including certificates of
deposit and bankers' acceptances; (3) A-rated or better corporate obligations;
(4) obligations issued or guaranteed by the U.S. government or by any agency or
instrumentality of the U.S. government; and (5) repurchase agreements
collateralized by any security listed above.
The types of U.S. government securities in which the Fund may invest
include: direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds, and discount notes of U.S. government
agencies or instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
Farmers Home Administration; Federal Home Loan Banks; Federal Home Loan Mortgage
Corporation; Federal National Mortgage Association; Government National Mortgage
Association; Student Loan Marketing Association; Tennessee Valley Authority;
Export-Import Bank of the United States; Commodity Credit Corporation; Federal
Financing Bank; and National Credit Union Administration (collectively, "U.S.
government securities"). Some U.S. government agency obligations are backed by
the full faith and credit of the U.S. Treasury. Others in which the Fund may
invest are supported by: the issuer's right to borrow an amount limited to a
specific line of credit from the U.S. Treasury; discretionary authority of the
U.S. government to purchase certain obligations of an agency or instrumentality;
or the credit of the agency or instrumentality.
The Fund may also invest up to 20% of its assets in foreign securities
or U.S. securities traded in foreign markets in order to provide further
diversification. The Fund may also invest in preferred stock; units which are
debt securities with stock or warrants attached; and obligations denominated in
foreign currencies. In making these decisions, the investment adviser will
consider such factors as the condition and growth potential of various economies
and securities markets, currency and taxation considerations and other pertinent
financial, social, national and political factors. (See "Investment Practices
and Restrictions " - "Foreign Investments.")
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen U.S. Government Fund
The investment objective of Evergreen U.S. Government Fund is a high
level of current income consistent with stability of principal. The Fund will
invest in debt instruments issued or guaranteed by the U.S. government, its
agencies, or instrumentalities ("U.S. government securities"). Evergreen U.S.
Government Fund is suitable for conservative investors seeking high current
yields plus relative safety and permits an investor to participate in a
portfolio that benefits from active management of a blend of securities and
maturities to maximize the opportunities and minimize the risks created by
changing interest rates.
In addition to U.S. government securities, the Evergreen U.S. Government Fund
may invest in:
Securities representing ownership interests in mortgage pools
("mortgage-backed securities"). The yield and maturity characteristics
of mortgage-backed securities correspond to those of the underlying
mortgages, with interest and principal payments including prepayments
(i.e. paying remaining principal before the mortgage's scheduled
maturity) passed through to the holder of the mortgage-backed
securities. The yield and price of mortgage-backed securities will be
affected by prepayments which substantially shorten effective
maturities. Thus, during periods of declining interest rates,
prepayments may be expected to increase, requiring the Fund to reinvest
the proceeds at lower interest rates, making it difficult to
effectively lock in high interest rates. Conversely, mortgage-backed
securities may experience less pronounced declines in value during
periods of rising interest rates;
Securities representing ownership interests in a pool of
assets ("asset-backed securities"), for which automobile and credit
card receivables are the most common collateral. Because much of the
underlying collateral is unsecured, asset-backed securities are
structured to include additional collateral and/or additional credit
support to protect against default. The investment adviser evaluates
the strength of each particular issue of asset-backed security, taking
into account the structure of the issue and its credit support. (See
"Investment Practices and Restrictions - Risk Characteristics of
Asset-Backed Securities.");
Collateralized mortgage obligations ("CMOs") issued by
single-purpose, stand-alone entities. A CMO is a mortgage-backed
security that manages the risk of repayment by separating mortgage
pools into short, medium and long term portions. These portions are
generally retired in sequence as the underlying mortgage loans in the
mortgage pool are repaid. Similarly, as prepayments are made, the
portion of CMO first to mature will be retired prior to its maturity,
thus having the same effect as the prepayment of mortgages underlying a
mortgage-backed security. The issuer of a series of CMOs may elect to
be treated as a Real Estate Mortgage Investment Conduit (a "REMIC"),
which has certain special tax attributes. The Fund will invest only in
CMOs which are rated AAA by a nationally recognized statistical rating
organization and which may be: (a) collateralized by pools of mortgages
in which each mortgage is guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. government; (b)
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; or (c) securities in
which the proceeds of the issuance are invested in mortgage securities
and payment of the principal and interest are supported by the credit
of an agency or instrumentality of the U.S. government.
The Fund may invest up to 20% of its total assets in CMOs; Commercial
paper which matures in 270 days or less so long as at least two of its ratings
are high quality ratings by nationally recognized statistical rating
organizations. Such ratings would include A-1 or A-2 by S&P, Prime-1 or Prime-2
by Moody's, or F-1 or F-2 by Fitch Investors Service and bonds and other debt
securities rated Baa or higher by Moody's or BBB or higher by S&P, or which, if
unrated, are considered to be comparable quality by the investment adviser.
Bonds rated Baa by Moody's or BBB by S&P have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered to be investment grade. (See the description of the rating categories
contained in the Statement of Additional Information).
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
<PAGE>
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond prices move inversely to interest rates, i.e. as interest
rates decline, the values of the bonds increase and vice versa. The longer the
maturity of a bond, the greater the exposure to market price fluctuations. The
same market factors are reflected in the share price or net asset value of bond
funds which will vary with interest rates.
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. Government securities if, in the opinion of the Funds'
investment adviser, market conditions warrant a temporary defensive investment
strategy.
Downgrades. If any security invested in by any of the Funds loses its rating or
has its rating reduced after the Fund has purchased it, the Fund is not required
to sell or otherwise dispose of the security, but may consider doing so.
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Fund's risk
is the inability of the seller to pay the agreed-upon price on delivery date.
However, this risk is tempered by the ability of the Fund to sell the security
in the open market in the case of a default. In such a case, the Fund may incur
costs in disposing of the security which would increase Fund expenses. The
investment adviser will monitor the creditworthiness of the firms with which the
Funds enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which a Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, a Fund may pay more or less than the market value of the securities
on the settlement date. The Funds may dispose of a commitment prior to
settlement if the investment adviser deems it appropriate to do so. In addition,
the Funds may enter into transactions to sell their purchase commitments to
third parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. The Funds may realize
short-term profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to 15%
(in the case of the Evergreen Fixed Income Fund) or one-third (in the case of
Evergreen U.S. Government Fund) of the value of their total assets. There is the
risk that when lending portfolio securities, the securities may not be available
to a Fund on a timely basis and the Fund may, therefore, lose the opportunity to
sell the securities at a desirable price. In addition, in the event that a
borrower of securities would file for bankruptcy or become insolvent,
disposition of the securities may be delayed pending court action.
Options And Futures. All of the Funds may engage in options and futures
transactions. Options and futures transactions are intended to enable a Fund to
manage market, interest rate or exchange rate risk, and the Funds do not use
these transactions for speculation or leverage.
The Funds may attempt to hedge all or a portion of their portfolios
through the purchase of both put and call options on their portfolio securities
and listed put options on financial futures contracts for portfolio securities.
The Funds may also write covered call options on their portfolio securities to
attempt to increase their current income. The Funds will maintain their
positions in securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or have expired. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. The Funds may purchase listed put options on
financial futures contracts. These options will be used only to protect
portfolio securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.
<PAGE>
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds also may write straddles (combinations of covered
puts and calls on the same underlying security). The Funds may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option, the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies, or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy or
sell securities or currencies during a designated month at whatever price exists
at that time. A futures contract on a securities index does not involve the
actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Funds do not make
payment or deliver securities upon entering into a futures contract. Instead,
they put down a margin deposit, which is adjusted to reflect changes in the
value of the contract and which remains in effect until the contract is
terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value or such
securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in
order to terminate a futures contract and may buy or sell put and call options
for the purpose of closing out their options positions. The Funds' ability to
enter into closing transactions depends on the development and maintenance of a
liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. As a result,
there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case the
Funds would continue to bear market risk on the transaction.
Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Funds' use of them can result in poorer performance (i.e., the Funds' returns
may be reduced). The Funds' attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the investment adviser could be
incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements, and other
economic factors. Even if the investment adviser correctly predicts interest
rate movements, a hedge could be unsuccessful if changes in the value of a
Fund's futures position did not correspond to changes in the value of its
investments. In these events, the Funds may lose money on the financial futures
contracts or the options on financial futures contracts. It is not certain that
a secondary market for positions in financial futures contracts or for options
on financial futures contracts will exist at all times. Although the investment
adviser will consider liquidity before entering into financial futures contracts
or options on financial futures contracts transactions, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
financial futures contract or option on a financial futures contract at any
particular time. The Funds' ability to establish and close out financial futures
contracts and options on financial futures contract positions depends on this
secondary market. If a Fund is unable to close out its position due to
disruptions in the market or lack of liquidity, the Fund may lose money on the
futures contract or option, and the losses to the Fund could be significant.
Zero-Coupon And Stripped Securities. The Funds may invest in zero-coupon and
stripped securities. Zero- coupon securities in which the Fund may invest are
debt obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Zero-coupon securities usually trade at a deep discount from their
face or par value and are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. As a result, the net asset value of
shares of the Funds may fluctuate over a greater range than shares of other
mutual funds investing in securities making current distributions of interest
and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment banking firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are owned ostensibly by the
bearer of holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, the Funds will be able to have their beneficial ownership of
U.S. Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidence
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
Foreign Investments. Evergreen Fixed Income Fund may invest in foreign
securities or securities denominated in or indexed to foreign currencies. In
addition, Evergreen Fixed Income Fund may invest in foreign currencies. These
may involve additional risks. Specifically, they may be affected by the strength
of foreign currencies relative to the U.S. dollar, or by political or economic
developments in foreign countries. Accounting procedures and government
supervision may be less stringent than those applicable to U.S. companies. There
may be less publicly available information about a foreign company than about a
U.S. company. Foreign markets may be less liquid or more volatile than U.S.
markets and may offer less protection to investors. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by the investment adviser before making any of these types of
investments.
Risk Characteristics Of Asset-Backed Securities. The Funds may invest in
asset-backed securities. Asset-backed securities are created by the grouping of
certain governmental, government-related and private loans, receivables and
other lender assets into pools. Interests in these pools are sold as individual
securities. Payments from the asset pools may be divided into several different
tranches of debt securities, with some tranches entitled to receive regular
installments of principal and interest, other tranches entitled to receive
regular installments of interest, with principal payable at maturity or upon
specified call dates, and other tranches only entitled to receive payments of
principal and accrued interest at maturity or upon specified call dates.
Different tranches of securities will bear different interest rates, which may
be fixed or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities and mortgage backed securities are
generally subject to higher prepayment risks than most other types of debt
instruments. Prepayment risks on mortgage securities tend to increase during
periods of declining mortgage interest rates, because many borrowers refinance
their mortgages to take advantage of the more favorable rates. Depending upon
market conditions, the yield that Evergreen Fixed Income Fund and Evergreen U.S.
Government Fund receive from the reinvestment of such prepayments, or any
scheduled principal payments, may be lower than the yield on the original
mortgage security. As a consequence, mortgage securities may be a less effective
means of "locking in" interest rates than other types of debt securities having
the same stated maturity and may also have less potential for capital
appreciation. For certain types of asset pools, such as CMOs, prepayments may be
allocated to one tranche of securities ahead of other tranches, in order to
reduce the risk of prepayment for the other tranches.
Prepayments may result in a capital loss to Evergreen Fixed Income Fund
and Evergreen U.S. Government Fund to the extent that the prepaid mortgage
securities were purchased at a market premium over their stated amount.
Conversely, the prepayment of mortgage securities purchased at a market discount
from their stated principal amount will accelerate the recognition of interest
income by Evergreen Fixed Income Fund and Evergreen U.S. Government Fund which
would be taxed as ordinary income when distributed to the shareholders. The
credit characteristics of asset-backed securities also differ in a number of
respects from those of traditional debt securities. The credit quality of most
asset-backed securities depends primarily upon the credit quality of the assets
underlying such securities, how well the entity issuing the securities is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement to such
securities.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except as a temporary measure to facilitate redemption requests or for
extraordinary or emergency purposes. The proceeds from borrowings may be used to
facilitate redemption requests which might otherwise require the untimely
disposition of portfolio securities. The specific limits applicable to borrowing
by each Fund are set forth in the Statement of Additional Information.
Restricted And Illiquid Securities. Evergreen Fixed Income Fund may invest up to
10% of its net assets and Evergreen U.S. Government Fund may invest up to 10% of
its total assets in securities which are subject to restrictions on resale under
federal securities law. In the case of the Evergreen Fixed Income Fund and
Evergreen U.S. Government Fund, this restriction is not applicable to commercial
paper issued under Section 4(2) of the Securities Act of 1933. The Evergreen
Fixed Income Fund may invest up to 10% of its net assets in illiquid securities.
Evergreen U.S. Government Fund may invest up to 15% of its net assets in
illiquid securities. Illiquid securities include certain restricted securities
not determined by the Trustees to be liquid, non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees. The Capital
Management Group of First Union National Bank of North Carolina ("CMG") serves
as investment adviser to each Fund. First Union National Bank of North Carolina
("FUNB") is a subsidiary of First Union Corporation ("First Union"), one of the
ten largest bank holding companies in the United States. First Union is a bank
holding company headquartered in Charlotte, North Carolina, which had $77.9
billion in consolidated assets as of March 31, 1995. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses through offices in 36 states. The Capital Management Group of FUNB
manages or otherwise oversees the investment of over $36 billion in assets
belonging to a wide range of clients, including all the series of Evergreen
Investment Trust (formerly known as First Union Funds). First Union Brokerage
Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer
that is principally engaged in providing retail brokerage services consistent
with its federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
CMG manages investments and supervises the daily business affairs of
each Fund and, as compensation therefor, is entitled to receive an annual fee
equal to .50 of 1% of average daily net assets of each Fund. The total
annualized operating expenses of Evergreen Fixed Income Fund and Evergreen U.S.
Government Fund for the most recent fiscal year ended December 31, 1994, are set
forth in the section entitled "Financial Highlights". Evergreen Asset Management
Corp. ("Evergreen Asset"), a subsidiary of FUNB, serves as administrator to each
Fund and is entitled to receive a fee based on the average daily net assets of
each Fund at a rate based on the total assets of the mutual funds administered
by Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. Furman Selz Incorporated, the parent of Evergreen
Funds Distributor, Inc., distributor for the Evergreen group of mutual funds,
serves as sub-administrator for each Fund and is entitled to receive a fee from
each Fund calculated on the average daily net assets of the Funds at a rate
based on the total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: .0100% of the first $7 billion; .0075%
on the next $3 billion; .0050% on the next $15 billion; and .0040% on assets in
excess of $25 billion. The total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset serve as investment adviser as
of March 31, 1995 were approximately $8 billion.
The portfolio manager of Evergreen Fixed Income Fund is Thomas L.
Ellis, who is a Vice President of FUNB. Prior to joining FUNB in 1985, Mr. Ellis
had seventeen years of investment management and sales experience, including
eleven years marketing short and medium-term obligations to institutional
investors, plus three years as head trader for First Boston Corporation. Mr.
Ellis has managed the Fund since its inception in July 1988. The portfolio
manager of Evergreen U.S. Government Fund is Rollin C. Williams, a Vice
President of FUNB, who has over 24 years of investment management experience.
Mr. Williams was the Head of Fixed Income Investments at Dominion Trust Company
from 1988 until its acquisition by First Union. Mr. Williams has served as the
portfolio manager for the Evergreen U.S. Government Fund since its inception in
December 1992.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A and Class B shares a Rule 12b-1 plan (each, a "Plan" or collectively
the "Plans"). Under the Plans, each Fund may incur distribution-related and
shareholder servicing-related expenses which may not exceed an annual rate of
.75 of 1% of the aggregate average daily net assets attributable to each Fund's
Class A shares, .75 of 1.00% of the aggregate average daily net assets
attributable to the Class B and Class C shares of each Fund. Payments under the
Plans adopted with respect to Class A shares are currently voluntarily limited
to .25 of 1% of each Fund's aggregate average daily net assets attributable to
Class A shares. The Plans provide that a portion of the fee payable thereunder
may constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. The Funds have, in addition to
the Plans adopted with respect to their Class B and Class C shares, adopted a
shareholder service plan ("Service Plans") relating to the Class B shares and
Class C shares which permit each Fund to incur a fee of up to .25 of 1% of the
aggregate average daily net assets attributable to the Class B and Class C
shares for ongoing personal services and/or the maintenance of shareholder
accounts. Such service fee payments to financial intermediaries for such
purposes, whether pursuant to a Plan or Service Plans, will not to exceed .25%
of the aggregate average daily net assets attributable to each Class of shares
of each Fund.
<PAGE>
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares and .75 of 1% of a
Fund's aggregate average daily net assets attributable to the Class B and Class
C shares. The Distribution Agreements provide that EFD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans and the Service
Plans in amounts up to .25 of 1% of a Fund's aggregate average daily net assets
on an annual basis attributable to Class B and Class C shares, to compensate
organizations, which may include EFD and each Fund's investment adviser or their
affiliates, for personal services rendered to shareholders and/or the
maintenance of shareholder accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment plan. Share certificates are not issued for
Class A, Class B and Class C shares. In states where EFD is not registered as a
broker-dealer shares of a Fund will only be sold through other broker-dealers or
other financial institutions that are registered. See the Share Purchase
Application and Statement of Additional Information for more information. Only
Class A, Class B and Class C shares are offered through this Prospectus (See
"General Information" - "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transactions in shares of the Funds.
Class A shares may also be purchased at net asset value by qualified
and non-qualified employee benefit and savings plans which make shares of the
Funds and the other Evergreen mutual funds available to their participants, and
which: (a) are employee benefit plans having at least $1,000,000 in investable
assets, or 250 or more eligible participants; or (b) are non-qualified benefit
or profit sharing plans which are sponsored by an organization which also makes
the Evergreen mutual funds available through a qualified plan meeting the
criteria specified under (a). In connection with sales made to plans of the type
described in the preceeding sentence that are clients of broker-dealers, and
which do not qualify for sales at net asset value under the conditions set forth
in the paragraph above, payments may be made in an amount equal to .50 of 1% of
the net asset value of shares purchased. These payments are subject to reclaim
in the event shares are redeemed within 12 months after purchase.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
average daily value on an annual basis of Class A shares held by their clients.
Certain purchases of Class A shares may qualify for reduced sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans and
Reinstatement Privilege. Consult the Share Purchase Application and Statement of
Additional Information for additional information concerning these reduced sales
charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which it is expected that they will convert to Class A
shares) . The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
Class C Shares--Level-Load Alternative. You can purchase Class C shares without
any initial sales charge and, therefore, the full amount of your investment will
be used to purchase Fund shares. However, you will pay a 1.0% CDSC if you redeem
shares during the first year after purchase. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of the Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. Shares
obtained from dividend or distribution reinvestment are not subject to the CDSC.
No contingent deferred sales charge will be imposed on Class C shares
purchased by institutional investors, and through employee benefit and savings
plans eligible for the exemption from front-end sales charges described under
"Class A Shares-Front End Sales Charge Alternative", above. Broker-dealers and
other financial intermediaries whose clients have purchased Class C shares may
receive a trailing commission equal to .75 of 1% of the average daily value of
such shares on an annual basis held by their clients more than one year from the
date of purchase. The payment of trailing commissions will commence immediately
with respect to shares eligible for exemption from the contingent deferred sales
charge normally applicable to Class C shares.
With respect to Class B Shares and Class C Shares, no CDSC will be
imposed on: (1) the portion of redemption proceeds attributable to increases in
the value of the account due to increases in the net asset value per Share, (2)
Shares acquired through reinvestment of dividends and capital gains, (3) Shares
held for more than seven years (in the case of Class B Shares) or one year (in
the case of Class C Shares) after the end of the calendar month of acquisition,
(4) accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or its investment adviser
incurs. If such investor is an existing shareholder, a Fund may redeem shares
from an investor's account to reimburse the Fund or its investment adviser for
any loss. In addition, such investors may be prohibited or restricted from
making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B or Class C shares) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 10 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
or C shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m.(Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The redemption of shares is a taxable transaction for Federal tax
purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for 30 days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which each Fund is obligated to redeem shares
solely in cash, up to the lesser of $250,000 or 1% of a Fund's total net assets
during any ninety day period for any one shareholder. See the Statement of
Additional Information for further details.
<PAGE>
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the Fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B or Class C
shares of the Evergreen mutual fund originally purchased for cash is applied.
Also, Class B shares will continue to age following an exchange for purposes of
conversion to Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number on the front of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Each Fund's investment adviser may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Internal
Revenue Code of 1986, as amended (the "Code"). Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in December of the previous year. Income dividends and capital
gain distributions are automatically reinvested in additional shares of the Fund
making the distribution at the net asset value per share at the close of
business on the record date, unless the shareholder has made a written request
for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of each Fund for its most recent fiscal
year is contained in the annual report of each Fund for the fiscal year ended
December 31, 1994.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Funds are each separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
The Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution and transfer agency expenses as well as
any other expenses applicable only to a specific class. Each class of shares
votes separately with respect to Rule 12b-1 distribution plans and other matters
for which separate class voting is appropriate under applicable law. Shares are
entitled to dividends as determined by the Trustees and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and distribution and shareholder
servicing-related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares.
Performance Information. The Funds' performance may be quoted in advertising in
terms of "yield" or "total return". Both types of performance are based on
formulas prescribed by the Securities and Exchange Commission ("SEC") and are
not intended to indicate future performance. Yield is a way of showing the rate
of income a Fund earns on its investments as a percentage of a Fund's share
price. A Fund's yield is calculated according to accounting methods that are
standardized by the SEC for all stock and bond funds. Because yield accounting
methods differ from the method used for other accounting purposes, a Fund's
yield may not equal its distribution rate, the income paid to your account or
the net investment income reported in the Fund's financial statements. To
calculate yield, a Fund takes the interest income it earned from its portfolio
of investments (as defined by the SEC formula) for a 30-day period (net of
expenses), divides it by the average number of shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on
the Fund's share price at the end of the 30-day period. This yield does not
reflect gains or losses from selling securities.
Total returns are based on the overall dollar or percentage change in
the value of a hypothetical investment in a Fund. A Fund's total return shows
its overall change in value including changes in share prices and assumes all
the Fund's distributions are reinvested. A cumulative total return reflects a
Fund's performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in the Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss. Comparative
performance information may also be used from time to time in advertising or
marketing a Fund's shares, including data from Lipper Analytical Services, Inc.
and Morningstar, Inc. as well as other industry publications, and comparisons to
various indices.
A Fund may also advertise in items of sales literature an "actual
distribution rate" which is computed by dividing the total ordinary income
distributed (which may include the excess of short-term capital gains over
losses) to shareholders for the latest twelve month period by the maximum public
offering price per share on the last day of the period. Investors should be
aware that past performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which each
Fund operates provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trust with
the Commission under the Securities Act. Copies of the Registration Statements
may be obtained at a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick, LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536117
<PAGE>
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN U.S. GOVERNMENT FUND
EVERGREEN FIXED INCOME FUND
EVERGREEN MANAGED BOND FUND
CLASS Y SHARES
The Evergreen Income Funds (the "Funds") are designed to provide
investors with a selection of investment alternatives which seek to provide
a high level of current income. This Prospectus provides information
regarding the Class Y shares offered by the Funds. Each Fund is, or is a
series of, an open-end, diversified, management investment company. This
Prospectus sets forth concise information about the Funds that a
prospective investor should know before investing. The address of the Funds
is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds dated July
7, 1995 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 235-0064. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Adviser
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
</TABLE>
OVERVIEW OF THE FUNDS
The following is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank ("CMG") serves
as investment adviser to Evergreen Income Funds which include: EVERGREEN FIXED
INCOME FUND, EVERGREEN MANAGED BOND FUND, and EVERGREEN U.S. GOVERNMENT FUND.
First Union National Bank of North Carolina ("FUNB"), is a subsidiary of First
Union Corporation, one of the ten largest bank holding companies in the United
States.
EVERGREEN FIXED INCOME FUND (formerly First Union Fixed Income Portfolio)
seeks to provide a high level of current income by investing in a broad range of
investment grade debt securities, with capital growth as a secondary objective.
EVERGREEN MANAGED BOND FUND (formerly First Union Managed Bond Portfolio)
seeks to achieve total return through investment in high grade corporate bonds
and U.S. Government and agency bonds.
EVERGREEN U.S. GOVERNMENT FUND (formerly First Union U.S. Government
Portfolio) seeks a high level of current income consistent with stability of
principal.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 8
Administrative Fees .06%
After 3 Years $24
12b-1 Fees --
After 5 Years $41
Other Expenses .19%
After 10 Years $93
Total .75%
</TABLE>
EVERGREEN FIXED INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 6
Administrative Fees .06%
After 3 Years $20
12b-1 Fees --
After 5 Years $35
Other Expenses .07%
After 10 Years $79
Total .63%
</TABLE>
EVERGREEN MANAGED BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 7
Administrative Fees .06%
After 3 Years $23
12b-1 Fees --
After 5 Years $40
Other Expenses .16%
After 10 Years $90
Total .72%
</TABLE>
*The estimated annual operating expenses and examples do not reflect fee waivers
and expense reimbursements for the year ended December 31, 1994. Actual expenses
for Class Y Shares net of fee waivers and expense reimbursements for the year
ended December 31, 1994 were as follows:
<TABLE>
<S> <C>
Evergreen U.S. Government Fund..................................................... .71%
Evergreen Fixed Income Fund........................................................ .65%
Evergreen Managed Bond Fund........................................................ .70%
</TABLE>
3
<PAGE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the year ended December 31, 1994. Such expenses have been
restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds." As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter, for EVERGREEN FIXED INCOME FUND, EVERGREEN MANAGED BOND
FUND, and EVERGREEN U.S. GOVERNMENT FUND has been audited by KPMG Peat Marwick
LLP, each Fund's independent auditors. A report of KPMG Peat Marwick LLP on the
audited information with respect to each Fund is incorporated by reference in
the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 11, JANUARY 11, SEPTEMBER 2,
YEAR ENDED 1993* THROUGH YEAR ENDED 1993* THROUGH 1994* THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $10.05 $10.00 $10.05 $10.00 $9.39 $10.05
Income from investment
operations:
Net investment income.......... .66 .68 .61 .63 .20 .69
Net realized and unrealized
gain (loss) on investments.... (.98) .05 (.98) .05 (.32) (.98)
Total from investment
operations.................. (.32) .73 (.37) .68 (.12) (.29)
Less distributions to
shareholders from:
Net investment income.......... (.66) (.68) (.61) (.63) (.20) (.69)
Net asset value, end of
period........................ $9.07 $10.05 $9.07 $10.05 $9.07 $9.07
TOTAL RETURN+.................. (3.2%) 7.4% (3.8%) 6.9% (1.3%) (2.9%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)............... $ 23,706 $38,851 $195,571 $ 236,696 $266 $ 15,595
Ratios to average net assets:
Expenses (a).................. .96% .68%++ 1.54% 1.19%++ 1.71%++ .71%
Net investment income (a)..... 6.97% 6.93%++ 6.42% 6.44%++ 6.70%++ 7.27%
Portfolio turnover rate........ 19% 39% 19% 39% 19% 19%
<CAPTION>
SEPTEMBER 2,
1993* THROUGH
DECEMBER 31,
1993
<S> <C>
PER SHARE DATA
Net asset value, beginning of
period........................ $10.25
Income from investment
operations:
Net investment income.......... .25
Net realized and unrealized
gain (loss) on investments.... (.20)
Total from investment
operations.................. .05
Less distributions to
shareholders from:
Net investment income.......... (.25)
Net asset value, end of
period........................ $10.05
TOTAL RETURN+.................. .5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)............... $14,486
Ratios to average net assets:
Expenses (a).................. .48%++
Net investment income (a)..... 7.20%++
Portfolio turnover rate........ 39%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS C
CLASS A SHARES CLASS B SHARES SHARES CLASS Y SHARES
JANUARY 11, JANUARY 11, SEPTEMBER 2, SEPTEMBER 2,
YEAR ENDED 1993 THROUGH YEAR ENDED 1993 THROUGH 1994 THROUGH YEAR ENDED 1993 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses......... 1.00% .99% 1.58% 1.50% 1.75% .75% .79%
Net investment
income......... 6.93% 6.62% 6.38% 6.13% 6.66% 7.23% 6.89%
</TABLE>
5
<PAGE>
EVERGREEN FIXED INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 4, 1991*
YEAR ENDED DECEMBER 31, THROUGH
1994 1993 1992 DECEMBER 31, 1991
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................... $10.43 $10.41 $10.54 $10.06
Income (loss) from investment operations:
Net investment income.................................................. .65 .69 .70 .71
Net realized and unrealized gain (loss) on investments................. (.91) .19 (.02) .56
Total from investment operations..................................... (.26) .88 .68 1.27
Less distributions to shareholders from:
Net investment income.................................................. (.65) (.68) (.70) (.71)
Net realized gains..................................................... -- (.18) (.11) (.07)
In excess of net investment income..................................... -- -- -- (.01)(b)
Total distributions.................................................. (.65) (.86) (.81) (.79)
Net asset value, end of period......................................... $9.52 $10.43 $10.41 $10.54
TOTAL RETURN +......................................................... (2.6%) 8.7% 6.6% 13.8%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).............................. $345,025 $376,445 $324,068 $ 256,254
Ratios to average net assets:
Expenses............................................................. .65% .66% .69% .69%++(a)
Net investment income................................................ 6.56% 6.41% 6.67% 7.12%++(a)
Portfolio turnover rate................................................ 48% 73% 66% 55%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 4, 1991
THROUGH
DECEMBER 31, 1991
<S> <C>
Expenses....................................................................... .76%
Net investment income.......................................................... 7.05%
</TABLE>
(b) Distributions in excess of net investment income for the year ended December
31, 1991 were a result of certain book and tax timing differences. These
distributions did not represent a return of capital for federal income tax
purposes for the year ended December 31, 1991.
6
<PAGE>
EVERGREEN FIXED INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 28,
NINE MONTHS YEAR 1989*
ENDED ENDED THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1993 1992 1991 1990** 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period....... $10.42 $10.41 $10.54 $9.99 $9.72 $9.50 $9.70
Income (loss) from investment operations:
Net investment income...................... .65 .65 .71 .73 .55 .79 .10
Net realized and unrealized gain (loss) on
investments.............................. (.91) .19 (.06) .60 .24 .20 (.14)
Total from investment operations......... (.26) .84 .65 1.33 .79 .99 (.04)
Less distributions to shareholders from:
Net investment income...................... (.64) (.65) (.67) (.70) (.52) (.77) (.16)
Net realized gains......................... -- (.18) (.11) (.07) -- -- --
In excess of net investment income......... -- -- -- (.01)(b) -- -- --
Total distributions...................... (.64) (.83) (.78) (.78) (.52) (.77) (.16)
Net asset value, end of period............. $9.52 $10.42 $10.41 $10.54 $9.99 $9.72 $9.50
TOTAL RETURN+.............................. (2.6%) 8.3% 6.4% 13.7% 8.3% 10.5% (.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)................................. $19,127 $22,865 $21,488 $17,680 $ 11,765 $6,496 $11,580
Ratios to average net assets:
Expenses................................. .75% .93% .90% .80%(a) 1.01%++(a) 1.00%(a) 1.78%++
Net investment income.................... 6.46% 6.15% 6.79% 7.30%(a) 7.53%++(a) 7.57%(a) 6.10%++
Portfolio turnover rate.................... 48% 73% 66% 53% 27% 32% 18%
</TABLE>
* Commencement of class operations.
** The Fund changed its fiscal year end to December 31.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1991 DECEMBER 31, 1990 MARCH 31, 1990
<S> <C> <C> <C>
Expenses............................ .89% 1.82% 1.50%
Net investment income............... 7.21% 6.72% 7.07%
</TABLE>
(b) Distributions in excess of net investment income for the year ended December
31, 1991 were a result of certain book and tax timing differences. These
distributions did not represent a return of capital for federal income tax
purposes for the year ended December 31, 1991.
7
<PAGE>
EVERGREEN FIXED INCOME FUND -- CLASS B AND CLASS C SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C
JANUARY 25, SHARES
1993* SEPTEMBER 2,
YEAR ENDED THROUGH 1993* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................................... $10.44 $10.57 $9.85
Income (loss) from investment operations:
Net investment income......................................................... .58 .58 .18
Net realized and unrealized gain (loss) on investments........................ (.92) .05 (.30)
Total from investment operations............................................ (.34) .63 (.12)
Less distributions to shareholders from:
Net investment income......................................................... (.56) (.58) (.18)
Net realized gains............................................................ -- (.18) --
Total distributions......................................................... (.56) (.76) (.18)
Net asset value, end of period................................................ $9.54 $10.44 $9.55
TOTAL RETURN+................................................................. (3.3%) 6.1% (1.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................................... $ 17,625 $8,876 $512
Ratios to average net assets:
Expenses.................................................................... 1.50% 1.57%++ 1.65%++
Net investment income....................................................... 5.75% 5.42%++ 5.87%++
Portfolio turnover rate....................................................... 48% 73% 48%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
8
<PAGE>
EVERGREEN MANAGED BOND FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
APRIL 1, 1991*
YEAR ENDED DECEMBER 31, THROUGH
1994 1993 1992 DECEMBER 31, 1991
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.................................... $10.46 $10.34 $10.60 $10.00
Income (loss) from investment operations:
Net investment income................................................... .66 .65 .66 .49
Net realized and unrealized gain (loss) on investments.................. (1.11) .43 (.08) .63
Total from investment operations...................................... (.45) 1.08 .58 1.12
Less distributions to shareholders from:
Net investment income................................................... (.66) (.65) (.66) (.49)
Net realized gains...................................................... -- (.31) (.18) (.03)
Total distributions................................................... (.66) (.96) (.84) (.52)
Net asset value, end of period.......................................... $9.35 $10.46 $10.34 $10.60
TOTAL RETURN+........................................................... (4.4%) 10.6% 5.7% 11.6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)............................... $90,318 $109,067 $121,655 $ 112,984
Ratios to average net assets:
Expenses.............................................................. .70%(a) .70%(a) .70%(a) .70%++
Net investment income................................................. 6.68%(a) 6.02%(a) 6.30%(a) 6.57%++
Portfolio turnover rate................................................. 32% 53% 56% 17%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
Expenses.................................................................. .71% .73% .75%
Net investment income..................................................... 6.67% 5.99% 6.25%
</TABLE>
9
<PAGE>
10
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
Investment Objectives and Policies
The investment objectives and policies of each Fund are stated below. Each
Fund's investment objective cannot be changed without shareholder approval.
While there is no assurance that each objective will be achieved, the Funds will
endeavor to do so by following the investment policies detailed below. Unless
otherwise indicated, the investment policies of a Fund may be changed by the
Trust's Board of Trustees ("Trustees") without the approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
Evergreen Fixed Income Fund
The objective of Evergreen Fixed Income Fund is to attain a high level
of current income, with capital growth as a secondary objective, through
investment in a broad range of investment grade debt securities. The Fund is
suitable for conservative investors who want attractive income and permits them
to participate in a broad portfolio of fixed income securities rather than
purchasing a single issue. While the Fund may invest in securities rated BBB by
Standard & Poor's Ratings Group ("S&P") or Baa by Moody's Investors Service,
Inc. ("Moody's"), the Adviser currently intends to limit the Fund's investments
to securities rated A or higher by Moody's or S&P, or which, if unrated, are
considered to be of comparable quality by the Adviser. A description of the
rating categories is contained in an Appendix to the Statement of Additional
Information.
Debt securities may include fixed, adjustable rate, zero coupon, or
stripped securities, debentures, notes, U.S. government securities, and debt
securities convertible into, or exchangeable for, preferred or common stock.
Debt securities may also include mortgage-backed and asset-backed securities
(see"Investment Practices and Restrictions, below)." Stated final maturity for
these securities may range up to 30 years. The duration of the securities will
not exceed 10 years. The Fund intends to maintain a dollar-weighted average
maturity of 5 years or less. Market-expected average life will be used for
certain types of issues in computing the average maturity.
In normal market conditions the Fund may invest up to 20% of its assets
in money market instruments consisting of: (1) high grade commercial paper,
including master demand notes; (2) obligations of banks or savings and loan
associations having at least $1 billion in deposits, including certificates of
deposit and bankers' acceptances; (3) A-rated or better corporate obligations;
(4) obligations issued or guaranteed by the U.S. government or by any agency or
instrumentality of the U.S. government; and (5) repurchase agreements
collateralized by any security listed above.
The types of U.S. government securities in which the Fund may invest
include: direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds, and discount notes of U.S. government
agencies or instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
Farmers Home Administration; Federal Home Loan Banks; Federal Home Loan Mortgage
Corporation; Federal National Mortgage Association; Government National Mortgage
Association; Student Loan Marketing Association; Tennessee Valley Authority;
Export-Import Bank of the United States; Commodity Credit Corporation; Federal
Financing Bank; and National Credit Union Administration (collectively, "U.S.
government securities"). Some U.S. government agency obligations are backed by
the full faith and credit of the U.S. Treasury. Others in which the Fund may
invest are supported by: the issuer's right to borrow an amount limited to a
specific line of credit from the U.S. Treasury; discretionary authority of the
U.S. government to purchase certain obligations of an agency or instrumentality;
or the credit of the agency or instrumentality.
The Fund may also invest up to 20% of its assets in foreign securities
or U.S. securities traded in foreign markets in order to provide further
diversification. The Fund may also invest in preferred stock; units which are
debt securities with stock or warrants attached; and obligations denominated in
foreign currencies. In making these decisions, the Adviser will consider such
factors as the condition and growth potential of various economies and
securities markets, currency and taxation considerations and other pertinent
financial, social, national and political factors. (See "Investment Practices
and Restrictions " - "Foreign Investments.")
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Managed Bond Fund
The objective of Evergreen Managed Bond Fund is total return through
investment in high grade corporate bonds and U.S. government and agency bonds.
The Fund is suitable for conservative investors who seek both income and capital
appreciation. The Fund permits an investor to participate in a diversified
portfolio of investment grade bonds.
Investments for Evergreen Managed Bond Fund are selected with a view
towards total return. Total return of an investment consists of the income (net
of associated expenses) it generates, plus or minus any change in its principal
value. The Fund seeks capital appreciation during periods of falling interest
rates and protection against capital depreciation during periods of rising
rates. In seeking its objective, the Fund invests primarily in a professionally
managed, diversified portfolio of high grade bonds with maturities up to 30
years. Under normal conditions, at least 65% of the value of the Fund's total
assets will be invested in high grade corporate bonds and government and agency
bonds.
Financial futures may also be used depending upon the outlook for the economy.
The Fund may invest in:
domestic issues of corporate debt obligations rated A or
better by Moody's or S&P;
U.S. government securities as more fully described under
"Evergreen Fixed Income Fund";
commercial paper which matures in 270 days or less, with at
least two high quality ratings by nationally recognized statistical
rating organizations, e.g. A-1 or A-2 by S&P, or Prime-1 or Prime-2 by
Moody's (see the description of the rating categories contained in the
Statement of Additional Information);
time and savings deposits (including certificates of deposit)
in commercial or savings banks whose accounts are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF") (both of which are administered by the Federal Deposit
Insurance Corp. ("FDIC")), including certificates of deposit and other
time deposits in foreign branches of banks insured by the BIF; bankers'
acceptances (maximum 0.25% of the bank's total deposits according to
the bank's last published statement of condition) issued by a bank
insured by the BIF, or issued by the bank's Edge Act subsidiary and
guaranteed by the bank, with remaining maturities of nine months or
less; and repurchase agreements collateralized by eligible investments.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen U.S. Government Fund
The investment objective of Evergreen U.S. government Fund is a high
level of current income consistent with stability of principal. The Fund will
invest in debt instruments issued or guaranteed by the U.S. government, its
agencies, or instrumentalities ("U.S. government securities"). Evergreen U.S.
Government Fund is suitable for conservative investors seeking high current
yields plus relative safety and permits an investor to participate in a
portfolio that benefits from active management of a blend of securities and
maturities to maximize the opportunities and minimize the risks created by
changing interest rates.
In addition to U.S. government securities, the Evergreen U.S. Government Fund
may invest in:
Securities representing ownership interests in mortgage pools
("mortgage-backed securities"). The yield and maturity characteristics
of mortgage-backed securities correspond to those of the underlying
mortgages, with interest and principal payments including prepayments
(i.e. paying remaining principal before the mortgage's scheduled
maturity) passed through to the holder of the mortgage-backed
securities. The yield and price of mortgage-backed securities will be
affected by prepayments which substantially shorten effective
maturities. Thus, during periods of declining interest rates,
prepayments may be expected to increase, requiring the Fund to reinvest
the proceeds at lower interest rates, making it difficult to
effectively lock in high interest rates. Conversely, mortgage-backed
securities may experience less pronounced declines in value during
periods of rising interest rates;
Securities representing ownership interests in a pool of
assets ("asset-backed securities"), for which automobile and credit
card receivables are the most common collateral. Because much of the
underlying collateral is unsecured, asset-backed securities are
structured to include additional collateral and/or additional credit
support to protect against default. The Adviser evaluates the strength
of each particular issue of asset-backed security, taking into account
the structure of the issue and its credit support. (See "Investment
Practices and Restrictions - Risk Characteristics of Asset-Backed
Securities.");
Collateralized mortgage obligations ("CMOs") issued by
single-purpose, stand-alone entities. A CMO is a mortgage-backed
security that manages the risk of repayment by separating mortgage
pools into short, medium and long term portions. These portions are
generally retired in sequence as the underlying mortgage loans in the
mortgage pool are repaid. Similarly, as prepayments are made, the
portion of CMO first to mature will be retired prior to its maturity,
thus having the same effect as the prepayment of mortgages underlying a
mortgage-backed security. The issuer of a series of CMOs may elect to
be treated as a Real Estate Mortgage Investment Conduit (a "REMIC"),
which has certain special tax attributes. The Fund will invest only in
CMOs which are rated AAA by a nationally recognized statistical rating
organization and which may be: (a) collateralized by pools of mortgages
in which each mortgage is guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. government; (b)
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; or (c) securities in
which the proceeds of the issuance are invested in mortgage securities
and payment of the principal and interest are supported by the credit
of an agency or instrumentality of the U.S. government.
The Fund may invest up to 20% of its total assets in CMOs; Commercial
paper which matures in 270 days or less so long as at least two of its ratings
are high quality ratings by nationally recognized statistical rating
organizations. Such ratings would include A-1 or A-2 by S&P, Prime-1 or Prime-2
by Moody's, or F-1 or F-2 by Fitch Investors Service and bonds and other debt
securities rated Baa or higher by Moody's or BBB or higher by S&P, or which, if
unrated, are considered to be comparable quality by the Adviser.
Bonds rated Baa by Moody's or BBB by S&P have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered to be investment grade. (See the description of the rating categories
contained in the Statement of Additional Information).
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Investment Practices and Restrictions
Risk Factors. Bond prices move inversely to interest rates, i.e. as interest
rates decline, the values of the bonds increase and vice versa. The longer the
maturity of a bond, the greater the exposure to market price fluctuations. The
same market factors are reflected in the share price or net asset value of bond
funds which will vary with interest rates.
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. Government securities if, in the opinion of the Funds'
investment adviser, market conditions warrant a temporary defensive investment
strategy.
Downgrades. If any security invested in by any of the Funds loses its rating or
has its rating reduced after the Fund has purchased it, the Fund is not required
to sell or otherwise dispose of the security, but may consider doing so.
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Fund's risk
is the inability of the seller to pay the agreed-upon price on delivery date.
However, this risk is tempered by the ability of the Fund to sell the security
in the open market in the case of a default. In such a case, the Fund may incur
costs in disposing of the security which would increase Fund expenses. The
Adviser will monitor the creditworthiness of the firms with which the Funds
enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which a Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, a Fund may pay more or less than the market value of the securities
on the settlement date. The Funds may dispose of a commitment prior to
settlement if the Adviser deems it appropriate to do so. In addition, the Funds
may enter into transactions to sell their purchase commitments to third parties
at current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. The Funds may realize short-term
profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to 15%
(in the case of the Evergreen Fixed Income Fund and Evergreen Managed Bond Fund)
or one-third (in the case of Evergreen U.S. Government Fund) of the value of
their total assets. There is the risk that when lending portfolio securities,
the securities may not be available to a Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price. In addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.
Options And Futures. All of the Funds may engage in options and futures
transactions. Options and futures transactions are intended to enable a Fund to
manage market, interest rate or exchange rate risk, and the Funds do not use
these transactions for speculation or leverage.
The Funds may attempt to hedge all or a portion of their portfolios
through the purchase of both put and call options on their portfolio securities
and listed put options on financial futures contracts for portfolio securities.
The Funds may also write covered call options on their portfolio securities to
attempt to increase their current income. The Funds will maintain their
positions in securities, option rights, and segregated cash subject to puts and
calls until the options are exercised, closed, or have expired. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. The Funds may purchase listed put options on
financial futures contracts. These options will be used only to protect
portfolio securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds also may write straddles (combinations of covered
puts and calls on the same underlying security). The Funds may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option, the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies, or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy or
sell securities or currencies during a designated month at whatever price exists
at that time. A futures contract on a securities index does not involve the
actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Funds do not make
payment or deliver securities upon entering into a futures contract. Instead,
they put down a margin deposit, which is adjusted to reflect changes in the
value of the contract and which remains in effect until the contract is
terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value or such
securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in
order to terminate a futures contract and may buy or sell put and call options
for the purpose of closing out their options positions. The Funds' ability to
enter into closing transactions depends on the development and maintenance of a
liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. As a result,
there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case the
Funds would continue to bear market risk on the transaction.
Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange, or
interest rate risks, these investment devices can be highly volatile, and the
Funds' use of them can result in poorer performance (i.e., the Funds' returns
may be reduced). The Funds' attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contracts and
options on financial futures contracts as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Adviser could be incorrect in
its expectations and forecasts about the direction or extent of market factors,
such as interest rates, securities price movements, and other economic factors.
Even if the Adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Adviser will consider liquidity
before entering into financial futures contracts or options on financial futures
contracts transactions, there is no assurance that a liquid secondary market on
an exchange will exist for any particular financial futures contract or option
on a financial futures contract at any particular time. The Funds' ability to
establish and close out financial futures contracts and options on financial
futures contract positions depends on this secondary market. If a Fund is unable
to close out its position due to disruptions in the market or lack of liquidity,
the Fund may lose money on the futures contract or option, and the losses to the
Fund could be significant.
Zero-Coupon And Stripped Securities. The Evergreen Fixed Income Fund and
Evergreen U.S. Government Fund may invest in zero-coupon and stripped
securities. Zero- coupon securities in which the Fund may invest are debt
obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Zero-coupon securities usually trade at a deep discount from their
face or par value and are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. As a result, the net asset value of
shares of Evergreen Fixed Income Fund may fluctuate over a greater range than
shares of other mutual funds investing in securities making current
distributions of interest and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly
by the U.S. Treasury or other short-term debt obligations, and longer-term bonds
or notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment banking firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are owned ostensibly by the
bearer of holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities." Under the
STRIPS program, the Evergreen Fixed Income Fund will be able to have its
beneficial ownership of U.S. Treasury zero-coupon securities recorded directly
in the book-entry record-keeping system in lieu of having to hold certificates
or other evidence of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
Foreign Investments. Evergreen Fixed Income Fund may invest in foreign
securities or securities denominated in or indexed to foreign currencies. In
addition, Evergreen Fixed Income Fund may invest in foreign currencies. These
may involve additional risks. Specifically, they may be affected by the strength
of foreign currencies relative to the U.S. dollar, or by political or economic
developments in foreign countries. Accounting procedures and government
supervision may be less stringent than those applicable to U.S. companies. There
may be less publicly available information about a foreign company than about a
U.S. company. Foreign markets may be less liquid or more volatile than U.S.
markets and may offer less protection to investors. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by the Adviser before making any of these types of investments.
Risk Characteristics Of Asset-Backed Securities. Evergreen Fixed Income Fund and
Evergreen U.S. Government Fund may invest in asset-backed securities.
Asset-backed securities are created by the grouping of certain governmental,
government-related and private loans, receivables and other lender assets into
pools. Interests in these pools are sold as individual securities. Payments from
the asset pools may be divided into several different tranches of debt
securities, with some tranches entitled to receive regular installments of
principal and interest, other tranches entitled to receive regular installments
of interest, with principal payable at maturity or upon specified call dates,
and other tranches only entitled to receive payments of principal and accrued
interest at maturity or upon specified call dates. Different tranches of
securities will bear different interest rates, which may be fixed or floating.
Because the loans held in the asset pool often may be prepaid without
penalty or premium, asset-backed securities and mortgage backed securities are
generally subject to higher prepayment risks than most other types of debt
instruments. Prepayment risks on mortgage securities tend to increase during
periods of declining mortgage interest rates, because many borrowers refinance
their mortgages to take advantage of the more favorable rates. Depending upon
market conditions, the yield that Evergreen Fixed Income Fund and Evergreen U.S.
Government Fund receive from the reinvestment of such prepayments, or any
scheduled principal payments, may be lower than the yield on the original
mortgage security. As a consequence, mortgage securities may be a less effective
means of "locking in" interest rates than other types of debt securities having
the same stated maturity and may also have less potential for capital
appreciation. For certain types of asset pools, such as CMOs, prepayments may be
allocated to one tranche of securities ahead of other tranches, in order to
reduce the risk of prepayment for the other tranches.
Prepayments may result in a capital loss to Evergreen Fixed Income Fund
and Evergreen U.S. Government Fund to the extent that the prepaid mortgage
securities were purchased at a market premium over their stated amount.
Conversely, the prepayment of mortgage securities purchased at a market discount
from their stated principal amount will accelerate the recognition of interest
income by Evergreen Fixed Income Fund and Evergreen U.S. Government Fund which
would be taxed as ordinary income when distributed to the shareholders. The
credit characteristics of asset-backed securities also differ in a number of
respects from those of traditional debt securities. The credit quality of most
asset-backed securities depends primarily upon the credit quality of the assets
underlying such securities, how well the entity issuing the securities is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement to such
securities.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except as a temporary measure to facilitate redemption requests or for
extraordinary or emergency purposes. The proceeds from borrowings may be used to
facilitate redemption requests which might otherwise require the untimely
disposition of portfolio securities. The specific limits applicable to borrowing
by each Fund are set forth in the Statement of Additional Information.
Restricted And Illiquid Securities. The Funds may invest up to 10% of their net
assets (in the Evergreen U.S. Government Fund) in securities which are subject
to restrictions on resale under federal securities law. In the case of the
Evergeen Fixed Income Fund and Evergreen U.S. Government Fund, this restriction
is not applicable to commercial paper issued under Section 4(2) of the
Securities Act of 1933. The Evergreen Fixed Income Fund and Evergreen Managed
Bond Fund may invest up to 10% of their net assets in illiquid securities.
Evergreen U.S. Government Fund may invest up to 15% of its net assets in
illiquid securities. With respect to the Evergreen Fixed Income Fund, Evergreen
Managed Bond Fund and Evergreen U.S. Government Fund, illiquid securities
include certain restricted securities not determined by the Trustees to be
liquid, non-negotiable time deposits, and repurchase agreements providing for
settlement in more than seven days after notice.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees. The Capital
Management Group of First Union National Bank of North Carolina ("CMG") serves
as investment adviser to each Fund. First Union National Bank of North Carolina
("FUNB") is a subsidiary of First Union Corporation ("First Union"), one of the
ten largest bank holding companies in the United States. First Union is a bank
holding company headquartered in Charlotte, North Carolina, which had $74.2
billion in consolidated assets as of September 30, 1994. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses through offices in 36 states. The Capital Management Group of FUNB
manages or otherwise oversees the investment of over $36 billion in assets
belonging to a wide range of clients, including all the series of Evergreen
Investment Trust (formerly known as First Union Funds). First Union Brokerage
Services, Inc., a wholly-owned subsidiary of FUNB, is a registered broker-dealer
that is principally engaged in providing retail brokerage services consistent
with its federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
CMG manages investments and supervises the daily business affairs of
each Fund and, as compensation therefor, is entitled to receive an annual fee
equal to .50 of 1% of average daily net assets of each Fund. The total
annualized operating expenses of Evergreen Fixed Income Fund, Evergreen Managed
Bond Fund and Evergreen U.S. Government Fund for the most recent fiscal year
ended December 31, 1994, are set forth in the section entitled "Financial
Highlights". Evergreen Asset Management Corp. ("Evergreen Asset"), a subsidiary
of FUNB, serves as administrator to each Fund and is entitled to receive a fee
based on the average daily net assets of each Fund at a rate based on the total
assets of the mutual funds administered by Evergreen Asset for which CMG or
Evergreen Asset also serve as investment adviser, calculated in accordance with
the following schedule: .050% of the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator for each Fund
and is entitled to receive a fee from each Fund calculated on the average daily
net assets of the Funds at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
serve as investment adviser as of March 31, 1995 were approximately $8 billion.
The portfolio manager of Evergreen Fixed Income Fund is Thomas L.
Ellis, who is a Vice President of FUNB. Prior to joining FUNB in 1985, Mr. Ellis
had seventeen years of investment management and sales experience, including
eleven years marketing short and medium-term obligations to institutional
investors, plus three years as head trader for First Boston Corporation. Mr.
Ellis has managed the Fund since its inception in July 1988. The portfolio
manager of Evergreen Managed Bond Fund is Glen T. Insley who is a Senior Vice
President and Director of Fixed Income Portfolio Management for FUNB. Mr. Insley
served as Director of Fixed Income Management at One Federal Asset Management, a
subsidiary of Shawmut Bank, for six years prior to joining FUNB. Mr. Insley has
served as the portfolio manager for the Evergreen Managed Bond Fund since May
1993. The portfolio manager of Evergreen U.S. Government Fund is Rollin C.
Williams, a Vice President of FUNB, who has over 24 years of investment
management experience. Mr. Williams was the Head of Fixed Income Investments at
Dominion Trust Company from 1988 until its acquisition by First Union. Mr.
Williams has served as the portfolio manager for the Evergreen U.S. Government
Fund since its inception in December 1992.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail
or wire as described below. The Fund imposes no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to the Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Fund Values Its Shares. The net asset value of each Class of shares of
the Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in the Fund are valued at their current market value determined
on the basis of market quotations or, if such quotations are not readily
available, such other methods as the Fund's Trustees believe would accurately
reflect fair market value.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss the Fund or the Adviser incurs. If
such investor is an existing shareholder, the Fund may redeem shares from an
investor's account to reimburse the Fund or the Adviser for any loss. In
addition, such investors may be prohibited or restricted from making further
purchases in any of the Evergreen Funds.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Fund is an available investment. For
information about the requirements to make such investments, including copies of
the necessary application forms, please call the telephone number set forth on
the cover page of this Prospectus. The Fund cannot accept investments specifying
a certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
Funds. Although not currently anticipated, the Fund reserves the right to
suspend the offer of shares for a period of time.
Shares of the Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Institutions
should telephone the Fund (800-235-0064) for additional information on purchases
by telephone. Investors may also purchase shares through a broker/dealer, which
may charge a fee for the service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in the Fund to the Fund on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, the Fund
will not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 15 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for the Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with the
Fund, and the account number. During periods of drastic economic or market
changes, shareholders may experience difficulty in effecting telephone
redemptions. Shareholders who are unable to reach the Fund or State Street by
telephone should follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in
the Fund at a designated commercial bank. State Street currently deducts a $5
wire charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Fund will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
The Fund reserves the right to close an account that through redemption has
remained below $1,000 for 30 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed. The Fund has
elected to be governed by Rule 18f-1 under the Investment Company Act of 1940
pursuant to which the Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of the Fund's total net assets during any ninety
day period for any one shareholder. See the Statement of Additional Information
for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. The Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, the Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by the Fund or
State Street if it is believed advisable to do so. Procedures for exchanging
Fund shares by telephone may be modified or terminated at any time. Written
requests for exchanges should follow the same procedures outlined for written
redemption requests in the section entitled "How to Redeem Shares", however, no
signature guarantee is required.
SHAREHOLDER SERVICES
The Fund offers the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Fund, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Internal
Revenue Code of 1986, as amended (the "Code"). Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in December of the previous year. Income dividends and capital
gain distributions are automatically reinvested in additional shares of the Fund
making the distribution at the net asset value per share at the close of
business on the record date, unless the shareholder has made a written request
for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of each Fund for its most recent fiscal
year is contained in the annual report of each Fund for the fiscal year ended
December 31, 1994.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Funds are each separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
The Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution and transfer agency expenses as well as
any other expenses applicable only to a specific class. Each class of shares
votes separately with respect to Rule 12b-1 distribution plans and other matters
for which separate class voting is appropriate under applicable law. Shares are
entitled to dividends as determined by the Trustees and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to the Funds.
Other Classes of Shares. Each Fund other than Evergreen Managed Bond Fund, which
only offers class Y shares, currently offers four classes of shares, Class A,
Class B, Class C and Class Y, and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and distribution and shareholder
servicing-related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares.
Performance Information. The Funds' performance may be quoted in advertising in
terms of "yield" or "total return". Both types of performance are based on
formulas prescribed by the Securities and Exchange Commission ("SEC") and are
not intended to indicate future performance. Yield is a way of showing the rate
of income a Fund earns on its investments as a percentage of a Fund's share
price. A Fund's yield is calculated according to accounting methods that are
standardized by the SEC for all stock and bond funds. Because yield accounting
methods differ from the method used for other accounting purposes, a Fund's
yield may not equal its distribution rate, the income paid to your account or
the net investment income reported in the Fund's financial statements. To
calculate yield, a Fund takes the interest income it earned from its portfolio
of investments (as defined by the SEC formula) for a 30-day period (net of
expenses), divides it by the average number of shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on
the Fund's share price at the end of the 30-day period. This yield does not
reflect gains or losses from selling securities.
Total returns are based on the overall dollar or percentage change in
the value of a hypothetical investment in a Fund. A Fund's total return shows
its overall change in value including changes in share prices and assumes all
the Fund's distributions are reinvested. A cumulative total return reflects a
Fund's performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in the Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss. Comparative
performance information may also be used from time to time in advertising or
marketing a Fund's shares, including data from Lipper Analytical Services, Inc.
and Morningstar, Inc. as well as other industry publications, and comparisons to
various indices.
A Fund may also advertise in items of sales literature an "actual
distribution rate" which is computed by dividing the total ordinary income
distributed (which may include the excess of short-term capital gains over
losses) to shareholders for the latest twelve month period by the maximum public
offering price per share on the last day of the period. Investors should be
aware that past performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which each
Fund operates provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trust with
the Commission under the Securities Act. Copies of the Registration Statements
may be obtained at a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick, LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536125
STATEMENT OF ADDITIONAL INFORMATION
July 7, 1995
THE EVERGREEN INCOME FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen U.S. Government Fund (formerly First Union U.S. Government
Portfolio) ("U.S. Government")
Evergreen Fixed Income Fund (formerly First Union Fixed Income
Portfolio) ("Fixed Income")
Evergreen Managed Bond Fund (formerly First Union Managed Bond
Portfolio) ("Managed Bond")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed below. It is not a prospectus and should be read in conjunction
with the Prospectus dated July 7, 1995 for the Fund in which you are making or
contemplating an investment. The Evergreen Income Funds are offered through two
separate prospectuses: one offering Class A, Class B and Class C shares of U.S.
Government and Fixed Income, and a separate prospectus offering Class Y shares
of each Fund. Copies of each Prospectus may be obtained without charge by
calling the number listed above.
TABLE OF CONTENTS
Page
Investment Objectives and Policies................................
Investment Restrictions...........................................
Non-Fundamental Operating Policies................................
Certain Risk Considerations.......................................
Management........................................................
Investment Adviser................................................
Distribution Plans................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Purchase of Shares................................................
Performance Information...........................................
Financial Statements..............................................
Appendix A - Note, Bond And Commercial Paper Ratings
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES (See also "Description
of the Funds - Investment Objective and Policies" in each Fund's
Prospectus)
The investment objective of each Fund and a description of the securities
in which each Fund may invest is set forth under "Description of the Funds -
Investment Objective and Policies" in the relevant Prospectus. The investment
objectives of each Fund are fundamental and cannot be changed without the
approval of shareholders. The following expands the discussion in the Prospectus
regarding certain investments of each Fund.
Types of Investments
U.S. Government Obligations (All Funds)
The types of U.S. government obligations in which the Funds may invest
generally include obligations issued or guaranteed by U.S. government agencies
or instrumentalities. These securities are backed by:
(i) the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
(ii) the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities that may not always receive
financial support from the U.S. Government are:
(i) Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association;
(vi) Government National Mortgage Association; and
(vii) Student Loan Marketing Association
Restricted and Illiquid Securities (All Funds)
The ability of the Board of Trustees ("Trustees") to determine the
liquidity of certain restricted securities is permitted under a Securities and
Exchange Commission ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive, safe-harbor for certain secondary market transactions involving
securities subject to restrictions on resale under federal securities laws. The
Rule provides an exemption from registration for resales of otherwise restricted
securities to qualified institutional buyers. The Rule was expected to further
enhance the liquidity of the secondary market for securities eligible for sale
under the Rule. The Funds which invest in Rule 144A Securities believe 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 Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
(i) the frequency of trades and quotes for the security;
(ii) the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
(iii) dealer undertakings to make a market in the security; and
(iv) the nature of the security and the nature of the marketplace trades.
<PAGE>
When-Issued and Delayed Delivery Securities (All Funds)
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of a Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Funds do not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of their
assets.
Lending of Portfolio Securities (All Funds)
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.
Reverse Repurchase Agreements (All Funds)
As described herein, certain Funds may also enter into reverse repurchase
agreements. These transactions are similar to borrowing cash. In a reverse
repurchase agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
Options and Futures Transactions
Options which Fixed Income and Managed Bond trade must be listed on
national securities exchanges.
.........Purchasing Put and Call Options on Financial Futures Contracts
Fixed Income and U.S. Government may purchase listed put and call options
on financial futures contracts for U.S. government securities. U.S. Government
may buy and sell financial futures contracts and options on financial futures
contracts and may buy and sell put and call options on U.S. Government
securities. Managed Bond may purchase put and call options on portfolio
securities and listed put options on financial futures contracts for portfolio
securities. Managed Bond may also write covered call options on its portfolio
securities and covered put options to attempt to increase its current income.
The aggregate value of the obligations underlying the puts will not exceed 5% of
Managed Bond's assets. This policy of Managed Bond cannot be changed without
shareholder approval. Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date at an
undetermined price, the purchase of a put option on a futures contract entitles
(but does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.
The Fund may purchase put and call options on futures to protect portfolio
securities against decreases in value resulting from an anticipated increase in
market interest rates.
3
<PAGE>
Generally, if the hedged portfolio securities decrease in value during the term
of an option, the related futures contracts will also decrease in value and the
put option will increase in value. In such an event, a Fund will normally close
out its option by selling an identical put option. If the hedge is successful,
the proceeds received by the Fund upon the sale of the put option plus the
realized decrease in value of the hedged securities.
Alternately, a Fund may exercise its put option to close out the position.
To do so, it would enter into a futures contract of the type underlying the
option. If the Fund neither closes out nor exercises an option, the option will
expire on the date provided in the option contract, and the premium paid for the
contract will be lost.
.........Purchasing Options
The Funds may purchase both put and call options on their portfolio
securities. These options will be used as a hedge to attempt to protect
securities which a Fund holds or will be purchasing against decreases or
increases in value. A Fund may purchase call and put options for the purpose of
offsetting previously written call and put options of the same series. If the
Fund is unable to effect a closing purchase transaction with respect to covered
options it has written, the Fund will not be able to sell the underlying
securities or dispose of assets held in a segregated account until the options
expire or are exercised.
Managed Bond and Fixed Income intend to purchase put and call options on
currency and other financial futures contracts for hedging purposes. A put
option purchased by a Fund would give it the right to assume a position as the
seller of a futures contract. A call option purchased by the Fund would give it
the right to assume a position as the purchaser of a futures contract. The
purchase of an option on a futures contract requires the Fund to pay a premium.
In exchange for the premium, the Fund becomes entitled to exercise the benefits,
if any, provided by the futures contract, but is not required to take any action
under the contract. If the option cannot be exercised profitably before it
expires, the Fund's loss will be limited to the amount of the premium and any
transaction costs.
Managed Bond and Fixed Income currently do not intend to invest more than
5% of their net assets in options transactions.
A Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the sue of such futures contracts is unleveraged.
Purchasing Call Options on Financial Futures Contracts
An additional way in which U.S. Government may hedge against decreases in
market interest rates is to buy a listed call option on a financial futures
contract for U.S. government securities. When the Fund purchases a call option
on a futures contract, it is purchasing the right (not the obligation) to assume
a long futures position (buy a futures contract) at a fixed price at any time
during the life of the option. As market interest rates fall, the value of the
underlying futures contract will normally increase, resulting in an increase in
value of the Fund's option position. When the market price of the underlying
futures contract increases above the strike price plus premium paid, the Fund
could exercise its option and buy the futures contact below market price.
Prior to the exercise or expiration of the call option, the Fund could sell
an identical call option and close out its position. If the premium received
upon selling the offsetting call is greater than the premium originally paid,
the Fund has completed a successful hedge.
........."Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an
4
<PAGE>
amount of "initial margin" in cash or U.S. Treasury bills with its custodian (or
the broker, if legally permitted). The nature of initial margin in futures
transactions is different from that of margin in securities transactions in that
futures contract initial margin does not involve the borrowing of funds by a
Fund to finance the transactions. Initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Managed Bond and U.S. Government will not maintain open positions in
futures contracts they have sold or call options they have written on futures
contracts if, in the aggregate, the value of the open positions (marked to
market) exceeds the current market value of their securities portfolio plus or
minus the unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, a Fund will take prompt
action to close out a sufficient number of open contracts to bring its open
futures and options positions within this limitation.
Purchasing and Writing Put and Call Options on U.S. Government Securities
U.S. Government may purchase put and call options on U.S. government
securities to protect against price movements in particular securities. A put
option gives the Fund, in return for a premium, the right to sell the underlying
security to the writer (seller) at a specified price during the term of the
option. A call option gives the Fund, in return for a premium, the right to buy
the underlying security from the seller.
The Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or writers of
the options since options on the portfolio securities held by the Fund are not
traded on an exchange. The Fund purchases and writes options only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan associations) deemed creditworthy by the Fund's investment
adviser.
Over-the-counter options are two party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange-traded options have a
continuous liquid market while over-the-counter options may not.
Asset-Backed Securities
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by automobile receivables permit the services of
such receivables to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
rated asset- backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
In general, issues of asset-backed securities are structured to include
additional collateral and/or additional credit support to protect against the
risk that a portion of the collateral supporting the asset-backed securities may
default and/or may suffer from
5
<PAGE>
these defects. In evaluating the strength of particular issues of asset-backed
securities, the Fund's investment adviser considers the financial strength of
the guarantor or other provider of credit support, the type and extent of credit
enhancement provided as well as the documentation and structure of the issue
itself and the credit support.
Collateralized Mortgage Obligations (CMOs)
Privately issued CMOs generally represent an ownership interest in federal
agency mortgage pass-through securities such as those issued by Government
National Mortgage Association. The terms and characteristics of the mortgage
instruments may vary among pass-through mortgage loan pools.
Most of the CMOs in which a Fund would invest use the same basic structure:
(i) Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities: the
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the residual
income from the underlying investment after payments are made to the other
classes.
(ii) The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities.
(iii) The classes of securities are retired sequentially. All principal
payments are directed first to the shortest-maturity class (or A bonds). When
those securities are completely retired, all principal payments are then
directed to the next-shortest-maturity security (or B bond). This process
continues until all of the classes have been paid off.
The market for such CMOs has expanded considerably since its inception. The
size of the primary issuance market and the active participation in the
secondary market by securities dealers and other investors make
government-related pools highly liquid.
Section 4(2) Commercial Paper
U.S. Government and Fixed Income may invest in commercial paper issued in
reliance on the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to institutional
investors, such as the Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the Funds through or with
the assistance of the issuer or investment dealers who make a market in Section
4(2) commercial paper, thus providing liquidity. The Funds believe that Section
4(2) commercial paper and possibly certain other restricted securities which
meet the criteria for liquidity established by the Trustees are quite liquid.
The Funds intend, therefore, to treat the restricted securities which meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Fund's investment adviser, as liquid and
not subject to the investment limitation applicable to illiquid securities. In
addition, because Section 4(2) commercial paper is liquid, the Funds do not
intend to subject such paper to the limitation applicable to restricted
securities.
Repurchase Agreements
A Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.
6
<PAGE>
Foreign Currency Transactions
As one way of managing exchange rate risk, Fixed Income may enter into
forward currency exchange contracts (agreements to purchase or sell currencies
at a specified price and date). The exchange rate for the transaction (the
amount of currency a Fund will deliver and receive when the contract is
completed) is fixed when the Fund enters into the contract. The Fund usually
will enter into these contracts to stabilize the U.S. dollar value of a security
it has agreed to buy or sell. The Fund intends to use these contracts to hedge
the U.S. dollar value of a security it already owns, particularly if the Fund
expects a decrease in the value of the currency in which the foreign security is
denominated. Although the Fund will attempt to benefit from using forward
contracts, the success of its hedging strategy will depend on the investment
adviser's ability to predict accurately the future exchange rates between
foreign currencies and the U.S. dollar. The value of the Fund's investments
denominated in foreign currencies will depend on the relative strengths of those
currencies and the U.S. dollar, and the Fund may be affected favorably or
unfavorably by changes in the exchange rates or exchange control regulations
between foreign currencies and the dollar. Changes in foreign currency exchange
rates also may affect the value of dividends and interest earned, gains and
losses realized on the sale of securities and net investment income and gains,
if any, to be distributed to shareholders by the Fund. The Fund may also
purchase and sell options related to foreign currencies in connection with
hedging strategies.
The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the Fund's assets denominated in
that currency, but as consistent with its other investment policies, is not
otherwise limited in its ability to use this strategy.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
Diversification of Investments
With respect to 75% of the value of its assets, a 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. U.S. Government will not acquire more than 10% of the
outstanding voting securities of any one issuer.
2........Purchase of Securities on Margin
.........No Fund will 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.
3........Unseasoned Issuers
.........Neither Fixed Income* nor U.S. Government* may 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.
7
<PAGE>
4........Underwriting
.........The Funds 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 objectives, policies
and limitations.
5........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
.........Managed Bond* and Fixed Income* 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.
6........Concentration in Any One Industry
.........No Fund will invest 25% or more of the value of its total assets in any
one industry except a Fund may invest more than 25% of its total assets in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities.
7........Warrants
.........Fixed Income*, will not invest more than 5% of its net assets in
warrants, including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its investment in
such warrants not listed on the New York Stock Exchange or the American Stock
Exchange to 2% of its net assets. (If state restrictions change, this latter
restriction may be changed without notice to shareholders). For purposes of this
restriction, warrants acquired by the Funds' in units or attached to securities
may be deemed to be without value.
8.......Ownership by Trustees/Officers
.........None of Fixed Income*, Managed Bond* and U.S. Government* may 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.
9.......Short Sales
.........Fixed Income and Managed Bond 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.
.........U.S. Government will not sell any securities short.
10.......Lending of Funds and Securities
.........U.S. Government and Managed Bond will not lend any of their assets
except portfolio securities in accordance with their investment objectives,
policies and limitations. Fixed Income will not lend portfolio securities valued
at more than 15% of its total assets to broker-dealers.
11.......Commodities
.........None of Fixed Income, Managed Bond or U.S. Government will 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.
12.......Real Estate
8
<PAGE>
.........No Fund will 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.
13.......Borrowing, Senior Securities, Reverse Repurchase Agreements
The Funds will not issue senior securities except that a 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, or, in addition, in
the case of Fixed Income, 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 and except
to the extent that a Fund will enter into futures contracts. Any such borrowings
need not be collateralized. During the period any reverse repurchase agreements
are outstanding, but only to the extent necessary to assure completion of the
reverse repurchase agreements, Managed Bond will restrict the purchase of
portfolio instruments to money market instruments maturing on or before the
expiration date of the reverse repurchase agreement. Fixed Income and U.S.
Government will not purchase any securities while borrowings in excess of 5% of
the value of their total assets are outstanding and Managed Bond will not
purchase any securities while any borrowings are outstanding.
14.......Pledging Assets
.........No Fund will mortgage, pledge or hypothecate any assets except to
secure permitted borrowings. In these cases, Fixed Income and Managed Bond 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.
15.......Investing in Securities of Other Investment Companies
.........Fixed Income, U.S. Government* and Managed Bond* 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.
16.......Restricted Securities
.........Fixed Income, U.S. Government* and Managed Bond will not invest more
than 10% of their net assets (total assets in the case of U.S. Government) in
securities subject to restrictions on resale under the Securities Act of 1933
(except for, in the case of Managed Bond and U.S. Government, certain restricted
securities which meet criteria for liquidity established by the Trustees). For
U.S. Government, the restriction is not applicable to commercial paper issued
under Section 4(2) of the Securities Act of 1933.
17........Illiquid Securities.
.........Fixed Income and Managed Bond* will not invest more than 10% and U.S.
Government* will not invest more than 15% of its 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.
18.......Other. In order to comply with certain state blue sky limitations Fixed
Income* will not invest in real estate limited partnerships.
-----
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting form any change in value or net assets will not result in a violation
of such restriction.
The Funds did not borrow money, sell securities short, invest in reverse
repurchase agreements in excess of 5% of the value of their net assets, or
invest more than 5% of
9
<PAGE>
their net assets in the securities of other investment companies in the last
fiscal year, and have no present intent to do so during the coming year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan, having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment, to be "cash items."
CERTAIN RISK CONSIDERATIONS
...........There can be no assurance that a Fund will achieve its investment
objective and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objective and Policies"
in the Prospectus.
MANAGEMENT
The Trustees and executive officers of the Evergreen Investment Trust
(formerly First Union Funds) (the "Trust"), their ages, addresses and principal
occupations during the past five years are set forth below:
James S. Howell (70), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Gerald M. McDonnell (55), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (56), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
William Walt Pettit*(39), Holcomb and Pettit, P.A., 207 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990; Attorney, Clontz and Clontz from 1980 to 1990.
Russell A. Salton, III, M.D. (47), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (35), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
The Trustees and officers listed above hold the same positions with a total
of ten registered investment companies offering a total of thirty-one investment
funds within the Evergreen mutual fund complex.
- --------
* Mr. Pettit may each be deemed to be an "interested person" within the
meaning of the Investment Company Act of 1940, as amended (the "1940 Act").
The officers of the Trust are all officers and/or employees of Furman
Selz Incorporated. Furman Selz Incorporated is the parent of Evergreen Funds
Distributor, Inc., the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee
who is an "affiliated person" of either First Union National Bank of North
Carolina or Evergreen
10
<PAGE>
Asset Management Corp. or their affiliates. See "Investment Adviser." Currently,
none of the Trustees is an "affiliated person" as defined in the 1940 Act. The
Trust pays each Trustee who is not an "affiliated person" an annual retainer and
a fee per meeting attended, plus expenses (and $50 for each telephone conference
meeting) as follows:
Name of Fund Annual Retainer Meeting Fee
Evergreen Investment Trust - 9,000** 1,500**
U.S. Government
Fixed Income
Managed Bond
- --------------------
** Evergreen Investment Trust pays an annual retainer to each trustee and a
per-meeting fee that are allocated among its fifteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
Set forth below for each of the Trustees is the aggregate compensation paid
to such Trustees by Evergreen Investment Trust for the fiscal year ended
December 31, 1994.
Aggregate Compensation From Evergreen Investment Trust
Aggregate Total Compensation
Compensation From Trust
Name of From Evergreen & Fund Complex
Person Investment Trust Paid To Trustees
James S. Howell $14,900 $26,900
Gerald M. McDonnell 11,900 26,100
Thomas L. McVerry 11,900 26,150
William Walt Pettit 11,900 26,100
Russell A. Salton, III, M.D. 11,900 26,100
Michael S. Scofield 11,900 26,650
No officer or Trustee of the Trust owned Class B or C shares of any Fund as
of the date hereof. The number and percent of outstanding shares of each Fund
owned by officers and Trustees as a group on June 15, 1995, is as follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of Class Y
Name of Fund as a Group Shares Outstanding
U.S. Government -0- -0-
Fixed Income -0- -0-
Managed Bond -0- -0-
Set forth below is information with respect to each person, who, to
each Fund's knowledge, owned beneficially or of record more than 5% of a class
of each Fund's total outstanding shares and their aggregate ownership of the
Fund's total outstanding shares as of June 15, 1995.
11
<PAGE>
Name of % of
Name and Address Fund/Class No. of Shares Class/Fund
- ---------------- ---------- ------------- ----------
First Union National Bank- U.S. Government/A 2,112 5.55%/.01%
NC C/F
Hilda C. Borders IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank-
FL C/F U.S. Government/A 2,688 7.06%/.01%
Carlos L. Conde IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union Ntaional Bank- U.S. Government/A 5,869 15.41%/.02%
GA C/F
John W. McGarr IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of U.S. Government/A 12,803 33.61%/.05%
NC C/F
Sylvia L. Jarrell IRA Rollover
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- U.S. Government/A 2,662 6.99%/.01%
GA C/F, Inc.
Ronald J. Kucharski IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/A 2,156 5.66%/.01%
Patricia F. Bigazzi
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/A 196,581 8.57%/.80%
LCMS Foundation
Attn: Joel Lange
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/B 16,399 5.74%/.07%
Matilda Wacher and
Luke Brady and
Beverly Brady
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/B 16,853 5.89%/.07%
Cheryl C. Gentry and
Jennifer Amy Gentry
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/B 15,473 5.41%/.07%
Maud M. Kearns
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. FBO U.S. Government/C 1,766 30.47%/.01%
James P. Faherty
Clara Faherty
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/C 2,874 49.57%/.01%
Lee Pinnell and
Fran Pinnell
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
12
<PAGE>
Fubs & Co. FBO U.S. Government/C 569 9.82%/0%
Carlos B. Benitez
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/C 563 9.72%/0%
Nazeera Mohammed
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/C 11,037 30.62%/.04%
Helen G. Bender
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/C 4,279 11.87%/.02%
Douglas H. Thompson, Sr.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/C 3,950 10.96%/.02%
Aileen D. Bell and
John H. Bell
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/C 3,537 9.81%/.01%
Franklin E. Moulder
Anne H. Moulder
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo U.S. Government/C 2,444 6.78%/.01%
Virginia T. Symons Trust
Virginia T. Symons Trustee
UAD 1-18-94
C/O First Union National Bank
301 S. Tryon Street Charlotte, NC
28288-0001
Fubs & Co. Febo U.S. Government/C 2,172 6.03%/.01%
George A. Cane
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- U.S. Government/C 1,995 5.54%/.01%
NC C/F
Dorothy D. Lyerly IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- U.S. Government/C 1,988 5.52%/.01%
GA C/F
David Sikes IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Stephen A. Lieber U.S. Government/Y 15,623 6.39%/.06%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Frank P. Rizzuto U.S. Government/Y 20,435 8.36%/.08%
Elyse L. Rizzuto
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
State Street Bank & Trust Co. U.S. Government/Y 17,914 7.33%/.07%
Cust for the IRA Rollover of
L. D. Starr
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
13
<PAGE>
Charles Schwab & Co. Inc. U.S. Government/Y 15,609 6.38%/.06%
Reinvest Account
Attn: Mutual Fund Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
First Union National Bank U.S. Government/Y 1,306,565 74.81%/5.30%
Trust Accounts
Attn: Ginny Batten
11th FL CMG-151
301 S. Tyron Street
Charlotte, NC 28288
First Union National Bank U.S. Government/Y 437,579 25.06%/1.78%
Trust Accounts
Attn: Ginny Batten
11th FL CMG-151
301 S. Tyron Street
Charlotte, NC 28288
Fubs & Co. Febo Fixed Income/C 10,305 20.04%/.03%
Kerry D. Fitzgerald GDH
Christina Griffin
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Fixed Income/C 10,277 19.99%/.03%
Lucile L. Murray
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Fixed Income/C 6,065 11.80%/.02%
Sidney Goldberg and
Mona V. Rose
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Fixed Income/C 3,739 7.27%/.01%
Kathleen W. Gladfelter
Patricia G. Sacerio JT WROS
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Fixed Income/C 3,221 6.27%/.01%
Francis O. Hunt
Mitchell W. Hunt
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Fixed Income/C 3,195 6.21%/.01%
Robert S. New, Sr. and
Willa Mae New
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Fixed Income/C 3,192 6.21%/.01%
GA C/F
Wayne C. Shultz IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank* Fixed Income/Y 30,876,522 89.84%/81.16%
Trust Accounts
Attn: Ginny Batten
11th FL CMG-151
301 S. Tyron Street
Charlotte, NC 28288
First Union National Bank* Fixed Income/Y 3,490,145 10.16%/9.17%
Trust Accounts
Attn: Ginny Batten
11th FL CMG-151
301 S. Tyron Street
Charlotte, NC 28288
14
<PAGE>
First Union National Bank* Managed Bond/Y 6,106,163 83.84%/83.84%
Trust Accounts
Attn: Ginny Batten
11th FL CMG-151
301 S. Tyron Street
Charlotte, NC 28288
First Union National Bank* Managed Bond/Y 1,177,179 16.16%/16.16%
Trust Accounts
Attn: Ginny Batten
11th FL CMG-151
301 S Tyron Street
Charlotte, NC 28288
- ---------------------------------
*Acting in various capacities for numerous accounts. As a result of its
ownership of 90.34% and 100% of U.S. Government, Fixed Income and Managed Bond,
respectively, on June 15, 1995, First Union National Bank of North Carolina may
be deemed to "control" each Fund as that term is defined in the 1940 Act.
INVESTMENT ADVISER
(See also "Management of the Fund" in each Fund's Prospectus)
The investment adviser of U.S. Government, Fixed Income and Managed
Bond is First Union National Bank of North Carolina ("FUNB" or the "Adviser")
which, in turn, is a subsidiary of First Union Corporation ("First Union"), a
bank holding company headquartered in Charlotte, North Carolina. FUNB provides
investment advisory services through its Capital Management Group.
Under its Investment Advisory Agreement with each Fund, the Adviser has
agreed to furnish reports, statistical and research services and recommendations
with respect to each Fund's portfolio of investments. In addition, the Adviser
provides office facilities to the Funds and performs a variety of administrative
services. Each Fund pays the cost of all of its other expenses and liabilities,
including expenses and liabilities incurred in connection with maintaining their
registration under the Securities Act of 1933, as amended, and the
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1940 Act, printing prospectuses (for existing shareholders) as they are updated,
state qualifications, share certificates, mailings, brokerage, custodian and
stock transfer charges, printing, legal and auditing expenses, expenses of
shareholder meetings and reports to shareholders. Notwithstanding the foregoing,
the Adviser will pay the costs of printing and distributing prospectuses used
for prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
U.S. GOVERNMENT Year Ended Year Ended
12/31/94 12/31/93
Advisory Fee $1,355,420 $802,441
--------- -------
Waiver ($105,523) ($465,195)
Net Advisory Fee $1,229,897 $337,246
========= =======
FIXED INCOME Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $2,022,773 $1,894,693 $1,531,707
========= ========= =========
MANAGED BOND Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $523,270 $576,619 $591,232
======== ======== =========
U.S. Government commenced operations on January 11, 1993 and,
therefore, the first year's figures set forth in the table above reflect for
U.S. Government investment advisory fees paid for the period from commencement
of operations through December 31, 1993.
Expense Limitations
The Adviser's fee will be reduced by, or the Adviser will reimburse the
Funds for any amount necessary to prevent such expenses (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, but inclusive of the
Adviser's fee) from exceeding the most restrictive of the expense limitations
imposed by state securities commissions of the states in which the Funds' shares
are then registered or qualified for sale. Reimbursement, when necessary, will
be made monthly in the same manner in which the advisory fee is paid. Currently
the most restrictive state expense limitation is 2.5% of the first $30,000,000
of the Fund's average daily net assets, 2% of the next $70,000,000 of such
assets and 1.5% of such assets in excess of $100,000,000.
The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of the
Trust's Trustees or by the Adviser. The Investment Advisory Agreements will
automatically terminate in the event of their assignment. Each Investment
Advisory Agreement provides in substance that the Adviser shall not be liable
for any action or failure to act in accordance with its duties thereunder in the
absence of willful misfeasance, bad faith or gross negligence on the part of the
Adviser or of reckless disregard of its obligations thereunder. With respect to
U.S. Government, Fixed Income and Managed Bond, the Investment Advisory
Agreement dated February 28, 1985 and amended from time to time thereafter was
last approved by the Trustees on April 20, 1995 and it will continue from year
to year with respect to each Fund provided that such continuance is approved
annually by a vote of a majority of the Trustees including a majority of those
Trustees who are not parties thereto or "interested persons" of any such party
cast in person at a meeting duly called for the purpose of voting on such
approval or by a vote of a majority of the outstanding voting securities of each
Fund.
Certain other clients of the Adviser may have investment objectives and
policies similar to those of the Funds. The Adviser may, from time to time, make
recommendations which result in the purchase or sale of a particular security by
its other clients simultaneously with a Fund. If transactions on behalf of more
than one client during the same period increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse effect
on price or quantity. It is the policy of each Adviser to allocate advisory
recommendations and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the
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Funds. When two or more of the clients of the Adviser (including one or more of
the Funds) are purchasing or selling the same security on a given day from the
same broker-dealer, such transactions may be averaged as to price.
Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, the Adviser
attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sales transactions to be effected between each Fund and the
other registered investment companies for which either Evergreen Asset
Management Corp., a subsidiary of FUNB ("Evergreen Asset"), or FUNB acts as
investment adviser or between the Fund and any advisory clients of Evergreen
Asset, FUNB or their affiliates. Each Fund may from time to time engage in such
transactions but only in accordance with these procedures and if they are
equitable to each participant and consistent with each participant's investment
objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of the Trust. The Trust
paid a fee for such services at the following annual rate: .15% on the first
$250 million average daily net assets of the Trust; .125% on the next $250
million; .10% on the next $250 million and .075% on assets in excess of $250
million. For the fiscal year ended December 31, 1994, and for the period from
January 11, 1993 (commencement of operations) to December 31, 1993, U.S.
Government, incurred $228,590 and $139,691, respectively, in administrative
service costs of which $0 and $30,827, respectively, were voluntarily waived.
For the fiscal years ended December 31, 1994, 1993 and 1992, Fixed Income
incurred $341,243, $331,342 and $282,292, respectively, in administrative
service costs. For the fiscal years ended December 31, 1994, 1993 and 1992,
Managed Bond incurred $88,279, $101,082 and $109,032, respectively, in
administrative service costs, of which $10,687, $36,701 and $52,159,
respectively, were voluntarily waived.
Commencing July 1, 1995, Evergreen Asset will provide administrative
services to each of the portfolios of the Trust for a fee based on the average
daily net assets of each fund administered by Evergreen Asset for which
Evergreen Asset or FUNB also serves as investment adviser, calculated daily and
payable monthly at the following annual rates: .050% on the first $7 billion;
.035% on the next $3 billion; .030% on the next $5 billion; .020% on the next
$10 billion; .015% on the next $10 billion; and .010% on assets in excess of $30
billion. Furman Selz Incorporated, the parent of Evergreen Funds Distributor,
Inc., distributor for the Evergreen group of mutual funds (the "Distributor),
serves as sub-administrator to U.S. Government, Fixed Income and Managed Bond
and is entitled to receive a fee from each Fund calculated on the average daily
net assets of each Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which FUNB or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of
mutual funds administered by Evergreen Asset for which Evergreen Asset or FUNB
serves as investment adviser as of March 31, 1995 were approximately $7.95
billion.
DISTRIBUTION PLANS
Reference is made to "Management of the Fund - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, B and C shares and are charged as class expenses,
as accrued. The distribution fees attributable to the Class B shares and Class C
shares are designed to permit an investor to purchase such shares through
broker-dealers without the assessment of a front-end sales charge, and, in the
case of Class C shares, without the assessment of a contingent deferred sales
charge after the first year following purchase, while at the same time
permitting the Distributor to compensate broker-dealers in connection with the
sale of such shares. In
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<PAGE>
this regard the purpose and function of the combined contingent deferred sales
charge and distribution services fee on the Class B shares and the Class C
shares, are the same as those of the front-end sales charge and distribution fee
with respect to the Class A shares in that in each case the sales charge and/or
distribution fee provide for the financing of the distribution of the Fund's
shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by U.S.
Government and Fixed Income with respect to each of its Class A, Class B and
Class C shares (each a "Plan" and collectively, the "Plans"), the Treasurer of
each Fund reports the amounts expended under the Plan and the purposes for which
such expenditures were made to the Trustees of the Trust for their review on a
quarterly basis. Also, each Plan provides that the selection and nomination of
Trustees who are not "interested persons" of the Trust (as defined in the 1940
Act) are committed to the discretion of such disinterested Trustees then in
office.
The Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Prior to July 7, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for U.S. Government, Fixed Income
and Managed Bond as well as other portfolios of the Trust. The Distribution
Agreements between each Fund and the Distributor pursuant to which distribution
fees are paid under the Plans by U.S. Government and Fixed Income with respect
to its Class A, Class B and Class C shares were approved on April 20, 1995 by
the unanimous vote of the Trustees including the disinterested Trustees voting
separately. Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Trust or by vote
of the holders of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that Class, and, in either case, by a majority of the Trustees
of the Trust who are not parties to the Agreement or interested persons, as
defined in the 1940 Act, of any such party (other than as Trustees of the Trust)
and who have no direct or indirect financial interest in the operation of the
Plan or any agreement related thereto.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to U.S. Government and Fixed Income and
holders of Class A, Class B and Class C shares and (ii) stimulate administrators
to render administrative support services to the Fund and holders of Class A,
Class B and Class C shares. The administrative services are provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals, and include, but are not limited to providing office space,
equipment, telephone facilities, and various personnel including clerical,
supervisory, and computer, as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding Class A, Class B and Class C
shares; assisting clients in changing dividend options, account designations,
and addresses; and providing such other services as the Fund reasonably requests
for its Class A, Class B and Class C shares.
In addition to the Plans, U.S. Government and Fixed Income have each
adopted a Shareholder Services Plan whereby shareholder servicing agents may
receive fees from the Fund for providing services which include, but are not
limited to, distributing prospectuses and other information, providing
shareholder assistance, and communicating or facilitating purchases and
redemptions of Class B and Class C shares of the Fund.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
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<PAGE>
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of the Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. Amendments to the Shareholder
Services Plan require a majority vote of the disinterested Trustees but do not
require a shareholders vote. Any Plan, Shareholder Services Plan or Distribution
Agreement may be terminated (a) by a Fund without penalty at any time by a
majority vote of the holders of the outstanding voting securities of the Fund,
voting separately by Class or by a majority vote of the Trustees who are not
"interested persons" as defined in the 1940 Act, or (b) by the Distributor. To
terminate any Distribution Agreement, any party must give the other parties 60
days' written notice; to terminate a Plan only, the Fund need give no notice to
the Distributor. Any Distribution Agreement will terminate automatically in the
event of its assignment.
For the fiscal year ended December 31, 1994, U.S. Government incurred
$79,158 and Fixed Income incurred $21,670 in distribution services fees on
behalf of Class A shares.
For the fiscal year ended December 31, 1994, U.S. Government incurred
$1,683,141 and Fixed Income incurred $108,896 in distribution services fees of
Class B shares.
For the period from September 7, 1994, (commencement of operations) to
December 31, 1994, U.S. Government incurred $313 in distribution services fees
on behalf of Class C shares. For the period from September 6, 1994 (commencement
of operations) to December 31, 1994, Fixed Income incurred $918 in distribution
service fees on behalf of Class C shares.
Managed Bond did not offer Class A, B or C shares as of December 31,
1994.
Shareholder Services Plans
For the period ended December 31, 1994, U.S. Government incurred
shareholder services fees of $174,961 and $104 on behalf of Class B shares and
Class C shares, respectively; and Fixed Income incurred shareholder services
fees of $14,697 and $306 on behalf of Class B shares and Class C shares,
respectively.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser,
subject to the supervision and control of the Trustees. Orders for the purchase
and sale of securities and other investments are placed by employees of the
Adviser. In general, the same individuals perform the same functions for the
other funds managed by the Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
A portion of any transactions in equity securities for each Fund will
occur on domestic stock exchanges. Transactions on stock exchanges involve the
payment of brokerage commissions. In transactions on stock exchanges in the
United States, these commissions are negotiated, whereas on many foreign stock
exchanges these commissions are fixed. In the case of securities traded in the
foreign and domestic over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup.
Over-the-counter transactions will generally be placed directly with a principal
market maker, although the Fund may place an over-the-counter order with a
broker-dealer if a better price (including commission) and execution are
available.
It is anticipated that most of each Fund's purchase and sale
transactions involving fixed income securities will be with the issuer or an
underwriter or with major dealers in such securities acting as principals. Such
transactions are normally on a net basis and generally do not involve payment of
brokerage commissions. However, the cost of securities purchased from an
underwriter usually includes a commission paid by the issuer
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<PAGE>
to the underwriter. Purchases or sales from dealers will normally reflect the
spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. A Fund will also consider such factors as the price of the securities and
the size and difficulty of execution of the order. If these objectives may be
met with more than one firm, the Fund will also consider the availability of
statistical and investment data and economic facts and opinions helpful to the
Fund. To the extent that receipt of these services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
U.S. Government, Fixed Income and Managed Bond did not pay any
commissions to affiliated brokers. For the fiscal year ended December 31, 1994,
and for the period from January 11, 1993 (commencement of operations) to
December 31, 1993, U.S. Government paid $10,180 and $0, respectively, in
commissions on brokerage transactions. For the fiscal years ended December 31,
1994, 1993 and 1992, Fixed Income paid $9,198, $7,908 and $15,573, respectively,
in commissions on brokerage transactions. For the fiscal years ended December
31, 1994, 1993 and 1992, Managed Bond paid $10,088, $1,662 and $16,922,
respectively, in commissions on brokerage transactions.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; (b) derive less than 30% of its gross
income from the sale or other disposition of securities, options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
Federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to
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<PAGE>
the extent that the shareholder received a long-term capital gain distribution
with respect to such shares.
Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.
Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the
forthcoming distribution. Those purchasing just prior to a distribution will
then receive what is in effect a return of capital upon the distribution which
will nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% Federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
NET ASSET VALUE
The following information supplements that set forth in each Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares".
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The public offering price of shares of a Fund is its net asset value,
plus, in the case of Class A shares, a sales charge which will vary depending on
the purchase alternative chosen by the investor, as more fully described in the
Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales Charge
Alternative. " On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in which a Fund
invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any weekday,
exclusive of national holidays on which the Exchange is closed and Good Friday.
For each Fund, securities for which the primary market is on a domestic or
foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked prices and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
The respective per share net asset values of the Class A, Class B,
Class C and Class Y shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of the Class B
and Class C shares may be lower than the per share net asset value of the Class
A shares (and, in turn, that of Class A shares may be lower than Class Y shares)
as a result of the greater daily expense accruals, relative to Class A and Class
Y shares, of Class B and Class C shares relating to distribution services fees
and shareholder service fee and, to the extent applicable, transfer agency fees
and the fact that Class Y shares bear no additional distribution, shareholder
service or transfer agency related fees. While it is expected that, in the event
each Class of shares of a Fund realizes net investment income or does not
realize a net operating loss for a period, the per share net asset values of the
four classes will tend to converge immediately after the payment of dividends,
which dividends will differ by approximately the amount of the expense accrual
differential among the Classes, there is no assurance that this will be the
case. In the event one or more Classes of a Fund experiences a net operating
loss for any fiscal period, the net asset value per share of such Class or
Classes will remain lower than that of Classes that incurred lower expenses for
the period.
To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and on
which the Fund's net asset value is not calculated. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of the Exchange will not be reflected in a Fund's
calculation of net asset value unless the Trustees deem that the particular
event would materially affect net asset value, in which case an adjustment will
be made. Securities transactions are accounted for on the trade date, the date
the order to buy or sell is executed. Dividend income and other distributions
are recorded on the ex-dividend date, except certain dividends and distributions
from foreign securities which are recorded as soon as the Fund is informed after
the ex-dividend date.
PURCHASE OF SHARES
The following information supplements that set forth in each Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares."
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General
Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value plus an initial sales charge at the time of
purchase (the "front-end sales charge alternative"), with a contingent deferred
sales charge (the deferred sales charge alternative"), or without any front-end
sales charge, but with a contingent deferred sales charge imposed only during
the first year after purchase (the "level-load alternative"), as described
below. Class Y shares which, as described below, are not offered to the general
public, are offered without any front-end or contingent sales charges. Shares of
each Fund are offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Distributor ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with the
Distributor ("selected agents"), or (iii) the Distributor. The minimum for
initial investments is $1,000; there is no minimum for subsequent investments.
The subscriber may use the Share Purchase Application available from the
Distributor for his or her initial investment. Sales personnel of selected
dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A, Class B or Class C shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing Class Y shares of a Fund are not issued except upon written request
to the Fund by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen certificates. No
certificates are issued for fractional shares, although such shares remain in
the shareholder's account on the records of a Fund, or for Class A, B or C
shares of any Fund.
Alternative Purchase Arrangements
Managed Bond issues only Class Y shares and U.S. Government and Fixed
Income each issues four classes of shares: (i) Class A shares, which are sold to
investors choosing the front-end sales charge alternative; (ii) Class B shares,
which are sold to
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investors choosing the deferred sales charge alternative; (iii) Class C shares,
which are sold to investors choosing the level-load sales charge alternative;
and (iv) Class Y shares, which are offered only to (a) persons who at or prior
to December 30, 1994 owned shares in a mutual fund advised by Evergreen Asset,
(b) certain investment advisory clients of the Evergreen Asset, FUNB and their
affiliates, and (c) institutional investors. The four classes of shares each
represent an interest in the same portfolio of investments of the Fund, have the
same rights and are identical in all respects, except that (I) only Class A,
Class B and Class C shares are subject to a Rule 12b-1 distribution fee, (II)
Class B and Class C shares are subject to a shareholder service fee, (III) Class
A shares bear the expense of the front-end sales charge and Class B and Class C
shares bear the expense of the deferred sales charge, (IV) Class B shares and
Class C shares each bear the expense of a higher Rule 12b-1 distribution
services fee and shareholder service fee than Class A shares and, in the case of
Class B shares, higher transfer agency costs, (V) with the exception of Class Y
shares, each Class of each Fund has exclusive voting rights with respect to
provisions of the Rule 12b-1 Plan pursuant to which its distribution services
(and, to the extent applicable, shareholder service) fee is paid which relates
to a specific Class and other matters for which separate Class voting is
appropriate under applicable law, provided that, if the Fund submits to a
simultaneous vote of Class A, Class B and Class C shareholders an amendment to
the Rule 12b-1 Plan that would materially increase the amount to be paid
thereunder with respect to the Class A shares, the Class A shareholders and the
Class B and Class C shareholders will vote separately by Class, and (VI) only
the Class B shares are subject to a conversion feature. Each Class has different
exchange privileges and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services and
shareholder service fees and contingent deferred sales charges on Class B shares
prior to conversion, or the accumulated distribution services and shareholder
service fees on Class C shares, would be less than the front-end sales charge
and accumulated distribution services fee on Class A shares purchased at the
same time, and to what extent such differential would be offset by the higher
return of Class A shares. Class B and Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A shares at the lowest
applicable sales charge. For this reason, the Distributor will reject any order
(except orders for Class B shares from certain retirement plans) for more than
$2,500,000 for Class B or Class C shares.
Class A shares are subject to a lower distribution services fee and no
shareholder service fee and, accordingly, pay correspondingly higher dividends
per share than Class B shares or Class C shares. However, because front-end
sales charges are deducted at the time of purchase, investors purchasing Class A
shares would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced front-end sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A shares because the accumulated continuing
distribution and shareholder service charges on Class B shares or Class C shares
may exceed the front-end sales charge on Class A shares during the life of the
investment. Again, however, such investors must weigh this consideration against
the fact that, because of such front-end sales charges, not all their funds will
be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution services and shareholder service fees and, in the case of Class B
shares, being subject to a contingent deferred sales charge for a seven-year
period. For example, based on current fees and expenses, an investor subject to
the 4.75% front-end sales charge would have to hold his or her investment
approximately seven years for the Class B and Class C distribution services and
shareholders service fees, to exceed the front-end sales charge plus the
accumulated distribution services fee of Class A shares. In this example, an
investor intending to maintain his or her investment for a longer period might
consider purchasing Class A shares. This example does not take into account the
time value of money, which further reduces the impact of the Class B and Class C
distribution services and shareholder service fees on the investment,
fluctuations in net asset value or the effect of different performance
assumptions.
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Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the seven year period
during which Class B shares are subject to a contingent deferred sales charge
may find it more advantageous to purchase Class C shares.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B, Class C
and Class Y shares. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
Front-end Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing the
front-end sales charge alternative is the net asset value plus a sales charge as
set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
Net Per Share Offering
Asset Sales Price
Value Charge Date Per Share
U.S. Government $ 9.07 $.45 12/31/94 $ 9.52
Fixed Income $ 9.52 $.48 12/31/94 $10.00
Managed Bond $9.35 $.47 12/31/94 $ 9.82
For the periods indicated, the following commissions were paid to and
amounts were retained by Federated Securities Corp., which, prior to July 7,
1995, was the principal underwriter of portfolios of the Trust:
Period From
Year Ended January 11, 1993
12/31/94 to 12/31/93
U.S. GOVERNMENT:
Commissions Received $450,000 ---
Commissions Retained 10,000 ---
Year Ended Year Ended Year Ended
FIXED INCOME: 12/31/94 12/31/93 12/31/92
Commissions Received $247,000 $98,000
Commissions Retained 21,000 15,000
Class A shares were not being offered as of December 31, 1994 by
Managed Bond.
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
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Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
mutual funds other than money market funds into a single "purchase", if the
resulting "purchase" totals at least $100,000. The term "purchase" refers to:
(i) a single purchase by an individual, or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his or
her spouse and their children under the age of 21 years purchasing shares for
his, her or their own account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company which has not
been in existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen mutual fund. Currently, the
Evergreen mutual funds include:
Evergreen Fund
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Total Return Fund
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Tax Exempt Money Market Fund
Evergreen Money Market Fund
Evergreen Foundation Fund
Evergreen Florida High Income Fund
Evergreen Aggressive Growth Fund
Evergreen Balanced Fund*
Evergreen Utility Fund*
Evergreen Value Fund*
Evergreen U.S. Government Fund*
Evergreen Fixed Income Fund*
Evergreen Managed Bond Fund*
Evergreen Emerging Markets Growth Fund*
Evergreen International Equity Fund*
Evergreen Treasury Money Market Fund*
Evergreen Florida Municipal Bond 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*
* Prior to July 7, 1995, each Fund was named "First Union" instead of
"Evergreen."
Prospectuses for the Evergreen mutual funds may be obtained without
charge by contacting the Distributor or the Advisers at the address or telephone
number shown on the front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
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(ii) the net asset value (at the close of business on the
previous day) of (a) all Class A, Class B and Class C shares
of the Fund held by the investor and (b) all such shares of
any other Evergreen mutual fund held by the investor; and
(iii) the net asset value of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned Class A, B or C shares of an
Evergreen mutual fund worth $200,000 at their then current net asset value and,
subsequently, purchased Class A shares of a Fund worth an additional $100,000,
the sales charge for the $100,000 purchase would be at the 3.00% rate applicable
to a single $300,000 purchase of shares of the Fund, rather than the 3.75% rate.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Statement of Intention. Class A investors may also obtain the reduced
sales charges shown in the Prospectus by means of a written Statement of
Intention, which expresses the investor's intention to invest not less than
$100,000 within a period of 13 months in Class A shares (or Class A, Class B
and/or Class C shares) of the Fund or any other Evergreen mutual fund. Each
purchase of shares under a Statement of Intention will be made at the public
offering price or prices applicable at the time of such purchase to a single
transaction of the dollar amount indicated in the Statement of Intention. At the
investor's option, a Statement of Intention may include purchases of Class A, B
or C shares of the Fund or any other Evergreen mutual fund made not more than 90
days prior to the date that the investor signs a Statement of Intention;
however, the 13-month period during which the Statement of Intention is in
effect will begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen mutual funds under a single Statement
of Intention. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in shares of the Fund or any other
Evergreen mutual fund, to qualify for the 3.75% sales charge on the total amount
being invested (the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial investment
under a Statement of Intention is 5% of such amount. Shares purchased with the
first 5% of such amount will be held in escrow (while remaining registered in
the name of the investor) to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased, and such escrowed shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will be released.
To the extent that an investor purchases more than the dollar amount indicated
on the Statement of Intention and qualifies for a further reduced sales charge,
the sales charge will be adjusted for the entire amount purchased at the end of
the 13-month period. The difference in sales charge will be used to purchase
additional shares of the Fund subject to the rate of sales charge applicable to
the actual amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in Class A shares of the Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting a Fund at the address or telephone number
shown on the cover of this Statement of Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain qualified
and non-qualified benefit and savings plans may make shares of the Evergreen
mutual funds
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<PAGE>
available to their participants. Investments made by such employee benefit plans
may be exempt from any applicable front-end sales charges if they meet the
criteria set forth in the Prospectus under "Class A Shares-Front End Sales
Charge Alternative". The Adviser may provide compensation to organizations
providing administrative and recordkeeping services to plans which make shares
of the Evergreen mutual funds available to their participants.
Reinstatement Privilege. A Class A shareholder, who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased, may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except that no loss will
be recognized to the extent that the proceeds are reinvested in shares of the
Fund. The reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased, except that the
privilege may be used without limit in connection with transactions whose sole
purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address and telephone number shown on the cover of this
Statement of Additional Information.
Sales at Net Asset Value. In addition to the categories of investors
set forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of Evergreen Asset, FUNB or their affiliates; (ii) officers and present
or former Trustees of the Trust; present or former trustees of other investment
companies managed by the Adviser; present or retired full-time employees of the
Adviser; officers, directors and present or retired full-time employees of the
Adviser, the Distributor, and their affiliates; officers, directors and present
and full-time employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives") of any such
person; or any trust, individual retirement account or retirement plan account
for the benefit of any such person or relative; or the estate of any such person
or relative, if such shares are purchased for investment purposes (such shares
may not be resold except to the Fund); (iii) certain employee benefit plans for
employees of the Adviser, the Distributor and their affiliates; (iv) persons
participating in a fee-based program, sponsored and maintained by a registered
broker-dealer and approved by the Distributor, pursuant to which such persons
pay an asset-based fee to such broker-dealer, or its affiliate or agent, for
service in the nature of investment advisory or administrative services. These
provisions are intended to provide additional job-related incentives to persons
who serve the Funds or work for companies associated with the Funds and selected
dealers and agents of the Funds. Since these persons are in a position to have a
basic understanding of the nature of an investment company as well as a general
familiarity with the Fund, sales to these persons, as compared to sales in the
normal channels of distribution, require substantially less sales effort.
Similarly, these provisions extend the privilege of purchasing shares at net
asset value to certain classes of institutional investors who, because of their
investment sophistication, can be expected to require significantly less than
normal sales effort on the part of the Funds and the Distributor.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee and the shareholder service fee enables the Fund to sell the Class
B shares without a sales charge being deducted at the time of purchase. The
higher
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distribution services fee and the shareholder service fee incurred by Class B
shares will cause such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within seven years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed, that the redemption is first of any Class A
shares or Class C shares in the shareholder's Fund account, second of Class B
shares held for over eight years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B shares held
longest during the eight-year period.
To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 50 Class B shares, 10
Class B shares will not be subject to charge because of dividend reinvestment.
With respect to the remaining 40 Class B shares, the charge is applied only to
the original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, of the $600 of the shares redeemed $400 of the
redemption proceeds (40 shares x $10 original purchase price) will be charged at
a rate of 4.0% (the applicable rate in the second year after purchase for a
contingent deferred sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee and the shareholder
service fee imposed on Class B shares. Such conversion will be on the basis of
the relative net asset values of the two classes, without the imposition of any
sales load, fee or other charge. The purpose of the conversion feature is to
reduce the distribution services fee paid by holders of Class B shares that have
been outstanding long enough for the Distributor to have been compensated for
the expenses associated with the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee and shareholder service fee
and transfer agency costs with respect to Class B shares does not result in the
dividends or distributions payable with respect to other Classes of a Fund's
shares being deemed "preferential dividends" under the Code, and (ii) the
conversion of Class B shares to Class A shares does not constitute a taxable
event under Federal income tax law. The conversion of Class B shares to Class A
shares may be suspended if such an opinion is no longer available at the time
such conversion is to occur. In that event, no further conversions of Class B
shares would occur, and shares might continue to be subject to the higher
distribution services fee and shareholder services fee
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for an indefinite period which may extend beyond the period ending eight years
after the end of the calendar month in which the shareholder's purchase order
was accepted.
Level-Load Alternative--Class C Shares
Investors choosing the level load sales charge alternative purchase
Class C shares at the public offering price equal to the net asset value per
share of the Class C shares on the date of purchase without the imposition of a
front-end sales charge. However, you will pay a 1.0% contingent deferred sales
charge if you redeem shares during the first year after purchase. No charge is
imposed in connection with redemptions made more than one year from the date of
purchase. Class C shares are sold without a front-end sales charge so that the
Fund will receive the full amount of the investor's purchase payment and after
the first year without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset value of his or
her Class C shares. The Class C distribution services fee and shareholder
service fee enables the Fund to sell Class C shares without either a front-end
or contingent deferred sales charge. However, unlike Class B shares, Class C
shares do not convert to any other class shares of the Fund. Class C shares
incur higher distribution services fees and shareholder service fees than Class
A shares, and will thus have a higher expense ratio and pay correspondingly
lower dividends than Class A shares.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of Evergreen Asset, FUNB and their affiliates, and (iii) institutional
investors. Class Y shares do not bear any Rule 12b-1 distribution expenses and
are not subject to any front-end or contingent deferred sales charges.
GENERAL INFORMATION ABOUT THE FUNDS
(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
The Evergreen U.S. Government Fund, Evergreen Fixed Income Fund and
Evergreen Managed Bond Fund, which prior to July 7, 1995 were known as the First
Union U.S. Government Portfolio, First Union Fixed Income Portfolio and First
Union Managed Bond Portfolio, respectively, are each separate series of
Evergreen Investment Trust, a Massachusetts business trust. On July 7, 1995,
First Union Funds changed its name to Evergreen Investment Trust. On December
14, 1992, The Salem Funds changed its name to First Union Funds. The Trust is
governed by a Board of Trustees.
U.S. Government, Fixed Income and Managed Bond may issue an unlimited
number of shares of beneficial interest without par value. All shares of these
Funds have equal rights and privileges. Each share is entitled to one vote, to
participate equally in dividends and distributions declared by the Funds and on
liquidation to their proportionate share of the assets remaining after
satisfaction of outstanding liabilities. Shares of these Funds are fully paid,
nonassessable and fully transferable when issued and have no pre-emptive,
conversion or exchange rights. Fractional shares have proportionally the same
rights, including voting rights, as are provided for a full share.
Under the Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Fund or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of the Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
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The Trustees of the Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the State of Massachusetts. If shares of another
series of the Trust were issued in connection with the creation of additional
investment portfolios, each share of the newly created portfolio would normally
be entitled to one vote for all purposes. Generally, shares of all portfolios
would vote as a single series on matters, such as the election of Trustees, that
affected all portfolios in substantially the same manner. As to matters
affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related an other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of the Trust, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of each Fund. The rights of the holders of
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of shares representing
interests in each Fund. In the event a Fund were to issue additional Classes of
shares other than those described herein, no further relief from the Securities
and Exchange Commission would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue,
New York, New York 10169, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the Agreement
between the Fund and the Distributor, the Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester, Washington, D.C., serves as counsel to the Funds.
Independent Auditors
KPMG Peat Marwick LLP has been selected to be the independent auditors of
U.S. Government, Fixed Income and Managed Bond.
PERFORMANCE INFORMATION
Total Return
From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for recent one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by the Securities
and Exchange Commission, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of such
investment at the end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales charge
applicable to purchases of Fund shares is assumed to have been paid. The Fund
will include performance data for Class A, Class B, Class C and Class Y shares
in any advertisement or information including performance data of the Fund.
31
<PAGE>
With respect to Managed Bond, Class A, Class B and Class C shares were
not being offered as of December 31, 1994. The average annual compounded total
return for each Class of shares offered by the Funds for the most recently
completed one, five and ten year fiscal periods is set forth in the table below.
U.S. GOVERNMENT 1 Year From
Ended (inception)*
12/31/94 to 12/31/94
Class A -7.77% -0.48%
Class B -8.50% -0.59%
Class C -- -2.28%
Class Y -2.94% -1.83%
FIXED INCOME 1 Year 5 Years From
Ended Ended (inception)**
12/31/94 12/31/94 to 12/31/94
Class A -7.20% 6.50%
Class B -8.20% -0.80%
Class C -- -2.30%
Class Y -2.55% 6.48%
MANAGED BOND 1 Year From
Ended (inception)***
12/31/94 to 12/31/94
Class Y -4.40% 6.06%
* Inception date: Class A - January 12, 1993; Class B - January 12, 1993; Class
C - September 2, 1994; Class Y - August 25, 1993.
** Inception date: Class A - January 31, 1989; Class B - January 25, 1993; Class
C - September 2, 1994; Class Y - December 31, 1990.
*** Inception date: Class Y - April 1, 1991.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal invested in a Fund is
not fixed and will fluctuate in response to prevailing market conditions.
YIELD CALCULATIONS
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where a = Interest earned during the period
b = Expenses accrued for the period (net of reimbursements) c = The
average daily number of shares outstanding during the period
that were entitled to receive dividends
32
<PAGE>
d = The maximum offering price per share on the last day of the period
Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond funds. Gains and
losses generally are excluded from the calculation. Income calculated for
purposes of determining a Fund's yield differs from income as determined for
other accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rate of distributions a Fund paid over the same
period, or the net investment income reported in a Fund's financial statements.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The yield of each Fund for the thirty-day period ended December 31,
1994 for each Class of shares offered by the Funds is set forth in the table
below:
U.S. Government
Class A - 7.10%
Class B - 6.08%
Class C - 6.08%
Class Y - 7.10%
Fixed Income Class A - 6.53% Class B - 5.95% Class C - 5.95% Class Y - 6.97%
Managed Bond
Class Y - 7.35%
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
GENERAL
From time to time, a Fund may quote its performance in advertising and
other types of literature as compared to the performance of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, Lehman
Brothers Intermediate Government Bond Index, or any other commonly quoted index
of common stock and bond prices. The Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average and the Lehman Brothers Intermediate
Government Bond Index are unmanaged indices of selected common stock and bond
prices. A Fund's performance may also be compared to those of other mutual funds
having similar objectives. This comparative performance would be expressed as a
ranking prepared by Lipper Analytical Services, Inc. or similar independent
services
33
<PAGE>
monitoring mutual fund performance. A Fund's performance will be calculated by
assuming, to the extent applicable, reinvestment of all capital gains
distributions and income dividends paid. Any such comparisons may be useful to
investors who wish to compare a Fund's past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to the Adviser at the address or telephone number shown on the front cover of
this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statement filed by the Trust with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely KPMG Peat Marwick LLP are incorporated by
reference in this Statement of Additional Information. The Annual Reports to
Shareholders for each Fund, which contain the referenced statements, are
available upon request and without charge.
34
<PAGE>
APPENDIX A - NOTE, BOND AND COMMERCIAL PAPER RATINGS
NOTE RATINGS
Moody's Investors Service, Inc.: MIG-1 -- the best quality. MIG-2 -- high
quality, with margins of protection ample though not so large as in the
preceding group. MIG-3 -- favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less well
established.
Standard & Poor's Ratings Group, Inc.: SP-1 -- Very strong or strong
capacity to pay principal and interest. SP-2 -- Satisfactory capacity to pay
principal and interest.
BOND RATINGS
Moody's Investors Service: Aaa -- judged to be the best quality, carry
the smallest degree of investment risk; Aa -- judged to be of high quality by
all standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as medium grade
obligations which are neither highly protected nor poorly secured. Moody's
Investors Service also applies numerical indicators, 1, 2 and 3, to rating
categories Aa through Baa. The modifier 1 indicates that the security is in the
higher end of its rating category; the modifier 2 indicates a mid-range ranking;
and 3 indicates a ranking toward the lower end of the category.
Standard & Poor's Ratings Group: AAA -- highest grade obligations,
possesses the ultimate degree of protection as to principal and interest; AA --
also qualify as high grade obligations, and in the majority of instances differ
from AAA issues only in small degree; A -- regarded as upper medium grade, have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions, interest and principal are regarded
as safe; BBB -- regarded as having adequate capacity to pay interest and repay
principal but are more susceptible than higher rated obligations to the adverse
effects of changes in economic and trade conditions. Standard & Poor's Ratings
Group applies indicators "+", no character, and "-" to the above rating
categories AA through BBB. The indicators show relative standing within the
major rating categories.
Duff & Phelps: AAA - highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which may vary very slightly from time to time because of economic
conditions; A -- average credit quality with adequate protection factors, but
with greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch Investors Service: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with a very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions; and BBB -- satisfactory credit quality with adequate ability with
regard to interest and principal, and likely to be affected by adverse changes
in economic conditions and circumstances. The indicators "+" and "-" to the AA,
A and BBB categories indicate the relative position of a credit within those
rating categories.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries
the smallest degree of investment risk. The modifiers 1, 2 and 3 are used to
denote relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
minimal risk factors. Duff 3
35
<PAGE>
represents satisfactory protection factors, with risk factors larger and subject
to more variation.
Fitch Investors Service: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1 -- very strong credit quality, with only slightly less
degree of assurance for timely payment than F-1+; F-2 -- good credit quality,
carrying a satisfactory degree of assurance for timely payment.
PROSPECTUS July 7, 1995
EVERGREEN(SM) INTERNATIONAL/GLOBAL GROWTH FUNDS (Evergreen Logo appears here)
EVERGREEN EMERGING MARKETS GROWTH FUND
EVERGREEN INTERNATIONAL EQUITY FUND
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen International/Global Growth Funds (the "Funds") are
designed to provide investors with a selection of investment alternatives
which seek to provide capital growth and diversification. This Prospectus
provides information regarding the Class A, Class B and Class C shares
offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds dated July
7, 1995 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 807-2940. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 9
Investment Practices and Restrictions 10
MANAGEMENT OF THE FUNDS
Investment Adviser 15
Sub-Advisers 17
Distribution Plan and Agreements 17
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 18
How to Redeem Shares 21
Exchange Privilege 22
Shareholder Services 23
Effect of Banking Laws 23
OTHER INFORMATION
Dividends, Distributions and Taxes 24
Management's Discussion of Fund Performance 25
General Information 26
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN GLOBAL REAL ESTATE EQUITY FUND is
Evergreen Asset Management Corp. ("Evergreen Asset") which, with its
predecessors, has served as an investment adviser to the Evergreen Funds since
1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank
of North Carolina ("FUNB"), which in turn is a subsidiary of First Union
Corporation, one of the ten largest bank holding companies in the United States.
The Capital Management Group of FUNB ("CMG") serves as investment adviser to
EVERGREEN EMERGING MARKETS GROWTH FUND and EVERGREEN INTERNATIONAL EQUITY FUND.
EVERGREEN EMERGING MARKETS GROWTH FUND (formerly First Union Emerging
Markets Growth Portfolio) seeks to provide long-term capital appreciation. The
EVERGREEN EMERGING MARKETS GROWTH FUND invests in equity securities of issuers
located in countries with emerging markets.
EVERGREEN INTERNATIONAL EQUITY FUND (formerly First Union International
Equity Portfolio) seeks to provide long-term capital appreciation. The EVERGREEN
INTERNATIONAL EQUITY FUND invests in equity securities of non-U.S. issuers.
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND seeks long-term capital growth.
Current income is a secondary objective. It invests primarily in equity
securities of United States and non-United States companies which are
principally engaged in the real estate industry or which own significant real
estate assets. It will not purchase direct interests in real estate.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C Shares of a
Fund. For further information see "Purchase and Redemption of Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the 1% during the
original purchase price or redemption second year, 3% during the third and fourth first year and
proceeds, whichever is lower) years, 2% during the fifth year, 1% during 0% thereafter
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B and C, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares and Class C Shares assume deduction at the time of
redemption (if applicable) of the maximum contingent deferred sales charge
applicable for that time period, and (iii) the expenses for Class B Shares
reflect the conversion to Class A Shares eight years after purchase (years eight
through ten, therefore, reflect Class A expenses).
EVERGREEN EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES** Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.50% 1.50% 1.50% After 1 Year $ 71 $ 82 $ 42 $ 32
Administrative Fees .06% .06% .06% After 3 Years $ 119 $ 127 $ 97 $ 97
12b-1 Fees* .25% .75% .75% After 5 Years $ 169 $ 185 $ 165 $ 165
Shareholder Service Fees -- .25% .25% After 10 Years $ 308 $ 320 $ 346 $ 320
Other Expenses .59% .59% .59%
Total 2.40% 3.15% 3.15%
<CAPTION>
Class C
<S> <C> <C>
Advisory Fees After 1 Year $ 32
Administrative Fees After 3 Years $ 97
12b-1 Fees* After 5 Years $ 165
Shareholder Service Fees After 10 Years $ 346
Other Expenses
Total
</TABLE>
EVERGREEN INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES** Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .82% .82% .82% After 1 Year $ 61 $ 72 $ 32 $ 22
Administrative Fees .06% .06% .06% After 3 Years $ 90 $ 98 $ 68 $ 68
12b-1 Fees* .25% .75% .75% After 5 Years $ 121 $ 136 $ 116 $ 116
Shareholder Service Fees -- .25% .25% After 10 Years $ 209 $ 272 $ 250 $ 222
Other Expenses .29% .29% .29%
Total 1.42% 2.17% 2.17%
<CAPTION>
Class C
<S> <C> <C>
Advisory Fees After 1 Year $ 22
Administrative Fees After 3 Years $ 68
12b-1 Fees* After 5 Years $ 116
Shareholder Service Fees After 10 Years $ 250
Other Expenses
Total
</TABLE>
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES** Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00% After 1 Year $ 64 $ 75 $ 35 $ 25
12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 99 $ 107 $ 77 $ 77
Other Expenses .46% .46% .46% After 5 Years $ 136 $ 151 $ 131 $ 131
Total 1.71% 2.46% 2.46% After 10 Years $ 240 $ 252 $ 280 $ 252
<CAPTION>
Class C
<S> <C> <C>
Advisory Fees After 1 Year $ 25
12b-1 Fees* After 3 Years $ 77
Other Expenses After 5 Years $ 131
Total After 10 Years $ 280
</TABLE>
3
<PAGE>
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the forseeable future, the Class A 12b-1 Fees will be limited to .25 of 1%
of average net assets. For Class B and Class C Shares of EVERGREEN GLOBAL REAL
ESTATE EQUITY FUND, a portion of the 12b-1 Fees equivalent to .25 of 1% of
average net assets will be shareholder servicing-related. Distribution-related
12b-1 Fees will be limited to .75 of 1% of average net assets as permitted under
the rules of the National Association of Securities Dealers, Inc.
**The annual operating expenses and examples do not reflect fee waivers and
expense reimbursements for the most recent fiscal period. Actual expenses net of
fee waivers and expense reimbursements for the fiscal period ended December 31,
1994 or September 30, 1994, as applicable, for Class A, B and C Shares were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Evergreen Emerging Markets Growth Fund 1.78% 2.53% 2.53%
Evergreen International Equity Fund 1.26% 2.02% 2.01%
</TABLE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds". As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted under the
rules of the National Association of Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN EMERGING MARKETS GROWTH FUND and EVERGREEN
INTERNATIONAL EQUITY FUND has been audited by KPMG Peat Marwick LLP, each Fund's
independent auditors, for EVERGREEN GLOBAL REAL ESTATE EQUITY FUND has, except
as noted otherwise, been audited by Price Waterhouse LLP, the Fund's independent
auditors. A report of KPMG Peat Marwick LLP or Price Waterhouse LLP, as the case
may be, on the audited information with respect to each Fund is incorporated by
reference in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
SEPTEMBER 6, 1994*
THROUGH DECEMBER 31, 1994
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period............................................. $10.00 $10.00 $10.00 $ 10.00
Income (loss) from investment operations:
Net investment income (loss)..................................................... -- (.02) (.02) .01
Net realized and unrealized loss on investments and foreign currency
transactions................................................................... (1.83) (1.82) (1.82) (1.84)
Total from investment operations............................................... (1.83) (1.84) (1.84) (1.83)
Net asset value, end of period................................................... $8.17 $8.16 $8.16 $8.17
TOTAL RETURN+.................................................................... (18.3%) (18.4%) (18.4%) (18.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................ $867 $1,589 $89 $5,878
Ratios to average net assets:
Expenses (a)................................................................... 1.78%++ 2.53%++ 2.53%++ 1.53%++
Net investment income (loss) (a)............................................... (.12%)++ (.84%)++ (.82%)++ .43%++
Portfolio turnover rate.......................................................... 17% 17% 17% 17%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, for the
period from September 6, 1994 through December 31, 1994 would have been the
following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
Expenses..................................................... 3.96% 4.71% 4.71% 3.71%
Net investment income (loss)................................. (2.30%) (3.02%) (3.00%) (1.75%)
</TABLE>
5
<PAGE>
EVERGREEN INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS C
SHARES CLASS B SHARES SHARES
<S> <C> <C> <C>
SEPTEMBER 2, 1994*
THROUGH DECEMBER 31, 1994
PER SHARE DATA
Net asset value, beginning of period.............................................. $10.00 $ 10.00 $10.00
Income (loss) from investment operations:
Net investment income............................................................. .02 -- .03
Net realized and unrealized loss on investments................................... (.52) (.50 ) (.54)
Total from investment operations................................................ (.50) (.50 ) (.51)
Less distributions to shareholders from:
Net investment income............................................................. -- -- --
Net asset value, end of period.................................................... $9.50 $9.50 $9.49
TOTAL RETURN+..................................................................... (5.1%) (5.2% ) (5.2%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)......................................... $2,545 $5,602 $163
Ratios to average net assets:
Expenses (a).................................................................... 1.26%++ 2.02% ++ 2.01%++
Net investment income (a)....................................................... .91%++ .10% ++ .85%++
Portfolio turnover rate........................................................... 1% 1% 1%
<CAPTION>
CLASS Y
SHARES
<S> <C>
PER SHARE DATA
Net asset value, beginning of period.............................................. $10.00
Income (loss) from investment operations:
Net investment income............................................................. .02
Net realized and unrealized loss on investments................................... (.51 )
Total from investment operations................................................ (.49 )
Less distributions to shareholders from:
Net investment income............................................................. (.01 )
Net asset value, end of period.................................................... $9.50
TOTAL RETURN+..................................................................... (5.0% )
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)......................................... $23,830
Ratios to average net assets:
Expenses (a).................................................................... 1.06% ++
Net investment income (a)....................................................... 1.03% ++
Portfolio turnover rate........................................................... 1%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, for the
period from September 2, 1994 through December 31, 1994 would have been the
following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
Expenses..................................................... 2.09% 2.85% 2.84% 1.89%
Net investment income (loss)................................. .08% (.73%) .02% .20%
</TABLE>
6
<PAGE>
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS FEBRUARY 1, 1989*
ENDED MARCH ENDED THROUGH
31, 1995 SEPTEMBER 30, YEAR ENDED DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994# 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period............................ $ 13.81 $ 14.75 $9.86 $9.16 $8.10 $10.03 $10.00
Income (loss) from investment
operations:
Net investment income (loss)........ .01 .07 -- (.01) (.02) (.03) .17
Net realized and unrealized gain
(loss) on investments............. (2.48) (1.01) 5.07 .94 1.08 (1.90) .03
Total from investment
operations.................... (2.47) (.94) 5.07 .93 1.06 (1.93) .20
Less distributions to shareholders
from:
Net investment income............... (.10) -- -- -- -- -- (.17)
Net realized gains.................. (.52) -- (.18) (.23) -- -- --
Total distributions............. (.62) -- (.18) (.23) -- -- (.17)
Net asset value, end of period...... $ 10.72 $ 13.81 $14.75 $9.86 $9.16 $8.10 $10.03
TOTAL RETURN+....................... (18.4%) (6.4%) 51.4% 10.2% 13.1% (19.2%) 2.0%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted).......................... $74,001 $132,294 $146,173 $8,618 $7,557 $6,004 $7,336
Ratios to average net assets:
Operating expenses................ 1.51%++ 1.46%++ 1.56%(a) 2.00%(a) 2.00%(a) 2.00%(a) 2.00%(a)++
Interest expense.................. .08%++ .08%++ -- -- -- -- --
Net investment income (loss)...... .39%++ .56%++ .03%(a) (.10%)(a) (.27%)(a) (.39%)(a) 2.23%(a)++
Portfolio turnover rate............. 17% 63% 88% 245% 207% 325% 151%
</TABLE>
# On September 21, 1994, the Fund changed its fiscal year end from December 31
to September 30.
* Commencement of operations.
+ Total return is calculated on net asset value per share and is not
annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
FEBRUARY 1,
1989 THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Operating expenses................................ 1.64% 3.72% 3.76% 3.99% 3.17%
Net investment income (loss)...................... (.05%) (1.82%) (2.02%) (2.38%) 1.06%
</TABLE>
7
<PAGE>
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FEBRUARY 10, 1995* FEBRUARY 8, 1995* FEBRUARY 9, 1995*
THROUGH THROUGH THROUGH
MARCH 31, 1995 MARCH 31, 1995 MARCH 31, 1995
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.............................. $11.46 $ 11.44 $ 11.43
Income (loss) from investment operations:
Net investment income............................................. .02 .02 .01
Net realized and unrealized loss on investments................... (.76) (.75) (.73)
Total from investment operations................................ (.74) (.73) (.72)
Net asset value, end of period.................................... $10.72 $ 10.71 $ 10.71
TOTAL RETURN+..................................................... (6.5%) (6.4%) (6.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)......................... $2,531 $ 3,362 $ 1,146
Ratios to average net assets:
Operating expenses (a).......................................... 1.51%++ 2.27%++ 2.31%++
Interest expense................................................ .02%++ .01%++ .01%++
Net investment income (a)....................................... 3.21%++ 1.53%++ .87%++
Portfolio turnover rate#.......................................... 17% 17% 17%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that
of the Class Y shares, and are not necessarily indicative of future ratios.
# Portfolio turnover rate is calculated for the six months ended March 31,
1995.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FEBRUARY 10, 1995 FEBRUARY 8, 1995 FEBRUARY 9, 1995
THROUGH THROUGH THROUGH
MARCH 31, 1995 MARCH 31, 1995 MARCH 31, 1995
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating expenses........................ 2.73% 3.49% 3.49%
Net investment income (loss).............. 1.99% .31% (.31%)
</TABLE>
8
9
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Emerging Markets Growth Fund
The objective of Evergreen Emerging Markets Growth Fund is long-term
capital appreciation. In seeking this objective, the Fund invests in equity
securities of issuers located in emerging markets. The Fund is suitable for
aggressive investors interested in the investment opportunities offered by
securities of issuers located in emerging or developing markets and the
resulting potential for growth opportunities resulting from political change,
economic deregulation and liberalized trade policies. The objective is
fundamental and may not be changed without shareholder approval.
The Fund seeks long-term capital appreciation. The Fund invests
primarily in a diversified portfolio of equity securities of issuers located in
countries with emerging markets. As a matter of policy, the Fund will invest at
least 65% of the value of its total assets in securities of emerging market
issuers.
A country will be considered to have an "emerging market" if it has
relatively low gross national product per capita compared to the world's major
economies and the potential for rapid economic growth. Countries with emerging
markets include those that have an emerging stock market (as defined by the
International Finance Corporation), those with low-to middle income economies
(according to the World Bank), and those listed in World Bank publications as
"developing." The Fund will normally invest in at least six different countries,
although it may invest all of its assets in a single country. At the present
time, the Fund has no intention of investing all of its assets in a single
country. The Fund focuses on equity securities, but may also invest in other
types of instruments, including debt securities. Marvin & Palmer Associates, the
Sub-Adviser to the Fund, will make investment decisions regarding equity
securities based on its analysis of returns, price momentum, business and
industry considerations, and management quality.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen International Equity Fund
The objective of Evergreen International Equity Fund is long-term
capital appreciation. The Fund invests primarily in equity securities of
non-U.S. issuers and is suitable for investors who want to pursue their
investment goals in markets outside the United States. The Fund provides
investors with a vehicle to pursue investment opportunities in countries outside
the U.S. whose securities markets may benefit from differing economic and
political cycles. The objective is fundamental and may not be changed without
shareholder approval.
The Fund invests primarily in foreign equity securities that Boston
International Advisers, Inc., the Sub-Adviser to the Fund, determines, through
both fundamental and technical analysis, to be undervalued compared to other
securities in their industries and countries. In most market conditions, the
stocks comprising the Fund's assets will exhibit traditional value
characteristics, such as higher than average dividend yields, lower than average
price to book value, and will include stocks of companies with unrecognized or
undervalued assets. As a matter of policy, the Fund will invest at least 65% of
the value of its total assets in equity securities of issuers located in at
least three countries outside of the United States.
The Fund will emphasize value stocks, primarily of companies which are
listed on one or more of thirty-two stock markets: twenty developed markets and
twelve emerging markets. While the current intention of the Fund is to invest in
32 stock markets, the Fund may invest in more or less, depending upon market
conditions as determined by the Sub-Adviser. The Fund will invest substantially
in industrialized companies throughout the world that comprise the Morgan
Stanley Capital International EAFE (Europe, Australia and the Far East) Index.
In addition, the Fund intends to invest up to 10% of its assets in emerging
country equity securities, as described above under "Evergreen Emerging Markets
Growth Fund."
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
<PAGE>
Evergreen Global Real Estate Equity Fund
The Evergreen Global Real Estate Equity Fund seeks to achieve its
investment objective of long-term capital growth through investment primarily in
equity securities of domestic and foreign companies which are principally
engaged in the real estate industry or which own significant real estate assets;
the Fund will not purchase direct interests in real estate. Current income will
be a secondary objective. Equity securities will include common stock, preferred
stock and securities convertible into common stock. The objective is fundamental
and may not be changed without shareholder approval.
The Fund will, under normal conditions, invest at least 65% of its
total assets in equity securities of domestic and foreign exchange or NASDAQ
listed companies which are principally engaged in the real estate industry. A
company is deemed to be "principally engaged" in the real estate industry if at
least 50% of its assets (marked to market), gross income or net profits are
attributable to ownership, construction, management or sale of residential,
commercial or industrial real estate. Real estate industry companies may include
among others: equity real estate investment trusts, which pool investors' funds
for investment primarily in commercial real estate properties; mortgage real
estate investment trusts, which invest pooled funds in real estate related
loans; brokers or real estate developers; and companies with substantial real
estate holdings, such as paper and lumber producers and hotel and entertainment
companies. The Fund will only invest in real estate equity trusts and limited
partnerships which are traded on major exchanges. As a matter of fundamental
policy, the Fund will also invest at least 65% of its total assets in the equity
securities of companies of at least three countries, including the United
States, except when abnormal market or financial conditions warrant the
assumption of a temporary defensive position. See "Investment Practices and
Restrictions" and "Special Risk Considerations".
The remainder of the Fund's investments may be made in equity
securities of issuers whose products and services are related to the real estate
industry, such as manufacturers and distributors of building supplies and
financial institutions which issue or service mortgages. 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.
The Fund pursues a flexible strategy of investing in a diversified
portfolio of securities of companies throughout the world. The Fund's investment
adviser anticipates that the Fund will give particular consideration to
investments in the United Kingdom, Western Europe, Australia, Canada, the Far
East (Japan, Hong Kong, Singapore, Malaysia and Thailand) and the United States.
The percentage of the Fund's assets invested in particular geographic regions
will shift from time to time in accordance with the judgment of the Fund's
investment adviser. Generally, a substantial portion of the assets of the Fund
will be denominated or traded in foreign currencies.
Investments may also be made in securities of issuers unrelated to the
real estate industry believed by the Fund's investment adviser to be undervalued
and to have capital appreciation potential. Also, consistent with the secondary
objective of current income, investments may also be made in nonconvertible debt
securities of such companies. The debt securities purchased (except for those
described below) will be of investment grade or better quality (e.g., rated no
lower than A by Moody's Investors Service ("Moody's") or Standard & Poor's
Ratings Group ("S&P")or if not so rated, believed by the Fund's investment
adviser to be of comparable quality). However, up to 10% of total assets may be
invested in unrated debt securities of issuers secured by real estate assets
where the Fund's investment adviser believes that the securities are trading at
a discount and the underlying collateral will ensure repayment of principal. In
such situations, it is conceivable that the Fund could, in the event of default,
end up holding the underlying real estate directly.
It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds primarily invest in:
common and preferred stocks, convertible securities and warrants of
foreign corporations. Common stocks represent an equity interest in a
corporation. This ownership interest often gives the Funds the right to
vote on measures affecting the company's organization and operations.
Although common stocks have a history of long-term growth in value,
their prices tend to fluctuate in the short-term, particularly those of
smaller capitalization companies. Smaller capitalization companies may
have limited product lines, markets, or financial resources. These
conditions may make them more susceptible to setbacks and reversals.
Therefore, their securities may have limited marketability and may be
subject to more abrupt or erratic market movements than securities of
larger companies;
obligations of foreign governments and supranational organizations;
corporate and foreign government fixed income securities denominated in
currencies other than U.S. dollars, rated, at the time of purchase, Baa
or higher by Moody's or BBB or higher by S&P, or which, if unrated, are
considered to be of comparable quality by the Fund's investment adviser
or sub-advisers. Bonds rated Baa by Moody's or BBB by S&P have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. Although the
Funds do not intend to invest significantly in debt securities, it
should be noted that the prices of fixed income securities fluctuate
inversely to the direction of interest rates;
strategic investments, such as options and futures contracts on
currency transactions, securities index futures contracts, and forward
foreign currency exchange contracts. The Funds can use these techniques
to increase or decrease their exposure to changing security prices,
interest rates, currency exchange rates, or other factors that affect
security values. (Although, of course, there can be no assurance that
these strategic investments will be successful in protecting the value
of the Funds' securities.); and
securities of closed-end investment companies.
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of a Fund's
investment adviser or sub-adviser, market conditions warrant a temporary
defensive investment strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund bears directly. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for Evergreen Global Real Estate Equity Fund effected on
those exchanges. See the Statement of Additional Information for further
information regarding the brokerage allocation practices of the Funds. The
portfolio turnover rate for each Fund is set forth in the tables contained in
the section entitled "Financial Highlights".
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security for cash and
obtains a simultaneous commitment from the seller (usually a bank or
broker/dealer) to repurchase the security at an agreed-upon price and specified
future date. The repurchase price reflects an agreed-upon interest rate for the
time period of the agreement. The Funds' risk is the inability of the seller to
pay the agreed-upon price on the delivery date. However, this risk is tempered
by the ability of the Funds to sell the security in the open market in the case
of a default. In such a case, the Funds may incur costs in disposing of the
security which would increase Fund expenses. Each Fund's investment adviser will
monitor the creditworthiness of the firms with which the Funds enter into
repurchase agreements.
When-Issued And Delayed Delivery Transactions. Evergreen International Equity
Fund and Evergreen Emerging Markets Growth Fund may purchase securities on a
when-issued or delayed delivery basis. These transactions are arrangements in
which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. A Fund may dispose of a commitment prior to
settlement if the Fund's investment adviser deems it appropriate to do so. In
addition, Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund may enter into transactions to sell their purchase commitments to
third parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. The Funds may realize
short-term profits or losses upon the sale of such commitments.
Temporary Investments. The Funds may invest in U.S. and foreign short-term money
market instruments (denominated in U.S. and/or foreign currencies), including
interest-bearing call deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. These investments may be used to
temporarily invest cash received from the sale of Fund shares, to establish and
maintain reserves for temporary defensive purposes, or to take advantage of
market opportunities.
Illiquid or Restricted Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities and other securities which are not readily
marketable. Illiquid securities include certain restricted securities not
determined by the Trustees to the liquid, non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days after
notice. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% limit. The
inability of a Fund to dispose of illiquid or not readily marketable investments
readily or at a reasonable price could impair the Fund's ability to raise cash
for redemptions or other purposes. The liquidity of securities purchased by a
Fund which are eligible for resale pursuant to Rule 144A will be monitored by
the each Fund's investment adviser on an ongoing basis, subject to the oversight
of the Trustees. In the event that such a security is deemed to be no longer
liquid, a Fund's holdings will be reviewed to determine what action, if any, is
required to ensure that the retention of such security does not result in a Fund
having more than 15% of its assets invested in illiquid or not readily
marketable securities.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except as a temporary measure to facilitate redemption requests or for
extraordinary or emergency purposes. The proceeds from borrowings may be used to
facilitate redemption requests which might otherwise require the untimely
disposition of portfolio securities. The specific limits applicable to borrowing
by each Fund are set forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers or sub-advisers will
monitor the creditworthiness of such borrowers. Loans of securities by the
Funds, if and when made, may not exceed 30% of the value of the total assets of
the Evergreen Global Real Estate Equity Fund, and must be collateralized by cash
or U.S. Government securities that are maintained at all times in an amount
equal to at least 100% of the current market value of the securities loaned,
including accrued interest. While such securities are on loan, the borrower will
pay a Fund any income accruing thereon, and the Fund may invest the cash
collateral in portfolio securities, thereby increasing its return. Any gain or
loss in the market price of the loaned securities which occurs during the term
of the loan would affect a Fund and its investors. A Fund has the right to call
a loan and obtain the securities loaned at any time on notice of not more than
five business days. A Fund may pay reasonable fees in connection with such
loans.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Foreign Currency Transactions. The Funds will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts. The Funds may also enter into foreign currency transactions to
protect Fund assets against adverse changes in foreign currency exchange rates
or exchange control regulations. Such changes could unfavorably affect the value
of Fund assets which are denominated in foreign currencies, such as foreign
securities or funds deposited in foreign banks, as measured in U.S. dollars.
Although foreign currency exchanges may be used by a Fund to protect against a
decline in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties. Generally, no commission charges or deposits are involved. At the
time a Fund enters into a forward contract, Fund assets with a value equal to
the Fund's obligation under the forward contract are segregated and are
maintained until the contract has been settled. The Funds will not enter into a
forward contract with a term of more than one year. The Funds will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between trade date and settlement date will vary between 24 hours and 60
days, depending upon local custom.
<PAGE>
The Funds may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Funds' assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although each Fund's
investment adviser or sub-adviser will consider the likelihood of changes in
currency values when making investment decisions, each Fund's investment adviser
or sub-adviser believes that it is important to be able to enter into forward
contracts when it believes the interests of a Fund will be served. The Funds
will not enter into forward contracts for hedging purposes in a particular
currency in an amount in excess of the Funds' assets denominated in that
currency, but as consistent with their other investment policies and as not
otherwise limited in their ability to use this strategy.
Options And Futures. The Funds may deal in options on foreign currencies, and
portfolio securities, and, in the case of Evergreen International Equity Fund
and Evergreen Emerging Markets Growth Fund, securities indices, which options
may be listed for trading on an international securities exchange. The Funds
will use these options to manage interest rate and currency risks. The Funds
also may write covered call options and secured put options to generate income
or to lock in gains. Each Fund may write covered call options and secured put
options on up to 25% of its net assets in the case of Evergreen International
Equity Fund and Evergreen Emerging Markets Growth Fund and 15% of its net assets
in the case of Evergreen Global Real Estate Equity Fund, and Evergreen
International Equity Fund and Evergreen Emerging Markets Growth Fund may
purchase put and call options provided that no more than 5% of the fair market
value of its net assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying asset at the exercise price during the option
period. A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying asset at the exercise price during the option
period. The writer of a covered call owns assets that are acceptable for escrow
and the writer of a secured put invests an amount not less than the exercise
price in eligible assets to the extent that it is obligated as a writer. If a
call written by a Fund is exercised, the Fund forgoes any possible profit from
an increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that a Fund may be
required to take delivery of the underlying asset at a disadvantageous price.
The Funds may enter into futures contracts involving foreign currency
and, in the case of Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund, securities indices,, or options on currency, for bona fide
hedging purposes The Funds may not enter into futures contracts or related
options if, immediately thereafter, the amounts committed to margin and premiums
paid for unexpired options would exceed 5% of a Fund's total assets and, in the
case of Evergreen Global Real Estate Equity Fund, more than 30% of the Fund's
net assets would be hedged thereby. Evergreen International Equity Fund and
Evergreen Emerging Markets Growth Fund, may also enter into such futures
contracts or related options for purposes other than bona fide hedging if the
aggregate amount of initial margin deposits on a Fund's futures and related
options positions would not exceed 5% of the net liquidation value of the Fund's
assets, provided further that in the case of an option that is in-the-money at
the time of the purchase, the in-the-money amount may be excluded in calculating
the 5% limitation. In addition, a Fund may not sell futures contracts if the
value of such futures contracts exceeds the total market value of the Fund's
portfolio securities. Futures contracts sold by a Fund are generally subject to
segregation and coverage requirements established by either the Commodity
Futures Trading Commission ("CFTC") or the Securities and Exchange Commission
("SEC"), with the result that, if a Fund does not hold the instrument underlying
the futures contract or option, the Fund will be required to segregate, on an
ongoing basis with its custodian, cash, U.S. government securities, or other
liquid high grade debt obligations in an amount at least equal to the Fund's
obligations with respect to such instruments.
Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund may enter into securities index futures contracts and purchase and
write put and call options on securities index futures contracts that are traded
on regulated exchanges, including non-U.S. exchanges, to the extent permitted by
the CFTC. Securities index futures contracts are based on indices that reflect
the market value of securities of the firms included in the indices. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written.
Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund may enter into securities index futures contracts to sell a
securities index in anticipation of or during a market decline to attempt to
offset the decrease in market value of securities in its portfolio that might
otherwise result. When a Fund is not fully invested and anticipates a
significant market advance, it may enter into futures contracts to purchase the
index in order to gain rapid market exposure that may in part or entirely offset
increases in the cost of securities that it intends to purchase. In many of
these transactions, a Fund will purchase such securities upon termination of the
futures position but, depending on market conditions, a futures position may be
terminated without the corresponding purchases of common stock. A Fund may also
invest in securities index futures contracts when its investment adviser or
sub-adviser believes such investment is more efficient, liquid or cost-effective
than investing directly in the securities underlying the index.
The use of futures and related options involves special considerations
and risks, including: (1) the ability of a Fund to utilize futures successfully
will depend on its investment adviser's or sub-adviser's ability to predict
pertinent market movements; and (2) there might be an imperfect correlation (or
conceivably no correlation) between the change in the market value of the
securities held by a Fund and the prices of the futures relating to the
securities purchased or sold by the Fund. The use of futures and related options
may reduce risk of loss by wholly or partially offsetting the negative effect of
unfavorable price movements, but these instruments can also reduce the
opportunity for gain by offsetting the positive effect of favorable price
movements in positions. No assurance can be given that the investment adviser's
or sub-adviser's judgment in this respect will be correct.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although each investment
adviser or sub-adviser will consider liquidity before entering into these
transactions, there is no assurance that a liquid secondary market on an
exchange or otherwise will exist for any particular futures contract or option
at any particular time. A Fund's ability to establish and close out futures and
options positions depends on this secondary market.
Risk Characteristics Of Foreign Securities. Investing in non-U.S. securities
carries substantial risks in addition to those associated with domestic
investments. In an attempt to reduce some of these risks, the Funds diversify
their investments broadly among foreign countries which may include both
developed and developing countries. With respect to Evergreen International
Equity Fund, at least three different countries will always be represented. The
Funds may take advantage of the unusual opportunities for higher returns
available from investing in developing countries. As discussed in detail below
under "Emerging Markets," however, these investments carry considerably more
volatility and risk because they generally are associated with less mature
economies and less stable political systems.
Foreign securities are denominated in foreign currencies. Therefore,
the value in U.S. dollars of a Fund's assets and income may be affected by
changes in exchange rates and regulations. Although the Funds value their assets
daily in U.S. dollars, they will not convert their holdings of foreign
currencies to U.S. dollars daily. When a Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers realize a
profit on the difference between the prices at which such dealers buy and sell
currencies.
To the extent that securities purchased by the Funds are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Funds' net asset values; the value of interest earned;
gains and losses realized on the sale of securities; and net investment income
and capital gains, if any, to be distributed to shareholders by a Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of a Fund's
assets denominated in that currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S.
dollar, the value of a Fund's assets denominated in that currency will decrease.
Other differences between investing in foreign and U.S. companies
include: less publicly available information about foreign companies; the lack
of uniform financial accounting standards applicable to foreign companies; less
readily available market quotations on foreign companies; differences in
government regulation and supervision of foreign stock exchanges, brokers,
listed companies, and banks; differences in legal systems which may affect the
ability to enforce contractual obligations or obtain court judgments; generally
lower foreign stock market volume; the likelihood that foreign securities may be
less liquid or more volatile; foreign brokerage commissions may be higher;
unreliable mail service between countries; and political or financial changes
which adversely affect investments in some countries. In the past, U.S.
government policies have discouraged or restricted certain investments abroad by
investors such as the Funds. Although the Funds are unaware of any current
restrictions, investors are advised that these policies could be reinstituted.
Emerging Markets. The economies of individual emerging countries may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Further, the economies of developing countries generally are heavily dependent
on international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been, and may
continue to be, adversely affected by economic conditions in the countries with
which they trade.
Prior governmental approval for foreign investments may be required
under certain circumstances in some emerging countries, and the extent of
foreign investment in certain debt securities and domestic companies may be
subject to limitation in other emerging countries. Foreign ownership limitations
also may be imposed by the charters of individual companies in emerging
countries to prevent, among other concerns, violation of foreign investment
limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
emerging countries. A Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental registration or approval for such
repatriation. Any investment subject to such repatriation controls will be
considered illiquid if it appears reasonably likely that this process will take
more than seven days.
With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economics of such countries or
the value of the Funds' investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the U.S.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees").. Evergreen Asset
Management Corp. (the "Evergreen Asset") has been retained by Evergreen Global
Real Estate Equity Fund as investment adviser. Evergreen Asset succeeded on June
30, 1994 to the advisory business of the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), one of the ten largest bank holding companies in
the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Fund. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund. Boston International Advisers, Inc. ("BIA") is Sub-Adviser to
Evergreen International Equity Fund and Marvin & Palmer Associates, Inc.
("Marvin & Palmer") is Sub-Adviser to Evergreen Emerging Markets Growth Fund
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Global Real Estate Equity Fund,
Evergreen Asset manages each Fund's investments, provides various administrative
services and supervises each Fund's daily business affairs, subject to the
authority of the Trustees. Evergreen Asset is entitled to receive a fee equal to
1% of average daily net assets on an annual basis from Evergreen Global Real
Estate Equity Fund. The fee paid by Evergreen Global Real Estate Equity Fund is
higher than the rate paid by most other investment companies. The total expenses
as a percentage of average daily net assets on an annual basis of Evergreen
Global Real Estate Equity Fund for the fiscal period ended September 30, 1994
are set forth in the section entitled "Financial Highlights". The
above-mentioned expense ratios for Evergreen Global Real Estate Equity Fund is
net of voluntary advisory fee waivers and expense reimbursements by Evergreen
Asset which may, at its discretion, revise or cease this voluntary waiver at any
time.
CMG, along with BIA and Marvin & Palmer, respectively, manages
investments and supervises the daily business affairs of Evergreen International
Equity Fund and Evergreen Emerging Markets Growth Fund. As compensation
therefor, CMG is entitled to receive an annual fee from Evergreen International
Equity Fund equal to: .82 of 1% of the first $20 million of average daily net
assets; .79 of 1% of the next $30 million of average daily net assets; .76 of 1%
of the next $50 million of average daily net assets; and .73 of 1% of average
daily net assets in excess of $100 million. From Evergreen Emerging Markets
Growth Fund, CMG is entitled to receive an annual fee equal to: 1.50% of the
first $100 million of average daily net assets; 1.45% of the next $100 million
of average daily net assets; 1.40% of the next $100 million of average daily net
assets; and 1.35% of average daily net assets in excess of $300 million. The
fees paid by Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund are higher than the rate paid by most other investment companies,
but are not higher than the fee paid by many funds with similar investment
objectives. The total expenses as a percentage of average daily net assets on an
annual basis of Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund for the fiscal year ended December 31, 1994 are set forth in
the section entitled "Financial Highlights". CMG has agreed to pay the sub
adviser to Evergreen International Equity Fund, BIA, a fee equal to: .32 of 1%
of the first $20 million of average daily net assets; .29 of 1% of the next $30
million of average daily net assets; .26 of 1% of the next $50 million of
average daily net assets; and .23 of 1% of average daily net assets in excess of
$100 million. For its services as sub-adviser to Evergreen Emerging Markets
Growth Fund, Marvin & Palmer receives from CMG a fee equal to: 1.00% of the
first $100 million of average daily net assets; .95 of 1% of the next $100
million of average daily net assets; .90 of 1% of the next $100 million of
average daily net assets; and .85 of 1% of average daily net assets in excess of
$300 million. Evergreen Asset serves as administrator to Evergreen International
Equity Fund and Evergreen Emerging Markets Growth Fund and is entitled to
receive a fee based on the average daily net assets of these Funds at a rate
based on the total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: .050% of the first $7 billion; .035% on
the next $3 billion; .030% on the next $5 billion; .020% on the next $10
billion; .015% on the next $5 billion; and .010% on assets in excess of $30
billion. Furman Selz Incorporated, the parent of Evergreen Funds Distributor,
Inc., distributor for the Evergreen group of mutual funds, serves as
sub-administrator to Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund and is entitled to receive a fee from each Fund calculated
on the average daily net assets of each Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .0100% of the first $7 billion; .0075% on the next $3
billion; .0050% on the next $15 billion; and .0040% on assets in excess of $25
billion. The total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset serve as investment adviser as of March 31,
1995 were approximately $8 billion.
The portfolio manager for Evergreen Global Real Estate Equity Fund is
Samuel A. Lieber. Mr. Samuel Lieber has been the Fund's principal manager since
inception and has been associated with the Evergreen Asset since prior to 1989.
The portfolio managers for Evergreen International Equity Fund are Maureen
Ghublikian and David A. Umstead, who are Managing Directors of BIA and have been
associated therewith since prior to 1989.
The portfolio managers for Evergreen Emerging Markets Growth Fund, all
of whom have served since its inception in September 1994, are David F. Marvin,
who is Chairman of Marvin & Palmer and is primarily responsible for Latin
America and currency management, Stanley Palmer, who is President of Marvin &
Palmer and primarily responsible for Southeast Asia and the India subcontinent,
Terry B. Mason, who is a Vice President of Marvin & Palmer and is primarily
responsible for Eastern Europe and Africa, Jay F. Middleton, who is a portfolio
manager for Marvin & Palmer and primarily responsible for Latin America and the
Middle East, and Todd D. Marvin, who is a portfolio manager for Marvin & Palmer
and, along with Mr. Palmer, primarily responsible for Southeast Asia and the
India subcontinent. David F. Marvin, and Stanley Palmer, President, founded
Marvin & Palmer in 1986. Mr. Mason and Mr. Middleton both joined Marvin & Palmer
in 1990. Mr. Todd Marvin joined Marvin & Palmer in 1991 and, prior thereto, was
employed by Oppenheimer & Company as an analyst in its investment banking
department from 1989 until 1991.
SUB-ADVISERS
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company with respect to Evergreen Global Real Estate Equity Fund which provides
that Lieber & Company's research department and staff will furnish Evergreen
Asset with information, investment recommendations, advice and assistance, and
will be generally available for consultation on each such Fund's portfolio.
Lieber & Company will be reimbursed by Evergreen Asset in connection with the
rendering of services on the basis of the direct and indirect costs of
performing such services. There is no additional charge to Evergreen Global Real
Estate Equity Fund for the services provided by Lieber & Company. It is
contemplated that Lieber & Company will, to the extent practicable, effect
substantially all of the portfolio transactions for this Fund on the New York
and American Stock Exchanges. The address of Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect,
wholly-owned, subsidiary of First Union.
The sub-adviser to the Evergreen International Equity Fund, BIA, has
been in operation since 1986 and specializes in the management of international
equity portfolios. BIA currently manages twenty international portfolios,
including five group trust funds, for pension fund sponsors and endowment plans
worldwide. Messrs. Lyle H. Davis, Norman H. Meltz and David A. Umstead are the
principal executive officers of BIA and each own more than 25% of the
outstanding voting securities thereof. As of March 31, 1995 BIA managed a total
of $2.7 billion in assets and served as sub-adviser to one other investment
company with total assets of $148 million.
Marvin & Palmer, Sub-Adviser for Evergreen Emerging Markets Growth Fund
was founded in 1986 and is engaged in the management of global, non-United
States and emerging markets equity portfolios for institutional accounts. At
March 31, 1995, Marvin & Palmer managed a total of $2.5 billion in investments
for 34 institutional investors and 5 commingled funds and served as sub-adviser
to another investment company with total assets of $33 million.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A, Class B and Class C shares a Rule 12b-1 plan (each, a "Plan" or
collectively the "Plans"). Under the Plans, each Fund may incur
distribution-related and shareholder servicing-related expenses which may not
exceed an annual rate of .75 of 1% of the aggregate average daily net assets
attributable to each Fund's Class A shares, 1.00% of the aggregate average daily
net assets attributable to the Class B and Class C shares of Evergreen Global
Real Estate Equity Fund, and .75 of 1% of the aggregate average daily net assets
attributable to the Class B and Class C shares of Evergreen International Equity
Fund and Evergreen Emerging Markets Growth Fund. Payments under the Plans
adopted with respect to Class A shares are currently voluntarily limited to .25
of 1% of each Fund's aggregate average daily net assets attributable to Class A
shares. The Plans provide that a portion of the fee payable thereunder may
constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. Evergreen International Equity
Fund and Evergreen Emerging Markets Growth Fund have each, in addition to the
Plans adopted with respect to their Class B and Class C shares, adopted
shareholder service plans ("Service Plans") relating to the Class B and Class C
shares which permit each Fund to incur a fee of up to .25 of 1% of the aggregate
average daily net assets attributable to the Class B and Class C shares for
ongoing personal services and/or the maintenance of shareholder accounts. Such
service fee payments to financial intermediaries for such purposes, whether
pursuant to a Plan or Service Plan, will not to exceed .25% of the aggregate
average daily net assets attributable to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, .75 of 1% of a Fund's
aggregate average daily net assets attributable to the Class B shares and .75 of
1% of a Fund's aggregate average daily net assets attributable to the Class C
shares. The Distribution Agreements provide that EFD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans ( and in the case
of Evergreen International Equity Fund and Evergreen Emerging Markets Growth
Fund, the Service Plans), in amounts up to .25 of 1% of a Fund's aggregate
average daily net assets on an annual basis attributable to Class B and Class C
shares, to compensate organizations, which may include EFD and each Fund's
investment adviser or their affiliates, for personal services rendered to
shareholders and/or the maintenance of shareholder accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment plan. Share certificates are not issued. In
states where EFD is not registered as a broker-dealer shares of a Fund will only
be sold through other broker-dealers or other financial institutions that are
registered. See the Share Purchase Application and Statement of Additional
Information for more information. Only Class A, Class B and Class C shares are
offered through this Prospectus (See "General Information" - "Other Classes of
Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
<PAGE>
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee in connection with transactions in shares of the
Funds.
Class A shares may also be purchased at net asset value by qualified
and non-qualified employee benefit and savings plans which make shares of the
Funds and the other Evergreen mutual funds available to their participants, and
which: (a) are employee benefit plans having at least $1,000,000 in investable
assets, or 250 or more eligible participants; or (b) are non-qualified benefit
or profit sharing plans which are sponsored by an organization which also makes
the Evergreen mutual funds available through a qualified plan meeting the
criteria specified under (a). In connection with sales made to plans of the type
described in the preceeding sentence that are clients of broker-dealers, and
which do not qualify for sales at net asset value under the conditions set forth
in the paragraph above, payments may be made in an amount equal to .50 of 1% of
the net asset value of shares purchased. These payments are subject to reclaim
in the event shares are redeemed within 12 months after purchase.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
average daily value on an annual basis of Class A shares held by their clients.
Certain purchases of Class A shares may qualify for reduced sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans and
Reinstatement Privilege. Consult the Share Purchase Application and Statement of
Additional Information for additional information concerning these reduced sales
charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
<PAGE>
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which it is expected that they will convert to Class A
shares) . The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
Class C Shares--Level-Load Alternative. You can purchase Class C shares without
any initial sales charge and, therefore, the full amount of your investment will
be used to purchase Fund shares. However, you will pay a 1.0% CDSC if you redeem
shares during the first year after purchase. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of the Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. Shares
obtained from dividend or distribution reinvestment are not subject to the CDSC.
No contingent deferred sales charge will be imposed on Class C shares
purchased by institutional investors, and through employee benefit and savings
plans eligible for the exemption from front-end sales charges described under
"Class A Shares-Front End Sales Charge Alternative", above. Broker-dealers and
other financial intermediaries whose clients have purchased Class C shares may
receive a trailing commission equal to .75 of 1% of the average daily value of
such shares on an annual basis held by their clients more than one year from the
date of purchase. The payment of trailing commissions will commence immediately
with respect to shares eligible for exemption from the contingent deferred sales
charge normally applicable to Class C shares.
With respect to Class B Shares and Class C Shares, no CDSC will be
imposed on: (1) the portion of redemption proceeds attributable to increases in
the value of the account due to increases in the net asset value per Share, (2)
Shares acquired through reinvestment of dividends and capital gains, (3) Shares
held for more than seven years (in the case of Class B Shares) or one year (in
the case of Class C Shares) after the end of the calendar month of acquisition,
(4) accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
<PAGE>
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B or Class C shares) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 10 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
or C shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund by telephone should follow the
procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The redemption of shares is a taxable transaction for Federal tax
purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for 30 days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which each Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the Fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B or Class C
shares of the Evergreen mutual fund originally purchased for cash is applied.
Also, Class B shares will continue to age following an exchange for purposes of
conversion to Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number on the front page of this Prospectus.
Some services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Each Fund's investment adviser may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
If more than 50% of the value of a Fund's assets at the end of the tax
year is represented by stock or securities of foreign corporations, the Fund
intends to qualify for certain Code stipulations that would allow shareholders
to claim a foreign tax credit or deduction on their U.S. income tax returns. The
Code may limit a shareholder's ability to claim a foreign tax credit.
Furthermore, shareholders who elect to deduct their portion of a Fund's foreign
taxes rather than take the foreign tax credit must itemize deductions on their
income tax returns.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Global Real Estate Equity
Fund for its most recent fiscal year is set forth below. A similar discussion
relating to Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund is contained in the annual report of each Fund for the fiscal year
ended December 31, 1994.
Evergreen Global Real Estate Equity Fund. For the nine month period ending
September 30, 1994, the Evergreen Global Real Estate Equity Fund was
significantly impacted by a combination of rising interest rates worldwide
leading to a performance decline of -6.4%. The relative indices performance was
similar, as the Morgan Stanley Global Real Estate Sub Index fell -9.9% and the
Wall Street Journal/Dow Jones World Sub Index of real estate stocks lost -11.5%.
The rise in interest rates in Europe was significantly higher than it was in the
U.S., despite little prospect of imminent inflation due to continued slow
economic recovery. We believe that both property and stock markets viewed rising
rates as a brake on economic growth. This resulted in weak performance for
European property shares. Japan also remained a relatively dull performer after
the first quarter as little evidence of economic growth was visible. Only
Southeast Asia and Latin America provided the Fund with significant
opportunities for capital appreciation during this period.
[CHART]
<PAGE>
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Global Real Estate Equity Fund is a separate series
of the Evergreen Real Estate Equity Trust, a Massachusetts business trust
organized in 1988. Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund are separate investment series of Evergreen Investment Trust
(formerly First Union Funds), which is a Massachusetts business trust organized
in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund and which provides certain sub-administrative services to
Evergreen Asset in connection with its role as investment adviser Evergreen
Global Real Estate Equity Fund, including providing personnel to serve as
officers of the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and distribution and shareholder
servicing related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN EMERGING MARKETS GROWTH FUND, EVERGREEN INTERNATIONAL EQUITY
FUND
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN EMERGING MARKETS GROWTH FUND, EVERGREEN INTERNATIONAL EQUITY
FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536113
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM mark) INTERNATIONAL GROWTH FUNDS (Evergreen Logo appears here)
EVERGREEN EMERGING MARKETS GROWTH FUND
EVERGREEN INTERNATIONAL EQUITY FUND
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
CLASS Y SHARES
The Evergreen International Growth Funds (the "Funds") are
designed to provide investors with a selection of investment alternatives
which seek to provide capital growth and diversification. This Prospectus
provides information regarding the Class Y shares offered by the Funds.
Each Fund is, or is a series of, an open-end, diversified, management
investment company. This Prospectus sets forth concise information about
the Funds that a prospective investor should know before investing. The
address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds dated July
7, 1995 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 235-0064. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM mark) is a Service Mark of Evergreen Asset
Management Corp. Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Adviser
Sub-Advisers
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN GLOBAL REAL ESTATE EQUITY FUND is
Evergreen Asset Management Corp. ("Evergreen Asset") which, with its
predecessors, has served as an investment adviser to the Evergreen Funds since
1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank
of North Carolina ("FUNB"), which in turn is a subsidiary of First Union
Corporation, one of the ten largest bank holding companies in the United States.
The Capital Management Group of FUNB ("CMG") serves as investment adviser to
EVERGREEN EMERGING MARKETS GROWTH FUND and EVERGREEN INTERNATIONAL EQUITY FUND.
EVERGREEN EMERGING MARKETS GROWTH FUND (formerly First Union Emerging
Markets Growth Portfolio) seeks to provide long-term capital appreciation. The
EMERGING MARKETS GROWTH FUND invests in equity securities of issuers located in
countries with emerging markets.
EVERGREEN INTERNATIONAL EQUITY FUND (formerly First Union International
Equity Portfolio) seeks to provide long-term capital appreciation. The EVERGREEN
INTERNATIONAL EQUITY FUND invests in equity securities of non-U.S. issuers.
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND seeks long-term capital growth.
Current income is a secondary objective. It invests primarily in equity
securities of United States and non-United States companies which are
principally engaged in the real estate industry or which own significant real
estate assets. It will not purchase direct interests in real estate.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per year) $5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.50%
After 1 Year $ 22
Administrative Fees .06%
After 3 Years $ 67
12b-1 Fees --
After 5 Years $ 115
Other Expenses .59%
After 10 Years $ 248
Total 2.15%
</TABLE>
EVERGREEN INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Advisory Fees .82%
After 1 Year $ 12
Administrative Fees .06%
After 3 Years $ 37
12b-1 Fees --
After 5 Years $ 64
Other Expenses .29%
After 10 Years $ 142
Total 1.17%
</TABLE>
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.00%
After 1 Year $ 15
12b-1 Fees --
After 3 Years $ 46
Other Expenses .46%
After 5 Years $ 80
After 10 Years $ 175
Total 1.46%
</TABLE>
*The estimated annual operating expenses and examples do not reflect fee waivers
and expense reimbursements for the most recent fiscal period. Actual expenses
for Class Y Shares net of fee waivers and expense reimbursements for the fiscal
periods ended December 31, 1994 or September 30, 1994, as applicable, were as
follows:
<TABLE>
<CAPTION>
Evergreen Emerging Markets Growth Fund 1.53%
<S> <C>
Evergreen International Equity Fund 1.06%
Evergreen Global Real Estate Equity Fund 1.46%
</TABLE>
3
<PAGE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Funds see "Management
of the Funds". As a result of asset-based sales charges, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities Dealers,
Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN EMERGING MARKETS GROWTH FUND and EVERGREEN
INTERNATIONAL EQUITY FUND has been audited by KPMG Peat Marwick LLP, each Fund's
independent auditors, for EVERGREEN GLOBAL REAL ESTATE EQUITY FUND has, except
as noted otherwise, been audited by Price Waterhouse LLP, the Fund's independent
auditors. A report of KPMG Peat Marwick LLP or Price Waterhouse LLP, as the case
may be, on the audited information with respect to each Fund is incorporated by
reference in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjuction with the financial
statements and related notes which are incorporated by reference in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN EMERGING MARKETS GROWTH FUND
<TABLE>
<CAPTION>
CLASS B CLASS C CLASS Y
SHARES SHARES SHARES
CLASS A
SHARES
SEPTEMBER 6, 1994*
THROUGH DECEMBER 31, 1994
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................. $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income (loss)......................................................... -- (.02 ) (.02 ) .01
Net realized and unrealized loss on investments and foreign currency transactions.... (1.83 ) (1.82 ) (1.82 ) (1.84 )
Total from investment operations................................................... (1.83 ) (1.84 ) (1.84 ) (1.83 )
Net asset value, end of period....................................................... $8.17 $8.16 $8.16 $8.17
TOTAL RETURN+........................................................................ (18.3% ) (18.4% ) (18.4% ) (18.3% )
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)............................................ $867 $1,589 $89 $5,878
Ratios to average net assets:
Expenses (a)....................................................................... 1.78% ++ 2.53% ++ 2.53% ++ 1.53% ++
Net investment income (loss)(a).................................................... (.12% )++ (.84% )++ (.82% )++ .43% ++
Portfolio turnover rate.............................................................. 17% 17% 17% 17%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, for the
period from September 6, 1994 through December 31, 1994 would have been the
following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
Expenses..................................................... 3.96% 4.71% 4.71% 3.71%
Net investment income (loss)................................. (2.30%) (3.02%) (3.00%) (1.75%)
</TABLE>
5
<PAGE>
EVERGREEN INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
SEPTEMBER 2, 1994*
THROUGH DECEMBER 31, 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period............................................... $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income.............................................................. .02 -- .03
Net realized and unrealized loss on investments.................................... (.52) (.50) (.54)
Total from investment operations................................................. (.50) (.50) (.51)
Less distributions to shareholders from:
Net investment income.............................................................. -- -- --
Net asset value, end of period..................................................... $9.50 $9.50 $9.49
TOTAL RETURN+...................................................................... (5.1%) (5.2%) (5.2%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).......................................... $2,545 $5,602 $163
Ratios to average net assets:
Expenses (a)..................................................................... 1.26%++ 2.02%++ 2.01%++
Net investment income (a)........................................................ .91%++ .10%++ .85%++
Portfolio turnover rate............................................................ 1% 1% 1%
<CAPTION>
CLASS Y
SHARES
<S> <C>
PER SHARE DATA
Net asset value, beginning of period............................................... $10.00
Income (loss) from investment operations:
Net investment income.............................................................. .02
Net realized and unrealized loss on investments.................................... (.51 )
Total from investment operations................................................. (.49 )
Less distributions to shareholders from:
Net investment income.............................................................. (.01 )
Net asset value, end of period..................................................... $9.50
TOTAL RETURN+...................................................................... (5.0% )
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).......................................... $23,830
Ratios to average net assets:
Expenses (a)..................................................................... 1.06% ++
Net investment income (a)........................................................ 1.03% ++
Portfolio turnover rate............................................................ 1%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, for the
period from September 2, 1994 through December 31, 1994 would have been the
following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C>
Expenses..................................................... 2.09% 2.85% 2.84% 1.89%
Net investment income (loss)................................. .08% (.73% ) .02% .20%
</TABLE>
6
<PAGE>
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS NINE MONTHS FEBRUARY 1, 1989*
ENDED ENDED THROUGH
MARCH 31, 1995 SEPTEMBER 30, YEAR ENDED DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1994# 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................ $13.81 $14.75 $9.86 $9.16 $8.10 $10.03 $10.00
Income (loss) from
investment operations:
Net investment income
(loss)................... .01 .07 -- (.01) (.02) (.03) .17
Net realized and unrealized
gain (loss) on
investments.............. (2.48) (1.01) 5.07 .94 1.08 (1.90) .03
Total from investment
operations........... (2.47) (.94) 5.07 .93 1.06 (1.93) .20
Less distributions to
shareholders from:
Net investment income...... (.10) -- -- -- -- -- (.17)
Net realized gains......... (.52) -- (.18) (.23) -- -- --
Total distributions.... (.62) -- (.18) (.23) -- -- (.17)
Net asset value, end of
period................... $10.72 $13.81 $14.75 $9.86 $9.16 $8.10 $10.03
TOTAL RETURN+.............. (18.4%) (6.4%) 51.4% 10.2% 13.1% (19.2%) 2.0%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted).......... $74,001 $132,294 $146,173 $8,618 $7,557 $6,004 $7,336
Ratios to average net
assets:
Operating expenses....... 1.51%++ 1.46%++ 1.56%(a) 2.00%(a) 2.00%(a) 2.00%(a) 2.00%(a)++
Interest expense......... .08%++ .08%++ -- -- -- -- --
Net investment income
(loss)................. .39%++ .56%++ .03%(a) (.10%)(a) (.27%)(a) (.39%)(a) 2.23%(a)++
Portfolio turnover rate.... 17% 63% 88% 245% 207% 325% 151%
</TABLE>
# On September 21, 1994, the Fund changed its fiscal year end from December 31
to September 30.
* Commencement of operations.
+ Total return is calculated on net asset value per share and is not
annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
FEBRUARY 1, 1989
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Operating expenses............................. 1.64% 3.72% 3.76% 3.99% 3.17%
Net investment income (loss)................... (.05%) (1.82%) (2.02%) (2.38%) 1.06%
</TABLE>
7
<PAGE>
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FEBRUARY 10, 1995* FEBRUARY 8, 1995* FEBRUARY 9, 1995*
THROUGH THROUGH THROUGH
MARCH 31, 1995 MARCH 31, 1995 MARCH 31, 1995
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.............................. $11.46 $ 11.44 $ 11.43
Income (loss) from investment operations:
Net investment income............................................. .02 .02 .01
Net realized and unrealized loss on investments................... (.76) (.75) (.73)
Total from investment operations.............................. (.74) (.73) (.72)
Net asset value, end of period.................................... $10.72 $ 10.71 $ 10.71
TOTAL RETURN+..................................................... (6.5%) (6.4%) (6.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)......................... $2,531 $ 3,362 $ 1,146
Ratios to average net assets:
Operating expenses (a).......................................... 1.51%++ 2.27%++ 2.31%++
Interest expense................................................ .02%++ .01%++ .01%++
Net investment income (a)....................................... 3.21%++ 1.53%++ .87%++
Portfolio turnover rate #......................................... 17% 17% 17%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A, Class B and Class C shares are not necessarily comparable to that
of the Class Y shares, and are not necessarily indicative of future ratios.
# Portfolio turnover rate is calculated for the six months ended March 31,
1995.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
FEBRUARY 10, 1995 FEBRUARY 8, 1995 FEBRUARY 9, 1995
THROUGH THROUGH THROUGH
MARCH 31, 1995 MARCH 31, 1995 MARCH 31, 1995
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating expenses.......................... 2.73% 3.49% 3.49%
Net investment income (loss)................ 1.99% .31% (.31%)
</TABLE>
8
9
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Emerging Markets Growth Fund
The objective of Evergreen Emerging Markets Growth Fund is long-term
capital appreciation. In seeking this objective, the Fund invests in equity
securities of issuers located in emerging markets. The Fund is suitable for
aggressive investors interested in the investment opportunities offered by
securities of issuers located in emerging or developing markets and the
resulting potential for growth opportunities resulting from political change,
economic deregulation and liberalized trade policies. The objective is
fundamental and may not be changed without shareholder approval.
The Fund seeks long-term capital appreciation. The Fund invests
primarily in a diversified portfolio of equity securities of issuers located in
countries with emerging markets. As a matter of policy, the Fund will invest at
least 65% of the value of its total assets in securities of emerging market
issuers.
A country will be considered to have an "emerging market" if it has
relatively low gross national product per capita compared to the world's major
economies and the potential for rapid economic growth. Countries with emerging
markets include those that have an emerging stock market (as defined by the
International Finance Corporation), those with low-to middle income economies
(according to the World Bank), and those listed in World Bank publications as
"developing." The Fund will normally invest in at least six different countries,
although it may invest all of its assets in a single country. At the present
time, the Fund has no intention of investing all of its assets in a single
country. The Fund focuses on equity securities, but may also invest in other
types of instruments, including debt securities. Marvin & Palmer Associates, the
Sub-Adviser to the Fund, will make investment decisions regarding equity
securities based on its analysis of returns, price momentum, business and
industry considerations, and management quality.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen International Equity Fund
The objective of Evergreen International Equity Fund is long-term
capital appreciation. The Fund invests primarily in equity securities of
non-U.S. issuers and is suitable for investors who want to pursue their
investment goals in markets outside the United States. The Fund provides
investors with a vehicle to pursue investment opportunities in countries outside
the U.S. whose securities markets may benefit from differing economic and
political cycles. The objective is fundamental and may not be changed without
shareholder approval.
The Fund invests primarily in foreign equity securities that Boston
International Advisers, Inc., the Sub-Adviser to the Fund, determines, through
both fundamental and technical analysis, to be undervalued compared to other
securities in their industries and countries. In most market conditions, the
stocks comprising the Fund's assets will exhibit traditional value
characteristics, such as higher than average dividend yields, lower than average
price to book value, and will include stocks of companies with unrecognized or
undervalued assets. As a matter of policy, the Fund will invest at least 65% of
the value of its total assets in equity securities of issuers located in at
least three countries outside of the United States.
The Fund will emphasize value stocks, primarily of companies which are
listed on one or more of thirty-two stock markets: twenty developed markets and
twelve emerging markets. While the current intention of the Fund is to invest in
32 stock markets, the Fund may invest in more or less, depending upon market
conditions as determined by the Sub-Adviser. The Fund will invest substantially
in industrialized companies throughout the world that comprise the Morgan
Stanley Capital International EAFE (Europe, Australia and the Far East) Index.
In addition, the Fund intends to invest up to 10% of its assets in emerging
country equity securities, as described above under "Evergreen Emerging Markets
Growth Fund."
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
<PAGE>
Evergreen Global Real Estate Equity Fund
The Evergreen Global Real Estate Equity Fund seeks to achieve its
investment objective of long-term capital growth through investment primarily in
equity securities of domestic and foreign companies which are principally
engaged in the real estate industry or which own significant real estate assets;
the Fund will not purchase direct interests in real estate. Current income will
be a secondary objective. Equity securities will include common stock, preferred
stock and securities convertible into common stock. The objective is fundamental
and may not be changed without shareholder approval.
The Fund will, under normal conditions, invest at least 65% of its
total assets in equity securities of domestic and foreign exchange or NASDAQ
listed companies which are principally engaged in the real estate industry. A
company is deemed to be "principally engaged" in the real estate industry if at
least 50% of its assets (marked to market), gross income or net profits are
attributable to ownership, construction, management or sale of residential,
commercial or industrial real estate. Real estate industry companies may include
among others: equity real estate investment trusts, which pool investors' funds
for investment primarily in commercial real estate properties; mortgage real
estate investment trusts, which invest pooled funds in real estate related
loans; brokers or real estate developers; and companies with substantial real
estate holdings, such as paper and lumber producers and hotel and entertainment
companies. The Fund will only invest in real estate equity trusts and limited
partnerships which are traded on major exchanges. As a matter of fundamental
policy, the Fund will also invest at least 65% of its total assets in the equity
securities of companies of at least three countries, including the United
States, except when abnormal market or financial conditions warrant the
assumption of a temporary defensive position. See "Investment Practices and
Restrictions" and "Special Risk Considerations".
The remainder of the Fund's investments may be made in equity
securities of issuers whose products and services are related to the real estate
industry, such as manufacturers and distributors of building supplies and
financial institutions which issue or service mortgages. 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.
The Fund pursues a flexible strategy of investing in a diversified
portfolio of securities of companies throughout the world. The Fund's investment
adviser anticipates that the Fund will give particular consideration to
investments in the United Kingdom, Western Europe, Australia, Canada, the Far
East (Japan, Hong Kong, Singapore, Malaysia and Thailand) and the United States.
The percentage of the Fund's assets invested in particular geographic regions
will shift from time to time in accordance with the judgment of the Fund's
investment adviser. Generally, a substantial portion of the assets of the Fund
will be denominated or traded in foreign currencies.
Investments may also be made in securities of issuers unrelated to the
real estate industry believed by the Fund's investment adviser to be undervalued
and to have capital appreciation potential. Also, consistent with the secondary
objective of current income, investments may also be made in nonconvertible debt
securities of such companies. The debt securities purchased (except for those
described below) will be of investment grade or better quality (e.g., rated no
lower than A by Moody's Investors Service ("Moody's") or Standard & Poor's
Ratings Group ("S&P")or if not so rated, believed by the Fund's investment
adviser to be of comparable quality). However, up to 10% of total assets may be
invested in unrated debt securities of issuers secured by real estate assets
where the Fund's investment adviser believes that the securities are trading at
a discount and the underlying collateral will ensure repayment of principal. In
such situations, it is conceivable that the Fund could, in the event of default,
end up holding the underlying real estate directly.
It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds primarily invest in:
common and preferred stocks, convertible securities and warrants of
foreign corporations. Common stocks represent an equity interest in a
corporation. This ownership interest often gives the Funds the right to
vote on measures affecting the company's organization and operations.
Although common stocks have a history of long-term growth in value,
their prices tend to fluctuate in the short-term, particularly those of
smaller capitalization companies. Smaller capitalization companies may
have limited product lines, markets, or financial resources. These
conditions may make them more susceptible to setbacks and reversals.
Therefore, their securities may have limited marketability and may be
subject to more abrupt or erratic market movements than securities of
larger companies;
obligations of foreign governments and supranational organizations;
corporate and foreign government fixed income securities denominated in
currencies other than U.S. dollars, rated, at the time of purchase, Baa
or higher by Moody's or BBB or higher by S&P, or which, if unrated, are
considered to be of comparable quality by the Fund's investment adviser
or sub-advisers. Bonds rated Baa by Moody's or BBB by S&P have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. Although the
Funds do not intend to invest significantly in debt securities, it
should be noted that the prices of fixed income securities fluctuate
inversely to the direction of interest rates;
strategic investments, such as options and futures contracts on
currency transactions, securities index futures contracts, and forward
foreign currency exchange contracts. The Funds can use these techniques
to increase or decrease their exposure to changing security prices,
interest rates, currency exchange rates, or other factors that affect
security values. (Although, of course, there can be no assurance that
these strategic investments will be successful in protecting the value
of the Funds' securities.); and
securities of closed-end investment companies.
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of a Fund's
investment adviser or sub-adviser, market conditions warrant a temporary
defensive investment strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund bears directly. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for Evergreen Global Real Estate Equity Fund effected on
those exchanges. See the Statement of Additional Information for further
information regarding the brokerage allocation practices of the Funds. The
portfolio turnover rate for each Fund is set forth in the tables contained in
the section entitled "Financial Highlights".
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security for cash and
obtains a simultaneous commitment from the seller (usually a bank or
broker/dealer) to repurchase the security at an agreed-upon price and specified
future date. The repurchase price reflects an agreed-upon interest rate for the
time period of the agreement. The Funds' risk is the inability of the seller to
pay the agreed-upon price on the delivery date. However, this risk is tempered
by the ability of the Funds to sell the security in the open market in the case
of a default. In such a case, the Funds may incur costs in disposing of the
security which would increase Fund expenses. Each Fund's investment adviser will
monitor the creditworthiness of the firms with which the Funds enter into
repurchase agreements.
When-Issued And Delayed Delivery Transactions. Evergreen International Equity
Fund and Evergreen Emerging Markets Growth Fund may purchase securities on a
when-issued or delayed delivery basis. These transactions are arrangements in
which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. A Fund may dispose of a commitment prior to
settlement if the Fund's investment adviser deems it appropriate to do so. In
addition, Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund may enter into transactions to sell their purchase commitments to
third parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. The Funds may realize
short-term profits or losses upon the sale of such commitments.
Temporary Investments. The Funds may invest in U.S. and foreign short-term money
market instruments (denominated in U.S. and/or foreign currencies), including
interest-bearing call deposits with banks, government obligations, certificates
of deposit, bankers' acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. These investments may be used to
temporarily invest cash received from the sale of Fund shares, to establish and
maintain reserves for temporary defensive purposes, or to take advantage of
market opportunities.
Illiquid or Restricted Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities and other securities which are not readily
marketable. Illiquid securities include certain restricted securities not
determined by the Trustees to the liquid, non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days after
notice. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% limit. The
inability of a Fund to dispose of illiquid or not readily marketable investments
readily or at a reasonable price could impair the Fund's ability to raise cash
for redemptions or other purposes. The liquidity of securities purchased by a
Fund which are eligible for resale pursuant to Rule 144A will be monitored by
the each Fund's investment adviser on an ongoing basis, subject to the oversight
of the Trustees. In the event that such a security is deemed to be no longer
liquid, a Fund's holdings will be reviewed to determine what action, if any, is
required to ensure that the retention of such security does not result in a Fund
having more than 15% of its assets invested in illiquid or not readily
marketable securities.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except as a temporary measure to facilitate redemption requests or for
extraordinary or emergency purposes. The proceeds from borrowings may be used to
facilitate redemption requests which might otherwise require the untimely
disposition of portfolio securities. The specific limits applicable to borrowing
by each Fund are set forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers or sub-advisers will
monitor the creditworthiness of such borrowers. Loans of securities by the
Funds, if and when made, may not exceed 30% of the value of the total assets of
the Evergreen Global Real Estate Equity Fund, and must be collateralized by cash
or U.S. Government securities that are maintained at all times in an amount
equal to at least 100% of the current market value of the securities loaned,
including accrued interest. While such securities are on loan, the borrower will
pay a Fund any income accruing thereon, and the Fund may invest the cash
collateral in portfolio securities, thereby increasing its return. Any gain or
loss in the market price of the loaned securities which occurs during the term
of the loan would affect a Fund and its investors. A Fund has the right to call
a loan and obtain the securities loaned at any time on notice of not more than
five business days. A Fund may pay reasonable fees in connection with such
loans.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Foreign Currency Transactions. The Funds will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts. The Funds may also enter into foreign currency transactions to
protect Fund assets against adverse changes in foreign currency exchange rates
or exchange control regulations. Such changes could unfavorably affect the value
of Fund assets which are denominated in foreign currencies, such as foreign
securities or funds deposited in foreign banks, as measured in U.S. dollars.
Although foreign currency exchanges may be used by a Fund to protect against a
decline in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund.
Forward Foreign Currency Exchange Contracts. A forward foreign currency exchange
contract ("forward contract") is an obligation to purchase or sell an amount of
a particular currency at a specific price and on a future date agreed upon by
the parties. Generally, no commission charges or deposits are involved. At the
time a Fund enters into a forward contract, Fund assets with a value equal to
the Fund's obligation under the forward contract are segregated and are
maintained until the contract has been settled. The Funds will not enter into a
forward contract with a term of more than one year. The Funds will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between trade date and settlement date will vary between 24 hours and 60
days, depending upon local custom.
<PAGE>
The Funds may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Funds' assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although each Fund's
investment adviser or sub-adviser will consider the likelihood of changes in
currency values when making investment decisions, each Fund's investment adviser
or sub-adviser believes that it is important to be able to enter into forward
contracts when it believes the interests of a Fund will be served. The Funds
will not enter into forward contracts for hedging purposes in a particular
currency in an amount in excess of the Funds' assets denominated in that
currency, but as consistent with their other investment policies and as not
otherwise limited in their ability to use this strategy.
Options And Futures. The Funds may deal in options on foreign currencies, and
portfolio securities, and, in the case of Evergreen International Equity Fund
and Evergreen Emerging Markets Growth Fund, securities indices, which options
may be listed for trading on an international securities exchange. The Funds
will use these options to manage interest rate and currency risks. The Funds
also may write covered call options and secured put options to generate income
or to lock in gains. Each Fund may write covered call options and secured put
options on up to 25% of its net assets in the case of Evergreen International
Equity Fund and Evergreen Emerging Markets Growth Fund and 15% of its net assets
in the case of Evergreen Global Real Estate Equity Fund, and Evergreen
International Equity Fund and Evergreen Emerging Markets Growth Fund may
purchase put and call options provided that no more than 5% of the fair market
value of its net assets may be invested in premiums on such options.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying asset at the exercise price during the option
period. A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying asset at the exercise price during the option
period. The writer of a covered call owns assets that are acceptable for escrow
and the writer of a secured put invests an amount not less than the exercise
price in eligible assets to the extent that it is obligated as a writer. If a
call written by a Fund is exercised, the Fund forgoes any possible profit from
an increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that a Fund may be
required to take delivery of the underlying asset at a disadvantageous price.
The Funds may enter into futures contracts involving foreign currency
and, in the case of Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund, securities indices,, or options on currency, for bona fide
hedging purposes The Funds may not enter into futures contracts or related
options if, immediately thereafter, the amounts committed to margin and premiums
paid for unexpired options would exceed 5% of a Fund's total assets and, in the
case of Evergreen Global Real Estate Equity Fund, more than 30% of the Fund's
net assets would be hedged thereby. Evergreen International Equity Fund and
Evergreen Emerging Markets Growth Fund, may also enter into such futures
contracts or related options for purposes other than bona fide hedging if the
aggregate amount of initial margin deposits on a Fund's futures and related
options positions would not exceed 5% of the net liquidation value of the Fund's
assets, provided further that in the case of an option that is in-the-money at
the time of the purchase, the in-the-money amount may be excluded in calculating
the 5% limitation. In addition, a Fund may not sell futures contracts if the
value of such futures contracts exceeds the total market value of the Fund's
portfolio securities. Futures contracts sold by a Fund are generally subject to
segregation and coverage requirements established by either the Commodity
Futures Trading Commission ("CFTC") or the Securities and Exchange Commission
("SEC"), with the result that, if a Fund does not hold the instrument underlying
the futures contract or option, the Fund will be required to segregate, on an
ongoing basis with its custodian, cash, U.S. government securities, or other
liquid high grade debt obligations in an amount at least equal to the Fund's
obligations with respect to such instruments.
Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund may enter into securities index futures contracts and purchase and
write put and call options on securities index futures contracts that are traded
on regulated exchanges, including non-U.S. exchanges, to the extent permitted by
the CFTC. Securities index futures contracts are based on indices that reflect
the market value of securities of the firms included in the indices. An index
futures contract is an agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to the differences between the value of
the index at the close of the last trading day of the contract and the price at
which the index contract was originally written.
Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund may enter into securities index futures contracts to sell a
securities index in anticipation of or during a market decline to attempt to
offset the decrease in market value of securities in its portfolio that might
otherwise result. When a Fund is not fully invested and anticipates a
significant market advance, it may enter into futures contracts to purchase the
index in order to gain rapid market exposure that may in part or entirely offset
increases in the cost of securities that it intends to purchase. In many of
these transactions, a Fund will purchase such securities upon termination of the
futures position but, depending on market conditions, a futures position may be
terminated without the corresponding purchases of common stock. A Fund may also
invest in securities index futures contracts when its investment adviser or
sub-adviser believes such investment is more efficient, liquid or cost-effective
than investing directly in the securities underlying the index.
The use of futures and related options involves special considerations
and risks, including: (1) the ability of a Fund to utilize futures successfully
will depend on its investment adviser's or sub-adviser's ability to predict
pertinent market movements; and (2) there might be an imperfect correlation (or
conceivably no correlation) between the change in the market value of the
securities held by a Fund and the prices of the futures relating to the
securities purchased or sold by the Fund. The use of futures and related options
may reduce risk of loss by wholly or partially offsetting the negative effect of
unfavorable price movements, but these instruments can also reduce the
opportunity for gain by offsetting the positive effect of favorable price
movements in positions. No assurance can be given that the investment adviser's
or sub-adviser's judgment in this respect will be correct.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although each investment
adviser or sub-adviser will consider liquidity before entering into these
transactions, there is no assurance that a liquid secondary market on an
exchange or otherwise will exist for any particular futures contract or option
at any particular time. A Fund's ability to establish and close out futures and
options positions depends on this secondary market.
Risk Characteristics Of Foreign Securities. Investing in non-U.S. securities
carries substantial risks in addition to those associated with domestic
investments. In an attempt to reduce some of these risks, the Funds diversify
their investments broadly among foreign countries which may include both
developed and developing countries. With respect to Evergreen International
Equity Fund, at least three different countries will always be represented. The
Funds may take advantage of the unusual opportunities for higher returns
available from investing in developing countries. As discussed in detail below
under "Emerging Markets," however, these investments carry considerably more
volatility and risk because they generally are associated with less mature
economies and less stable political systems.
Foreign securities are denominated in foreign currencies. Therefore,
the value in U.S. dollars of a Fund's assets and income may be affected by
changes in exchange rates and regulations. Although the Funds value their assets
daily in U.S. dollars, they will not convert their holdings of foreign
currencies to U.S. dollars daily. When a Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers realize a
profit on the difference between the prices at which such dealers buy and sell
currencies.
To the extent that securities purchased by the Funds are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Funds' net asset values; the value of interest earned;
gains and losses realized on the sale of securities; and net investment income
and capital gains, if any, to be distributed to shareholders by a Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of a Fund's
assets denominated in that currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S.
dollar, the value of a Fund's assets denominated in that currency will decrease.
Other differences between investing in foreign and U.S. companies
include: less publicly available information about foreign companies; the lack
of uniform financial accounting standards applicable to foreign companies; less
readily available market quotations on foreign companies; differences in
government regulation and supervision of foreign stock exchanges, brokers,
listed companies, and banks; differences in legal systems which may affect the
ability to enforce contractual obligations or obtain court judgments; generally
lower foreign stock market volume; the likelihood that foreign securities may be
less liquid or more volatile; foreign brokerage commissions may be higher;
unreliable mail service between countries; and political or financial changes
which adversely affect investments in some countries. In the past, U.S.
government policies have discouraged or restricted certain investments abroad by
investors such as the Funds. Although the Funds are unaware of any current
restrictions, investors are advised that these policies could be reinstituted.
Emerging Markets. The economies of individual emerging countries may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Further, the economies of developing countries generally are heavily dependent
on international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been, and may
continue to be, adversely affected by economic conditions in the countries with
which they trade.
Prior governmental approval for foreign investments may be required
under certain circumstances in some emerging countries, and the extent of
foreign investment in certain debt securities and domestic companies may be
subject to limitation in other emerging countries. Foreign ownership limitations
also may be imposed by the charters of individual companies in emerging
countries to prevent, among other concerns, violation of foreign investment
limitations.
Repatriation of investment income, capital and the proceeds of sales by
foreign investors may require governmental registration and/or approval in some
emerging countries. A Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental registration or approval for such
repatriation. Any investment subject to such repatriation controls will be
considered illiquid if it appears reasonably likely that this process will take
more than seven days.
With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economics of such countries or
the value of the Funds' investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the U.S.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. (the "Evergreen Asset") has been retained by Evergreen Global
Real Estate Equity Fund as investment adviser. Evergreen Asset succeeded on June
30, 1994 to the advisory business of the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), one of the ten largest bank holding companies in
the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Fund. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund. Boston International Advisers, Inc. ("BIA") is Sub-Adviser to
Evergreen International Equity Fund and Marvin & Palmer Associates, Inc.
("Marvin & Palmer") is Sub-Adviser to Evergreen Emerging Markets Growth Fund
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Global Real Estate Equity Fund,
Evergreen Asset manages each Fund's investments, provides various administrative
services and supervises each Fund's daily business affairs, subject to the
authority of the Trustees. Evergreen Asset is entitled to receive a fee equal to
1% of average daily net assets on an annual basis from Evergreen Global Real
Estate Equity Fund. The fee paid by Evergreen Global Real Estate Equity Fund is
higher than the rate paid by most other investment companies. The total expenses
as a percentage of average daily net assets on an annual basis of Evergreen
Global Real Estate Equity Fund for the fiscal period ended September 30, 1994
are set forth in the section entitled "Financial Highlights". The
above-mentioned expense ratios for Evergreen Global Real Estate Equity Fund is
net of voluntary advisory fee waivers and expense reimbursements by Evergreen
Asset which may, at its discretion, revise or cease this voluntary waiver at any
time.
CMG, along with BIA and Marvin & Palmer, respectively, manages
investments and supervises the daily business affairs of Evergreen International
Equity Fund and Evergreen Emerging Markets Growth Fund. As compensation
therefor, CMG is entitled to receive an annual fee from Evergreen International
Equity Fund equal to: .82 of 1% of the first $20 million of average daily net
assets; .79 of 1% of the next $30 million of average daily net assets; .76 of 1%
of the next $50 million of average daily net assets; and .73 of 1% of average
daily net assets in excess of $100 million. From Evergreen Emerging Markets
Growth Fund, CMG is entitled to receive an annual fee equal to: 1.50% of the
first $100 million of average daily net assets; 1.45% of the next $100 million
of average daily net assets; 1.40% of the next $100 million of average daily net
assets; and 1.35% of average daily net assets in excess of $300 million. The
fees paid by Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund are higher than the rate paid by most other investment companies,
but are not higher than the fee paid by many funds with similar investment
objectives. The total expenses as a percentage of average daily net assets on an
annual basis of Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund for the fiscal year ended December 31, 1994 are set forth in
the section entitled "Financial Highlights". CMG has agreed to pay the sub
adviser to Evergreen International Equity Fund, BIA, a fee equal to: .32 of 1%
of the first $20 million of average daily net assets; .29 of 1% of the next $30
million of average daily net assets; .26 of 1% of the next $50 million of
average daily net assets; and .23 of 1% of average daily net assets in excess of
$100 million. For its services as sub-adviser to Evergreen Emerging Markets
Growth Fund, Marvin & Palmer receives from CMG a fee equal to: 1.00% of the
first $100 million of average daily net assets; .95 of 1% of the next $100
million of average daily net assets; .90 of 1% of the next $100 million of
average daily net assets; and .85 of 1% of average daily net assets in excess of
$300 million. Evergreen Asset serves as administrator to Evergreen International
Equity Fund and Evergreen Emerging Markets Growth Fund and is entitled to
receive a fee based on the average daily net assets of these Funds at a rate
based on the total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: .050% of the first $7 billion; .035% on
the next $3 billion; .030% on the next $5 billion; .020% on the next $10
billion; .015% on the next $5 billion; and .010% on assets in excess of $30
billion. Furman Selz Incorporated, the parent of Evergreen Funds Distributor,
Inc., distributor for the Evergreen group of mutual funds, serves as
sub-administrator to Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund and is entitled to receive a fee from each Fund calculated
on the average daily net assets of each Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .0100% of the first $7 billion; .0075% on the next $3
billion; .0050% on the next $15 billion; and .0040% on assets in excess of $25
billion. The total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset serve as investment adviser as of March 31,
1995 were approximately $8 billion.
The portfolio manager for Evergreen Global Real Estate Equity Fund is
Samuel A. Lieber. Mr. Samuel Lieber has been the Fund's principal manager since
inception and has been associated with the Evergreen Asset since prior to 1989.
The portfolio managers for Evergreen International Equity Fund are Maureen
Ghublikian and David A. Umstead, who are Managing Directors of BIA and have been
associated therewith since prior to 1989.
The portfolio managers for Evergreen Emerging Markets Growth Fund, all
of whom have served since its inception in September 1994, are David F. Marvin,
who is Chairman of Marvin & Palmer and is primarily responsible for Latin
America and currency management, Stanley Palmer, who is President of Marvin &
Palmer and primarily responsible for Southeast Asia and the India subcontinent,
Terry B. Mason, who is a Vice President of Marvin & Palmer and is primarily
responsible for Eastern Europe and Africa, Jay F. Middleton, who is a portfolio
manager for Marvin & Palmer and primarily responsible for Latin America and the
Middle East, and Todd D. Marvin, who is a portfolio manager for Marvin & Palmer
and, along with Mr. Palmer, primarily responsible for Southeast Asia and the
India subcontinent. David F. Marvin, and Stanley Palmer, President, founded
Marvin & Palmer in 1986. Mr. Mason and Mr. Middleton both joined Marvin & Palmer
in 1990. Mr. Todd Marvin joined Marvin & Palmer in 1991 and, prior thereto, was
employed by Oppenheimer & Company as an analyst in its investment banking
department from 1989 until 1991.
SUB-ADVISERS
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company with respect to Evergreen Global Real Estate Equity Fund which provides
that Lieber & Company's research department and staff will furnish Evergreen
Asset with information, investment recommendations, advice and assistance, and
will be generally available for consultation on each such Fund's portfolio.
Lieber & Company will be reimbursed by Evergreen Asset in connection with the
rendering of services on the basis of the direct and indirect costs of
performing such services. There is no additional charge to Evergreen Global Real
Estate Equity Fund for the services provided by Lieber & Company. It is
contemplated that Lieber & Company will, to the extent practicable, effect
substantially all of the portfolio transactions for this Fund on the New York
and American Stock Exchanges. The address of Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect,
wholly-owned, subsidiary of First Union.
The sub-adviser to the Evergreen International Equity Fund, BIA, has
been in operation since 1986 and specializes in the management of international
equity portfolios. BIA currently manages twenty international portfolios,
including five group trust funds, for pension fund sponsors and endowment plans
worldwide. Messrs. Lyle H. Davis, Norman H. Meltz and David A. Umstead are the
principal executive officers of BIA and each own more than 25% of the
outstanding voting securities thereof. As of March 31, 1995 BIA managed a total
of $2.7 billion in assets and served as sub-adviser to one other investment
company with total assets of $148 million.
Marvin & Palmer, Sub-Adviser for Evergreen Emerging Markets Growth Fund
was founded in 1986 and is engaged in the management of global, non-United
States and emerging markets equity portfolios for institutional accounts. At
March 31, 1995, Marvin & Palmer managed a total of $2.5 billion in investments
for 34 institutional investors and 5 commingled funds and served as sub-adviser
to another investment company with total assets of $33 million.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
market value. Non-dollar denominated securities will be valued as of the close
of the Exchange at the closing price of such securities in their principal
trading market.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from an investor's
account to reimburse the Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Funds are an available investment. For
information about the requirements to make such investments, including copies of
the necessary application forms, please call the telephone number set forth on
the cover page of this Prospectus. A Fund cannot accept investments specifying a
certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
Funds. Although not currently anticipated, each Fund reserves the right to
suspend the offer of shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the enclosed Application and choose how the redemption proceeds
are to be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in a Fund
at a designated commercial bank. State Street currently deducts a $5 wire charge
from all redemption proceeds wired. This charge is subject to change without
notice. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Funds will employ reasonable procedures to verify that telephone requests
are genuine. These procedures include requiring some form of personal
identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
If more than 50% of the value of a Fund's assets at the end of the tax
year is represented by stock or securities of foreign corporations, the Fund
intends to qualify for certain Code stipulations that would allow shareholders
to claim a foreign tax credit or deduction on their U.S. income tax returns. The
Code may limit a shareholder's ability to claim a foreign tax credit.
Furthermore, shareholders who elect to deduct their portion of a Fund's foreign
taxes rather than take the foreign tax credit must itemize deductions on their
income tax returns.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Global Real Estate Equity
Fund for its most recent fiscal year is set forth below. A similar discussion
relating to Evergreen International Equity Fund and Evergreen Emerging Markets
Growth Fund is contained in the annual report of each Fund for the fiscal year
ended December 31, 1994.
Evergreen Global Real Estate Equity Fund. For the nine month period ending
September 30, 1994, the Evergreen Global Real Estate Equity Fund was
significantly impacted by a combination of rising interest rates worldwide
leading to a performance decline of -6.4%. The relative indices performance was
similar, as the Morgan Stanley Global Real Estate Sub Index fell -9.9% and the
Wall Street Journal/Dow Jones World Sub Index of real estate stocks lost -11.5%.
The rise in interest rates in Europe was significantly higher than it was in the
U.S., despite little prospect of imminent inflation due to continued slow
economic recovery. We believe that both property and stock markets viewed rising
rates as a brake on economic growth. This resulted in weak performance for
European property shares. Japan also remained a relatively dull performer after
the first quarter as little evidence of economic growth was visible. Only
Southeast Asia and Latin America provided the Fund with significant
opportunities for capital appreciation during this period.
[CHART]
<PAGE>
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Global Real Estate Equity Fund is a separate series
of the Evergreen Real Estate Equity Trust, a Massachusetts business trust
organized in 1988. Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund are separate investment series of Evergreen Investment Trust
(formerly First Union Funds), which is a Massachusetts business trust organized
in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen International Equity Fund and Evergreen Emerging
Markets Growth Fund and which provides certain sub-administrative services to
Evergreen Asset in connection with its role as investment adviser Evergreen
Global Real Estate Equity Fund, including providing personnel to serve as
officers of the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) all shareholders of record in one or more of the
Funds for which Evergreen Asset serves as investment adviser as of December 30,
1994, (ii) certain institutional investors and (iii) investment advisory clients
of CMG, Evergreen Asset or their affiliates. The dividends payable with respect
to Class A, Class B and Class C shares will be less than those payable with
respect to Class Y shares due to the distribution and distribution and
shareholder servicing related expenses borne by Class A, Class B and Class C
shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN EMERGING MARKETS GROWTH FUND, EVERGREEN INTERNATIONAL EQUITY
FUND
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN EMERGING MARKETS GROWTH FUND, EVERGREEN INTERNATIONAL EQUITY
FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536121
B
STATEMENT OF ADDITIONAL INFORMATION
July 7, 1995
THE EVERGREEN INTERNATIONAL GROWTH FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen Emerging Markets Growth Fund (formerly First Union Emerging Markets
Growth Portfolio) ("Emerging Markets")
Evergreen International Equity Fund (formerly First Union International Equity
Portfolio) ("International")
Evergreen Global Real Estate Equity Fund ("Global")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed below. It is not a prospectus and should be read in conjunction
with the Prospectus dated July 7, 1995 for the Fund in which you are making or
contemplating an investment. The Evergreen International Growth Funds are
offered through two separate prospectuses: one offering Class A, Class B and
Class C shares, and a separate prospectus offering Class Y shares of each Fund.
Copies of each Prospectus may be obtained without charge by calling the number
listed above.
TABLE OF CONTENTS
Page
Investment Objectives and Policies................................
Investment Restrictions...........................................
Non-Fundamental Operating Policies................................
Certain Risk Considerations.......................................
Management........................................................
Investment Adviser................................................
Distribution Plans................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Purchase of Shares................................................
Performance Information...........................................
Financial Statements..............................................
Appendix A - Note, Bond And Commercial Paper Ratings
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objective
and Policies" in each Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds -
Investment Objective and Policies" in the relevant Prospectus. The investment
objectives of Emerging Growth and International Equity are fundamental and
cannot be changed without the approval of shareholders. The following expands
the discussions in the Prospectus regarding certain investment practices of each
Fund.
Types of Investments
Convertible Securities -- (All Funds)
Each Fund may invest in convertible securities. Convertible securities
include fixed-income securities that may be exchanged or converted into a
predetermined number of shares of the issuer's underlying common stock at the
option of the holder during a specified period. Convertible securities may take
the form of convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features of
several of these securities. The investment characteristics of each convertible
security vary widely, which allow convertible securities to be employed for a
variety of investment strategies.
Each Fund will exchange or convert convertible securities into shares of
underlying common stock when, in the opinion of its investment adviser or
sub-adviser, the investment characteristics of the underlying common shares will
assist a Fund in achieving its investment objective. A Fund may also elect to
hold or trade convertible securities. In selecting convertible securities, the
adviser or sub-adviser evaluates the investment characteristics of the
convertible security as a fixed-income instrument, and the investment potential
of the underlying equity security for capital appreciation. In evaluating these
matters with respect to a particular convertible security, the adviser or
sub-adviser considers numerous factors, including the economic and political
outlook, the value of the security relative to other investments alternatives,
trends in the determinants of the issuer's profits, and the issuer's management
capability and practices.
Warrants (All Funds)
Each Fund may invest in warrants. Warrants are options to purchase common
stock at a specific price (usually at a premium above the market value of the
optioned common stock at issuance) valid for a specific period of time. Warrants
may have a life ranging form less than one year to twenty years, or they may be
perpetual. However, most warrants have expiration dates after which they are
worthless. In addition, a warrant is worthless if the market price of the common
stock does not exceed the warrant's exercise price during the life of the
warrant. Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the corporation issuing them. The percentage
increase or decrease in the market price of the warrant may tend to be greater
than the percentage increase or decrease in the market price of the optioned
common stock.
Sovereign Debt Obligations (All Funds)
Each Fund may purchase sovereign debt instruments issued or guaranteed by
foreign governments or their agencies, including debt of Latin American nations
or other developing countries. Sovereign debt may be in the form of conventional
securities or other types of debt instruments such as loans or loan
participations. Sovereign debt of developing countries may involve a high degree
of risk, and may be in default or present the risk of default. Governmental
entities responsible for repayment of the debt may be unable or unwilling to
repay principal and interest when due, and may require renegotiation or
rescheduling of debt payments. In addition, prospects for repayment of principal
and interest may depend on political as well as economic factors.
Closed-End Investment Companies (All Funds)
Each Fund may purchase the equity securities of closed-end investment
companies to facilitate investment in certain countries. Equity securities of
closed-end investment companies generally trade at a discount to their net asset
value.
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Strategic Investments (All Funds)
Foreign Currency Transactions; Currency Risks
The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation and
other economic and political conditions. Although a Fund values its assets daily
in U.S. dollars, a Fund may not convert its holdings to another currency.
Foreign exchange dealers may realize a profit on the difference between the
price at which a Fund buys and sells currencies.
Each Fund will engage in foreign currency exchange transactions in
connection with its portfolio investments. A Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market or through forward
contracts to purchase or sell foreign currencies.
Forward Foreign Currency Exchange Contracts
Each Fund may enter into forward foreign currency exchange contracts in
order to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and a foreign currency involved in an
underlying transaction. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days (usually less than one year) from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A forward
contract generally has a deposit requirement, and no commissions are charged at
any stage for trades. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the spread)
between the price at which they are buying and selling various currencies.
However, forward foreign currency exchange contracts may limit potential gains
which could result from a positive change in such currency relationships. The
adviser and the sub-advisers believe that it is important to have the
flexibility to enter into forward foreign currency exchange contracts whenever
they determine that it is in a Fund's best interest to do so. A Fund will not
speculate in foreign currency exchange.
Except for cross-hedges, a Fund will not enter into forward foreign
currency exchange contracts or maintain a net exposure in such contracts when it
would be obligated to deliver an amount of foreign currency in excess of the
value of its portfolio securities or other assets denominated in that currency
or, in the case of a "cross-hedge" denominated in a currency or currencies that
the adviser or sub-adviser believes will tend to be closely correlated with that
currency with regard to price movements. At the consummation of such a forward
contract, a Fund may either make delivery of the foreign currency or terminate
its contractual obligation to deliver the foreign currency by purchasing an
offsetting contract obligating it to purchase, at the same maturity date, the
same amount of such foreign currency. If a Fund chooses to make delivery of the
foreign currency, it may be required to obtain such currency through the sale of
portfolio securities denominated in such currency or through conversion of other
assets of the Fund into such currency. If a Fund engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been a change in forward contract prices.
The Funds will place cash or high grade debt securities in a separate
account of a Fund at its custodian bank in an amount equal to the value of the
Fund's total assets committed to forward foreign currency exchange contracts
entered into as a hedge against a substantial decline in the value of a
particular foreign currency. If the value of the securities placed in the
separate account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Fund's commitments with respect to such contracts.
It should be realized that this method of protecting the value of a Fund's
portfolio securities against a decline in the value of a currency does not
eliminate fluctuations in the underlying prices of the securities. It simply
establishes a rate of exchange which can be achieved at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain which might result should the value of such
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currency increase. Generally, a Fund will not enter into a forward foreign
currency exchange contract with a term longer than one year.
Foreign Currency Options
A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price on a specified
date or during the option period. The owner of a call option has the right, but
not the obligation, to buy the currency. Conversely, the owner of a put option
has the right, but not the obligation, to sell the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the seller or
the buyer may, in the secondary market, close its position during the option
period at any time prior to expiration.
A call option on a foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on a foreign currency
generally falls in value if the underlying currency depreciates in value.
Although purchasing a foreign currency option can protect the Fund against an
adverse movement in the value of a foreign currency, the option will not limit
the movement in the value of such currency. For example, if a Fund was holding
securities denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, the Fund would not have to exercise its put option. Likewise, if a
Fund were to enter into a contract to purchase a security denominated in foreign
currency and, in conjunction with that purchase, were to purchase a foreign
currency call option to hedge against a rise in value of the currency, and if
the value of the currency instead depreciated between the date of purchase and
the settlement date, the Fund would not have to exercise its call. Instead, the
Fund could acquire in the spot market the amount of foreign currency needed for
settlement.
Special Risks Associated with Foreign Currency Options
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally. In addition, there are certain additional
risks associated with foreign currency options. The markets in foreign currency
options are relatively new, and the Fund's ability to establish and close out
positions on such options is subject to the maintenance of a liquid secondary
market. Although the Funds will not purchase or write such options unless and
until, in the opinion of the adviser or sub-advisers, the market for them has
developed sufficiently to ensure that the risks in connection with such options
are not greater than the risks in connection with the underlying currency, there
can be no assurance that a liquid secondary market will exist for a particular
option at any specific time.
A risk in employing currency futures contracts to protect against the price
volatility of portfolio securities denominated in a particular currency is that
the prices of such securities subject to currency futures contracts may
correlate imperfectly with the behavior of the cash prices of a Fund's
securities. The correlation may be distorted by the fact that the currency
futures market may be dominated by short-term traders seeking to profit from
changes in exchange rates. This would reduce their value for hedging purposes
over a short-term period. Such distortions are generally minor and would
diminish as the contract approached maturity. Another risk is that a Fund's
investment adviser or sub- adviser could be incorrect in its expectations as to
the direction or extent of various exchange rate movements or the time span
within which the movements take place.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1
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million) for the underlying foreign currencies at prices that are less favorable
than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Available
quotation information is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e, less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. option markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that cannot be reflected in the options markets until
they reopen.
Foreign Currency Futures Transactions
By using foreign currency futures contracts and options on such contracts,
a Fund may be able to achieve many of the same objectives as it would through
the use of forward foreign currency exchange contracts. The Funds may be able to
achieve these objectives possibly more effectively and at a lower cost by using
futures transactions instead of forward foreign currency exchange contracts.
A foreign currency futures contract sale creates an obligation by the Fund,
as seller, to deliver the amount of currency called for in the contract at a
specified future time for a specified price. A currency futures contract
purchase creates an obligation by the Fund, as purchaser, to take delivery of an
amount of currency at a specified future time at a specified price. Although the
terms of currency futures contracts specify actual delivery or receipt, in most
instances the contracts are closed out before the settlement date without the
making or taking of delivery of the currency. Closing out of currency futures
contracts is effected by entering into an offsetting purchase or sale
transaction. An offsetting transaction for a currency futures contract sale is
effected by the Fund entering into a currency futures contract purchase for the
same aggregate amount of currency and same delivery date. If the price of the
sale exceeds the price of the offsetting purchase, the Fund is immediately paid
the difference and realizes a loss. Similarly, the closing out of a currency
futures contract purchase is effected by the Fund entering into a currency
futures contract sale. If the offsetting sale price exceeds the purchase price,
the Fund realizes a gain, and if the offsetting sale price is less than the
purchase price, the Fund realizes a loss.
Special Risks Associated with Foreign Currency Futures Contracts and Related
Options
Buyers and sellers of foreign currency futures contracts are subject to the
same risks that apply to the use of futures generally. In addition, there are
risks associated with foreign currency futures contracts and their use as a
hedging device similar to those associated with options on futures currencies,
as described above.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such options
is subject to the maintenance of a liquid secondary market. To reduce this risk,
the Funds will not purchase or write options on foreign currency futures
contracts unless and until, in the opinion of the adviser or the sub-advisers,
the market for such options has developed sufficiently that the risks in
connection with such options are not greater than the risks in connection with
transactions in the underlying foreign currency futures contracts. Compared to
the purchase or sale of foreign currency futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Funds
because the maximum amount at risk is the premium paid for the option (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss, such as when
there is no movement in the price of the underlying currency or futures
contract.
Restricted and Illiquid Securities
The ability of the Board of Trustees ("Trustees") to determine the
liquidity of certain restricted securities is permitted under a Securities and
Exchange Commission ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive, safe-harbor for certain secondary
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market transactions involving securities subject to restrictions on resale under
federal securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional buyers.
The Rule was expected to further enhance the liquidity of the secondary market
for securities eligible for sale under the Rule. The Funds which invest in Rule
144A Securities believe 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 Trustees consider the
following criteria in determining the liquidity of certain restricted
securities:
(i) the frequency of trades and quotes for the security;
(ii) the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
(iii) dealer undertakings to make a market in the security; and
(iv) the nature of the security and the nature of the marketplace trades.
When-Issued and Delayed Delivery Securities (Emerging Markets and International
Equity)
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of a Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. Emerging Markets and
International Equity do not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20% of
the total value of their assets.
Lending of Portfolio Securities
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.
Repurchase Agreements
The Funds or their custodian will take possession of the securities subject
to repurchase agreements, and these securities will be marked to market daily.
To the extent that the original seller does not repurchase the securities from
the Funds, the Funds could receive less than the repurchase price on any sale of
such securities. In the event that such a defaulting seller filed for bankruptcy
or became insolvent, disposition of such securities by the Funds might be
delayed pending court action. The Funds believe that under the regular
procedures normally in effect for custody of a Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Funds will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker-dealers, which are deemed by the adviser
or a sub-adviser to be creditworthy pursuant to guidelines established by the
Trustees.
Reverse Repurchase Agreements
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Fund transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
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The use of reverse repurchase agreements may enable a Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
........No Fund may 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, with respect to Emerging
Markets and International Equity, 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.
2........Ten Percent Limitation on Securities of Any One Issuer
.........Global 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.
.........Neither Emerging Markets nor International Equity may purchase more
than 10% of the outstanding voting securities of any one issuer.
3........Investment for Purposes of Control or Management
.........Global may not invest in companies for the purpose of exercising
control or management.
4........Purchase of Securities on Margin
.........No Fund may 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.
5........Unseasoned Issuers
........Emerging Markets*, International Equity* and Global may not invest more
than 15% of their total assets in securities of unseasoned issuers that have
been in continuous operation for less than three years, including operating
periods of their 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).
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6........Underwriting
.........The Funds 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 objectives, policies
and limitations.
7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
.........Global may not purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.
.........Neither Emerging Markets* nor International Equity* will 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.
8........Concentration in Any One Industry
.........Global 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.
.........Emerging Markets and International Equity will not invest 25% or more
of the value of their total assets in any one industry except that they may
invest more than 25% of their total assets in securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities.
9........Warrants
.........Global 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 neither the New York nor the American Stock
Exchanges.
.........Emerging Markets* and International Equity* will not invest more than
5% of their net assets in warrants, including those acquired in units or
attached to other securities. To comply with certain state restrictions, the
Funds will limit their investment in such warrants not listed on the New York
Stock Exchange or the American Stock Exchange to 2% of their net assets. (If
state restrictions change, this latter restriction may be changed without notice
to shareholders). For purposes of this restriction, warrants acquired by the
Funds' in units or attached to securities may be deemed to be without value.
10.......Ownership by Trustees/Officers
.........None of Emerging Markets*, International Equity* or Global may 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-advisers 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.
11.......Short Sales
.........Neither Emerging Markets nor International Equity will sell any
securities short.
.........Global 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.
12.......Lending of Funds and Securities
.........Global 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. Global 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
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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.
.........Emerging Markets and International Equity will not lend any of their
assets, except portfolio securities up to one-third of the value of their total
assets. This does not prevent the Funds 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 a Fund's investment objectives and policies or the Declaration of
Trust governing the Fund.
13.......Commodities
.........Emerging Markets and International Equity will not invest in
commodities except that each Fund reserves the right to engage in transactions
including futures contracts, options and forward contracts with respect to
securities indices or currencies.
.........Global will not purchase, sell or invest in commodities or commodity
contracts; provided, however, that this policy does not prevent the Fund from
purchasing and selling currency futures contracts and entering into forward
foreign currency contracts.
14.......Real Estate
.........Neither Emerging Markets nor International Equity will purchase or sell
real estate, including limited partnership interests in 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.
.........Global may not purchase or invest in real estate or interests in real
estate (although it 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).
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
.........Emerging Markets and International Equity will not issue senior
securities except that each 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 amount borrowed and except to the extent that 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. A Fund will not purchase any securities while borrowings in
excess of 5% of its total assets are outstanding.
.........Global 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
Global 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.
16.......Joint Trading
.........Global 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
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.........Global 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 its Prospectus.
.........Emerging Markets* and International Equity* may write covered call
options and secured put options on up to 25% of their net assets and may
purchase put and call options provided that no more than 5% of the fair market
value of its net assets may be invested in premiums on such options.
18.......Pledging Assets
.........Neither Emerging Markets nor International Equity will 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.
19.......Investing in Securities of Other Investment Companies
.........Emerging Markets* and International Equity* will limit their investment
in other investment companies to no more than 3% of the total outstanding voting
stock of any investment company, will invest no more than 5% of their total
assets in any one investment company and will invest no more than 10% of their
total assets in investment companies in general. A Fund will purchase securities
of closed-end 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.
20.......Restricted Securities
.........Emerging Markets* and International Equity* will not invest more than
5% of their total assets in securities subject to restrictions on resale under
the Securities Act of 1933, except for restricted securities which meet criteria
for liquidity established by the Trustees.
21........Illiquid Securities.
.........Global* may not invest more than 15% of its net assets in illiquid
securities and other securities which are not readily marketable, including
repurchase agreements which have a maturity of longer than seven days, but
excluding securities eligible for resale under Rule 144A of the Securities Act
of 1933, as amended, which the Trustees have determined to be liquid.
.........Emerging Markets* and International Equity* will not invest more than
15% of their net assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice and certain
securities not determined by the Trustees to be liquid.
22........Other. In order to comply with certain state blue sky limitations:
-----
...........Global* interprets fundamental investment restriction 7 to prohibit
investments in oil, gas and mineral leases.
...........Global* interprets fundamental investment restriction 14 to prohibit
investment in real estate limited partnerships which are not readily marketable.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value of net assets will not result in a violation
of such restriction.
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To comply with registration requirements in certain states, Emerging
Markets* and International Equity* will limit the margin deposits on futures
contracts entered into by a Fund to 5% of its net assets. (If state requirements
change, these restrictions may be revised without shareholder notification.)
Emerging Markets* and International Equity* have no present intention to
borrow money or enter into reverse repurchase agreements in excess of 5% of the
value of their net assets during the coming fiscal year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items".
CERTAIN RISK CONSIDERATIONS
...........There can be no assurance that a Fund will achieve its investment
objective and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objective and Policies"
in the Prospectus.
...........While Global is technically diversified within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), because the
investment alternatives of the Fund are restricted by a policy of concentrating
at least 65% of its total assets in companies in the real estate industry,
investors should understand that investment in the Fund may be subject to
greater risk and market fluctuation than an investment in a portfolio of
securities representing a broader range of industry investment alternatives.
Borrowing.
The table set forth below describes the extent to which Global entered into
borrowing transactions during the fiscal year ended September 30, 1994.
Global
Average
Amount of Debt Average Amount of Average Number of Amount of Debt
Outstanding Debt Outstanding Shares Outstanding Per-Share
Year Ended End of Year During the Year During the Year During Year
- ---------- ----------- ----------------- ------------------ --------------
9/30/1994 $0 $ 1,369,863 50,301,298 $0.03
MANAGEMENT
The Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
Laurence B. Ashkin (67), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam*(68), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (70), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Robert J. Jeffries (72), 2118 New Bedford Drive, Sun City Center, FL-Trustee.
Corporate consultant since 1967.
Gerald M. McDonnell (55), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (56), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
11
<PAGE>
William Walt Pettit*(39), Holcomb and Pettit, P.A., 207 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990; Attorney, Clontz and Clontz from 1980 to 1990.
Russell A. Salton, III, M.D. (47), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (35), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
Except for Messrs. Ashkin, Bam and Jeffries, who are not Trustees of
Evergreen Investment Trust (formerly First Union Funds), the Trustees and
officers listed above hold the same positions with a total of ten registered
investment companies offering a total of thirty-one investment funds within the
Evergreen mutual fund complex.
- --------
* Mr. Bam and Mr. Pettit may each be deemed to be an "interested person"
within the meaning of the 1940 Act.
The officers of the Trusts are all officers and/or employees of Furman
Selz Incorporated. Furman Selz Incorporated is the parent of Evergreen Funds
Distributor, Inc., the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee
who is an "affiliated person" of either First Union National Bank of North
Carolina or Evergreen Asset Management Corp. or their affiliates. See
"Investment Adviser." Currently, none of the Trustees is an "affiliated person"
as defined in the 1940 Act. The Trusts pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses (and $50 for each telephone conference meeting) as follows:
Name of Trust/Fund Annual Retainer Meeting Fee
Evergreen Real Estate Equity Trust 1,000*
Global 100
Evergreen Investment Trust 9,000** 1,500**
Emerging Markets
International
- --------------------
* This reflects the aggregate retainer paid by Evergreen Real Estate Equity
Trust with respect to both of its investment series, which are Evergreen U.S.
Real Estate Equity Fund and Evergreen Global Real Estate Equity Fund.
** Evergreen Investment Trust pays an annual retainer to each trustee and a
per-meeting fee that are allocated among its fifteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
Set forth below for each of the Trustees is the aggregate compensation
paid to such Trustees by each Trust for the fiscal year ended December 31, 1994
(fiscal year ended September 30, 1994 for Global)
Total
Compensation
Aggregate Compensation From Trust From Trusts
& Fund
Name of Investment Complex Paid
Person Global* Trust** to Trustees
Laurence Ashkin 1,494 29,800
Foster Bam 1,494 29,850
12
<PAGE>
James S. Howell 622 14,900 26,900
Robert J.
Jeffries 1,494 29,800
Gerald M.
McDonnell 722 11,900 26,100
Thomas L.
McVerry 722 11,900 26,150
William Walt
Pettit 722 11,900 26,100
Russell A.
Salton, III, M.D. 722 11,900 26,100
Michael S.
Scofield 1,108 11,700 25,650
* Global changed its fiscal year end during the period covered by the foregoing
table from December 31 to September 30. Accordingly, the Trustees fees reported
in the foregoing table reflect, for Global, the period from January 1, 1994 to
September 30, 1994.
** Formerly known as First Union Funds.
No officer or Trustee of the Trusts owned Class B or C shares of any
Fund as of the date hereof. The number and percent of outstanding shares of each
Fund owned by officers and Trustees as a group on June 15, 1995, is as follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of Class Y
Name of Fund as a Group Shares Outstanding
Emerging Markets -0- -0-
International -0- -0-
Global 22,588 .35%
Set forth below is information with respect to each person, who, to
each Fund's knowledge, owned beneficially or of record more than 5% of a class
of each Fund's total outstanding shares and their aggregate ownership of the
Fund's total outstanding shares as of June 15, 1995.
Name of % of
Name and Address Fund/Class No. of Shares Class/Fund
- ---------------- ---------- ------------- ----------
Fubs & Co. Febo Emerging Markets/C 1,000 39.80%/
Frances B. Goldstein
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 507 20.18%/
Victor McCauley
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 357 14.21%/
Gales Chimney Rock Shop Inc.
Attn: Steve Gale
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
13
<PAGE>
Fubs & Co. Febo Emerging Markets/C 204 8.15%/
Elizabeth R. Langdon
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 139 5.57%/
C. Robert Gidlow C/F
Amy Gidlow
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 137 5.46%/
Matthew S. Palmer
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Emerging Markets/C 766,762 77.48%/
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Emerging Markets/Y 222,795 22.51%/
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 4,227 18.92%/
Julio Noltenius
Julio G. Noltenius
Alicia Noltenius
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 2,950 11.81%/
G. Gene Wilhelm
Pola Wilhelm
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 2,873 11.51%/
Richard K. Hamilton and
Sandra H. Hamilton
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 2,703 10.82%/
George M. Kingsbury
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Emerging Markets/C 1,632 6.54%/
C. Wilson Construction Company
Profit Sharing Plan
U/A/D 7-1-87
C/O First Union National Bank
301 S. Tryon Street Charlotte, NC
28288-0001
First Union National Bank International Equity/Y 1,762,827 51.51%/
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank International Equity/Y 1,659,266 48.49%/
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
14
<PAGE>
Fubs & Co. Febo Global Real Estate/A 134 5.88%/
Mark Major Thomsen
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Global Real Estate/A 539 23.56%/
John E. Benson
Vivianle M. Benson
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Global Real Estate/A 338 14.77%/
Joan B. Huber C/F
Andrew P. Huber
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Global Real Estate/A 338 14.77%/
Joan B. Huber C/F
Marissa A. Huber
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Global Real Estate/A 261 11.40%/
Richard Leyba Rubio
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Global Real Estate/A 134 5.86%/
VA C/F
Alisa Van Zant Shannon IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Global Real Estate/ 190 14.46%/
NC C/F
Glenda E. Laws
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & & Co. Febo Global Real Estate/B 87 8.63%/
Christian Saade
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Global Real Estate/B 85 6.54%/
Richard D. Zuroweste
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Global Real Estate/B 832 63.34%/
Allie M. Frazier
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank- Global Real Estate/B 100 7.61%/
FL C/F
David L. Schurger IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Global Real Estate/C 87 7.13%/
Patrick K. De Garay
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
NFSC Febo #144-285862 Global Real Estate/C 247 20.22%/
Eric J. Jorgenson
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
15
<PAGE>
Fubs & Co. Febo Global Real Estate/C 871 71.05%/
R. Frazior Inc.
Investment Account
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Stephen A. Lieber Global Real Estate/Y 1,089,041 16.82%/
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Charles Schwab & Co. Inc. Global Real Estate/Y 1,823,491 25.07%/
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
- ---------------------------------
*Acting in various capacities for numerous accounts. As a result of its
ownership of %, % and % of Global, Emerging Markets and International,
respectively, on June 15, 1995, First Union National Bank of North Carolina may
be deemed to "control" each Fund as that term is defined in the 1940 Act.
INVESTMENT ADVISER
(See also "Management of the Fund" in each Fund's Prospectus)
The investment adviser of Global is Evergreen Asset Management Corp., a
New York corporation, with offices at 2500 Westchester Avenue, Purchase, New
York or ("Evergreen Asset" or the "Adviser."). Evergreen Asset is owned by First
Union National Bank of North Carolina ("FUNB" or the "Adviser") which, in turn,
is a subsidiary of First Union Corporation ("First Union"), a bank holding
company headquartered in Charlotte, North Carolina. The investment adviser of
Emerging Markets and International is FUNB which provides investment
16
<PAGE>
advisory services through its Capital Management Group. Marvin & Palmer
Associates, Inc. ("Marvin & Palmer") and Boston International Advisors, Inc.
("Boston International") are the sub-advisers for Emerging Markets and
International, respectively, under the terms of Sub- Advisory Agreements between
FUNB and the respective sub-adviser. The Directors of Evergreen Asset are
Richard K. Wagoner and Barbara I. Colvin. The executive officers of Evergreen
Asset are Stephen A. Lieber, Chairman and Co-Chief Executive Officer, Nola
Maddox Falcone, President and Co-Chief Executive Officer, Theodore J. Israel,
Jr., Executive Vice President, Joseph J. McBrien, Senior Vice President and
General Counsel, and George R. Gaspari, Senior Vice President and Chief
Financial Officer.
On June 30, 1994, Evergreen Asset and Lieber and Company ("Lieber")
were acquired by First Union through certain of its subsidiaries. Evergreen
Asset was acquired by FUNB, a wholly-owned subsidiary (except for directors'
qualifying shares) of First Union, by merger into EAMC Corporation ("EAMC") a
wholly-owned subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset
Management Corp." and succeeded to the business of Evergreen Asset.
Contemporaneously with the succession of EAMC to the business of Evergreen Asset
and its assumption of the name "Evergreen Asset Management Corp.", Global
entered into a new investment advisory agreement with EAMC and into a
distribution agreement with Evergreen Funds Distributor, Inc., (the
"Distributor") a subsidiary of Furman Selz Incorporated. At that time, EAMC also
entered into a new sub-advisory agreement with Lieber pursuant to which Lieber
provides certain services to Evergreen Asset in connection with its duties as
investment adviser.
The partnership interests in Lieber, a New York general partnership,
were acquired by Lieber I Corp. and Lieber II Corp., which are both wholly-owned
subsidiaries of FUNB. The business of Lieber is being continued. The new
advisory and sub-advisory agreements were approved by the shareholders of Global
at their meeting held on June 23, 1994, and became effective on June 30, 1994.
Under its Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registration under the Securities Act of 1933,
as amended, and the 1940 Act, printing prospectuses (for existing shareholders)
as they are updated, state qualifications, share certificates, mailings,
brokerage, custodian and stock transfer charges, printing, legal and auditing
expenses, expenses of shareholder meetings and reports to shareholders.
Notwithstanding the foregoing, each Adviser will pay the costs of printing and
distributing prospectuses used for prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
GLOBAL Period Ended Year Ended Year Ended
9/30/94 12/31/93 12/31/92
Advisory Fee $1,133,380 $523,294 $75,696
========== ========== ========
Expense
Reimbursement --- $41,226 $130,246
------ -------
EMERGING
MARKETS Year Ended
12/31/94
Advisory Fee $35,047
--------
Waiver ($35,047)
Net Advisory Fee $ 0
========
INTERNATIONAL Year Ended
12/31/94
Advisory Fee $60,885
---------
Waiver ($44,928)
Net Advisory Fee $15,957
=========
17
<PAGE>
Global changed its fiscal year end from December 31 to September 30
during the periods covered by the foregoing table. Accordingly, the investment
advisory fees reported in the foregoing table reflect for Global, the period
from January 1, 1994 to September 30, 1994. In addition, Emerging Markets and
International commenced operations on September 6, 1994 and September 2, 1994,
respectively, and, therefore, the first year's figures set forth in the table
above reflect for Emerging Markets and International investment advisory fees
paid for the period from commencement of operations through December 31, 1994.
For their sub-advisory services, Marvin & Palmer and Boston
International receive an annual sub-advisory fee as described in the
Prospectuses. For the period from September 6, 1994 (commencement of operations)
to December 31, 1994, Marvin & Palmer Associates, Inc. earned sub-advisory fees
from the Emerging Markets of $23,133. For the period from September 2, 1994
(commencement of operations) to December 31, 1994, Boston International
Advisers, Inc.
earned sub-advisory fees from the International of $23,505.
Expense Limitations
Each Adviser's fee will be reduced by, or the Adviser will reimburse
the Funds for any amount necessary to prevent such expenses (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, but inclusive of the
Adviser's fee) from exceeding the most restrictive of the expense limitations
imposed by state securities commissions of the states in which the Funds' shares
are then registered or qualified for sale. Reimbursement, when necessary, will
be made monthly in the same manner in which the advisory fee is paid. Currently
the most restrictive state expense limitation is 2.5% of the first $30,000,000
of the Fund's average daily net assets, 2% of the next $70,000,000 of such
assets and 1.5% of such assets in excess of $100,000,000.
Pursuant to the Sub-Advisory Agreements between FUNB and the
sub-advisers, in the event that the Adviser's fee is reduced in order to meet
the expense limitations established by certain states, the sub-advisory fee for
the sub-adviser to the affected Fund shall be reduced in accordance with the
mutual agreement of the Adviser and the sub-adviser.
In addition, each Adviser has in some instances voluntarily limited
(and may in the future limit) expenses of certain of the Funds. For the years
ended December 31, 1991 and 1992, and for the four month period ended March 31,
1993, Evergreen Asset voluntarily limited the expenses of Global to 2% of
average net assets.
The Investment Advisory Agreements and Sub-Advisory Agreements are
terminable, without the payment of any penalty, on sixty days' written notice,
by a vote of the holders of a majority of each Fund's outstanding shares, or by
a vote of a majority of each Trust's Trustees or by the respective Adviser. The
Investment Advisory Agreements will automatically terminate in the event of
their assignment. Each Investment Advisory Agreement provides in substance that
the Adviser shall not be liable for any action or failure to act in accordance
with its duties thereunder in the absence of willful misfeasance, bad faith or
gross negligence on the part of the Adviser or of reckless disregard of its
obligations thereunder. The Investment Advisory Agreement with respect to Global
was approved by the Fund's shareholders on June 23, 1994, became effective on
June 30, 1994, and will continue in effect until June 30, 1996, and thereafter
from year to year provided that its continuance is approved annually by a vote
of a majority of the Trustees of the Trust including a majority of those
Trustees who are not parties thereto or "interested persons" (as defined in the
1940 Act) of any such party, cast in person at a meeting duly called for the
purpose of voting on such approval or a majority of the outstanding voting
shares of the Fund. With respect to Emerging Markets and International, the
Investment Advisory Agreement dated February 28, 1985 and amended from time to
time thereafter and the Sub-Advisory Agreements dated ------------- were last
approved by the Trustees of Evergreen Investment Trust (formerly, First Union
Funds) on April 20, 1995 and each Agreement will continue from year to year with
respect to each Fund provided that such continuance is approved annually by a
vote of a majority of the Trustees of Evergreen Investment Trust including a
majority of those Trustees who are not parties thereto or "interested persons"
of any such party cast in person at a meeting duly called for the purpose of
voting on such approval or by a vote of a majority of the outstanding voting
securities of each Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-advisers) may, from time to time, make recommendations which result in the
purchase or sale of a particular security
18
<PAGE>
by its other clients simultaneously with a Fund. If transactions on behalf of
more than one client during the same period increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price or quantity. It is the policy of each Adviser to allocate
advisory recommendations and the placing of orders in a manner which is deemed
equitable by the Adviser to the accounts involved, including the Funds. When two
or more of the clients of the Adviser (including one or more of the Funds) are
purchasing or selling the same security on a given day from the same
broker-dealer, such transactions may be averaged as to price.
Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, the Adviser
attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to permit
purchase and sales transactions to be effected between each Fund and the other
registered investment companies for which either Evergreen Asset or FUNB acts as
investment adviser or between the Fund and any advisory clients of Evergreen
Asset, FUNB, Lieber & Company, Marvin & Palmer or Boston International. Each
Fund may from time to time engage in such transactions but only in accordance
with these procedures and if they are equitable to each participant and
consistent with each participant's investment objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the period from September 6, 1994 (commencement of
operations) to December 31, 1994, Emerging Markets incurred $15,890 in
administrative service costs, all of which was voluntarily waived. From
September 2, 1994 (commencement of operations) to December 31, 1994,
International incurred $16,438 in administrative service costs, all of which was
voluntarily waived.
Commencing July 1, 1995, Evergreen Asset will provide administrative
services to each of the portfolios of Evergreen Investment Trust for a fee based
on the average daily net assets of each fund administered by Evergreen Asset for
which Evergreen Asset or FUNB also serves as investment adviser, calculated
daily and payable monthly at the following annual rates: .050% on the first $7
billion; .035% on the next $3 billion; .030% on the next $5 billion; .020% on
the next $10 billion; .015% on the next $10 billion; and .010% on assets in
excess of $30 billion. Furman Selz Incorporated, the parent of the Distributor,
serves as sub-administrator to Emerging Markets and International and is
entitled to receive a fee from each Fund calculated on the average daily net
assets of each Fund at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which FUNB or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .0100%
of the first $7 billion; .0075% on the next $3 billion; .0050% on the next $15
billion; and .0040% on assets in excess of $25 billion. The total assets of
mutual funds administered by Evergreen Asset for which Evergreen Asset or FUNB
serves as investment adviser as of March 31, 1995 were approximately $7.95
billion.
DISTRIBUTION PLANS
Reference is made to "Management of the Fund - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, B and C shares and are charged as class expenses,
as accrued. The distribution fees attributable to the Class B shares and Class C
shares are designed to permit an investor to purchase such shares through
broker-dealers without the assessment of a front-end sales charge, and, in the
case of Class C shares, without the assessment of a contingent deferred sales
charge after the first year following purchase, while at the same time
permitting the
19
<PAGE>
Distributor to compensate broker-dealers in connection with the sale of such
shares. In this regard the purpose and function of the combined contingent
deferred sales charge and distribution services fee on the Class B shares and
the Class C shares, are the same as those of the front-end sales charge and
distribution fee with respect to the Class A shares in that in each case the
sales charge and/or distribution fee provide for the financing of the
distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plan and the purposes for which such expenditures
were made to the Trustees of each Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of Trustees who are
not "interested persons" of each Trust (as defined in the 1940 Act) are
committed to the discretion of such disinterested Trustees then in office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Global commenced offering Class A, B or C shares on January 3, 1995.
The Plan with respect to the Fund became effective on December 30, 1994 and was
initially approved by the sole shareholder of each Class of shares of the Fund
with respect to which a Plan was adopted on that date and by the unanimous vote
of the Trustees of the Trust, including the disinterested Trustees voting
separately, at a meeting called for that purpose and held on December 13, 1994.
The Distribution Agreement between the Fund and the Distributor, pursuant to
which distribution fees are paid under the Plan by the Fund with respect to its
Class A, Class B and Class C shares was also approved at the December 13, 1994
meeting by the unanimous vote of the Trustees, including the disinterested
Trustees voting separately. Each Plan and Distribution Agreement will continue
in effect for successive twelve-month periods provided, however, that such
continuance is specifically approved at least annually by the Trustees of the
Trust or by vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Class, and, in either case, by a
majority of the Trustees of the Trust who are not parties to the Agreement or
interested persons, as defined in the 1940 Act, of any such party (other than as
Trustees of the Trust) and who have no direct or indirect financial interest in
the operation of the Plan or any agreement related thereto.
Prior to July 7, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for Emerging Markets and
International as well as other portfolios of Evergreen Investment Trust. The
Distribution Agreements between each Fund and the Distributor pursuant to which
distribution fees are paid under the Plans by each Fund with respect to its
Class A, Class B and Class C shares were approved on April 20, 1995 by the
unanimous vote of the Trustees including the disinterested Trustees voting
separately.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to each Fund and holders of Class A, Class B
and Class C shares and (ii) stimulate administrators to render administrative
support services to the Fund and holders of Class A, Class B and Class C shares.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to providing office space, equipment, telephone facilities, and
various personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B and Class C shares; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Fund reasonably requests for its Class A, Class B and Class C shares.
In addition to the Plans, Emerging Markets and International have each
adopted a Shareholder Services Plan whereby shareholder servicing agents may
receive fees from the Fund for providing services which include, but are not
limited to, distributing prospectuses and other information, providing
shareholder assistance, and communicating or facilitating purchases and
redemptions of Class B and Class C shares of the Fund.
20
<PAGE>
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. With respect to Emerging
Markets and International, amendments to the Shareholder Services Plan require a
majority vote of the disinterested Trustees but do not require a shareholders
vote. Any Plan, Shareholder Services Plan or Distribution Agreement may be
terminated (a) by a Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
Class or by a majority vote of the Trustees who are not "interested persons" as
defined in the 1940 Act, or (b) by the Distributor. To terminate any
Distribution Agreement, any party must give the other parties 60 days' written
notice; to terminate a Plan only, the Fund need give no notice to the
Distributor. Any Distribution Agreement will terminate automatically in the
event of its assignment.
For the period from September 6, 1994 (commencement of operations) to
December 31, 1994, Emerging Markets incurred $505 in distribution services fees
on behalf of Class A shares. For the period from September 2, 1994 (commencement
of operations) to December 31, 1994, International incurred $1,270 in
distribution services fees on behalf of Class A shares.
For the period from September 6, 1994 (commencement of operations) to
December 31, 1994, Emerging Markets incurred $2,924 in distribution services
fees of Class B shares. For the period from September 2, 1994 (commencement of
operations) to December 31, 1994, International incurred $8,718 in distribution
services fees on behalf of Class B shares.
For the period from September 6, 1994 (commencement of operations) to
December 31, 1994, Emerging Markets incurred $163 in distribution services fees
on behalf of Class C shares. For the period from September 2, 1994 (commencement
of operations) to December 31, 1994, International incurred $281 in distribution
service fees on behalf of its Class C shares.
Shareholder Services Plans - Emerging Markets and International
For the period ended December 31, 1994, Emerging Markets incurred
shareholder services fees of $975 and $54 on behalf of Class B shares and Class
C shares, respectively; and International incurred shareholder services fees of
$2,906 and $93 on behalf of Class B shares and Class C shares, respectively.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser or,
in the case of Emerging Markets and International, the sub-advisers, subject to
the supervision and control of the Trustees. Orders for the purchase and sale of
securities and other investments are placed by employees of the Adviser or
sub-advisers, all of whom, in the case of Evergreen Asset, are associated with
Lieber. In general, the same individuals perform the same functions for the
other funds managed by the Adviser or sub-advisers. A Fund will not effect any
brokerage transactions with any broker or dealer affiliated directly or
indirectly with the Adviser or sub-advisers unless such transactions are fair
and reasonable, under the circumstances, to the Fund's shareholders.
Circumstances that may indicate that such transactions are fair or reasonable
include the frequency of such transactions, the selection process and the
commissions payable in connection with such transactions.
A substantial portion of the transactions in equity securities for each
Fund will occur on foreign stock exchanges. Transactions on stock exchanges
involve the payment of
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brokerage commissions. In transactions on stock exchanges in the United States,
these commissions are negotiated, whereas on many foreign stock exchanges these
commissions are fixed. In the case of securities traded in the foreign and
domestic over-the-counter markets, there is generally no stated commission, but
the price usually includes an undisclosed commission or markup. Over-the-counter
transactions will generally be placed directly with a principal market maker,
although the Fund may place an over-the-counter order with a broker-dealer if a
better price (including commission) and execution are available.
It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. A Fund will also consider such factors as the price of the securities and
the size and difficulty of execution of the order. If these objectives may be
met with more than one firm, the Fund will also consider the availability of
statistical and investment data and economic facts and opinions helpful to the
Fund. To the extent that receipt of these services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
No Fund, other than Global, allocated brokerage commissions to firms in
exchange for research during the most recent fiscal year. Of the total brokerage
commissions paid by Global for its fiscal year ended September 30, 1994,
$738,237 or 80% were allocated in exchange for best execution and research.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the Securities and Exchange Commission,
Lieber may be compensated for effecting transactions in portfolio securities for
a Fund on a national securities exchange provided the conditions of the rules
are met. Each Fund advised by Evergreen Asset has entered into an agreement with
Lieber authorizing Lieber to retain compensation for brokerage services. In
accordance with such agreement, it is contemplated that Lieber, a member of the
New York and American Stock Exchanges, will, to the extent practicable, provide
brokerage services to the Fund with respect to substantially all securities
transactions effected on the New York and American Stock Exchanges. In such
transactions, a Fund will seek the best execution at the most favorable price
while paying a commission rate no higher than that offered to other clients of
Lieber or that which can be reasonably expected to be offered by an unaffiliated
broker-dealer having comparable execution capability in a similar transaction.
However, no Fund will engage in transactions in which Lieber would be a
principal. While no Fund advised by Evergreen Asset contemplates any ongoing
arrangements with other brokerage firms, brokerage business may be given from
time to time to other firms. In addition, the Trustees have adopted procedures
pursuant to Rule 17e-1 under the 1940 Act to ensure that all brokerage
transactions with Lieber, as an affiliated broker-dealer, are fair and
reasonable.
Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements does not provide for a
reduction of the Adviser's fee with respect to any fund by the amount of any
profits earned by Lieber from brokerage commissions generated by portfolio
transactions of the Fund.
The following chart shows: (1) the brokerage commissions paid by Global
during its last three fiscal years; (2) the amount and percentage thereof paid
to Lieber; and (3) the percentage of the total dollar amount of all portfolio
transactions with respect to which commissions have been paid which were
effected by Lieber:
GLOBAL Period Ended Year Ended Year Ended
9/30/94 12/31/93 12/31/92
Total Brokerage $917,989 $868,367 $196,719
Commissions
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Dollar Amount and % $174,137 $154,666 $5,685
paid to Lieber 19% 18% 26%
% of Transactions
Effected by Lieber 33% 29% 35%
Global changed its fiscal year end from December 31 to September 30
during the periods covered by the foregoing table. Accordingly, the commissions
reported in the foregoing table reflect for Global the period from January 1,
1994 to September 30, 1994.
Emerging Markets and International did not pay any commissions to
Lieber. For the period from September 6, 1994 (commencement of operations) to
December 31, 1994, Emerging Markets paid $41,532 in commissions on brokerage
transactions. For the period from September 2, 1994 (commencement of operations)
to December 31, 1994, International paid $16,438 in commissions on brokerage
transactions.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; (b) derive less than 30% of its gross
income from the sale or other disposition of securities, options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
Federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who
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are not exempt from tax), whether made in shares or in cash. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for Federal income tax purposes in each share so received equal to
the net asset value of a share of a Fund on the reinvestment date.
Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the
forthcoming distribution. Those purchasing just prior to a distribution will
then receive what is in effect a return of capital upon the distribution which
will nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% Federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations
Each Fund maintains accounts and calculates income in U.S. dollars. In
general, gains or losses on the disposition of debt securities denominated in a
foreign currency that are attributable to fluctuations in exchange rates between
the date the debt security is acquired and the date of disposition, gains and
losses attributable to fluctuations in exchange rates that occur between the
time the Fund accrues interest or other receivable or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivable or pays such liabilities, and gains and losses from the
disposition of foreign currencies and foreign currency forward contracts will be
treated as ordinary income or loss. These gains or losses increase or decrease,
respectively, the amount
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of the Fund's investment company taxable income available to be distributed to
its shareholders as ordinary income.
Each Fund's transactions in foreign currencies, forward contracts,
options and futures contracts (including options and futures contracts on
foreign currencies) are subject to special provisions of the Code that, among
other things, may affect the character of gains and losses of the Fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) require the Fund to mark-to-market
certain types of positions in its portfolio (i.e., treat them as if they were
closed out) and (b) may cause the Fund to recognize income without receiving
cash with which to pay dividends or make distributions in amounts necessary to
satisfy the distribution requirements for avoiding U.S. Federal income and
excise taxes. Each Fund will monitor its transactions, make appropriate tax
elections and make appropriate entries in its books and records when it acquires
any foreign currency, forward contract, option, futures contract or hedged
investment in order to mitigate the effect of these rules. The Funds anticipate
that their hedging activities will not adversely affect their regulated
investment company status.
Income received by a Fund from sources within various foreign countries
may be subject to foreign income tax. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of the stock or
securities of foreign corporations, the Fund may elect to "pass through" to the
Fund's shareholders the amount of foreign income taxes paid by the Fund.
Pursuant to such election, shareholders would be required: (i) to treat a
proportionate share of dividends paid by the Fund which represent foreign source
income received by the Fund plus the foreign taxes paid by the Fund as foreign
source income; and (ii) either to deduct their pro-rata share of foreign taxes
in computing their taxable income, or to use it as a foreign tax credit against
Federal income taxes (but not both). No deduction for foreign taxes could be
claimed by a shareholder who does not itemize deductions.
Each Fund intends to meet for each taxable year the requirements of the
Code to "pass through" to its shareholders foreign income taxes paid if it is
determined by its Adviser to be beneficial to do so. There can be no assurance
that the Fund will be able to pass through foreign income taxes paid. Each
shareholder will be notified within 60 days after the close of each taxable year
of the Fund whether the foreign taxes paid by the Fund will "pass through" for
that year, and, if so, the amount of each shareholder's pro-rate share (by
country) of (i) the foreign taxes paid and (ii) the Fund's gross income from
foreign sources. Of course, shareholders who are not liable for Federal income
taxes, such as retirement plans qualified under Section 401 of the Code, will
not be affected by any such "pass through" of foreign tax credits.
Each Fund may invest in certain entities that may qualify as "passive
foreign investment companies." Generally, the income of such companies may
become taxable to the Fund prior to the receipt of distributions, or,
alternatively, income taxes and interest charges may be imposed on the Fund on
"excess distributions" received by the Fund or on gain from the disposition of
such investments by the Fund. In addition, gains from the sale of such
investments held for less than three months will count toward the 30% of gross
income test described above. Each Fund will take steps to minimize income taxes
and interest charges arising form such investments, and will monitor such
investments to insure that the Fund complies with the 30% of gross income test.
Proposed tax regulations, if they become effective, will allow the Funds to mark
to market and recognize gains on such investments at each Fund's taxable year
end. The Funds would not be subject to income tax on these gains if they are
distributed subject to these proposed rules.
NET ASSET VALUE
The following information supplements that set forth in each Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value,
plus, in the case of Class A shares, a sales charge which will vary depending on
the purchase alternative chosen by the investor, as more fully described in the
Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales Charge
Alternative. " On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in which a Fund
invests might materially affect the value of Fund shares, the
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<PAGE>
per share net asset value of each such Fund is computed in accordance with the
Declaration of Trust and By-Laws governing each Fund as of the next close of
regular trading on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding. A Fund business
day is any weekday, exclusive of national holidays on which the Exchange is
closed and Good Friday. For each Fund, securities for which the primary market
is on a domestic or foreign exchange and over-the-counter securities admitted to
trading on the NASDAQ National List are valued at the last quoted sale or, if no
sale, at the mean of closing bid and asked prices and portfolio bonds are
presently valued by a recognized pricing service when such prices are believed
to reflect the fair value of the security. Over-the-counter securities not
included in the NASDAQ National List for which market quotations are readily
available are valued at a price quoted by one or more brokers. If accurate
quotations are not available, securities will be valued at fair value determined
in good faith by the Board of Trustees.
The respective per share net asset values of the Class A, Class B,
Class C and Class Y shares are expected to be substantially the same. Under
certain circumstances, however, the per share net asset values of the Class B
and Class C shares may be lower than the per share net asset value of the Class
A shares (and, in turn, that of Class A shares may be lower than Class Y shares)
as a result of the greater daily expense accruals, relative to Class A and Class
Y shares, of Class B and Class C shares relating to distribution services fees
(and, with respect to Emerging Market and International shareholder service fee)
and, to the extent applicable, transfer agency fees and the fact that Class Y
shares bear no additional distribution, shareholder service or transfer agency
related fees. While it is expected that, in the event each Class of shares of a
Fund realizes net investment income or does not realize a net operating loss for
a period, the per share net asset values of the four classes will tend to
converge immediately after the payment of dividends, which dividends will differ
by approximately the amount of the expense accrual differential among the
Classes, there is no assurance that this will be the case. In the event one or
more Classes of a Fund experiences a net operating loss for any fiscal period,
the net asset value per share of such Class or Classes will remain lower than
that of Classes that incurred lower expenses for the period.
To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and on
which the Fund's net asset value is not calculated. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of the Exchange will not be reflected in a Fund's
calculation of net asset value unless the Trustees deem that the particular
event would materially affect net asset value, in which case an adjustment will
be made. Securities transactions are accounted for on the trade date, the date
the order to buy or sell is executed. Dividend income and other distributions
are recorded on the ex-dividend date, except certain dividends and distributions
from foreign securities which are recorded as soon as the Fund is informed after
the ex-dividend date.
PURCHASE OF SHARES
The following information supplements that set forth in each Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares."
General
Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value plus an initial sales charge at the time of
purchase (the "front-end sales charge alternative"), with a contingent deferred
sales charge (the deferred
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sales charge alternative"), or without any front-end sales charge, but with a
contingent deferred sales charge imposed only during the first year after
purchase (the "level-load alternative"), as described below. Class Y shares
which, as described below, are not offered to the general public, are offered
without any front-end or contingent sales charges. Shares of each Fund are
offered on a continuous basis through (i) investment dealers that are members of
the National Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Distributor ("selected dealers"), (ii)
depository institutions and other financial intermediaries or their affiliates,
that have entered into selected agent agreements with the Distributor ("selected
agents"), or (iii) the Distributor. The minimum for initial investments is
$1,000; there is no minimum for subsequent investments. The subscriber may use
the Share Purchase Application available from the Distributor for his or her
initial investment. Sales personnel of selected dealers and agents distributing
a Fund's shares may receive differing compensation for selling Class A, Class B
or Class C shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing Class Y shares of a Fund are not issued except upon written request
to the Fund by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen certificates. No
certificates are issued for fractional shares, although such shares remain in
the shareholder's account on the records of a Fund, or for Class A, B or C
shares of any Fund.
Alternative Purchase Arrangements
Each Fund issues four classes of shares: (i) Class A shares, which are
sold to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; (iii) Class C shares, which are sold to investors choosing the
level-load sales charge alternative; and (iv) Class Y shares, which are offered
only to (a) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (b) certain investment advisory clients
of the Advisers and their affiliates, and (c) institutional investors. The four
classes of shares each represent an interest in the same portfolio of
27
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investments of the Fund, have the same rights and are identical in all respects,
except that (I) Class A, Class B and Class C shares are subject to a Rule 12b-1
distribution fee, (II) Class B and Class C shares of Emerging Markets and
International are subject to a shareholder service fee, (III) Class A shares
bear the expense of the front-end sales charge and Class B and Class C shares
bear the expense of the deferred sales charge, (IV) Class B shares and Class C
shares each bear the expense of a higher Rule 12b-1 distribution services fee
and shareholder service fee than Class A shares and, in the case of Class B
shares, higher transfer agency costs, (V) with the exception of Class Y shares,
each Class of each Fund has exclusive voting rights with respect to provisions
of the Rule 12b-1 Plan pursuant to which its distribution services (and, to the
extent applicable, shareholder service) fee is paid which relates to a specific
Class and other matters for which separate Class voting is appropriate under
applicable law, provided that, if the Fund submits to a simultaneous vote of
Class A, Class B and Class C shareholders an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder with respect to
the Class A shares, the Class A shareholders and the Class B and Class C
shareholders will vote separately by Class, and (VI) only the Class B shares are
subject to a conversion feature. Each Class has different exchange privileges
and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, shareholder service) fee and contingent deferred sales
charges on Class B shares prior to conversion, or the accumulated distribution
services (and, to the extent applicable, shareholder service) fee on Class C
shares, would be less than the front-end sales charge and accumulated
distribution services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher return of Class A
shares. Class B and Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at the lowest applicable sales
charge. For this reason, the Distributor will reject any order (except orders
for Class B shares from certain retirement plans) for more than $2,500,000 for
Class B or Class C shares.
Class A shares are subject to a lower distribution services fee and no
shareholder service fee and, accordingly, pay correspondingly higher dividends
per share than Class B shares or Class C shares. However, because front-end
sales charges are deducted at the time of purchase, investors purchasing Class A
shares would not have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced front-end sales
charges who expect to maintain their investment for an extended period of time
might consider purchasing Class A shares because the accumulated continuing
distribution (and, to the extent applicable, shareholder service) charges on
Class B shares or Class C shares may exceed the front-end sales charge on Class
A shares during the life of the investment. Again, however, such investors must
weigh this consideration against the fact that, because of such front-end sales
charges, not all their funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution services (and, to the extent applicable, shareholder service) fees
and, in the case of Class B shares, being subject to a contingent deferred sales
charge for a seven-year period. For example, based on current fees and expenses,
an investor subject to the 4.75% front-end sales charge would have to hold his
or her investment approximately seven years for the Class B and Class C
distribution services (and, to the extent applicable, shareholders service)
fees, to exceed the front-end sales charge plus the accumulated distribution
services fee of Class A shares. In this example, an investor intending to
maintain his or her investment for a longer period might consider purchasing
Class A shares. This example does not take into account the time value of money,
which further reduces the impact of the Class B and Class C distribution
services (and, to the extent applicable, shareholder service) fees on the
investment, fluctuations in net asset value or the effect of different
performance assumptions.
Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the seven year period
during which Class B
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<PAGE>
shares are subject to a contingent deferred sales charge may find it more
advantageous to purchase Class C shares.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B, Class C
and Class Y shares. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
Front-end Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing the
front-end sales charge alternative is the net asset value plus a sales charge as
set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
Net Per Share Offering
Asset Sales Price
Value Charge Date Per Share
Emerging
Markets $ 8.17 $.41 12/31/94 $ 8.58
International $ 9.50 $.47 12/31/94 $9.97
Global $13.81 $.69 9/30/94 $14.50
Prior to January 3, 1995, shares of Global were offered exclusively on
a no-load basis and, accordingly, no underwriting commissions were paid in
respect of sales of shares of the Fund or retained by the Distributor. In
addition, since Class B and Class C shares were not offered prior to January 3,
1995, contingent deferred sales charges have been paid to the Distributor with
respect to Class B or Class C shares only since January 3, 1995.
With respect to Emerging Markets, and International for the periods
indicated, the following commissions were paid to and amounts were retained by
Federated Securities Corp., which, prior to July 7, 1995, was the principal
underwriter of portfolios of Evergreen Investment Trust:
Period From
September 6, 1994
to 12/31/94
Emerging Markets:
Commissions Received $11,000
Commissions Retained
Period From
September 2, 1994
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<PAGE>
International: to December 31, 1994
Commissions Received $6,000
Commissions Retained $1,000
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
mutual funds other than money market funds into a single "purchase", if the
resulting "purchase" totals at least $100,000. The term "purchase" refers to:
(i) a single purchase by an individual, or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his or
her spouse and their children under the age of 21 years purchasing shares for
his, her or their own account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company which has not
been in existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen mutual fund. Currently, the
Evergreen mutual funds include:
Evergreen Fund
Evergreen Global Real Estate Equity Fund Evergreen U.S. Real Estate Equity Fund
The Evergreen Limited Market Fund, Inc. Evergreen Growth and Income Fund
Evergreen Total Return Fund Evergreen American Retirement Fund Evergreen Small
Cap Equity Income Fund Evergreen Tax Strategic Foundation Fund Evergreen
Short-Intermediate Municipal Fund Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Tax Exempt Money Market Fund Evergreen Money Market Fund Evergreen
U.S. Government Fund* Evergreen Foundation Fund Evergreen Florida High Income
Fund Evergreen Aggressive Growth Fund Evergreen Balanced Fund* Evergreen Utility
Fund* Evergreen Value Fund* Evergreen Fixed Income Fund* Evergreen Managed Bond
Fund* Evergreen Emerging Markets Growth Fund* Evergreen International Equity
Fund* Evergreen Treasury Money Market Fund* Evergreen Florida Municipal Bond
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*
* Prior to July 7, 1995, each Fund was named "First Union" instead of
"Evergreen."
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<PAGE>
Prospectuses for the Evergreen mutual funds may be obtained without
charge by contacting the Distributor or the Advisers at the address or telephone
number shown on the front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the
previous day) of (a) all Class A, Class B and Class C shares
of the Fund held by the investor and (b) all such shares of
any other Evergreen mutual fund held by the investor; and
(iii) the net asset value of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned Class A, B or C shares of an
Evergreen mutual fund worth $200,000 at their then current net asset value and,
subsequently, purchased Class A shares of a Fund worth an additional $100,000,
the sales charge for the $100,000 purchase would be at the 3.00% rate applicable
to a single $300,000 purchase of shares of the Fund, rather than the 3.75% rate.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Statement of Intention. Class A investors may also obtain the reduced
sales charges shown in the Prospectus by means of a written Statement of
Intention, which expresses the investor's intention to invest not less than
$100,000 within a period of 13 months in Class A shares (or Class A, Class B
and/or Class C shares) of the Fund or any other Evergreen mutual fund. Each
purchase of shares under a Statement of Intention will be made at the public
offering price or prices applicable at the time of such purchase to a single
transaction of the dollar amount indicated in the Statement of Intention. At the
investor's option, a Statement of Intention may include purchases of Class A, B
or C shares of the Fund or any other Evergreen mutual fund made not more than 90
days prior to the date that the investor signs a Statement of Intention;
however, the 13-month period during which the Statement of Intention is in
effect will begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen mutual funds under a single Statement
of Intention. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in shares of the Fund or any other
Evergreen mutual fund, to qualify for the 3.75% sales charge on the total amount
being invested (the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Statement of Intention is 5% of such amount. Shares purchased with the first 5%
of such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released. To the extent
that an investor purchases more than the dollar amount indicated on the
Statement of Intention and qualifies for a further reduced sales charge, the
sales charge will be adjusted for the entire amount purchased at the end of the
13-month period. The
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<PAGE>
difference in sales charge will be used to purchase additional shares of the
Fund subject to the rate of sales charge applicable to the actual amount of the
aggregate purchases.
Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in Class A shares of the Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting a Fund at the address or telephone number
shown on the cover of this Statement of Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain
qualified and non-qualified benefit and savings plans may make shares of the
Evergreen mutual funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative". The Advisers may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen mutual funds available to
their participants.
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except that no loss will
be recognized to the extent that the proceeds are reinvested in shares of the
Fund. The reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased, except that the
privilege may be used without limit in connection with transactions whose sole
purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of Additional
Information.
Sales at Net Asset Value. In addition to the categories of investors
set forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trust; present or former trustees of other investment companies
managed by the Advisers; present or retired full-time employees of the Adviser;
officers, directors and present or retired full-time employees of the Adviser,
the Distributor, and their affiliates; officers, directors and present and
full-time employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives") of any such
person; or any trust, individual retirement account or retirement plan account
for the benefit of any such person or relative; or the estate of any such person
or relative, if such shares are purchased for investment purposes (such shares
may not be resold except to the Fund); (iii) certain employee benefit plans for
employees of the Adviser, the Distributor and their affiliates; (iv) persons
participating in a fee-based program, sponsored and maintained by a registered
broker-dealer and approved by the Distributor, pursuant to which such persons
pay an asset-based fee to such broker-dealer, or its affiliate or agent, for
service in the nature of investment advisory or administrative services. These
provisions are intended to provide additional job-related incentives to persons
who serve the Funds or work for companies associated with the Funds and selected
dealers and agents of the Funds. Since these persons are in a position to have a
basic understanding of the nature of an investment company as well as a general
familiarity with the Fund, sales to these persons, as compared to sales in the
normal channels of distribution, require substantially less sales effort.
Similarly, these provisions extend the privilege of purchasing shares at net
asset value to certain classes of institutional investors who, because of their
investment sophistication, can be expected to require significantly less than
normal sales effort on the part of the Funds and the Distributor.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class B
shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The
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<PAGE>
Class B shares are sold without a front-end sales charge so that the full amount
of the investor's purchase payment is invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee (and, with respect to Emerging Markets and International, the
shareholder service fee) enables the Fund to sell the Class B shares without a
sales charge being deducted at the time of purchase. The higher distribution
services fee (and, with respect to Emerging Markets and International, the
shareholder service fee) incurred by Class B shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those related to
Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within seven years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed, that the redemption is first of any Class A
shares or Class C shares in the shareholder's Fund account, second of Class B
shares held for over eight years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B shares held
longest during the eight-year period.
To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 50 Class B shares, 10
Class B shares will not be subject to charge because of dividend reinvestment.
With respect to the remaining 40 Class B shares, the charge is applied only to
the original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, of the $600 of the shares redeemed $400 of the
redemption proceeds (40 shares x $10 original purchase price) will be charged at
a rate of 4.0% (the applicable rate in the second year after purchase for a
contingent deferred sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee (and, with respect to
Emering Markets and International, the shareholder service fee) imposed on Class
B shares. Such conversion will be on the basis of the relative net asset values
of the two classes, without the imposition of any sales load, fee or other
charge. The purpose of the conversion feature is to reduce the distribution
services fee paid by holders of Class B shares that have been outstanding long
enough for the Distributor to have been compensated for the expenses associated
with the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
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<PAGE>
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee (and, with respect to
Emerging Markets and International, shareholder service fee) and transfer agency
costs with respect to Class B shares does not result in the dividends or
distributions payable with respect to other Classes of a Fund's shares being
deemed "preferential dividends" under the Code, and (ii) the conversion of Class
B shares to Class A shares does not constitute a taxable event under Federal
income tax law. The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution
services fee for an indefinite period which may extend beyond the period ending
eight years after the end of the calendar month in which the shareholder's
purchase order was accepted.
Level-Load Alternative--Class C Shares
Investors choosing the level load sales charge alternative purchase
Class C shares at the public offering price equal to the net asset value per
share of the Class C shares on the date of purchase without the imposition of a
front-end sales charge. However, you will pay a 1.0% contingent deferred sales
charge if you redeem shares during the first year after purchase. No charge is
imposed in connection with redemptions made more than one year from the date of
purchase. Class C shares are sold without a front-end sales charge so that the
Fund will receive the full amount of the investor's purchase payment and after
the first year without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset value of his or
her Class C shares. The Class C distribution services fee (and, with respect to
Emerging Markets and International, shareholder service fee) enables the Fund to
sell Class C shares without either a front-end or contingent deferred sales
charge. However, unlike Class B shares, Class C shares do not convert to any
other class shares of the Fund. Class C shares incur higher distribution
services fees (and, with respect to Emerging Markets and International,
shareholder service fees) than Class A shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class A shares.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
GENERAL INFORMATION ABOUT THE FUNDS (See also "Other
Information - General Information"
in each Fund's Prospectus)
Capitalization and Organization
The Evergreen Emerging Markets Growth Fund and Evergreen International
Equity Fund, which prior to July 7, 1995 were known as the First Union Emerging
Markets Growth Portfolio, and First Union International Equity Portfolio,
respectively, are each separate series of Evergreen Investment Trust, a
Massachusetts business trust. On July 7, 1995, First Union Funds changed its
name to Evergreen Investment Trust. On December 14, 1992, The Salem Funds
changed its name to First Union Funds. The Evergreen Global Real Estate Equity
Fund is a separate series of Evergreen Real Estate Equity Trust, a Massachusetts
business trust. The above-named Trusts are individually referred to in this
Statement of Additional Information as the "Trust" and collectively as the
"Trusts." Each Trust is governed by a board of trustees. Unless otherwise
stated, references to the "Board of Trustees" or "Trustees" in this Statement of
Additional Information refer to the Trustees of all the Trusts.
Global may issue an unlimited number of shares of beneficial interest
with a $0.0001 par value. Emerging Markets and International may issue an
unlimited number of shares of beneficial interest without par value. All shares
of these Funds have equal rights and privileges. Each share is entitled to one
vote, to participate equally in dividends and distributions declared by the
Funds and on liquidation to their proportionate share of the
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<PAGE>
assets remaining after satisfaction of outstanding liabilities. Shares of these
Funds are fully paid, nonassessable and fully transferable when issued and have
no pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Fund or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the State of Massachusetts. If shares of another
series of a Trust were issued in connection with the creation of additional
investment portfolios, each share of the newly created portfolio would normally
be entitled to one vote for all purposes. Generally, shares of all portfolios
would vote as a single series on matters, such as the election of Trustees, that
affected all portfolios in substantially the same manner. As to matters
affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related an other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of each Fund. The rights of the holders of
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of shares representing
interests in each Fund. In the event a Fund were to issue additional Classes of
shares other than those described herein, no further relief from the Securities
and Exchange Commission would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue,
New York, New York 10169, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the Agreement
between the Fund and the Distributor, the Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester, Washington, D.C., serves as counsel to the Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors
of Global.
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KPMG Peat Marwick LLP has been selected to be the independent auditors
of Emerging Markets and International.
PERFORMANCE INFORMATION
Total Return
From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for recent one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by the Securities
and Exchange Commission, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of such
investment at the end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales charge
applicable to purchases of Fund shares is assumed to have been paid. The Fund
will include performance data for Class A, Class B, Class C and Class Y shares
in any advertisement or information including performance data of the Fund.
With respect to Global, the shares of the Fund outstanding prior to
January 3, 1995 have been reclassified as Class Y shares. The average annual
compounded total return for each Class of shares offered by the Funds for the
most recently completed one, five and ten year fiscal periods is set forth in
the table below.
From
GLOBAL 1 Year 5 Years 2/1/89
Ended Ended (inception)
9/30/94 9/30/94 to 9/30/94
Class A -1.74% 6.28% 5.92%
Class B -1.84% 7.01% 5.70%
Class C 2.16% 7.32% 6.83%
Class Y 3.16% 7.32% 6.83%
From
EMERGING 9/6/94
MARKETS (inception)
to 12/31/94
Class A -22.19%
Class B -22.50%
Class C -19.20%
Class Y -18.30%
INTERNATIONAL From 9/2/94 (Inception)
to 12/31/94
Class A -9.60%
Class B -9.89%
Class C -6.09%
Class Y -5.02%
The performance numbers for Global for the Class A, Class B and Class C
shares are hypothetical numbers based on the performance for Class Y shares as
adjusted for any applicable front-end sales charge or contingent deferred sales
charge.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's
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<PAGE>
principal invested in a Fund is not fixed and will fluctuate in response to
prevailing market conditions.
YIELD CALCULATIONS
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where a = Interest earned during the period
b = Expenses accrued for the period (net of reimbursements) c = The
average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond funds. Gains and
losses generally are excluded from the calculation. Income calculated for
purposes of determining a Fund's yield differs from income as determined for
other accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rate of distributions a Fund paid over the same
period, or the net investment income reported in a Fund's financial statements.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The yield of each Fund for the thirty-day period ended December 31,
1994 (May 31, 1995 with respect to Global) for each Class of shares offered by
the Funds is set forth in the table below:
Global Class A 1.05% Class B .41% Class C .43% Class Y 1.13%
Emerging Markets
Class A N/A
Class B N/A
Class C N/A
Class Y N/A
International
Class A N/A
Class B N/A
37
<PAGE>
Class C N/A
Class Y N/A
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
GENERAL
From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Standard & Poor's 500
Composite Stock Price Index, the Dow Jones Industrial Average, Russell 2000
Index, Europe, Australia and Far East index, Morgan Stanley Capital
International Emerging Markets Free Index or any other commonly quoted index of
common stock prices, which are unmanaged indices of selected common stock
prices. A Fund's performance may also be compared to those of other mutual funds
having similar objectives. This comparative performance would be expressed as a
ranking prepared by Lipper Analytical Services, Inc. or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statement filed by the Trusts with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely Price Waterhouse LLP (in the case of Global)
or KPMG Peat Marwick LLP (in the case of Emerging Markets and International) are
incorporated by reference in this Statement of Additional Information. The
Annual Reports to Shareholders for each Fund, which contain the referenced
statements, are available upon request and without charge.
38
<PAGE>
APPENDIX A - NOTE, BOND AND COMMERCIAL PAPER RATINGS
NOTE RATINGS
Moody's Investors Service, Inc.: MIG-1 -- the best quality. MIG-2 --
high quality, with margins of protection ample though not so large as in the
preceding group. MIG-3 -- favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less well
established.
Standard & Poor's Ratings Group, Inc.: SP-1 -- Very strong or strong
capacity to pay principal and interest. SP-2 -- Satisfactory capacity to pay
principal and interest.
BOND RATINGS
Moody's Investors Service: Aaa -- judged to be the best quality, carry
the smallest degree of investment risk; Aa -- judged to be of high quality by
all standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as medium grade
obligations which are neither highly protected nor poorly secured. Moody's
Investors Service also applies numerical indicators, 1, 2 and 3, to rating
categories Aa through Baa. The modifier 1 indicates that the security is in the
higher end of its rating category; the modifier 2 indicates a mid-range ranking;
and 3 indicates a ranking toward the lower end of the category.
Standard & Poor's Ratings Group: AAA -- highest grade obligations,
possesses the ultimate degree of protection as to principal and interest; AA --
also qualify as high grade obligations, and in the majority of instances differ
from AAA issues only in small degree; A -- regarded as upper medium grade, have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions, interest and principal are regarded
as safe; BBB -- regarded as having adequate capacity to pay interest and repay
principal but are more susceptible than higher rated obligations to the adverse
effects of changes in economic and trade conditions. Standard & Poor's Ratings
Group applies indicators "+", no character, and "-" to the above rating
categories AA through BBB. The indicators show relative standing within the
major rating categories.
Duff & Phelps: AAA - highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which may vary very slightly from time to time because of economic
conditions; A -- average credit quality with adequate protection factors, but
with greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch: AAA -- highest credit quality, with an exceptionally strong
ability to pay interest and repay principal; AA -- very high credit quality,
with a very strong ability to pay interest and repay principal; A -- high credit
quality, considered strong as regards principal and interest protection, but may
be more vulnerable to adverse changes in economic conditions; and BBB --
satisfactory credit quality with adequate ability with regard to interest and
principal, and likely to be affected by adverse changes in economic conditions
and circumstances. The indicators "+" and "-" to the AA, A and BBB categories
indicate the relative position of a credit within those rating categories.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries
the smallest degree of investment risk. The modifiers 1, 2 and 3 are used to
denote relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
minimal risk factors. Duff 3
39
<PAGE>
represents satisfactory protection factors, with risk factors larger and subject
to more variation.
Fitch: F-1+ -- denotes exceptionally strong credit quality given to
issues regarded as having strongest degree of assurance for timely payment; F-1
- -- very strong credit quality, with only slightly less degree of assurance for
timely payment than F-1+; F-2 -- good credit quality, carrying a satisfactory
degree of assurance for timely payment.
PROSPECTUS July 7, 1995
EVERGREEN(SM) MONEY MARKET FUNDS (Evergreen logo appears here)
EVERGREEN MONEY MARKET FUND
EVERGREEN TAX EXEMPT MONEY MARKET FUND
EVERGREEN TREASURY MONEY MARKET FUND
CLASS A SHARES
CLASS B SHARES
The EVERGREEN MONEY MARKET FUNDS (the "Funds") are designed to
provide investors with current income, stability of principal and
liquidity. This Prospectus provides information regarding the Class A
offered by the Funds and the Class B shares offered by the EVERGREEN MONEY
MARKET FUND. Each Fund is, or is a series of, an open-end, diversified,
management investment company. This Prospectus sets forth concise
information about the Funds that a prospective investor should know before
investing. The address of the Funds is 2500 Westchester Avenue, Purchase,
New York 10577.
A "Statement of Additional Information" for the Funds dated July
7, 1995 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 807-2940. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 10
Investment Practices and Restrictions 13
MANAGEMENT OF THE FUNDS
Investment Advisers 14
Sub-Adviser 15
Distribution Plans and Agreements 16
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 16
How to Redeem Shares 18
Exchange Privilege 19
Shareholder Services 20
Effect of Banking Laws 21
OTHER INFORMATION
Dividends, Distributions and Taxes 21
General Information 22
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN MONEY MARKET FUND and EVERGREEN TAX
EXEMPT MONEY MARKET FUND is Evergreen Asset Management Corp. ("Evergreen Asset")
which, with its predecessors, has served as an investment adviser to the
Evergreen Funds since 1971. Evergreen Asset is a wholly-owned subsidiary of
First Union National Bank of North Carolina ("FUNB"), which in turn is a
subsidiary of First Union Corporation, one of the ten largest bank holding
companies in the United States. The Capital Management Group of FUNB ("CMG")
serves as investment adviser to EVERGREEN TREASURY MONEY MARKET FUND.
EVERGREEN MONEY MARKET FUND seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Fund will invest
only in high quality money market instruments.
EVERGREEN TAX EXEMPT MONEY MARKET FUND seeks as high a level of current
income exempt from Federal income tax as is consistent with preserving capital
and providing liquidity. The Fund invests substantially all of its assets in
short-term municipal securities, the interest from which is exempt from Federal
income tax.
EVERGREEN TREASURY MONEY MARKET FUND (formerly First Union Treasury Money
Market Portfolio) seeks to achieve stability of principal and current income
consistent with stability of principal.
Each Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A shares of each Fund, and in the case of
EVERGREEN MONEY MARKET FUND, Class B Shares. For further information see
"Purchase and Redemption of Fund Shares" and "General Information -- Other
Classes of Shares".
<TABLE>
<CAPTION>
Class B Shares
SHAREHOLDER TRANSACTION EXPENSES Class A Shares (Evergreen Money Market Fund only)
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases None None
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the
original purchase price or redemption second year, 3% during the third and fourth
proceeds, whichever is lower) years, 2% during the fifth year, 1% during
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None
Exchange Fee None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class B Shares assume
deduction at the time of redemption (if applicable) of the maximum contingent
deferred sales charge applicable for that time period and (ii) the expenses for
Class B Shares reflect the conversion to Class A Shares eight years after
purchase (years eight through ten, therefore, reflect Class A expenses).
EVERGREEN MONEY MARKET FUND (A)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES* at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50%
After 1 Year $ 10 $ 67 $ 17
12b-1 Fees ** .30% 1.00%
After 3 Years $ 32 $ 84 $ 54
Other Expenses .21% .21%
After 5 Years $ 56 $ 113 $ 93
After 10 Years $ 123 $ 175 $175
Total 1.01% 1.71%
</TABLE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND (B)
<TABLE>
<CAPTION>
EXAMPLES
ANNUAL OPERATING Assuming Redemption
EXPENSES* at End of Period
Class A Class A
<S> <C> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 9
12b-1 Fees ** .30%
After 3 Years $ 27
Other Expenses .05%
After 5 Years $ 47
After 10 Years $105
Total .85%
</TABLE>
EVERGREEN TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
EXAMPLES
ANNUAL OPERATING Assuming Redemption
EXPENSES* at End of Period
Class A Class A
<S> <C> <C> <C> <C>
Advisory Fees .35%
After 1 Year $ 7
Administrative Fees .06%
After 3 Years $ 23
12b-1 Fees** .30%
After 5 Years $ 40
Other Expenses .05%
After 10 Years $ 90
Total .76%
</TABLE>
3
<PAGE>
(a) Estimated annual operating expenses reflect the combination of EVERGREEN
MONEY MARKET FUND and FIRST UNION MONEY MARKET PORTFOLIO.
(b) Estimated annual operating expenses reflect the combination of EVERGREEN TAX
EXEMPT MONEY MARKET FUND and FIRST UNION TAX EXEMPT MONEY MARKET PORTFOLIO.
Evergreen Asset has agreed to reimburse EVERGREEN MONEY MARKET FUND and
EVERGREEN TAX EXEMPT MONEY MARKET FUND to the extent that the Fund's aggregate
annual operating expenses (including the Adviser's fee, but excluding taxes,
interest, brokerage commissions, Rule 12b-1 distribution fees and shareholder
services fees and extraordinary expenses) exceed 1% of the average net assets
for any fiscal year.
*The annual operating expenses and examples do not reflect the voluntary fee
waivers of .39 of 1% of average net assets for EVERGREEN MONEY MARKET FUND and
.30 of 1% of average net assets for EVERGREEN TAX EXEMPT MONEY MARKET FUND for
the fiscal period ended August 31, 1994, and .28 of 1% of average net assets for
EVERGREEN TREASURY MONEY MARKET FUND for the fiscal period ended December 31,
1994.
**Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the foreseeable future, the Class A Share's 12b-1 Fees will be limited to
.30 of 1% of average net assets. For Class B Shares of EVERGREEN MONEY MARKET
FUND, a portion of the 12b-1 Fees equivalent to .25 of 1% of average net assets
will be shareholder servicing related. Distribution related 12b-1 fees will be
limited to .75 of 1% of average net assets as permitted under the rules of the
National Association of Securities Dealers, Inc.
From time to time, each Fund's investment adviser may, at its discretion, waive
its fee or reimburse a Fund for certain of its expenses in order to reduce a
Fund's expense ratio. The investment adviser may cease these voluntary waivers
or reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds". As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted under the
rules of the National Association of Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the fund if shorter for EVERGREEN TREASURY MONEY MARKET FUND has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors, for EVERGREEN MONEY
MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND has, except as noted
otherwise, been audited by Price Waterhouse LLP, each Fund's independent
auditors. A report of KPMG Peat Marwick LLP or Price Waterhouse LLP, as the case
may be, on the audited information with respect to each Fund is incorporated by
reference in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN MONEY MARKET FUND -- Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 2,
TEN MONTHS 1987*
SIX MONTHS ENDED ENDED THROUGH
FEBRUARY 28, 1995 AUGUST 31, YEAR ENDED OCTOBER 31, OCTOBER 31,
(UNAUDITED) 1994 # 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period............... $1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income.............................. .02 .03 .03 .04 .07 .08 .09 .07
Total from investment operations................. .02 .03 .03 .04 .07 .08 .09 .07
Less distributions to shareholders from net
investment income................................ (.02) (.03) (.03) (.04) (.07) (.08) (.09) (.07)
Net asset value, end of period..................... $1.00 $ 1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+...................................... 2.4% 2.9% 3.2% 4.2% 6.7% 8.4% 9.4% 7.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in millions)............ $244 $273 $299 $358 $438 $458 $408 $161
Ratios to average net assets:
Expenses (a)..................................... .54%++ .32%++ .39% .36% .30% .35% .38% .43%++
Net investment income (a)........................ 4.88%++ 3.46%++ 3.19% 4.18% 6.53% 8.08% 9.42% 7.26%++
</TABLE>
# On September 21, 1994, the Fund changed its fiscal year end from October 31
to August 31.
* Commencement of operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED TEN MONTHS
FEBRUARY 28, ENDED NOVEMBER 2, 1987
1995 AUGUST 31, YEAR ENDED OCTOBER 31, THROUGH
(UNAUDITED) 1994 1993 1992 1991 1990 1989 OCTOBER 31, 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses.............................. .74% .71% .71% .72% .70% .69% .75% .93%
Net investment income................. 4.68% 3.07% 2.87% 3.82% 6.13% 7.74% 9.05% 6.76%
</TABLE>
5
<PAGE>
EVERGREEN MONEY MARKET FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 4, 1995* JANUARY 26, 1995*
THROUGH THROUGH
FEBRUARY 28, 1995 FEBRUARY 28, 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.................................................. $ 1.000 $ 1.000
Income from investment operations:
Net investment income............................................................... .008 .004
Total income from investment operations............................................. .008 .004
Less distributions to shareholders from net investment income......................... (.008) (.004)
Net asset value, end of period........................................................ $ 1.000 $ 1.000
TOTAL RETURN+......................................................................... .8% .4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)............................................. $668 $35
Ratios to average net assets:
Expenses (a)........................................................................ .85%++ 1.56%++
Net investment income (a)........................................................... 5.40%++ 5.03%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value. Contingent deferred sales
charge is not reflected. Total return is calculated for the periods indicated
and is not annualized.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A and Class B shares are not necessarily comparable to that of the
Class Y shares, and are not necessarily indicative of future ratios.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 4, 1995 JANUARY 26, 1995
THROUGH THROUGH
FEBRUARY 28, 1995 FEBRUARY 28, 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Expenses................................................... 1.30% 2.00%
Net investment income...................................... 4.95% 4.59%
</TABLE>
6
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1995 YEAR ENDED AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income................ .02 .02 .03 .04 .05 .06
Total from investment operations... .02 .02 .03 .04 .05 .06
Less distributions to shareholders from
net investment income................ (.02 ) (.02) (.03) (.04) (.05) (.06)
Net asset value, end of period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+.......................... 1.7% 2.5% 2.6% 3.7% 5.5% 6.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in
millions)............................ $387 $402 $401 $417 $510 $311
Ratios to average net assets:
Expenses (a)......................... .51% ++ .34% .34% .32% .28% .31%
Net investment income (a)............ 3.34% ++ 2.47% 2.58% 3.72% 5.23% 5.94%
<CAPTION>
NOVEMBER 2,
1988* THROUGH
AUGUST 31, 1989
<S> <C>
PER SHARE DATA
Net asset value, beginning of period $1.00
Income from investment operations:
Net investment income................ .05
Total from investment operations... .05
Less distributions to shareholders from
net investment income................ (.05)
Net asset value, end of period......... $1.00
TOTAL RETURN+.......................... 5.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in
millions)............................ $109
Ratios to average net assets:
Expenses (a)......................... .24%++
Net investment income (a)............ 6.77%++
</TABLE>
* Commencement of operations.
+ Total return is calculated for the period indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED NOVEMBER 2, 1988
FEBRUARY 28, 1995 YEAR ENDED AUGUST 31, THROUGH AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses............................... .64% .64% .63% .63% .66% .71% .79%
Net investment income.................. 3.21% 2.17% 2.29% 3.41% 4.85% 5.54% 6.22%
</TABLE>
7
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 5, 1995*
THROUGH
FEBRUARY 28, 1995
(UNAUDITED)
<S> <C>
PER SHARE DATA
Net asset value, beginning of period...................................................................... $ 1.000
Income from investment operations:
Net investment income................................................................................... .005
Total from investment operations........................................................................ .005
Distributions to shareholders from net investment income.................................................. (.005)
Net asset value, end of period............................................................................ $ 1.000
TOTAL RETURN+............................................................................................. .5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................................................. $144
Ratios to average net assets:
Expenses (a)............................................................................................ .83%++
Net investment income (a)............................................................................... 3.53%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized. Due to the recent commencement of its offering, the ratios for
Class A shares are not necessarily comparable to that of the Class Y shares,
and are not necessarily indicative of future ratios.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 5, 1995
THROUGH FEBRUARY 28, 1995
(UNAUDITED)
<S> <C>
Expenses................................................................ 1.30%
Net investment income................................................... 3.06%
</TABLE>
8
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS Y SHARES
MARCH 6, 1991* MARCH 6, 1991*
THROUGH THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income...... .04 .03 .03 .04 .04 .03 .04 .05
Less distributions to
shareholders from net
investment income........ (.04) (.03) (.03) (.04) (.04) (.03) (.04) (.05)
Net asset value, end of
period................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+.............. 3.8% 2.7% 3.4% 4.5% 4.1% 3.0% 3.7% 4.7%
Net assets, end of period
(000's omitted).......... $755,050 $261,475 $208,792 $ 99,549 $162,921 $366,109 $286,230 $265,109
Ratios to average net
assets:
Expenses (a)............. .50% .48% .48% .47%++ .20% .18% .17% 0.20%++
Net investment
income (a)............. 3.91% 2.70% 3.22% 4.95%++ 3.78% 3.00% 3.61% 5.53%++
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS Y SHARES
YEAR ENDED MARCH 6, 1991 YEAR ENDED MARCH 6, 1991
DECEMBER 31, THROUGH DECEMBER 31, DECEMBER 31, THROUGH DECEMBER 31,
1994 1993 1992 1991 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses................ .78% .82% .82% 1.08% .48% .52% .52% .52%
Net investment income... 3.63% 2.36% 2.88% 4.34% 3.50% 2.66% 3.26% 5.21%
</TABLE>
10
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Money Market Fund
The investment objective of Evergreen Money Market Fund is to achieve
as high a level of current income as is consistent with preserving capital and
providing liquidity. This objective is a fundamental policy and may not be
changed without shareholder approval. The Fund invests in high quality money
market instruments, which are determined to be of eligible quality under
Securities and Exchange Commission ("SEC") rules and to present minimal credit
risk. Under SEC rules, eligible securities include First Tier Securities (i.e.,
securities rated in the highest short-term rating category) and Second Tier
Securities (i.e., securities which are not in the First Tier). The rules
prohibit the Fund from holding more than 5% of its value in Second Tier
Securities. The Fund's permitted investments include:
1. Marketable obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, including issues of the United
States Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the authority of
an act of Congress. Some of these securities are supported by the full faith and
credit of the United States Government, others are supported by the right of the
issuer to borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Agencies or instrumentalities whose
securities are supported only by the credit of the agency or instrumentality
include the Interamerican Development Bank and the International Bank for
Reconstruction and Development. These obligations are supported by appropriated
but unpaid commitments of its member countries. There are no assurances that the
commitments will be undertaken in the future.
2. Commercial paper, including variable amount master demand notes,
that is rated in one of the two highest short-term rating categories by any two
of Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO") (or by a single rating agency if only one of these agencies has assigned
a rating). The Fund will not invest more than 10% of its total assets, at the
time of the investment in question, in variable amount master demand notes. For
a description of these ratings see the Statement of Additional Information.
3. Corporate debt securities and bank obligations that are rated in one
of the two highest short-term rating categories by any two of S&P, Moody's and
any other SRO (or by a single rating agency if only one of these agencies has
assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a class of
short-term debt instruments (i.e., instruments having a maturity of 366 days or
less) that (A) is comparable in priority and security to the unrated securities
and (B) meets the rating requirements of paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by domestic and foreign companies which have an outstanding
long-term debt issue rated in the top two rating categories by a SRO and
determined by the Trustees to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the Trustees to be of comparable quality.
7. Repurchase agreements with respect to the securities described
in paragraphs 1 through 6 above.
The Fund may invest up to 30% of its total assets in bank certificates
of deposit and bankers' acceptances payable in U.S. dollars and issued by
foreign banks (including U.S. branches of foreign banks) or by foreign branches
of U.S. banks. These investments involve risks that are different from
investments in domestic securities. These risks may include future unfavorable
political and economic developments, possible withholding taxes, seizure of
foreign deposits, currency controls, interest limitations or other governmental
restrictions which might affect the payment of principal or interest on the
securities in the Fund's portfolio. Additionally, there may be less publicly
available information about foreign issuers.
The Fund may invest in commercial paper and other short-term corporate
obligations which meet the rating criteria specified in paragraphs 3 and 4 above
which are issued in private placements pursuant to Section 4(2) of the
Securities Act of 1933 (the "Act"). Such securities are not registered for
purchase and sale by the public under the Act. The Fund has been informed that
the staff of the SEC does not consider such securities to be readily marketable.
The Fund will not invest more than 10% of its total assets in securities which
are not readily marketable (including private placement securities) and in
repurchase agreements maturing in more than seven days.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Tax Exempt Money Market Fund
The investment objective of Evergreen Tax Exempt Money Market Fund is
to achieve as high a level of current income exempt from Federal income tax, as
is consistent with preserving capital and providing liquidity. This objective is
a fundamental policy and may not be changed without shareholder approval. The
Fund will seek to achieve its objective by investing substantially all of its
assets in a diversified portfolio of short-term (i.e., with remaining maturities
not exceeding 397 days) debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax. Such securities are generally known as
Municipal Securities (see "Municipal Securities" below.)
The Fund will invest in Municipal Securities only if they are
determined to be of eligible quality under SEC rules and to present minimum
credit risk. Municipal Securities in which the Fund may invest include: (i)
municipal securities that are rated in one of the top two short-term rating
categories by any two of S&P, Moody's or any other nationally recognized SRO (or
by a single rating agency if only one of these agencies has assigned a rating);
(ii) municipal securities that are issued by an issuer that has outstanding a
class of short-term debt instruments (i.e., having a maturity of 366 days or
less) that (A) is comparable in priority and security to such instruments and
(B) meets the rating requirements above; and (iii) bonds with a remaining
maturity of 397 days or less that are rated no lower than one of the top two
long-term rating categories by any SRO and determined by the Trustees to be of
comparable quality. For a description of such ratings see the Statement of
Additional Information. The Fund may also purchase Municipal Securities which
are unrated at the time of purchase up to a maximum of 20% of its total assets,
if such securities are determined by the Fund's Trustees to be of comparable
quality. Certain Municipal Securities (primarily variable rate demand notes) may
be entitled to the benefit of standby letters of credit or similar commitments
issued by banks or other financial institutions and, in such instances, the
Trustees will take into account the obligation of the bank in assessing the
quality of such security. The ability of the Fund to meet its investment
objective is necessarily subject to the ability of municipal issuers to meet
their payment obligations.
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 the 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, 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.
Municipal Securities. As noted above, the Fund will invest substantially all of
its assets in Municipal Securities. These include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed. The
term "municipal bonds" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in municipal bonds, including IDBs and PABs, and floating and variable
rate obligations that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature is
backed by an irrevocable letter of credit or guarantee of the bank. A put bond
is a municipal bond which gives the holder the unconditional right to sell the
bond back to the issuer at a specified price and exercise date, which is
typically well in advance of the bond's maturity date. "Short-term municipal
notes" and "tax exempt commercial paper" include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Such securities must comply with conditions established by the SEC
under which they may be considered to have remaining maturities of 397 days or
less. Certain of these obligations may carry a demand feature that gives the
Fund the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. As a matter of
fundamental policy, which may not be changed without shareholder approval, 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 total assets.
Stand-by Commitments. The Fund may also acquire "stand-by commitments" with
respect to Municipal Securities held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Securities at a specified price. The Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, the Fund may pay
for stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Fund's portfolio will not exceed 10% of the value of the Fund's total assets
calculated immediately after each stand-by commitment is acquired. The Fund will
enter into stand-by commitments only with banks and broker-dealers that, in the
judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's net
assets in taxable securities under any one or more of the following
circumstances: (a) pending investment of proceeds of sale of Fund shares or of
portfolio securities, (b) pending settlement of purchases of portfolio
securities, and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. In addition, the Fund may temporarily invest more than 20% of its
total assets in taxable securities for defensive purposes. The Fund may invest
for defensive purposes during periods when the Fund's assets available for
investment exceed the available Municipal Securities that meet the Fund's
quality and other investment criteria. Taxable securities in which the Fund may
invest on a short-term basis include obligations of the United States
Government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest ratings assigned by an SRO; commercial paper rated in the highest grade
by Moody's or S&P; and certificates of deposit issued by United States branches
of United States banks with assets of $1 billion or more.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Treasury Money Market Fund
The investment objective of Evergreen Treasury Money Market Fund, which
is a matter of fundamental policy that may not be changed without shareholder
approval, is to maintain stability of principal while earning current income.
However, the Fund will only attempt to seek income to the extent consistent with
stability of principal and, therefore, investments will only be made in
short-term United States Treasury obligations with an average dollar-weighted
maturity of 90 days or less. As a matter of investment strategy, the Fund's
investment adviser intends to maintain a dollar-weighted average maturity for
the Fund of 60 days or less.
Evergreen Treasury Money Market Fund is suitable for conservative
investors seeking high current yields plus relative safety. The Fund provides a
reasonable means of maximizing opportunities and minimizing risks resulting from
changing interest rates.
The short-term United States Treasury obligations in which the Fund
invests are issued by the U.S. Government and are fully guaranteed as to
principal and interest by the United States. Such securities will have a
maturity date that is 397 days or less from the date of acquisition unless they
are purchased under an agreement that provides for repurchase of the securities
from the Fund within 397 days from the date of acquisition. The Fund may also
retain Fund assets in cash.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds invest only in securities that have remaining maturities of
397 days (thirteen months) or less at the date of purchase. For this purpose,
floating rate or variable rate obligations (described under Evergreen Tax Exempt
Money Market Fund, above), which are payable on demand, but which may otherwise
have a stated maturity in excess of this period, will be deemed to have
remaining maturities of less than 397 days pursuant to conditions established by
the SEC. The Funds maintain a dollar-weighted average portfolio maturity of
ninety days or less. The Funds follow these policies to maintain a stable net
asset value of $1.00 per share, although there is no assurance they can do so on
a continuing basis. The market value of the obligations in a Fund's portfolio
can be expected to vary inversely to changes in prevailing interest rates. If a
portfolio security is no longer of eligible quality, a Fund shall dispose of
such security in an orderly fashion as soon as reasonably practicable, unless
the Trustees determine, in light of market conditions or other factors, that
disposal of the instrument would not be in the best interests of the Fund and
its shareholders.
The ability of each Fund to meet its investment objective is
necessarily subject to the ability of the issuers of securities in which the
Funds invest to meet their payment obligations. In addition, the portfolio of
each Fund will be affected by general changes in interest rates which will
result in increases or decreases in the value of the obligations held by the
Fund. Investors should recognize that, in periods of declining interest rates,
the yield of a Fund will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the yield of a Fund will tend to
be somewhat lower. Also, when interest rates are falling, the inflow of net new
money to a Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite can be expected to occur.
Repurchase Agreements. The Funds may enter into repurchase agreements. A
repurchase agreement is an arrangement pursuant to which a buyer purchases a
security and simultaneously agrees to resell it to the vendor at a price that
results in an agreed-upon market rate of return which is effective for the
period of time (which is normally one to seven days, but may be longer) the
buyer's money is invested in the security. The arrangement results in a fixed
rate of return that is not subject to market fluctuations during a Fund's
holding period. Repurchase agreements may be entered into with member banks of
the Federal Reserve System, including, the Fund's custodian or "primary dealers"
(as designated by the Federal Reserve Bank of New York) in United States
Government securities. Each Fund will require continued maintenance of
collateral with its Custodian in an amount equal to, or in excess of, the
repurchase price (including accrued interest). In the event a vendor defaults on
its repurchase obligation, a Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which the
Fund enters into a repurchase agreement to evaluate these risks. A Fund may not
enter into repurchase agreements if, as a result, more than 10% of a Fund's
total assets would be invested in repurchase agreements maturing in more than
seven days and in other securities that are not readily marketable.
Securities Lending. In order to generate income and to offset expenses,
Evergreen Tax Exempt Money Market Fund and Evergreen Money Market Fund may lend
portfolio securities to brokers, dealers and other financial organizations. Each
Fund's investment adviser will monitor the creditworthiness of such borrowers.
Loans of securities by Evergreen Tax Exempt Money Market Fund or Evergreen Money
Market Fund, if and when made, may not exceed 30% of a Fund's total assets and
will be collateralized by cash, letters of credit or United States Government
securities that are maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities, including accrued
interest. While such securities are on loan, the borrower will pay a Fund any
income accruing thereon, and the Fund may invest the cash collateral in
portfolio securities, thereby increasing its return. A Fund will have the right
to call any such loan and obtain the securities loaned at any time on five days'
notice. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
may pay reasonable fees in connection with such loans.
When-Issued Securities. Evergreen Tax Exempt Money Market Fund and Evergreen
Treasury Money Market Fund may purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
Evergreen Tax Exempt Money Market Fund does not expect that commitments to
purchase when-issued securities will normally exceed 25% of its total assets and
Evergreen Treasury Money Market Fund does not expect that such commitments will
exceed 20% of its total assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Illiquid Securities. The Funds may invest up to 10% of their net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements with maturities longer than seven days. In the
case of Evergreen Tax Exempt Money Market Fund and Evergreen Money Market Fund,
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, which have been determined to be liquid, will not be considered by each
Fund's investment adviser to be illiquid or not readily marketable and,
therefore, are not subject to the aforementioned 10% limit. The inability of a
Fund to dispose of illiquid or not readily marketable investments readily or at
a reasonable price could impair the Fund's ability to raise cash for redemptions
or other purposes. The liquidity of securities purchased by a Fund which are
eligible for resale pursuant to Rule 144A will be monitored by each Fund's
investment adviser on an ongoing basis, subject to the oversight of the
Trustees. In the event that such a security is deemed to be no longer liquid, a
Fund's holdings will be reviewed to determine what action, if any, is required
to ensure that the retention of such security does not result in a Fund having
more than 10% of its assets invested in illiquid or not readily marketable
securities.
Other Investment Policies. The Funds may borrow money for temporary or emergency
purposes in amounts not in excess of 10% of the value of a Fund's total assets
in the case of Evergreen Tax Exempt Money Market Fund and Evergreen Money Market
Fund and one-third of the value of Evergreen Treasury Money Market Fund's total
assets, including the amount borrowed. As another means of borrowing both
Evergreen Tax Exempt Money Market Fund and Evergreen Money Market Fund may agree
to sell portfolio securities to financial institutions such as banks and
broker-dealers and to repurchase them at a mutually agreed upon date and price
(a "reverse repurchase agreement") at the time of such borrowing in amounts up
to 5% of the value of their total assets. A Fund will not purchase any
securities whenever any borrowings (including reverse repurchase agreements) are
outstanding. If either Evergreen Tax Exempt Money Market Fund or Evergreen Money
Market Fund enter into a reverse repurchase agreement, they 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
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained to serve as investment
adviser to Evergreen Money Market Fund and Evergreen Tax Exempt Money Market
Fund. Evergreen Asset succeeded on June 30, 1994 to the advisory business of the
same name, but under different ownership, which was organized in 1971. Evergreen
Asset, with its predecessors, has served as investment adviser to the Evergreen
Group of Mutual Funds since 1971. Evergreen Asset is a wholly-owned subsidiary
of First Union National Bank of North Carolina ("FUNB"). The address of
Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a
subsidiary of First Union Corporation ("First Union"), one of the ten largest
bank holding companies in the United States. Stephen A. Lieber and Nola Maddox
Falcone serve as the chief investment officers of Evergreen Asset and, along
with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor
and the former general partners of Lieber & Company, which, as described below,
provides certain subadvisory services to Evergreen Asset in connection with its
duties as investment adviser to the aforementioned Funds. The Capital Management
Group of FUNB ("CMG") serves as investment adviser to Evergreen Treasury Money
Market Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, and had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of Evergreen Money Market
Fund and Evergreen Tax Exempt Money Market Fund, subject to the authority of the
Trustees. Evergreen Asset is entitled to receive from each Fund an annual fee
equal to .50 of 1% of average daily net assets of each Fund on the first $1
billion in assets and .45 of 1% of average daily net assets in excess of $1
billion. However, Evergreen Asset has in the past, and may in the future,
voluntarily waive all or a portion of its fee for the purpose of reducing each
Fund's expense ratio. For the fiscal period ended August 31, 1994 Evergreen
Asset waived a portion of the advisory fee payable by the Evergreen Money Market
Fund and Evergreen Tax Exempt Money Market Fund as set forth in the section
entitled "Financial Highlights". The total expenses as a percentage of average
daily net assets on an annualized basis for Evergreen Money Market Fund and
Evergreen Tax Exempt Money Market Fund for the fiscal period ended August 31,
1994 are also set forth in the section entitled "Financial Highlights". CMG
manages investments and supervises the daily business affairs of Evergreen
Treasury Money Market Fund and, as compensation therefor, is entitled to receive
an annual fee equal to .35 of 1% of average daily net assets of Evergreen
Treasury Money Market Fund. For the fiscal period ended December 31, 1994 CMG
waived a portion of the advisory fee payable by the Evergreen Treasury Money
Market Fund as set forth in the section entitled "Financial Highlights". The
total annualized operating expenses of Evergreen Treasury Money Market Fund for
its most recent fiscal year ended December 31, 1994 are also set forth in the
section entitled "Financial Highlights". Evergreen Asset serves as administrator
to Evergreen Treasury Money Market Fund and is entitled to receive a fee based
on the average daily net assets of the Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .050% of the first $7 billion; .035% on the next $3 billion;
.030% on the next $5 billion; .020% on the next $10 billion; .015% on the next
$5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
Treasury Money Market Fund and is entitled to receive a fee from the Fund
calculated on the average daily net assets of the Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .0100% of the first $7 billion; .0075% on the next
$3 billion; .0050% on the next $15 billion; and .0040% on assets in excess of
$25 billion. The total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset serve as investment adviser as of March
31, 1995 were approximately $8 billion.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Money Market Fund and Evergreen Tax Exempt Money Market
Fund. Lieber & Company will be reimbursed by Evergreen Asset in connection with
the rendering of services on the basis of the direct and indirect costs of
performing such services. There is no additional charge to Evergreen Money
Market Fund and Evergreen Tax Exempt Money Market Fund for the services provided
by Lieber & Company. The address of Lieber & Company is 2500 Westchester Avenue,
Purchase, New York 10577. Lieber & Company is an indirect, wholly-owned,
subsidiary of First Union.
<PAGE>
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for its
Class A shares and Evergreen Money Market Fund for its Class B shares, a "Rule
12b-1 plan" (each, a "Plan" or collectively the "Plans"). Pursuant to each Plan,
a Fund may incur distribution-related and shareholder servicing-related expenses
which may not exceed an annual rate of .75 of 1% of the Fund's aggregate average
daily net assets attributable to Class A shares and 1.00% of the Fund's
aggregate average daily net assets attributable to the Class B shares. Payments
with respect to Class A shares under the Plan are currently voluntarily limited
to .30 of 1% of each Fund's aggregate average daily net assets attributable to
Class A shares. The Plans provide that a portion of the fee payable thereunder
may constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. Service fee payments to
financial intermediaries for such purposes will not to exceed .25% of the
aggregate average daily net assets attributable to each Class of shares of each
Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with,
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as EFD at a rate
which may not exceed an annual rate of .30 of 1% of a Fund's aggregate average
daily net assets attributable to Class A shares and .75 of 1% of aggregate
average daily net assets attributable to the Class B shares of the Evergreen
Money Market Fund. The Distribution Agreements provide that EFD will use the
distribution fee received from a Fund for payments (i) to compensate
broker-dealers or other persons for distributing shares of the Funds, including
interest and principal payments made in respect of amounts paid to
broker-dealers or other persons that have been financed (EFD may assign its
rights to receive compensation under the Plans to secure such financings), (ii)
to otherwise promote the sale of shares of the Fund, and (iii) to compensate
broker-dealers, depository institutions and other financial intermediaries for
providing administrative, accounting and other services with respect to the
Fund's shareholders. The financing of payments made by EFD to compensate
broker-dealers or other persons for distributing shares of the Funds may be
provided by First Union or its affiliates. The Evergreen Money Market Fund may
also make payments under its Class B Plan, in amounts up to .25 of 1% of the
Fund's aggregate average daily net assets on an annual basis attributable to
Class B shares, to compensate organizations, which may include EFD and Evergreen
Asset or its affiliates, for personal services rendered to shareholders and/or
the maintenance of shareholder accounts or for engaging other to render such
services.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Share certificates are not issued. In
states where EFD is not registered as a broker-dealer shares of a Fund will only
be sold through other broker-dealers or other financial institutions that are
registered. See the Share Purchase Application and Statement of Additional
Information for more information. Only Class A shares of Evergreen Money Market
Fund, Evergreen Treasury Money Market Fund and Evergreen Tax Exempt Money Market
Fund, and Class B shares of Evergreen Money Market Fund are offered through this
Prospectus (See "General Information" - Other Classes of Shares).
Class A Shares. Class A shares of the Evergreen Money Market Funds can be
purchased at net asset value without an initial sales charge. Certain
broker-dealers or other financial institutions may impose a fee in connection
with purchases at net asset value.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares of the Evergreen Money Market Fund at net asset value without an initial
sales charge. However, you may pay a contingent deferred sales charge ("CDSC")
if you redeem shares within seven years after purchase. Shares obtained from
dividend or distribution reinvestment are not subject to the CDSC. The amount of
the CDSC (expressed as a percentage of the lesser of the current net asset value
or original cost) will vary according to the number of years from the purchase
of Class B shares as set forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan, and may be waived in other situations. Class B
shares are subject to higher distribution and/or shareholder service fees than
Class A shares for a period of seven years (after which they convert to Class A
shares) . The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
With respect to Class B shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per Share, (2) Shares acquired
through reinvestment of dividends and capital gains, (3) Shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (the "Exchange") (usually 4 p.m. Eastern time) each business day (i.e.,
any weekday exclusive of days on which the Exchange or State Street is closed).
The Exchange is closed on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net
asset value per share is calculated by taking the sum of the values of a Fund's
investments and any cash and other assets, subtracting liabilities, and dividing
by the total number of shares outstanding. All expenses, including the fees
payable to each Fund's investment adviser, are accrued daily. The securities in
a Fund's portfolio are valued on an amortized cost basis. Under this method of
valuation, a security is initially valued at its acquisition cost, and
thereafter, a constant straight-line amortization of any discount or premium is
assumed each day regardless of the impact of fluctuating interest rates on the
market value of the security. The market value of the obligations in a Fund's
portfolio can be expected to vary inversely to changes in prevailing interest
rates. As a result, the market value of the obligations in a Fund's portfolio
may vary from the value determined using the amortized cost method. Securities
which are not rated are normally valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Other assets and securities for which no quotations are readily
available are valued at the fair value as determined in good faith by the
Trustees.
Each Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of a Fund's portfolio valued at amortized cost with
market values. If a deviation of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and a Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees
believed would result in a material dilution to shareholders or purchasers, the
Trustees would promptly consider what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or its investment adviser
incurs. If such investor is an existing shareholder, a Fund may redeem shares
from his or her account to reimburse a Fund or its investment adviser for any
loss. In addition, such investors may be prohibited or restricted from making
further purchases in any of the Evergreen mutual funds.
Shares of the Funds are sold at the net asset value per share next
determined after a shareholder's investment has been received. Investments by
federal funds wire will be effective upon receipt. Qualified institutions may
telephone orders for the purchase of Fund shares. Shares purchased by
institutions via telephone will receive the dividend declared on that day if the
telephone order is placed by 12 noon (Eastern time), and federal funds are
received the same day by 4 p.m. (Eastern time). Institutions should telephone
the Fund at the phone number on the front page of this Prospectus for additional
information on same day purchases by telephone. Investment checks received at
State Street will be invested on the date of receipt. Shareholders will begin
earning dividends the following business day.
General. The decision as to which Class of shares of Evergreen Money Market Fund
is more beneficial to you depends primarily on whether or not you wish to
exchange all or part of any Class B shares you purchase for Class B shares of
another Evergreen Fund at some future date. If you are not contemplating such an
exchange, it would probably be in your best interest to purchase Class A shares.
Consult your financial intermediary for further information. The compensation
received by dealers and agents may differ depending on whether they sell Class A
or Class B shares. There is no size limit on purchases of Class A shares.
In addition to any discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B shares) next calculated after the Fund receives your
request in proper form. Proceeds generally will be sent to you within seven
days. However, for shares recently purchased by check, a Fund will not send
proceeds until it is reasonably satisfied that the check has been collected
(which may take up to 15 days).
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
shares). Your financial intermediary is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service. Certain financial
intermediaries may require that you give instructions earlier than 4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund by telephone should follow the
procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the enclosed Share Purchase Application and choose how the
redemption proceeds are to be paid. Redemption proceeds will either (i) be
mailed by check to the shareholder at the address in which the account is
registered or (ii) be wired to an account with the same registration as the
shareholder's account in a Fund at a designated commercial bank. State Street
currently deducts a $5.00 wire charge from all redemption proceeds wired. This
charge is subject to change without notice. Redemption proceeds will be wired on
the same day if the request is made prior to 12 noon (Eastern time). Such
shares, however, will not earn dividends for that day. Redemption requests
received after 12 noon will earn dividends for that day, and the proceeds will
be wired on the following business day. A shareholder who decides later to use
this service, or to change instructions already given, should fill out a
Shareholder Services Form and send it to State Street Bank and Trust Company,
P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's
signature guaranteed by a bank or trust company (not a Notary Public), a member
firm of a domestic stock exchange or by other financial institutions whose
guarantees are acceptable to State Street. Shareholders should allow
approximately 10 days for such form to be processed. The Funds will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include requiring some form of personal identification
prior to acting upon instructions and tape recording of telephone instructions.
If a Fund fails to follow such procedures, it may be liable for any losses due
to unauthorized or fraudulent instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine. The Funds
reserve the right to refuse a telephone redemption if it is believed advisable
to do so. Procedures for redeeming Fund shares by telephone may be modified or
terminated without notice at any time.
Redemptions by Check. Upon request, each Fund will provide holders of Class A
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Class B shares cannot be redeemed by check. Shareholders will be
subject to State Street's rules and regulations governing such checking
accounts. Checks will be sent usually within ten business days following the
date the account is established. Checks may be made payable to the order of any
payee in an amount of $250 or more. The payee of the check may cash or deposit
it like a check drawn on a bank. (Investors should be aware that, as in the case
with regular bank checks, certain banks may not provide cash at the time of
deposit, but will wait until they have received payment from State Street.) When
such a check is presented to State Street for payment, State Street, as the
shareholder's agent, causes the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the check.
Checks will be returned by State Street if there are insufficient or
uncollectable shares to meet the withdrawal amount. The check writing procedure
for withdrawal enables shareholders to continue earning income on the shares to
be redeemed up to but not including the date the redemption check is presented
to State Street for payment.
Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently, there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
General. Under unusual circumstances, a Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
The Funds reserve the right to close an account that through redemption has
remained below $1,000 for 30 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed. See the
Statement of Additional Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the other Evergreen mutual funds through your financial intermediary, or by
telephone or mail as described below. An exchange which represents an initial
investment in another Evergreen mutual fund must amount to at least $1,000. Once
an exchange request has been telephoned or mailed, it is irrevocable and may not
be modified or canceled. Exchanges will be made on the basis of the relative net
asset values of the shares exchanged next determined after an exchange request
is received. Exchanges are subject to minimum investment and suitability
requirements.
Each of the Evergreen mutual funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be materially modified or
discontinued at any time by the Fund upon sixty days' notice to shareholders and
is only available in states in which shares of the fund being acquired may
lawfully be sold.
No CDSC will be imposed in the event Class B shares of the Evergreen
Money Market Fund are exchanged for Class B shares of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B shares of the
Evergreen Mutual Fund originally purchased for cash is applied. Also, Class B
shares will continue to age following an exchange for purposes of conversion to
Class A shares. An exchange of Class A shares of the Funds for Class A shares of
other Evergreen mutual funds not offered in this Prospectus would, to the extent
a waiver or reduction were not available, require the payment of the applicable
front-end sales charge.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
the telephone number on the front of this Prospectus. Exchange requests made
after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the enclosed Share
Purchase Application. As noted above, each Fund will employ reasonable
procedures to confirm that instructions for the redemption or exchange of shares
communicated by telephone are genuine. A telephone exchange may be refused by a
Fund or State Street if it is believed advisable to do so. Procedures for
exchanging Fund shares by telephone may be modified or terminated at any time.
Written requests for exchanges should follow the same procedures outlined for
written redemption requests in the section entitled "How to Redeem Shares",
however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact EFD or the toll-free
number on the front page of this Prospectus. Some services are described in more
detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Each Fund's
investment adviser may provide compensation to organizations providing
administrative and recordkeeping services to plans which make shares of the
Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds declare substantially all of their net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of a Fund. Gains or losses realized upon the sale of
portfolio securities are not included in net income, but are reflected in the
net asset value of a Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed net investment income. Dividends and
distributions generally are taxable in the year in which they are paid, except
any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in the immediately preceding December.
Such dividends will be automatically reinvested in full and fractional
shares of a Fund on the last business day of each month. However, shareholders
who so inform the transfer agent in writing may have their dividends paid out in
cash monthly. Shareholders who invest by check will be credited with a dividend
on the business day following initial investment. Shareholders will receive
dividends on investments made by federal funds bank wire the same day the wire
is received provided that wire purchases are received by State Street by 12 noon
(Eastern time). Shares purchased by qualified institutions via telephone as
described in "How to Purchase Shares" will receive the dividend declared on that
day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received by 4 p.m. (Eastern time). All other wire purchases received
after 12 noon (Eastern time) will earn dividends beginning the following
business day. Dividends accruing on the day of redemption will be paid to
redeeming shareholders except for redemptions by check and where proceeds are
wired the same day. (See "How to Redeem Shares".)
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. The excise tax generally does not apply to the tax exempt income
of a regulated investment company (such as Evergreen Tax Exempt Money Market
Fund) that pays exempt interest dividends. Except as noted below with respect to
Evergreen Tax Exempt Money Market Fund, most shareholders of the Funds normally
will have to pay Federal income taxes and any state or local taxes on the
dividends and distributions they receive from a Fund.
Evergreen Tax Exempt Money Market Fund will designate and pay
exempt-interest dividends derived from interest earned on qualifying tax exempt
obligations. Such exempt-interest dividends may be excluded by shareholders of
the Fund from their gross income for Federal income tax purposes, however, (1)
all or a portion of such exempt-interest dividends may be a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes to the extent that they are derived from certain types of private activity
bonds issued after August 7, 1986, and (2) all exempt-interest dividends will be
a component of "adjusted current earnings" for purposes of the Federal corporate
alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any net realized short-term capital gains (whether from tax
exempt or taxable obligations) are taxable as ordinary income, even though
received in additional Fund shares. Market discount recognized on taxable and
tax-free bonds is taxable as ordinary income, not as excludable income.
Following the end of each calendar year, every shareholder of the Funds
will be sent applicable tax information and information regarding the dividends
and capital gain distributions made during the calendar year. Under current law,
the highest Federal income tax rate applicable to net long-term capital gains
realized by individuals is 28%. The rate applicable to corporations is 35%.
Since the Funds' gross income is ordinarily expected to be interest income, it
is not expected that the 70% dividends-received deduction for corporations will
be applicable. Specific questions should be addressed to the investor's own tax
adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that the investor's social security
or taxpayer identification number is correct and that the investor is not
currently subject to backup withholding or is exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Money Market Fund (formerly Evergreen Money Market
Trust) is a Massachusetts business trust organized in 1987, the Evergreen Tax
Exempt Money Market Fund is a separate investment series of the Evergreen
Municipal Trust, which is a Massachusetts business trust organized in 1988, and
the Evergreen Treasury Money Market Fund is a separate investment series of
Evergreen Investment Trust (formerly First Union Funds), which is a
Massachusetts business trust organized in 1984.
The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
The Trusts are empowered to establish, without shareholder approval, additional
investment series, which may have different investment objectives, and
additional classes of shares for any existing or future series. If an additional
series or class were established in a Fund, each share of the series or class
would normally be entitled to one vote for all purposes. Generally, shares of
each series and class would vote together as a single class on matters, such as
the election of Trustees, that affect each series and class in substantially the
same manner. Class A, B and Y shares have identical voting, dividend,
liquidation and other rights, except that each class bears, to the extent
applicable, its own distribution and transfer agency expenses as well as any
other expenses applicable only to a specific class. Each class of shares votes
separately with respect to Rule 12b-1 distribution plans and other matters for
which separate class voting is appropriate under applicable law. Shares are
entitled to dividends as determined by the Trustees and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund.
Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Treasury Money Market Fund and which provides
certain sub-administrative services to Evergreen Asset in connection with its
role as investment adviser to Evergreen Tax Exempt Money Market Fund and
Evergreen Treasury Money Market Fund, including providing personnel to serve as
officers of the Funds.
Other Classes of Shares. Evergreen Money Market Fund offers three classes of
shares, Class A, Class B, and Class Y. Evergreen Tax Exempt Money Market Fund
and Evergreen Treasury Money Market Fund each offer two classes of shares, Class
A and Class Y. Class Y shares are not offered by this Prospectus and are only
available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A and Class B shares will be less than those payable with respect to Class Y
shares due to the distribution and distribution and shareholder servicing
related expenses borne by Class A and Class B shares and the fact that such
expenses are not borne by Class Y shares.
Performance Information. From time to time, a Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of a Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of a
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of a Fund's
yields for any future period.
The method of calculating each Fund's yield is set forth in the
Statement of Additional Information. Before investing in the Evergreen Tax
Exempt Money Market Fund, the investor may want to determine which investment --
tax-free or taxable -- will result in a higher after-tax return. To do this, the
yield on the tax-free investment should be divided by the decimal determined by
subtracting from 1 the highest Federal tax rate to which the investor currently
is subject. For example, if the tax-free yield is 6% and the investor's maximum
tax bracket is 36%, the computation is:
6% Tax-Free Yield /(1 - .36 Tax Rate) = 6/.64 = 9.38%
Taxable Yield.
In this example, the investor's after-tax return will be higher from
the 6% tax-free investment if available taxable yields are below 9.38%.
Conversely, the taxable investment will provide a higher return when taxable
yields exceed 9.38%. This is only an example and is not necessarily reflective
of a Fund's yield. The tax equivalent yield will be lower for investors in the
lower income brackets.
Comparative performance information may also be used from time to time
in advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
Funds operate provide that no trustee or shareholder will be personally liable
for the obligations of the trust and that every written contract made by the
trust contain a provision to that effect. If any trustee or shareholder were
required to pay any liability of the trust, that person would be entitled to
reimbursement from the general assets of the trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
9
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN TREASURY MONEY MARKET FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
KPMG Peat Marwick, LLP One Mellon Bank Center Pittsburgh, Pennsylvania 15219
EVERGREEN TREASURY MONEY MARKET FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536120
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) MONEY MARKET FUNDS (Evergreen logo appears here)
EVERGREEN MONEY MARKET FUND
EVERGREEN TAX EXEMPT MONEY MARKET FUND
EVERGREEN TREASURY MONEY MARKET FUND
CLASS Y SHARES
The Evergreen Money Market Funds (the "Funds") are designed to
provide investors with current income, stability of principal and
liquidity. This Prospectus provides information regarding the Class Y
shares offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds dated July
7, 1995 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Funds at (800) 235-0064. There can
be no assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 10
Investment Practices and Restrictions 13
MANAGEMENT OF THE FUNDS
Investment Advisers 14
Sub-Adviser 15
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 16
How to Redeem Shares 17
Exchange Privilege 18
Shareholder Services 19
Effect of Banking Laws 19
OTHER INFORMATION
Dividends, Distributions and Taxes 20
General Information 21
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN MONEY MARKET FUND and EVERGREEN TAX
EXEMPT MONEY MARKET FUND is Evergreen Asset Management Corp. ("Evergreen Asset")
which, with its predecessors, has served as an investment adviser to the
Evergreen Funds since 1971. Evergreen Asset is a wholly-owned subsidiary of
First Union National Bank of North Carolina ("FUNB"), which in turn is a
subsidiary of First Union Corporation, one of the ten largest bank holding
companies in the United States. The Capital Management Group of FUNB ("CMG")
serves as investment adviser to EVERGREEN TREASURY MONEY MARKET FUND.
EVERGREEN MONEY MARKET FUND seeks as high a level of current income as is
consistent with preserving capital and providing liquidity. The Fund will invest
only in high quality money market instruments.
EVERGREEN TAX EXEMPT MONEY MARKET FUND seeks as high a level of current
income exempt from Federal income tax as is consistent with preserving capital
and providing liquidity. The Fund invests substantially all of its assets in
short-term municipal securities, the interest from which is exempt from Federal
income tax.
EVERGREEN TREASURY MONEY MARKET FUND (formerly First Union Treasury Money
Market Portfolio) seeks to achieve stability of principal and current income
consistent with stability of principal.
Each Fund seeks to maintain a stable net asset value of $1.00 per share
although no assurances can be given that such a stable net asset value will be
maintained.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN MONEY MARKET FUND (A)
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 7
12b-1 Fees -- After 3 Years
After 3 Years $23
Other Expenses .21%
After 5 Years $40
After 10 Years $88
Total .71%
</TABLE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND (B)
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 6
12b-1 Fees --
After 3 Years $18
Other Expenses .05%
After 5 Years $31
After 10 Years $69
Total .55%
</TABLE>
EVERGREEN TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING EXAMPLE
EXPENSES Class Y
<S> <C> <C> <C>
Advisory Fees .35%
After 1 Year $ 5
Administrative Fees .06%
After 3 Years $15
12b-1 Fees --
After 5 Years $26
Other Expenses .05%
After 10 Years $58
Total .46%
</TABLE>
(a) Estimated annual operating expenses reflect the combination of EVERGREEN
MONEY MARKET FUND and First Union Money Market Portfolio.
(b) Estimated annual operating expenses reflect the combination of EVERGREEN TAX
EXEMPT MONEY MARKET FUND and First Union Tax Free Money Market Portfolio.
3
<PAGE>
Evergreen Asset has agreed to reimburse EVERGREEN MONEY MARKET FUND and
EVERGREEN TAX EXEMPT MONEY MARKET FUND to the extent that the Fund's aggregate
annual operating expenses (including the Adviser's fee, but excluding interest,
taxes, brokerage commissions, Rule 12b-1 distribution fees and shareholder
services fees, and extraordinary expenses) exceed 1% of the Fund's average net
assets.
The estimated operating expenses and examples do not reflect fee waivers
and expense reimbursements for the most recent fiscal year. Actual expenses, net
of fee waivers and expense reimbursements for the fiscal year ended December 31,
1994 or August 31, 1994, as applicable for Class Y Shares were as follows:
<TABLE>
<S> <C>
EVERGREEN MONEY MARKET FUND .32%
EVERGREEN TAX EXEMPT MONEY MARKET FUND .34%
EVERGREEN TREASURY MONEY MARKET FUND .20%
</TABLE>
From time to time, each Fund's investment adviser may, at its discretion,
waive its fee or reimburse a Fund for certain of its expenses in order to reduce
a Fund's expense ratio. The Adviser may cease these voluntary waivers or
reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Class Y Shares
of the Funds will bear directly or indirectly. The amounts set forth under
"Other Expenses" as well as the amounts set forth in the examples are estimated
amounts based on historical experience for the most recent fiscal period. Such
expenses have been restated to reflect current fee arrangements. THE EXAMPLES
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL
RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE
SHOWN. For a more complete description of the various costs and expenses borne
by the Funds see "Management of the Funds".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the fund if shorter for EVERGREEN TREASURY MONEY MARKET FUND has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors, for EVERGREEN MONEY
MARKET FUND and EVERGREEN TAX EXEMPT MONEY MARKET FUND has, except as noted
otherwise, been audited by Price Waterhouse LLP, each Fund's independent
auditors. A report of KPMG Peat Marwick LLP or Price Waterhouse LLP, as the case
may be, on the audited information with respect to each Fund is incorporated by
reference in the Fund's Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are incorporated by reference in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN MONEY MARKET FUND -- Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED TEN MONTHS
FEBRUARY 28, ENDED
1995 AUGUST 31, YEAR ENDED OCTOBER 31,
(UNAUDITED) 1994# 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income.............. .02 .03 .03 .04 .07 .08 .09
Total from investment
operations..................... .02 .03 .03 .04 .07 .08 .09
Less distributions to shareholders
from net investment income....... (.02) (.03) (.03) (.04) (.07) (.08) (.09)
Net asset value, end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+...................... 2.4% 2.9% 3.2% 4.2% 6.7% 8.4% 9.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(in millions).................... $244 $273 $299 $358 $438 $458 $408
Ratios to average net assets:
Expenses (a)..................... .54%++ .32%++ .39% .36% .30% .35% .38%
Net investment income (a)........ 4.88%++ 3.46%++ 3.19% 4.18% 6.53% 8.08% 9.42%
<CAPTION>
NOVEMBER 2, 1987*
THROUGH
OCTOBER 31, 1988
<S> <C>
PER SHARE DATA
Net asset value, beginning of
period........................... $1.00
Income from investment operations:
Net investment income.............. .07
Total from investment
operations..................... .07
Less distributions to shareholders
from net investment income....... (.07)
Net asset value, end of period..... $1.00
TOTAL RETURN+...................... 7.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(in millions).................... $161
Ratios to average net assets:
Expenses (a)..................... .43%++
Net investment income (a)........ 7.26%++
</TABLE>
# On September 21, 1994, the Fund changed its fiscal year end from October 31
to August 31.
* Commencement of operations.
+ Total return is calculated for the periods indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED TEN MONTHS
FEBRUARY 28, ENDED YEAR ENDED NOVEMBER 2, 1987
1995 AUGUST 31, OCTOBER 31, THROUGH
(UNAUDITED) 1994 1993 1992 1991 1990 1989 OCTOBER 31, 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses........................ .74% .71% .71% .72% .70% .69% .75% .93%
Net investment income........... 4.68% 3.07% 2.87% 3.82% 6.13% 7.74% 9.05% 6.76%
</TABLE>
5
<PAGE>
EVERGREEN MONEY MARKET FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 4, 1995* JANUARY 26, 1995*
THROUGH THROUGH
FEBRUARY 28, 1995 FEBRUARY 28, 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.................................................. $ 1.000 $ 1.000
Income from investment operations:
Net investment income................................................................. .008 .004
Total income from investment operations............................................. .008 .004
Less distributions to shareholders from net investment income......................... (.008) (.004)
Net asset value, end of period........................................................ $ 1.000 $ 1.000
TOTAL RETURN+......................................................................... .8% .4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)............................................. $668 $35
Ratios to average net assets:
Expenses (a)........................................................................ .85%++ 1.56%++
Net investment income (a)........................................................... 5.40%++ 5.03%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value. Contingent deferred sales
charge is not reflected. Total return is calculated for the periods indicated
and is not annualized.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A and Class B shares are not necessarily comparable to that of the
Class Y shares, and are not necessarily indicative of future ratios.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 4, 1995 JANUARY 26, 1995
THROUGH THROUGH
FEBRUARY 28, 1995 FEBRUARY 28, 1995
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Expenses...................................................... 1.30% 2.00%
Net investment income......................................... 4.95% 4.59%
</TABLE>
6
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED NOVEMBER 2,
FEBRUARY 28, 1995 YEAR ENDED AUGUST 31, 1988* THROUGH
(UNAUDITED) 1994 1993 1992 1991 1990 AUGUST 31, 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income................ .02 .02 .03 .04 .05 .06 .05
Total from investment operations... .02 .02 .03 .04 .05 .06 .05
Less distributions to shareholders from
net investment income................ (.02) (.02) (.03) (.04) (.05) (.06) (.05)
Net asset value, end of period......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN........................... 1.7% 2.5% 2.6% 3.7% 5.5% 6.2% 5.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in
millions)............................ $387 $402 $401 $417 $510 $311 $109
Ratios to average net assets:
Expenses (a)......................... .51++ .34% .34% .32% .28% .31% .24%++
Net investment income (a)............ 3.34++ 2.47% 2.58% 3.72% 5.23% 5.94% 6.77%++
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, NOVEMBER 2, 1988
1995 YEAR ENDED AUGUST 31, THROUGH AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses.............................. .64% .64% .63% .63% .66% .71% .79%
Net investment income................. 3.21% 2.17% 2.29% 3.41% 4.85% 5.54% 6.22%
</TABLE>
7
<PAGE>
EVERGREEN TAX EXEMPT MONEY MARKET FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 5, 1995*
THROUGH
FEBRUARY 28, 1995
(UNAUDITED)
<S> <C>
PER SHARE DATA
Net asset value, beginning of period...................................................................... $ 1.000
Income from investment operations:
Net investment income..................................................................................... .005
Total from investment operations........................................................................ .005
Distributions to shareholders from net investment income.................................................. (.005)
Net asset value, end of period............................................................................ $ 1.000
TOTAL RETURN+............................................................................................. .5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................................................. $144
Ratios to average net assets:
Expenses (a)............................................................................................ .83%++
Net investment income (a)............................................................................... 3.53%++
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized. Due to the recent commencement of its offering, the ratios for
Class A shares are not necessarily comparable to that of the Class Y shares,
and are not necessarily indicative of future ratios.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 5, 1995
THROUGH
FEBRUARY 28, 1995
(UNAUDITED)
<S> <C>
Expenses.......................................................................... 1.30%
Net investment income............................................................. 3.06%
</TABLE>
8
<PAGE>
EVERGREEN TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS Y SHARES
MARCH 6, MARCH 6,
1991* 1991*
THROUGH THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment
operations:
Net investment income..... .04 .03 .03 .04 .04 .03 .04 .05
Less distributions to
shareholders from net
investment income....... (.04) (.03) (.03) (.04) (.04) (.03) (.04) (.05)
Net asset value, end of
period.................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN+............. 3.8% 2.7% 3.4% 4.5% 4.1% 3.0% 3.7% 4.7%
Net assets, end of period
(000's omitted)......... $755,050 $261,475 $208,792 $ 99,549 $162,921 $366,109 $286,230 $265,109
Ratios to average net
assets:
Expenses (a)............ .50% .48% .48% .47%++ .20% .18% .17% .20%++
Net investment
income (a)............ 3.91% 2.70% 3.22% 4.95%++ 3.78% 3.00% 3.61% 5.53%++
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS Y SHARES
YEAR ENDED MARCH 6, 1991 YEAR ENDED MARCH 6, 1991
DECEMBER 31, THROUGH DECEMBER 31, DECEMBER 31, THROUGH DECEMBER 31,
1994 1993 1992 1991 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses................ .78% .82% .82% 1.08% .48% .52% .52% .52%
Net investment income... 3.63% 2.36% 2.88% 4.34% 3.50% 2.66% 3.26% 5.21%
</TABLE>
9
<PAGE>
10
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DESCRIPTION OF THE FUNDS
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INVESTMENT OBJECTIVES AND POLICIES
Evergreen Money Market Fund
The investment objective of Evergreen Money Market Fund is to achieve
as high a level of current income as is consistent with preserving capital and
providing liquidity. This objective is a fundamental policy and may not be
changed without shareholder approval. The Fund invests in high quality money
market instruments, which are determined to be of eligible quality under
Securities and Exchange Commission ("SEC") rules and to present minimal credit
risk. Under SEC rules, eligible securities include First Tier Securities (i.e.,
securities rated in the highest short-term rating category) and Second Tier
Securities (i.e., securities which are not in the First Tier). The rules
prohibit the Fund from holding more than 5% of its value in Second Tier
Securities. The Fund's permitted investments include:
1. Marketable obligations of, or guaranteed by, the United States
Government, its agencies or instrumentalities, including issues of the United
States Treasury, such as bills, certificates of indebtedness, notes and bonds,
and issues of agencies and instrumentalities established under the authority of
an act of Congress. Some of these securities are supported by the full faith and
credit of the United States Government, others are supported by the right of the
issuer to borrow from the Treasury, and still others are supported only by the
credit of the agency or instrumentality. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. Agencies or instrumentalities whose
securities are supported only by the credit of the agency or instrumentality
include the Interamerican Development Bank and the International Bank for
Reconstruction and Development. These obligations are supported by appropriated
but unpaid commitments of its member countries. There are no assurances that the
commitments will be undertaken in the future.
2. Commercial paper, including variable amount master demand notes,
that is rated in one of the two highest short-term rating categories by any two
of Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO") (or by a single rating agency if only one of these agencies has assigned
a rating). The Fund will not invest more than 10% of its total assets, at the
time of the investment in question, in variable amount master demand notes. For
a description of these ratings see the Statement of Additional Information.
3. Corporate debt securities and bank obligations that are rated in one
of the two highest short-term rating categories by any two of S&P, Moody's and
any other SRO (or by a single rating agency if only one of these agencies has
assigned a rating).
4. Unrated corporate debt securities, commercial paper and bank
obligations that are issued by an issuer that has outstanding a class of
short-term debt instruments (i.e., instruments having a maturity of 366 days or
less) that (A) is comparable in priority and security to the unrated securities
and (B) meets the rating requirements of paragraphs 2 or 3 above.
5. Unrated corporate debt securities, commercial paper and bank
obligations issued by domestic and foreign companies which have an outstanding
long-term debt issue rated in the top two rating categories by a SRO and
determined by the Trustees to be of comparable quality.
6. Unrated corporate debt securities, commercial paper and bank
obligations otherwise determined by the Trustees to be of comparable quality.
7. Repurchase agreements with respect to the securities described in
paragraphs 1 through 6 above.
The Fund may invest up to 30% of its total assets in bank certificates
of deposit and bankers' acceptances payable in U.S. dollars and issued by
foreign banks (including U.S. branches of foreign banks) or by foreign branches
of U.S. banks. These investments involve risks that are different from
investments in domestic securities. These risks may include future unfavorable
political and economic developments, possible withholding taxes, seizure of
foreign deposits, currency controls, interest limitations or other governmental
restrictions which might affect the payment of principal or interest on the
securities in the Fund's portfolio. Additionally, there may be less publicly
available information about foreign issuers.
The Fund may invest in commercial paper and other short-term corporate
obligations which meet the rating criteria specified in paragraphs 3 and 4 above
which are issued in private placements pursuant to Section 4(2) of the
Securities Act of 1933 (the "Act"). Such securities are not registered for
purchase and sale by the public under the Act. The Fund has been informed that
the staff of the SEC does not consider such securities to be readily marketable.
The Fund will not invest more than 10% of its total assets in securities which
are not readily marketable (including private placement securities) and in
repurchase agreements maturing in more than seven days.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Tax Exempt Money Market Fund
The investment objective of Evergreen Tax Exempt Money Market Fund is
to achieve as high a level of current income exempt from Federal income tax, as
is consistent with preserving capital and providing liquidity. This objective is
a fundamental policy and may not be changed without shareholder approval. The
Fund will seek to achieve its objective by investing substantially all of its
assets in a diversified portfolio of short-term (i.e., with remaining maturities
not exceeding 397 days) debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax. Such securities are generally known as
Municipal Securities (see "Municipal Securities" below.)
The Fund will invest in Municipal Securities only if they are
determined to be of eligible quality under SEC rules and to present minimum
credit risk. Municipal Securities in which the Fund may invest include: (i)
municipal securities that are rated in one of the top two short-term rating
categories by any two of S&P, Moody's or any other nationally recognized SRO (or
by a single rating agency if only one of these agencies has assigned a rating);
(ii) municipal securities that are issued by an issuer that has outstanding a
class of short-term debt instruments (i.e., having a maturity of 366 days or
less) that (A) is comparable in priority and security to such instruments and
(B) meets the rating requirements above; and (iii) bonds with a remaining
maturity of 397 days or less that are rated no lower than one of the top two
long-term rating categories by any SRO and determined by the Trustees to be of
comparable quality. For a description of such ratings see the Statement of
Additional Information. The Fund may also purchase Municipal Securities which
are unrated at the time of purchase up to a maximum of 20% of its total assets,
if such securities are determined by the Fund's Trustees to be of comparable
quality. Certain Municipal Securities (primarily variable rate demand notes) may
be entitled to the benefit of standby letters of credit or similar commitments
issued by banks or other financial institutions and, in such instances, the
Trustees will take into account the obligation of the bank in assessing the
quality of such security. The ability of the Fund to meet its investment
objective is necessarily subject to the ability of municipal issuers to meet
their payment obligations.
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 the 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, 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.
Municipal Securities. As noted above, the Fund will invest substantially all of
its assets in Municipal Securities. These include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed. The
term "municipal bonds" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in municipal bonds, including IDBs and PABs, and floating and variable
rate obligations that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature is
backed by an irrevocable letter of credit or guarantee of the bank. A put bond
is a municipal bond which gives the holder the unconditional right to sell the
bond back to the issuer at a specified price and exercise date, which is
typically well in advance of the bond's maturity date. "Short-term municipal
notes" and "tax exempt commercial paper" include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Such securities must comply with conditions established by the SEC
under which they may be considered to have remaining maturities of 397 days or
less. Certain of these obligations may carry a demand feature that gives the
Fund the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. As a matter of
fundamental policy, which may not be changed without shareholder approval, 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 total assets.
Stand-by Commitments. The Fund may also acquire "stand-by commitments" with
respect to Municipal Securities held in its portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at the Fund's option, specified
Municipal Securities at a specified price. The Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, the Fund may pay
for stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Fund's portfolio will not exceed 10% of the value of the Fund's total assets
calculated immediately after each stand-by commitment is acquired. The Fund will
enter into stand-by commitments only with banks and broker-dealers that, in the
judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. The Fund may temporarily invest up to 20% of the Fund's net
assets in taxable securities under any one or more of the following
circumstances: (a) pending investment of proceeds of sale of Fund shares or of
portfolio securities, (b) pending settlement of purchases of portfolio
securities, and (c) to maintain liquidity for the purpose of meeting anticipated
redemptions. In addition, the Fund may temporarily invest more than 20% of its
total assets in taxable securities for defensive purposes. The Fund may invest
for defensive purposes during periods when the Fund's assets available for
investment exceed the available Municipal Securities that meet the Fund's
quality and other investment criteria. Taxable securities in which the Fund may
invest on a short-term basis include obligations of the United States
Government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest ratings assigned by an SRO; commercial paper rated in the highest grade
by Moody's or S&P; and certificates of deposit issued by United States branches
of United States banks with assets of $1 billion or more.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Treasury Money Market Fund
The investment objective of Evergreen Treasury Money Market Fund, which
is a matter of fundamental policy that may not be changed without shareholder
approval, is to maintain stability of principal while earning current income.
However, the Fund will only attempt to seek income to the extent consistent with
stability of principal and, therefore, investments will only be made in
short-term United States Treasury obligations with an average dollar-weighted
maturity of 90 days or less. As a matter of investment strategy, the Fund's
investment adviser intends to maintain a dollar-weighted average maturity for
the Fund of 60 days or less.
Evergreen Treasury Money Market Fund is suitable for conservative
investors seeking high current yields plus relative safety. The Fund provides a
reasonable means of maximizing opportunities and minimizing risks resulting from
changing interest rates.
The short-term United States Treasury obligations in which the Fund
invests are issued by the U.S. Government and are fully guaranteed as to
principal and interest by the United States. Such securities will have a
maturity date that is 397 days or less from the date of acquisition unless they
are purchased under an agreement that provides for repurchase of the securities
from the Fund within 397 days from the date of acquisition. The Fund may also
retain Fund assets in cash.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
General. The Funds invest only in securities that have remaining maturities of
397 days (thirteen months) or less at the date of purchase. For this purpose,
floating rate or variable rate obligations (described under Evergreen Tax Exempt
Money Market Fund, above), which are payable on demand, but which may otherwise
have a stated maturity in excess of this period, will be deemed to have
remaining maturities of less than 397 days pursuant to conditions established by
the SEC. The Funds maintain a dollar-weighted average portfolio maturity of
ninety days or less. The Funds follow these policies to maintain a stable net
asset value of $1.00 per share, although there is no assurance they can do so on
a continuing basis. The market value of the obligations in a Fund's portfolio
can be expected to vary inversely to changes in prevailing interest rates. If a
portfolio security is no longer of eligible quality, a Fund shall dispose of
such security in an orderly fashion as soon as reasonably practicable, unless
the Trustees determine, in light of market conditions or other factors, that
disposal of the instrument would not be in the best interests of the Fund and
its shareholders.
The ability of each Fund to meet its investment objective is
necessarily subject to the ability of the issuers of securities in which the
Funds invest to meet their payment obligations. In addition, the portfolio of
each Fund will be affected by general changes in interest rates which will
result in increases or decreases in the value of the obligations held by the
Fund. Investors should recognize that, in periods of declining interest rates,
the yield of a Fund will tend to be somewhat higher than prevailing market
rates, and in periods of rising interest rates, the yield of a Fund will tend to
be somewhat lower. Also, when interest rates are falling, the inflow of net new
money to a Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite can be expected to occur.
Repurchase Agreements. The Funds may enter into repurchase agreements. A
repurchase agreement is an arrangement pursuant to which a buyer purchases a
security and simultaneously agrees to resell it to the vendor at a price that
results in an agreed-upon market rate of return which is effective for the
period of time (which is normally one to seven days, but may be longer) the
buyer's money is invested in the security. The arrangement results in a fixed
rate of return that is not subject to market fluctuations during a Fund's
holding period. Repurchase agreements may be entered into with member banks of
the Federal Reserve System, including, the Fund's custodian or "primary dealers"
(as designated by the Federal Reserve Bank of New York) in United States
Government securities. Each Fund will require continued maintenance of
collateral with its Custodian in an amount equal to, or in excess of, the
repurchase price (including accrued interest). In the event a vendor defaults on
its repurchase obligation, a Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which the
Fund enters into a repurchase agreement to evaluate these risks. A Fund may not
enter into repurchase agreements if, as a result, more than 10% of a Fund's
total assets would be invested in repurchase agreements maturing in more than
seven days and in other securities that are not readily marketable.
Securities Lending. In order to generate income and to offset expenses,
Evergreen Tax Exempt Money Market Fund and Evergreen Money Market Fund may lend
portfolio securities to brokers, dealers and other financial organizations. Each
Fund's investment adviser will monitor the creditworthiness of such borrowers.
Loans of securities by Evergreen Tax Exempt Money Market Fund or Evergreen Money
Market Fund, if and when made, may not exceed 30% of a Fund's total assets and
will be collateralized by cash, letters of credit or United States Government
securities that are maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities, including accrued
interest. While such securities are on loan, the borrower will pay a Fund any
income accruing thereon, and the Fund may invest the cash collateral in
portfolio securities, thereby increasing its return. A Fund will have the right
to call any such loan and obtain the securities loaned at any time on five days'
notice. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
may pay reasonable fees in connection with such loans.
When-Issued Securities. Evergreen Tax Exempt Money Market Fund and Evergreen
Treasury Money Market Fund may purchase securities on a "when-issued" basis
(i.e., for delivery beyond the normal settlement date at a stated price and
yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
Evergreen Tax Exempt Money Market Fund does not expect that commitments to
purchase when-issued securities will normally exceed 25% of its total assets and
Evergreen Treasury Money Market Fund does not expect that such commitments will
exceed 20% of its total assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Illiquid Securities. The Funds may invest up to 10% of their net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements with maturities longer than seven days. In the
case of Evergreen Tax Exempt Money Market Fund and Evergreen Money Market Fund,
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, which have been determined to be liquid, will not be considered by each
Fund's investment adviser to be illiquid or not readily marketable and,
therefore, are not subject to the aforementioned 10% limit. The inability of a
Fund to dispose of illiquid or not readily marketable investments readily or at
a reasonable price could impair the Fund's ability to raise cash for redemptions
or other purposes. The liquidity of securities purchased by a Fund which are
eligible for resale pursuant to Rule 144A will be monitored by each Fund's
investment adviser on an ongoing basis, subject to the oversight of the
Trustees. In the event that such a security is deemed to be no longer liquid, a
Fund's holdings will be reviewed to determine what action, if any, is required
to ensure that the retention of such security does not result in a Fund having
more than 10% of its assets invested in illiquid or not readily marketable
securities.
Other Investment Policies. The Funds may borrow money for temporary or emergency
purposes in amounts not in excess of 10% of the value of a Fund's total assets
in the case of Evergreen Tax Exempt Money Market Fund and Evergreen Money Market
Fund and one-third of the value of Evergreen Treasury Money Market Fund's total
assets, including the amount borrowed. As another means of borrowing both
Evergreen Tax Exempt Money Market Fund and Evergreen Money Market Fund may agree
to sell portfolio securities to financial institutions such as banks and
broker-dealers and to repurchase them at a mutually agreed upon date and price
(a "reverse repurchase agreement") at the time of such borrowing in amounts up
to 5% of the value of their total assets. A Fund will not purchase any
securities whenever any borrowings (including reverse repurchase agreements) are
outstanding. If either Evergreen Tax Exempt Money Market Fund or Evergreen Money
Market Fund enter into a reverse repurchase agreement, they 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
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained to serve as investment
adviser to Evergreen Money Market Fund and Evergreen Tax Exempt Money Market
Fund. Evergreen Asset succeeded on June 30, 1994 to the advisory business of the
same name, but under different ownership, which was organized in 1971. Evergreen
Asset, with its predecessors, has served as investment adviser to the Evergreen
Group of Mutual Funds since 1971. Evergreen Asset is a wholly-owned subsidiary
of First Union National Bank of North Carolina ("FUNB"). The address of
Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a
subsidiary of First Union Corporation ("First Union"), one of the ten largest
bank holding companies in the United States. Stephen A. Lieber and Nola Maddox
Falcone serve as the chief investment officers of Evergreen Asset and, along
with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor
and the former general partners of Lieber & Company, which, as described below,
provides certain subadvisory services to Evergreen Asset in connection with its
duties as investment adviser to the aforementioned Funds. The Capital Management
Group of FUNB ("CMG") serves as investment adviser to Evergreen Treasury Money
Market Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, and had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of Evergreen Money Market
Fund and Evergreen Tax Exempt Money Market Fund, subject to the authority of the
Trustees. Evergreen Asset is entitled to receive from each Fund an annual fee
equal to .50 of 1% of average daily net assets of each Fund on the first $1
billion in assets and .45 of 1% of average daily net assets in excess of $1
billion. However, Evergreen Asset has in the past, and may in the future,
voluntarily waive all or a portion of its fee for the purpose of reducing each
Fund's expense ratio. For the fiscal period ended August 31, 1994 Evergreen
Asset waived a portion of the advisory fee payable by the Evergreen Money Market
Fund and Evergreen Tax Exempt Money Market Fund as set forth in the section
entitled "Financial Highlights". The total expenses as a percentage of average
daily net assets on an annualized basis for Evergreen Money Market Fund and
Evergreen Tax Exempt Money Market Fund for the fiscal period ended August 31,
1994 are also set forth in the section entitled "Financial Highlights". CMG
manages investments and supervises the daily business affairs of Evergreen
Treasury Money Market Fund and, as compensation therefor, is entitled to receive
an annual fee equal to .35 of 1% of average daily net assets of Evergreen
Treasury Money Market Fund. For the fiscal period ended December 31, 1994 CMG
waived a portion of the advisory fee payable by the Evergreen Treasury Money
Market Fund as set forth in the section entitled "Financial Highlights". The
total annualized operating expenses of Evergreen Treasury Money Market Fund for
its most recent fiscal year ended December 31, 1994 are also set forth in the
section entitled "Financial Highlights". Evergreen Asset serves as administrator
to Evergreen Treasury Money Market Fund and is entitled to receive a fee based
on the average daily net assets of the Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .050% of the first $7 billion; .035% on the next $3 billion;
.030% on the next $5 billion; .020% on the next $10 billion; .015% on the next
$5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
Treasury Money Market Fund and is entitled to receive a fee from the Fund
calculated on the average daily net assets of the Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .0100% of the first $7 billion; .0075% on the next
$3 billion; .0050% on the next $15 billion; and .0040% on assets in excess of
$25 billion. The total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset serve as investment adviser as of March
31, 1995 were approximately $8 billion.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Money Market Fund and Evergreen Tax Exempt Money Market
Fund. Lieber & Company will be reimbursed by Evergreen Asset in connection with
the rendering of services on the basis of the direct and indirect costs of
performing such services. There is no additional charge to Evergreen Money
Market Fund and Evergreen Tax Exempt Money Market Fund for the services provided
by Lieber & Company. The address of Lieber & Company is 2500 Westchester Avenue,
Purchase, New York 10577. Lieber & Company is an indirect, wholly-owned,
subsidiary of First Union.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at (800) 423-2615 and (ii) instructing your bank, which may charge a fee,
to wire federal funds to State Street, as follows: State Street Bank and Trust
Company, ABA No.0110-0002-8, Attn: Custodian and Shareholder Services. The wire
must include references to the Fund in which an investment is being made,
account registration, and the account number. A completed Application must also
be sent to State Street indicating that the shares have been purchased by wire,
giving the date the wire was sent and referencing the account number. Subsequent
wire investments may be made by existing shareholders by following the
instructions outlined above. It is not necessary, however, for existing
shareholders to call for another account number.
How the Funds Value Their Shares. The net asset value of each Fund's shares for
purposes of both purchases and redemptions is determined twice daily, at 12 noon
(Eastern time) and promptly after the regular close of the New York Stock
Exchange (usually 4 p.m. New York time) each business day (i.e., any weekday
exclusive of days on which the New York Stock Exchange or State Street is
closed). The New York Stock Exchange is closed on New Year's Day, Presidents
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The net asset value per share is calculated by taking the sum
of the values of a Fund's investments and any cash and other assets, subtracting
liabilities, and dividing by the total number of shares outstanding. All
expenses, including the fees payable to the Adviser, are accrued daily. The
securities in a Fund's portfolio are valued on an amortized cost basis. Under
this method of valuation, a security is initially valued at its acquisition
cost, and thereafter, a constant straight-line amortization of any discount or
premium is assumed each day regardless of the impact of fluctuating interest
rates on the market value of the security. The market value of the obligations
in a Fund's portfolio can be expected to vary inversely to changes in prevailing
interest rates. As a result, the market value of the obligations in a Fund's
portfolio may vary from the value determined using the amortized cost method.
Securities which are not rated are normally valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Other assets and securities for which no quotations
are readily available are valued at the fair value as determined in good faith
by the Trustees.
Each Fund attempts to maintain its net asset value at $1.00 per share.
Under most conditions, management believes this will be possible, although there
can be no assurance that this will be achieved. Calculations are periodically
made to compare the value of a Fund's portfolio valued at amortized cost with
market values. If a deviation of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and a Fund's $1.00 per
share net asset value, or if there were other deviations which the Trustees
believed would result in a material dilution to shareholders or purchasers, the
Trustees would promptly consider what action, if any, should be initiated.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because a investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from his or her
account to reimburse a Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
Shares of the Funds are sold at the net asset value per share next
determined after a shareholder's investment has been converted to federal funds.
Investments by federal funds wire will be effective upon receipt. Qualified
institutions may telephone orders for the purchase of Fund shares. Shares
purchased by institutions via telephone will receive the dividend declared on
that day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received the same day by 4 p.m. (Eastern time). Institutions should
telephone the Fund at the number on the front page of this Prospectus for
additional information on same day purchases by telephone. Investment checks
received at State Street will be invested on the date of receipt. Shareholders
will begin earning dividends the following business day.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Evergreen Money Market Fund is an
available investment. For information about the requirements to make such
investments, including copies of the necessary application forms, please call
the telephone number set forth on the cover page of this Prospectus. A Fund
cannot accept investments specifying a certain price or date and reserves the
right to reject any specific purchase order, including orders in connection with
exchanges from the other Evergreen Funds. Although not currently anticipated,
each Fund reserves the right to suspend the offer of shares for a period of
time.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 10 days).
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street at (800) 423-2615 between the hours of 8:00 a.m. and
5:30 p.m. (Eastern time) each business day (i.e., any weekday exclusive of days
on which the New York Stock Exchange or State Street's offices are closed). The
New York Stock Exchange is closed on New Year's Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Redemption requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. Such
redemption requests must include the shareholder's account name, as registered
with a Fund, and the account number. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
redemptions. Shareholders who are unable to reach a Fund or State Street by
telephone should follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the enclosed Share Purchase Application and choose how the
redemption proceeds are to be paid. Redemption proceeds will either (i) be
mailed by check to the shareholder at the address in which the account is
registered or (ii) be wired to an account with the same registration as the
shareholder's account in a Fund at a designated commercial bank. State Street
currently deducts a $5.00 wire charge from all redemption proceeds wired. This
charge is subject to change without notice. Redemption proceeds will be wired on
the same day if the request is made prior to 12 noon (Eastern time). Such
shares, however, will not earn dividends for that day. Redemption requests
received after 12 noon will earn dividends for that day, and the proceeds will
be wired on the following business day. A shareholder who decides later to use
this service, or to change instructions already given, should fill out a
Shareholder Services Form and send it to State Street Bank and Trust Company,
P.O. Box 9021, Boston, Massachusetts 02205-9827, with such shareholder's
signature guaranteed by a bank or trust company (not a Notary Public), a member
firm of a domestic stock exchange or by other financial institutions whose
guarantees are acceptable to State Street. Shareholders should allow
approximately 10 days for such form to be processed. The Funds will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. These procedures include requiring some form of personal identification
prior to acting upon instructions and tape recording of telephone instructions.
If a Fund fails to follow such procedures, it may be liable for any losses due
to unauthorized or fraudulent instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine. The Funds
reserve the right to refuse a telephone redemption if it is believed advisable
to do so. Procedures for redeeming Fund shares by telephone may be modified or
terminated without notice at any time.
Redemptions by Check. Upon request, each Fund will provide holders of Class Y
shares, without charge, with checks drawn on the Fund that will clear through
State Street. Shareholders will be subject to State Street's rules and
regulations governing such checking accounts. Checks will be sent usually within
ten business days following the date the account is established. Checks may be
made payable to the order of any payee in an amount of $250 or more. The payee
of the check may cash or deposit it like a check drawn on a bank. (Investors
should be aware that, as in the case with regular bank checks, certain banks may
not provide cash at the time of deposit, but will wait until they have received
payment from State Street.) When such a check is presented to State Street for
payment, State Street, as the shareholder's agent, causes the Fund to redeem a
sufficient number of full and fractional shares in the shareholder's account to
cover the amount of the check. Checks will be returned by State Street if there
are insufficient or uncollectable shares to meet the withdrawal amount. The
check writing procedure for withdrawal enables shareholders to continue earning
income on the shares to be redeemed up to but not including the date the
redemption check is presented to State Street for payment.
Shareholders wishing to use this method of redemption, should fill out
the appropriate part of the Share Purchase Application (including the Signature
Card) and mail the completed form to State Street Bank and Trust Company, P.O.
Box 9021, Boston, Massachusetts 02205-9827. Shareholders requesting this service
after an account has been opened must contact State Street since additional
documentation will be required. Currently, there is no charge either for checks
or for the clearance of any checks. This service may be terminated or altered at
any time.
General. Under unusual circumstances, a Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by Federal securities law.
The Funds reserve the right to close an account that through redemption has
remained below $1,000 for 30 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed. See the
Statement of Additional Information for further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the other Evergreen Funds by telephone or mail as described below. An
exchange which represents an initial investment in another Evergreen Fund must
amount to at least $1,000. Once an exchange request has been telephoned or
mailed, it is irrevocable and may not be modified or canceled. Exchanges will be
made on the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. Exchanges are subject to
minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be materially modified or
discontinued at any time by the Fund upon sixty days' notice to shareholders and
is only available in states in which shares of the fund being acquired may
lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares by telephone by calling
State Street at (800) 423-2615. Exchange requests made after 4:00 p.m. (Eastern
time) will be processed using the net asset value determined on the next
business day. During periods of drastic economic or market changes, shareholders
may experience difficulty in effecting telephone exchanges. You should follow
the procedures outlined below for exchanges by mail if you are unable to reach
State Street by telephone. If you wish to use the telephone exchange service you
should indicate this on the enclosed Share Purchase Application. As noted above,
each Fund will employ reasonable procedures to confirm that instructions for the
redemption or exchange of shares communicated by telephone are genuine. A
telephone exchange may be refused by a Fund or State Street if it is believed
advisable to do so. Procedures for exchanging Fund shares by telephone may be
modified or terminated at any time. Written requests for exchanges should follow
the same procedures outlined for written redemption requests in the section
entitled "How to Redeem Shares", however, no signature guarantee is required..
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the number on the front page of this Prospectus. Some services are
described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $25,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account two business days after the request
is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Retirement Plans. Eligible investors may invest in Evergreen Money Market Fund
under the following prototype retirement plans: (i) Individual Retirement
Account (IRA); (ii) Simplified Employee Pension (SEP) for sole proprietors,
partnerships and corporations; and (iii) Profit-Sharing and Money Purchase
Pension Plans for corporations and their employees.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the last
business day of each month, unless otherwise requested by a shareholder in
writing. If the transfer agent does not receive a written request for subsequent
dividends and/or distributions to be paid in cash at least three full business
days prior to a given record date, the dividends and/or distributions to be paid
to a shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds declare substantially all of their net income as dividends on
each business day. Such dividends are paid monthly. Net income, for dividend
purposes, includes accrued interest and any market discount or premium that day,
less the estimated expenses of a Fund. Gains or losses realized upon the sale of
portfolio securities are not included in net income, but are reflected in the
net asset value of a Fund's shares. Distributions of any net realized capital
gains will be made annually or more frequently as required by the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"). The amount of
dividends may fluctuate from day to day, and the dividend may be omitted on a
day where Fund expenses exceed net investment income. Dividends and
distributions generally are taxable in the year in which they are paid, except
any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in the immediately preceding December.
Such dividends will be automatically reinvested in full and fractional
shares of a Fund on the last business day of each month. However, shareholders
who so inform the transfer agent in writing may have their dividends paid out in
cash monthly. Shareholders who invest by check will be credited with a dividend
on the business day following initial investment. Shareholders will receive
dividends on investments made by federal funds bank wire the same day the wire
is received provided that wire purchases are received by State Street by 12 noon
(Eastern time). Shares purchased by qualified institutions via telephone as
described in "How to Purchase Shares" will receive the dividend declared on that
day if the telephone order is placed by 12 noon (Eastern time), and federal
funds are received by 4 p.m. (Eastern time). All other wire purchases received
after 12 noon (Eastern time) will earn dividends beginning the following
business day. Dividends accruing on the day of redemption will be paid to
redeeming shareholders except for redemptions by check and where proceeds are
wired the same day. (See "How to Redeem Shares".)
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. The excise tax generally does not apply to the tax exempt income
of a regulated investment company (such as Evergreen Tax Exempt Money Market
Fund) that pays exempt interest dividends. Except as noted below with respect to
Evergreen Tax Exempt Money Market Fund, most shareholders of the Funds normally
will have to pay Federal income taxes and any state or local taxes on the
dividends and distributions they receive from a Fund.
Evergreen Tax Exempt Money Market Fund will designate and pay
exempt-interest dividends derived from interest earned on qualifying tax exempt
obligations. Such exempt-interest dividends may be excluded by shareholders of
the Fund from their gross income for Federal income tax purposes, however, (1)
all or a portion of such exempt-interest dividends may be a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes to the extent that they are derived from certain types of private activity
bonds issued after August 7, 1986, and (2) all exempt-interest dividends will be
a component of "adjusted current earnings" for purposes of the Federal corporate
alternative minimum tax. Dividends paid from taxable income, if any, and
distributions of any net realized short-term capital gains (whether from tax
exempt or taxable obligations) are taxable as ordinary income, even though
received in additional Fund shares. Market discount recognized on taxable and
tax-free bonds is taxable as ordinary income, not as excludable income.
Following the end of each calendar year, every shareholder of the Funds
will be sent applicable tax information and information regarding the dividends
and capital gain distributions made during the calendar year. Under current law,
the highest Federal income tax rate applicable to net long-term capital gains
realized by individuals is 28%. The rate applicable to corporations is 35%.
Since the Funds' gross income is ordinarily expected to be interest income, it
is not expected that the 70% dividends-received deduction for corporations will
be applicable. Specific questions should be addressed to the investor's own tax
adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that the investor's social security
or taxpayer identification number is correct and that the investor is not
currently subject to backup withholding or is exempt from backup withholding.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Money Market Fund (formerly Evergreen Money Market
Trust) is a Massachusetts business trust organized in 1987, the Evergreen Tax
Exempt Money Market Fund is a separate investment series of the Evergreen
Municipal Trust, which is a Massachusetts business trust organized in 1988, and
the Evergreen Treasury Money Market Fund is a separate investment series of
Evergreen Investment Trust (formerly First Union Funds), which is a
Massachusetts business trust organized in 1984.
The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
The Trusts are empowered to establish, without shareholder approval, additional
investment series, which may have different investment objectives, and
additional classes of shares for any existing or future series. If an additional
series or class were established in a Fund, each share of the series or class
would normally be entitled to one vote for all purposes. Generally, shares of
each series and class would vote together as a single class on matters, such as
the election of Trustees, that affect each series and class in substantially the
same manner. Class A, B and Y shares have identical voting, dividend,
liquidation and other rights, except that each class bears, to the extent
applicable, its own distribution and transfer agency expenses as well as any
other expenses applicable only to a specific class. Each class of shares votes
separately with respect to Rule 12b-1 distribution plans and other matters for
which separate class voting is appropriate under applicable law. Shares are
entitled to dividends as determined by the Trustees and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund.
Registrar, Transfer Agent And Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Treasury Money Market Fund and which provides
certain sub-administrative services to Evergreen Asset in connection with its
role as investment adviser to Evergreen Tax Exempt Money Market Fund and
Evergreen Treasury Money Market Fund, including providing personnel to serve as
officers of the Funds.
Other Classes of Shares. Evergreen Money Market Fund offers three classes of
shares, Class A, Class B, and Class Y. Evergreen Tax Exempt Money Market Fund
and Evergreen Treasury Money Market Fund each offer two classes of shares, Class
A and Class Y. Class Y shares are the only Class offered by this Prospectus and
are only available to (i) all shareholders of record in one or more of the Funds
for which Evergreen Asset serves as investment adviser as of December 30, 1994,
(ii) certain institutional investors and (iii) investment advisory clients of
CMG, Evergreen Asset or their affiliates. The dividends payable with respect to
Class A and Class B shares will be less than those payable with respect to Class
Y shares due to the distribution and distribution and shareholder servicing
related expenses borne by Class A and Class B shares and the fact that such
expenses are not borne by Class Y shares.
Performance Information. From time to time, a Fund may quote its yield in
advertisements or in reports to shareholders. Yield information may be useful in
reviewing the performance of a Fund and for providing a basis for comparison
with other investment alternatives. However, since net investment income of a
Fund changes in response to fluctuations in interest rates and Fund expenses,
any given yield quotation should not be considered representative of a Fund's
yields for any future period.
The method of calculating each Fund's yield is set forth in the
Statement of Additional Information. Before investing in the Evergreen Tax
Exempt Money Market Fund, the investor may want to determine which investment --
tax-free or taxable -- will result in a higher after-tax return. To do this, the
yield on the tax-free investment should be divided by the decimal determined by
subtracting from 1 the highest Federal tax rate to which the investor currently
is subject. For example, if the tax-free yield is 6% and the investor's maximum
tax bracket is 36%, the computation is:
6% Tax-Free Yield /(1 - .36 Tax Rate) = 6/.64 = 9.38%
Taxable Yield.
In this example, the investor's after-tax return will be higher from
the 6% tax-free investment if available taxable yields are below 9.38%.
Conversely, the taxable investment will provide a higher return when taxable
yields exceed 9.38%. This is only an example and is not necessarily reflective
of a Fund's yield. The tax equivalent yield will be lower for investors in the
lower income brackets.
Comparative performance information may also be used from time to time
in advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., IBC/Donoghue's Money Fund Report, Bank Rate Monitor
and other industry publications.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which
Funds operate provide that no trustee or shareholder will be personally liable
for the obligations of the trust and that every written contract made by the
trust contain a provision to that effect. If any trustee or shareholder were
required to pay any liability of the trust, that person would be entitled to
reimbursement from the general assets of the trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN TREASURY MONEY MARKET FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN MONEY MARKET FUND, EVERGREEN TAX EXEMPT MONEY MARKET FUND
KPMG Peat Marwick, LLP One Mellon Bank Center Pittsburgh, Pennsylvania 15219
EVERGREEN TREASURY MONEY MARKET FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536128
STATEMENT OF ADDITIONAL INFORMATION
July 7, 1995
THE EVERGREEN MONEY MARKET FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
The Evergreen Money Market Trust ("Money Market")
Evergreen Tax Exempt Money Market Fund ("Tax Exempt")
Evergreen Treasury Money Market Fund (formerly First Union Treasury Money
Market Portfolio)("Treasury")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed below. It is not a prospectus and should be read in conjunction
with the Prospectus dated July 7, 1995 for the Fund in which you are making or
contemplating an investment. The Evergreen Money Market Funds are offered
through two separate prospectuses: one offering Class A and Class B shares of
Money Market and Class A shares of Tax Exempt and Treasury and a separate
prospectus offering Class Y shares of each Fund. Copies of each Prospectus may
be obtained without charge by calling the number listed above.
TABLE OF CONTENTS
Page
Investment Objectives and Policies................................
Investment Restrictions...........................................
Non-Fundamental Operating Policies................................
Certain Risk Considerations.......................................
Management........................................................
Investment Adviser................................................
Distribution Plans................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Purchase of Shares................................................
Performance Information...........................................
Financial Statements..............................................
Appendix A - Note, Bond And Commercial Paper Ratings
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objective and Policies" in each
Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds -
Investment Objective and Policies" in the relevant Prospectus. The following
expands upon the discussion in the Prospectus regarding certain investments of
each Fund.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........Tax Exempt and Money Market 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 each 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.
2........Ten Percent Limitation on Securities of Any One Issuer
.........Neither Money Market nor Tax-Exempt may purchase more than 10% of any
class of securities of any one issuer other than the U.S. government and its
agencies or instrumentalities.
3........Investment for Purposes of Control or Management
.........Neither Money Market nor Tax-Exempt may invest in companies for the
purpose of exercising control or management.
4........Purchase of Securities on Margin
.........No Fund may 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.
5........Unseasoned Issuers
.........Money Market 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.
.........Tax-Exempt 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) the 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.
<PAGE>
6........Underwriting
.........Money Market and Tax-Exempt may not engage in the business of
underwriting the securities of other issuers; provided that the purchase by
Tax-Exempt 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 the Fund's investment program
shall not be deemed to be an underwriting.
7........Interests in Oil, Gas or Other Mineral Exploration or
Development Programs
.........Neither Money Market nor Tax-Exempt may purchase, sell or invest in
interests in oil, gas or other mineral exploration or development programs.
8........Concentration in Any One Industry
.........Neither Money Market nor Tax-Exempt may 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 Tax-Exempt, to municipal securities and
certificates of deposit and bankers' acceptances issued by domestic branches of
U.S. banks.
9........Warrants
.........Tax-Exempt may not invest more than 5% of its 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.
10.......Ownership by Trustees/Officers
.........Neither Money Market nor Tax-Exempt may 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.
11.......Short Sales
.........None of the Funds may make short sales of securities or maintain a
short position; except that, in the case of Treasury, 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.......Lending of Funds and Securities
.........Tax-Exempt and Money Market may not lend their funds to other persons;
however, they may purchase issues of debt securities, enter into repurchase
agreements and, in the case of Tax-Exempt, acquire privately negotiated loans
made to municipal borrowers.
.........Money Market may not lend its funds to other persons, provided that it
may purchase money market securities or enter into repurchase agreements.
.........Treasury will not lend any of its assets, except that it may purchase
or hold U.S. Treasury obligations, including repurchase agreements.
.........Neither Money Market nor Tax-Exempt may 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 United States 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.
13.......Commodities
.........Tax-Exempt and Money Market may not purchase, sell or invest in
commodities, commodity contracts or financial futures contracts.
14.......Real Estate
.........The Funds may not purchase, sell or invest in real estate or interests
in real estate, except that Money Market may purchase, sell or invest in
marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts, and Tax-Exempt may purchase
municipal securities and other debt securities secured by real estate or
interests therein.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
.........Tax-Exempt and Money Market 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
Funds will not enter into reverse repurchase agreements exceeding 5% of the
value of their total assets.
.........Treasury 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. Treasury will not mortgage, pledge or hypothecate any assets
except to secure permitted borrowings. In these cases, it 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.
16.......Options
.........Money Market and Tax-Exempt may not write, purchase or sell put or call
options, or combinations thereof, except Money Market may do so as permitted
under "Description of the Funds - Investment Objective and Policies" in the
Prospectus and Tax- Exempt may purchase securities with rights to put securities
to the seller in accordance with its investment program.
17.......Investment in Municipal Securities
.........Tax-Exempt may not invest more than 20% of its total assets in
securities other than municipal securities (as described under "Description of
Funds - Investment Objective and Policies" in the Fund's Prospectus), unless
extraordinary circumstances dictate a more defensive posture.
18.......Investment in Money Market Securities
.........Money Market may not purchase any securities other than money market
instruments (as described under "Description of Funds - Investment Objectives
and Policies" in the Fund's Prospectus).
19.......Investing in Securities of Other Investment Companies
.........Treasury*, Money Market* and Tax-Exempt* 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 the Funds in shares of another
investment company would be subject to such duplicate expenses.
4
<PAGE>
20........Other. In order to comply with certain state blue sky limitations:
-----
...........Money Market and Tax-Exempt interpret fundamental investment
restriction 7 to prohibit investments in oil, gas and mineral leases.
...........Money Market and Tax-Exempt interpret fundamental investment
restriction 14 to prohibit investment in real estate limited partnerships which
are not readily marketable.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
CERTAIN RISK CONSIDERATIONS
...........There can be no assurance that a Fund will achieve its investment
objective and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objective and Policies"
in the Prospectus.
MANAGEMENT
The Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
Laurence B. Ashkin (67), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam*(68), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (70), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Robert J. Jeffries (72), 2118 New Bedford Drive, Sun City Center, FL-Trustee.
Corporate consultant since 1967.
Gerald M. McDonnell (55), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (56), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
William Walt Pettit*(39), Holcomb and Pettit, P.A., 207 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990; Attorney, Clontz and Clontz from 1980 to 1990.
Russell A. Salton, III, M.D. (47), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (35), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
5
<PAGE>
Except for Messrs. Ashkin, Bam and Jeffries, who are not Trustees of
Evergreen Investment Trust, the Trustees and officers listed above hold the same
positions with a total of ten registered investment companies offering a total
of thirty-one investment funds within the Evergreen mutual fund complex.
- --------
* Mr. Bam and Mr. Pettit may each be deemed to be an "interested person"
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act").
The officers of the Trusts are all officers and/or employees of Furman
Selz Incorporated. Furman Selz Incorporated is the parent of Evergreen Funds
Distributor, Inc., the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee
who is an "affiliated person" of either First Union National Bank of North
Carolina or Evergreen Asset Management Corp. or their affiliates. See
"Investment Adviser." Currently, none of the Trustees is an "affiliated person"
as defined in the 1940 Act. The Trusts pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses (and $50 for each telephone conference meeting) as follows:
Name of Trust/Fund Annual Retainer Meeting Fee
Money Market $4,000* $300
Evergreen Municipal Trust $4,000* $300
Tax Exempt
Evergreen Investment Trust $9,000** $1,500**
Treasury
* Allocated among the Evergreen Money Market Fund, which is not a series fund,
and Evergreen Municipal Trust which offers four investment series, the Evergreen
Tax Exempt Money Market Fund, Evergreen Short-Intermediate Municipal Fund,
Evergreen Short-Intermediate Fund-CA, and Evergreen National Tax-Free Fund.
** Evergreen Investment Trust pays an annual retainer to each trustee and a
per-meeting fee that are allocated among its fifteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
Set forth below for each of the Trustees is the aggregate compensation
paid to such Trustees by each Trust for the fiscal year ended August 31, 1994
(fiscal year ended December 31, 1994 for Treasury)
6
<PAGE>
Total
Compensation
Aggregate Compensation From Trust From Trusts
& Fund
Name of Money Municipal Investment Complex Paid
Person Market Trust Trust* to Trustees
Laurence Ashkin 3,031 2,443 --- 29,800
Foster Bam 3,031 2,493 --- 29,850
James S. Howell 1,090 1,098 14,900 26,900
Robert J.
Jeffries 3,031 2,443 26,800
Gerald M.
McDonnell 1,390 1,198 11,900 26,100
Thomas L.
McVerry 1,390 1,248 11,900 26,150
William Walt
Pettit 1,390 1,198 11,900 26,100
Russell A.
Salton, III, M.D. 1,390 1,198 11,900 26,100
Michael S.
Scofield 1,390 1,198 11,700 25,650
* Formerly known as First Union Funds.
No officer or Trustee of the Trusts owned Class B shares of any Fund as
of the date hereof. The number and percent of outstanding shares of each Fund
owned by officers and Trustees as a group on June 15, 1995, is as follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of
Name of Fund as a Group Shares Outstanding
Money Market 7,557,274 2.53%
Tax Exempt 607,888 .14%
Treasury -0- -0-
Set forth below is information with respect to each person, who, to
each Fund's knowledge, owned beneficially or of record more than 5% of a class
of each Fund's total outstanding shares and their aggregate ownership of the
Fund's total outstanding shares as of June 15, 1995.
Name of % of
Name and Address* Fund/Class No. of Shares Class/Fund
- ---------------- ---------- ------------- ----------
First Union National Bank of FL Money Market/A 211,909,336 39.51%/25.07%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Money Market/A 75,313,128 14.04%/8.91%
Cap Account
Attn: Shelia Bryendon CMG 1164
One First Union Center
301 S. College Street
Charlotte, NC 28202-6000
7
<PAGE>
First Union National Bank of VA Money Market/A 43,639,682 8.14%/5.16%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
Estate of Catherine Ken Doyle Money Market/A 207,475 11.59%/.02%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. FBO Money Market/B 1,009 8.99%/0%
Kevin T. Lonergan
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of VA Money Market/B 10,008 89.21%/0%
C/F
Clifton L. McDonald IRA
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Money Market/Y 55,236,710 93.75%/6.53%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank of FL Tax-Exempt/A 187,277,537 36.59%/19.82%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of NC Tax-Exempt/A 131,293,365 25.65%/13.90%
Cap Account
Attn: Shelia Bryendon CMG 1164
One First Union Cneter
301 S. College Street
Charlotte, NC 28288-0001
First Union National Bank of GA Tax-Exempt/A 32,907,348 6.43%/3.48%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of VA Tax-Exempt/A 30,618,267 5.98%/3.24%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
Kent S. Hathaway Tax Exempt/A 101,048 28.29%/.01%
Martha M. Hathaway
2727 Inverness Road
Charlotte, NC 28209-3601
Fubs & Co. Febo Tax Exempt/A 170,589 47.76%/1.02%
Feldman & Koenig PA Escrow
Agent F/B/O Robert J. F. Brobyn
and Margaret M. Brobyn
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Tax Exempt/A 25,330 7.09%/0%
Estate of Chavalit Patrachai
Ralph M. McBride Executor
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Tax-Exempt/Y 76,935,104 100%/8.14%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-151
301 S. Tyron Street
Charlotte, NC 28288
First Union National Bank of FL Treasury/A 324,451,247 32.48%/23.99%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
8
<PAGE>
First Union National Bank of NC Treasury/A 204,205,682 20.44%/15.10%
Attn: Cap Account Dept.
One First Union Center
301 S. College Street
Charlotte, NC 28202-6000
First Union National Bank of VA Treasury/A 107,586,389 10.77%/7.95%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank of GA Treasury/A 82,114,367 8.22%/6.07%
Attn: Cap Account Dept.
One First Union Center
Charlotte, NC 28288
First Union National Bank Treasury/Y 353,847,491 100%/26.12%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
- ---------------------------------
*First Union National Bank of North Carolina and its affiliates act in
various capacities for numerous accounts. As a result of its ownership of 79.23%
of Treasury, 45.67% of Money Market and 48.67% of Tax Exempt on June 15, 1995,
First Union National Bank of North Carolina and its affiliated banks may be
deemed to "control" each Fund as that term is defined in the 1940 Act.
INVESTMENT ADVISER
(See also "Management of the Fund" in each Fund's Prospectus)
The investment adviser of Money Market and Tax Exempt is Evergreen
Asset Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York or ("Evergreen Asset" or the "Adviser."). Evergreen
Asset is owned by First Union National Bank of North Carolina ("FUNB" or the
"Adviser") which, in turn, is a subsidiary of First Union Corporation ("First
Union"), a bank holding company headquartered in Charlotte, North Carolina. The
investment adviser of Treasury is FUNB which provides investment advisory
services through its Capital Management Group. The Directors of Evergreen Asset
are Richard K. Wagoner and Barbara I. Colvin. The executive officers of
Evergreen Asset are Stephen A. Lieber, Chairman and Co-Chief Executive Officer,
Nola Maddox Falcone, President and Co-Chief Executive Officer, Theodore J.
Israel, Jr., Executive Vice President, Joseph J. McBrien, Senior Vice President
and General Counsel, and George R. Gaspari, Senior Vice President and Chief
Financial Officer.
On June 30, 1994, Evergreen Asset and Lieber and Company ("Lieber")
were acquired by First Union through certain of its subsidiaries. Evergreen
Asset was acquired by FUNB, a wholly-owned subsidiary (except for directors'
qualifying shares) of First Union, by merger into EAMC Corporation ("EAMC") a
wholly-owned subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset
Management Corp." and succeeded to the business of Evergreen Asset.
Contemporaneously with the succession of EAMC to the business of Evergreen Asset
and its assumption of the name "Evergreen Asset Management Corp.", Money Market
and Tax Exempt entered into a new investment advisory agreement with EAMC and
into
9
<PAGE>
a distribution agreement with Evergreen Funds Distributor, Inc. (the
"Distributor"), a subsidiary of Furman Selz Incorporated. At that time, EAMC
also entered into a new sub-advisory agreement with Lieber pursuant to which
Lieber provides certain services to Evergreen Asset in connection with its
duties as investment adviser.
The partnership interests in Lieber, a New York general partnership,
were acquired by Lieber I Corp. and Lieber II Corp., which are both wholly-owned
subsidiaries of FUNB. The business of Lieber is being continued. The new
advisory and sub-advisory agreements were approved by the shareholders of Money
Market and Tax Exempt at their meeting held on June 23, 1994, and became
effective on June 30, 1994.
Under its Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registration under the Securities Act of 1933,
as amended, and the 1940 Act, printing prospectuses (for existing shareholders)
as they are updated, state qualifications, share certificates, mailings,
brokerage, custodian and stock transfer charges, printing, legal and auditing
expenses, expenses of shareholder meetings and reports to shareholders.
Notwithstanding the foregoing, each Adviser will pay the costs of printing and
distributing prospectuses used for prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
TAX EXEMPT Year Ended Year Ended Year Ended
8/31/94 8/31/93 8/31/92
Advisory Fee $2,126,246 $2,028,966 $2,272,890
--------- --------- ---------
Waiver ($1,256,653) ($1,168,131) ($1,411,094)
Net Advisory Fee $869,593 $860,835 $861,796
MONEY MARKET Year Ended Year Ended Year Ended
8/31/94 8/31/93 8/31/92
Advisory Fee $1,245,513 $1,637,123 $2,089,939
---------- --------- ---------
Waiver ($974,438) ($1,047,935) ($1,507,506)
Net Advisory Fee $271,075 $589,188 $582,433
TREASURY Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $2,549,955 $1,977,645 $1,723,873
--------- --------- ---------
Waiver ($1,948,237) ($1,712,975) ($1,492,021)
Net Advisory Fee $601,718 $264,670 $231,852
========= ========= =========
Expense Limitations
Each Adviser's fee will be reduced by, or the Adviser will reimburse
the Funds (except Money Market and Tax Exempt which have specific percentage
limitations described below) for any amount necessary to prevent such expenses
(exclusive of taxes, interest, brokerage commissions and extraordinary expenses,
but inclusive of the Adviser's fee) from exceeding the most restrictive of the
expense limitations imposed by state securities commissions of the states in
which the Funds' shares are then registered or qualified for sale.
Reimbursement, when necessary, will be made monthly in the same manner in which
the advisory fee is paid. Currently the most restrictive state expense
limitation is 2.5% of the first $30,000,000 of the Fund's average daily net
assets, 2% of the next $70,000,000 of such assets and 1.5% of such assets in
excess of $100,000,000.
With respect to Money Market and Tax Exempt, Evergreen Asset has
voluntarily agreed to reimburse each Fund to the extent that any of these Funds'
aggregate operating expenses (including the Adviser's fee but excluding
interest, taxes, brokerage commissions, and extraordinary expenses, and for
Class A and Class B shares Rule 12b-1 distribution fees and shareholder
servicing fees payable exceed 1.00% of their daily average net assets for any
fiscal year.
10
<PAGE>
The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignment. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder. The Investment Advisory Agreements with respect to Money Market and
Tax Exempt were approved by each Fund's shareholders on June 23, 1994, became
effective on June 30, 1994, and will continue in effect until June 30, 1996, and
thereafter from year to year provided that their continuance is approved
annually by a vote of a majority of the Trustees of each Trust including a
majority of those Trustees who are not parties thereto or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person at a meeting duly
called for the purpose of voting on such approval or a majority of the
outstanding voting shares of each Fund. With respect to Treasury, the Investment
Advisory Agreement dated February 28, 1985 and amended from time to time
thereafter was last approved by the Trustees of Evergreen Investment Trust
(formerly, First Union Funds) on April 20, 1995 and it will continue from year
to year with respect to each Fund provided that such continuance is approved
annually by a vote of a majority of the Trustees of Evergreen Investment Trust
including a majority of those Trustees who are not parties thereto or
"interested persons" of any such party cast in person at a meeting duly called
for the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities of each Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.
Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, the Adviser
attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sales transactions to be effected between each Fund and the
other registered investment companies for which either Evergreen Asset or FUNB
acts as investment adviser or between the Fund and any advisory clients of
Evergreen Asset, FUNB or Lieber & Company. Each Fund may from time to time
engage in such transactions but only in accordance with these procedures and if
they are equitable to each participant and consistent with each participant's
investment objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the fiscal years ended December 31, 1994, 1993 and 1992,
Treasury incurred $613,889, $490,126 and $175,540 in administrative service
costs, of which $111,107, $198,476 and $208,794 were waived, respectively.
11
<PAGE>
Commencing July 1, 1995, Evergreen Asset will provide administrative
services to each of the portfolios of Evergreen Investment Trust for a fee based
on the average daily net assets of each fund administered by Evergreen Asset for
which Evergreen Asset or FUNB calculated daily and payable monthly at the
following annual rates: .050% on the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of the Distributor, serves as sub-administrator to
Treasury and is entitled to receive a fee based on the average daily net assets
of Treasury at a rate from the Fund calculated on the total assets of the mutual
funds administered by Evergreen Asset for which FUNB or Evergreen Asset also
serve as investment adviser, calculated in accordance with the following
schedule: of the first $7 billion; .0075% on the next $3 billion; .0050% on the
next $15 billion; .0040% on assets in excess of $25 billion. The total assets of
mutual funds administered by Evergreen Asset for which Evergreen Asset or FUNB
serves as investment adviser as of March 31, 1995 were approximately $7.95
billion.
DISTRIBUTION PLANS
Reference is made to "Management of the Fund - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, and for Money Market its Class B shares and are
charged as class expenses, as accrued. The distribution fees attributable to the
Class B shares are designed to permit an investor to purchase such shares
through broker-dealers without the assessment of a front-end sales charge, while
at the same time permitting the Distributor to compensate broker-dealers in
connection with the sale of such shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, and Class B shares (to the extent that
each Fund offers such classes) (each a "Plan" and collectively, the "Plans"),
the Treasurer of each Fund reports the amounts expended under the Plan and the
purposes for which such expenditures were made to the Trustees of each Trust for
their review on a quarterly basis. Also, each Plan provides that the selection
and nomination of Trustees who are not "interested persons" of each Trust (as
defined in the 1940 Act) are committed to the discretion of such disinterested
Trustees then in office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Money Market commenced offering Class A or B shares and Tax Exempt
commenced offering Class A shares, on January 3, 1995. Each Plan with respect to
such Funds became effective on December 30, 1994 and was initially approved by
the sole shareholder of each Class of shares of each Fund with respect to which
a Plan was adopted on that date and by the unanimous vote of the Trustees of
each Trust, including the disinterested Trustees voting separately, at a meeting
called for that purpose and held on December 13, 1994. The Distribution
Agreements between each Fund and the Distributor, pursuant to which distribution
fees are paid under the Plans by each Fund with respect to its Class A and Class
B shares were also approved at the December 13, 1994 meeting by the unanimous
vote of the Trustees, including the disinterested Trustees voting separately.
Each Plan and Distribution Agreement will continue in effect for successive
twelve-month periods provided, however, that such continuance is specifically
approved at least annually by the Trustees of each Trust or by vote of the
holders of a majority of the outstanding voting securities (as defined in the
1940 Act) of that Class, and, in either case, by a majority of the Trustees of
the Trust who are not parties to the Agreement or interested persons, as defined
in the 1940 Act, of any such party (other than as Trustees of the Trust) and who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
Prior to July 7, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for Treasury as well as other
portfolios of Evergreen Investment Trust. The Distribution Agreement between
Treasury and the Distributor pursuant to which distribution fees are paid under
the Plans by Treasury with respect to its Class A shares was approved on April
20, 1995 by the unanimous vote of the Trustees including the disinterested
Trustees voting separately.
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The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A and Class B shares. The
Plans are designed to (i) stimulate brokers to provide distribution and
administrative support services to each Fund and holders of Class A and Class B
shares and (ii) stimulate administrators to render administrative support
services to the Fund and holders of Class A and Class B shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A and Class B shares; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests for its Class A and Class B shares.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. Any Plan or Distribution
Agreement may be terminated (a) by a Fund without penalty at any time by a
majority vote of the holders of the outstanding voting securities of the Fund,
voting separately by Class or by a majority vote of the Trustees who are not
"interested persons" as defined in the 1940 Act, or (b) by the Distributor. To
terminate any Distribution Agreement, any party must give the other parties 60
days' written notice; to terminate a Plan only, the Fund need give no notice to
the Distributor. Any Distribution Agreement will terminate automatically in the
event of its assignment.
For the fiscal year ended December 31, 1994, Treasury incurred
$1,451,396 in distribution services fees on behalf of Class A shares.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser,
subject to the supervision and control of the Trustees. Orders for the purchase
and sale of securities and other investments are placed by employees of the
Adviser, all of whom, in the case of Evergreen Asset, are associated with
Lieber. In general, the same individuals perform the same functions for the
other funds managed by the Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. A Fund will also consider such factors as the price of the securities and
the size and difficulty of execution of the order. If these objectives may be
met with more than one firm, the Fund will also
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consider the availability of statistical and investment data and economic facts
and opinions helpful to the Fund. To the extent that receipt of these services
for which the Adviser or its affiliates might otherwise have paid, it would tend
to reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the Securities and Exchange Commission,
Lieber may be compensated for effecting transactions in portfolio securities for
a Fund on a national securities exchange provided the conditions of the rules
are met. Each Fund advised by Evergreen Asset has entered into an agreement with
Lieber authorizing Lieber to retain compensation for brokerage services. In
accordance with such agreement, it is contemplated that Lieber, a member of the
New York and American Stock Exchanges, will, to the extent practicable, provide
brokerage services to the Fund with respect to substantially all securities
transactions effected on the New York and American Stock Exchanges. In such
transactions, a Fund will seek the best execution at the most favorable price
while paying a commission rate no higher than that offered to other clients of
Lieber or that which can be reasonably expected to be offered by an unaffiliated
broker-dealer having comparable execution capability in a similar transaction.
However, no Fund will engage in transactions in which Lieber would be a
principal. While no Fund advised by Evergreen Asset contemplates any ongoing
arrangements with other brokerage firms, brokerage business may be given from
time to time to other firms. In addition, the Trustees have adopted procedures
pursuant to Rule 17e-1 under the 1940 Act to ensure that all brokerage
transactions with Lieber, as an affiliated broker-dealer, are fair and
reasonable.
Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements does not provide for a
reduction of the Adviser's fee with respect to any Fund by the amount of any
profits earned by Lieber from brokerage commissions generated by portfolio
transactions of the Fund.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward foreign contracts) derived with respect
to its business of investing in such securities; (b) derive less than 30% of its
gross income from the sale or other disposition of securities, options, futures
or forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. Government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
Federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income generally
will be taxed to the shareholders as ordinary income. Investment company taxable
income includes net investment income and net realized short-term gains (if
any). Any dividends received by a Fund from domestic corporations will
constitute a portion of the Fund's gross investment income. It is anticipated
that this portion of the dividends paid by a Fund (other than distributions of
securities profits) will qualify for the 70% dividends-received deduction for
corporations. Shareholders will be informed of the amounts of dividends which so
qualify.
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Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.
Distributions by each Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% Federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
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withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Exempt
With respect to Tax Exempt, to the extent that the Fund distributes
exempt interest dividends to a shareholder, interest on indebtedness incurred or
continued by such shareholder to purchase or carry shares of the Fund is not
deductible. Furthermore, entities or persons who are "substantial users" (or
related persons) of facilities financed by "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds) should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is defined generally as including a "non-exempt person" who regularly uses
in its trade or business a part of a facility financed from the proceeds of
industrial development bonds.
The percentage of the total dividends paid by a Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
The following information supplements that set forth in each Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value.
On each Fund business day on which a purchase or redemption order is received by
a Fund and trading in the types of securities in which a Fund invests might
materially affect the value of Fund shares, the per share net asset value of
each such Fund is computed in accordance with the Declaration of Trust and
By-Laws governing each Fund twice daily, at 12 noon Eastern time and as of the
next close of regular trading on the New York Stock Exchange (the "Exchange")
(currently 4:00 p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares then
outstanding. A Fund business day is any weekday, exclusive of national holidays
on which the Exchange is closed and Good Friday. Each Fund's securities are
valued at amortized cost. Under this method of valuation, a security is
initially valued at its acquisition cost and, thereafter, a constant straight
line amortization of any discount or premium is assumed each day regardless of
the impact of fluctuating interest rates on the market value of the security. If
accurate quotations are not available, securities will be valued at fair value
determined in good faith by the Board of Trustees.
PURCHASE OF SHARES
The following information supplements that set forth in each Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares."
General
Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value without any front-end or contingent deferred
sales charges or with a contingent deferred sales charge (the "deferred sales
charge alternative") as described below. Class Y shares which, as described
below, are not offered to the general public, are offered without any front-end
or contingent sales charges. Shares of each Fund are offered on a continuous
basis through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into selected dealer
agreements with the Distributor ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their affiliates, that have
entered into selected agent agreements with the Distributor ("selected agents"),
or (iii) the Distributor. The minimum for initial investments is $1,000; there
is no minimum for subsequent investments. The subscriber may use the Share
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Purchase Application available from the Distributor for his or her initial
investment. Sales personnel of selected dealers and agents distributing a Fund's
shares may receive differing compensation for selling Class A or Class B shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined, as described below. Orders received by the Distributor prior to the
close of regular trading on the Exchange on each day the Exchange is open for
trading are priced at the net asset value computed as of the close of regular
trading on the Exchange on that day. In the case of orders for purchase of
shares placed through selected dealers or agents, the applicable public offering
price will be the net asset value as so determined, but only if the selected
dealer or agent receives the order prior to the close of regular trading on the
Exchange and transmits it to the Distributor prior to its close of business that
same day (normally 5:00 p.m. Eastern time). The selected dealer or agent is
responsible for transmitting such orders by 5:00 p.m. If the selected dealer or
agent fails to do so, the investor's right to that day's closing price must be
settled between the investor and the selected dealer or agent. If the selected
dealer or agent receives the order after the close of regular trading on the
Exchange, the price will be based on the net asset value determined as of the
close of regular trading on the Exchange on the next day it is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing Class Y shares are not issued except upon written request to the
Fund by the shareholder or his or her authorized selected dealer or agent. This
facilitates later redemption and relieves the shareholder of the responsibility
for and inconvenience of lost or stolen certificates. No certificates are issued
for fractional shares, although such shares remain in the shareholder's account
on the records of a Fund, or for Class A or B shares of any Fund.
Alternative Purchase Arrangements
Except as noted, each Fund issues three classes of shares: (i) Class A
shares, which are sold to investors choosing the no front-end sales charge or
contingent deferred sales charge alternative; (ii) Class B shares, which are
sold to investors choosing the deferred sales charge alternative and which are
not currently offered by Tax Exempt and Treasury; and (iii) Class Y shares,
which are offered only to (a) persons who at or prior to December 30, 1994 owned
shares in a mutual fund advised by Evergreen Asset, (b) certain investment
advisory clients of the Advisers and their affiliates, and (c) institutional
investors. The three classes of shares each represent an interest in the same
portfolio of investments of the Fund, have the same rights and are identical in
all respects, except that (I) only Class A and Class B shares are subject to a
Rule 12b-1 distribution fee, (II) Class B shares bear the expense of the
deferred sales charge, (III) Class B shares bear the expense of a higher Rule
12b-1 distribution services fee than Class A shares and higher transfer agency
costs, (IV) with the exception of Class Y shares, each Class of each Fund has
exclusive voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid which relates to a
specific Class and other matters for which separate Class voting is appropriate
under applicable law, provided that, if the Fund submits to a simultaneous vote
of Class A and Class B shareholders an amendment to the Rule 12b-1 Plan that
would materially increase the amount to be paid thereunder with respect to the
Class A shares, the Class A shareholders and the Class B shareholders will vote
separately by Class, and (VI) only the
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Class B shares are subject to a conversion feature. Each Class has different
exchange privileges and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial. The decision as to which
Class of shares of Money Market is more beneficial depends primarily on whether
or not the investor wishes to exchange all or part of any Class B shares
purchased for Class B shares of another Evergreen mutual fund at some future
date. If the investor does not contemplate such an exchange, it is probably in
such investor's best interest to purchase Class A shares. Class A shares are
subject to a lower distribution services fee and, accordingly, pay
correspondingly higher dividends per share than Class B shares.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B and Class Y
shares. On an ongoing basis, the Trustees, pursuant to their fiduciary duties
under the 1940 Act and state laws, will seek to ensure that no such conflict
arises.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee enables the Fund to sell the Class B shares without a sales charge
being deducted at the time of purchase. The higher distribution services fee
incurred by Class B shares will cause such shares to have a higher expense ratio
and to pay lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within seven years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed, that the redemption is first of any Class A
shares in the shareholder's Fund account, second of Class B shares held for over
eight years or Class B shares acquired pursuant to reinvestment of dividends or
distributions and third of Class B shares held longest during the eight-year
period.
To illustrate, assume that an investor purchased 1,000 Class B shares
at $1 per share (at a cost of $1,000) and, during such time, the investor has
acquired 100 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 500 Class B shares, 100
Class B shares will not be subject to charge because of dividend reinvestment.
Therefore, of the $500 of the shares redeemed $400 of the redemption proceeds
(400 shares x $1 original purchase price) will be charged at a rate of 4.0% (the
applicable rate in the second year after purchase for a contingent deferred
sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
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Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee imposed on Class B
shares. Such conversion will be on the basis of the relative net asset values of
the two classes, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee and transfer agency costs
with respect to Class B shares does not result in the dividends or distributions
payable with respect to other Classes of a Fund's shares being deemed
"preferential dividends" under the Code, and (ii) the conversion of Class B
shares to Class A shares does not constitute a taxable event under Federal
income tax law. The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution
services fee for an indefinite period which may extend beyond the period ending
eight years after the end of the calendar month in which the shareholder's
purchase order was accepted.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
GENERAL INFORMATION ABOUT THE FUNDS
(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
Evergreen Money Market Fund is a Massachusetts business trust. The
Evergreen Tax Exempt Money Market Fund is a separate series of the Evergreen
Municipal Trust, a Massachusetts business trust. The Evergreen Treasury Money
Market Fund, which prior to July 7, 1995 was known as the First Union Treasury
Money Market Portfolio, is a separate series of Evergreen Investment Trust, a
Massachusetts business trust. On July 7, 1995, First Union Funds changed its
name to Evergreen Investment Trust. On December 14, 1992, The Salem Funds
changed its name to First Union Funds. The above-named Trusts are individually
referred to in this Statement of Additional Information as the "Trust" and
collectively as the "Trusts." Each Trust is governed by a board of trustees.
Unless otherwise stated, references to the "Board of Trustees" or "Trustees" in
this Statement of Additional Information refer to the Trustees of all the
Trusts.
Money Market and Tax Exempt may issue an unlimited number of shares of
beneficial interest with a $0.0001 par value. Treasury may issue an unlimited
number of shares of beneficial interest without par value. All shares of these
Funds have equal rights and privileges. Each share is entitled to one vote, to
participate equally in dividends and distributions declared by the Funds and on
liquidation to their proportionate share of the assets remaining after
satisfaction of outstanding liabilities. Shares of these Funds are fully paid,
nonassessable and fully transferable when issued and have no pre-emptive,
19
<PAGE>
conversion or exchange rights. Fractional shares have proportionally the same
rights, including voting rights, as are provided for a full share.
Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Fund or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the State of Massachusetts. If shares of another
series of a Trust were issued in connection with the creation of additional
investment portfolios, each share of the newly created portfolio would normally
be entitled to one vote for all purposes. Generally, shares of all portfolios
would vote as a single series on matters, such as the election of Trustees, that
affected all portfolios in substantially the same manner. As to matters
affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related an other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of each Fund. The rights of the holders of
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of shares representing
interests in each Fund. In the event a Fund were to issue additional classes of
shares other than those described herein, no further relief from the Securities
and Exchange Commission would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue,
New York, New York 10169, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the Agreement
between the Fund and the Distributor, the Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester, Washington, D.C., serves as counsel to the Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors
of Money Market and Tax Exempt.
KPMG Peat Marwick LLP has been selected to be the independent auditors
of Treasury.
20
<PAGE>
PERFORMANCE INFORMATION
YIELD CALCULATIONS
Money Market, Tax Exempt and Treasury may quote a "Current Yield" or
"Effective Yield" from time to time. The Current Yield is an annualized yield
based on the actual total return for a seven-day period. The Effective Yield is
an annualized yield based on a compounding of the Current Yield. These yields
are each computed by first determining the "Net Change in Account Value" for a
hypothetical account having a share balance of one share at the beginning of a
seven-day period ("Beginning Account Value"), excluding capital changes. The Net
Change in Account Value will generally equal the total dividends declared with
respect to the account.
The yields are then computed as follows:
Net Change in Account Value
Current Yield = Beginning Account Value x 365/7
Effective Yield = (1 + Total Dividend for 7 days) 365/7-1
Yield fluctuations may reflect changes in a Fund's net investment income, and
portfolio changes resulting from net purchases or net redemptions of the Fund's
shares may affect the yield. Accordingly, a Fund's yield may vary from day to
day, and the yield stated for a particular past period is not necessarily
representative of its future yield. Since the Funds use the amortized cost
method of net asset value computation, it does not anticipate any change in
yield resulting from any unrealized gains or losses or unrealized appreciation
or depreciation not reflected in the yield computation, or change in net asset
value during the period used for computing yield. If any of these conditions
should occur, yield quotations would be suspended. A Fund's yield is not
guaranteed, and the principal is not insured.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The current yield and effective yield of each Fund for the seven-day
period ended October 31, 1994 (December 31, 1994 with respect to Treasury) for
each Class of shares offered by the Funds is set forth in the table below:
Current Effective
Yield Yield
Money Market
Class A * *
Class B * *
Class Y 4.21% 4.30%
Tax Exempt
Class A * *
Class Y 2.87% 2.91%
Treasury
Class A 4.97% 5.09%
Class Y 5.27% 5.41%
* Not available. These classes commenced operations on or after January 3, 1995.
21
<PAGE>
GENERAL
From time to time, a Fund may quote its performance in advertising and other
types of literature as compared to the performance of the Bank Rate Monitor
National Index which publishes weekly average rates of 50 leading bank and
thrift institution money market deposit accounts. A Fund's performance may also
be compared to those of other mutual funds having similar objectives. This
comparative performance would be expressed as a ranking prepared by Lipper
Analytical Services, Inc., Donoghue's Money Fund Report or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statement filed by the Trusts with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely Price Waterhouse LLP (in the case of Money
Market and Tax Exempt) or KPMG Peat Marwick LLP (in the case of Treasury) are
incorporated by reference in this Statement of Additional Information. The
Annual Reports to Shareholders for each Fund, which contain the referenced
statements, are available upon request and without charge.
22
<PAGE>
APPENDIX A - NOTE, BOND AND COMMERCIAL PAPER RATINGS
NOTE RATINGS
Moody's Investors Service, Inc.: MIG-1 -- the best quality. MIG-2 --
high quality, with margins of protection ample though not so large as in the
preceding group. MIG-3 -- favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less well
established.
Standard & Poor's Ratings Group, Inc.: SP-1 -- Very strong or strong
capacity to pay principal and interest. SP-2 -- Satisfactory capacity to pay
principal and interest.
BOND RATINGS
Moody's Investors Service: Aaa -- judged to be the best quality, carry
the smallest degree of investment risk; Aa -- judged to be of high quality by
all standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as medium grade
obligations which are neither highly protected nor poorly secured. Moody's
Investors Service also applies numerical indicators, 1, 2 and 3, to rating
categories Aa through Baa. The modifier 1 indicates that the security is in the
higher end of its rating category; the modifier 2 indicates a mid-range ranking;
and 3 indicates a ranking toward the lower end of the category.
Standard & Poor's Ratings Group: AAA -- highest grade obligations,
possesses the ultimate degree of protection as to principal and interest; AA --
also qualify as high grade obligations, and in the majority of instances differ
from AAA issues only in small degree; A -- regarded as upper medium grade, have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions, interest and principal are regarded
as safe; BBB -- regarded as having adequate capacity to pay interest and repay
principal but are more susceptible than higher rated obligations to the adverse
effects of changes in economic and trade conditions. Standard & Poor's Ratings
Group applies indicators "+", no character, and "-" to the above rating
categories AA through BBB. The indicators show relative standing within the
major rating categories.
Duff & Phelps: AAA - highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which may vary very slightly from time to time because of economic
conditions; A -- average credit quality with adequate protection factors, but
with greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch: AAA -- highest credit quality, with an exceptionally strong
ability to pay interest and repay principal; AA -- very high credit quality,
with a very strong ability to pay interest and repay principal; A -- high credit
quality, considered strong as regards principal and interest protection, but may
be more vulnerable to adverse changes in economic conditions; and BBB --
satisfactory credit quality with adequate ability with regard to interest and
principal, and likely to be affected by adverse changes in economic conditions
and circumstances. The indicators "+" and "-" to the AA, A and BBB categories
indicate the relative position of a credit within those rating categories.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries
the smallest degree of investment risk. The modifiers 1, 2 and 3 are used to
denote relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
23
<PAGE>
minimal risk factors. Duff 3 represents satisfactory protection factors, with
risk factors larger and subject to more variation.
Fitch: F-1+ -- denotes exceptionally strong credit quality given to
issues regarded as having strongest degree of assurance for timely payment; F-1
- -- very strong credit quality, with only slightly less degree of assurance for
timely payment than F-1+; F-2 -- good credit quality, carrying a satisfactory
degree of assurance for timely payment.
PROSPECTUS July 7, 1995
EVERGREEN(SM) TAX FREE FUNDS (Evergreen Logo appears here)
EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
CLASS A SHARES
CLASS B SHARES
The Evergreen Tax-Free Funds (the "Funds") are designed to provide
investors with income exempt from Federal income taxes. This Prospectus
provides information regarding the Class A and Class B shares offered by
the Funds. Each Fund is, or is a series of, an open-end, diversified,
management investment company. This Prospectus sets forth concise
information about the Funds that a prospective investor should know before
investing. The address of the Funds is 2500 Westchester Avenue, Purchase,
New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 807-2940. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 9
Investment Practices and Restrictions 10
MANAGEMENT OF THE FUNDS
Investment Advisers 13
Sub-Adviser 14
Distribution Plans and Agreements 14
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 15
How to Redeem Shares 17
Exchange Privilege 18
Shareholder Services 19
Effect of Banking Laws 19
OTHER INFORMATION
Dividends, Distributions and Taxes 20
Management's Discussion of Fund Performance 21
General Information 22
APPENDIX -- California Risk Considerations 25
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA is Evergreen Asset
Management Corp. ("Evergreen Asset") which, with its predecessors, has served as
an investment adviser to the Evergreen Funds since 1971. Evergreen Asset is a
wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"),
which in turn is a subsidiary of First Union Corporation, one of the ten largest
bank holding companies in the United States. The Capital Management Group of
FUNB ("CMG") serves as investment adviser to EVERGREEN HIGH GRADE TAX FREE FUND.
EVERGREEN HIGH GRADE TAX FREE FUND (formerly First Union High Grade Tax
Free Portfolio) seeks to provide a high level of federally tax-free income that
is consistent with preservation of capital.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND seeks as high a level of
current income, exempt from Federal income tax other than the alternative
minimum tax ("AMT"), as is consistent with preserving capital and providing
liquidity. The Fund invests substantially all of its assets in short and
intermediate-term municipal securities with a dollar weighted average portfolio
maturity of two to five years.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA seeks as high a
level of current income exempt from Federal and California income taxes as is
consistent with preserving capital and providing liquidity. The Fund invests
substantially all of its assets in short and intermediate-term municipal
securities with a dollar weighted average portfolio maturity of two to five
years.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A and Class B Shares of a Fund. For
further information see "Purchase and Redemption of Fund Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of original purchase None 5% during the first year, 4% during the
price or redemption proceeds, whichever is lower) second year, 3% during the third and fourth
year, 2% during the fifth year, 1% during the
sixth and seventh years and 0% after the
seventh year
Redemption Fee None None
Exchange Fee None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return and (ii) redemption at the end of each period and,
additionally for Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares assume deduction at the time of redemption (if
applicable) of the maximum contingent deferred sales charge applicable for that
time period, and (iii) the expenses for Class B Shares reflect the conversion to
Class A Shares eight years after purchase (years eight through ten, therefore,
reflect Class A expenses).
EVERGREEN HIGH GRADE TAX FREE FUND (A)
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .37% .37%
After 1 Year $ 56 $ 67 $ 17
Administrative Fees .06% .06%
After 3 Years $ 75 $ 82 $ 52
12b-1 Fees* .25% .75%
After 5 Years $ 95 $ 110 $ 90
Shareholder Service Fees -- .25%
After 10 Years $ 154 $ 167 $167
Other Expenses .23% .23%
Total .91% 1.66%
</TABLE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES*** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50%
After 1 Year $ 57 $ 69 $ 19
12b-1 Fees* .10% 1.00%
After 3 Years $ 76 $ 88 $ 58
Other Expenses .33% .33%
After 5 Years $ 97 $ 119 $ 99
After 10 Years $ 156 $ 180 $180
Total .93% 1.83%
</TABLE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA
<TABLE>
<CAPTION>
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES*** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .55% .55%
After 1 Year $ 58 $ 70 $ 20
12b-1 Fees* .10% 1.00%
After 3 Years $ 79 $ 91 $ 61
Other Expenses .40% .40%
After 5 Years $ 103 $ 125 $105
After 10 Years $ 170 $ 193 $193
Total 1.05% 1.95%
</TABLE>
3
<PAGE>
(a) Estimated annual operating expenses reflect the combination of Evergreen
National Tax Free Fund and First Union High Grade Tax Free Portfolio.
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 fee.
For the forseeable future, the Class A Shares 12b-1 fees will be limited to .25
of 1% of average net assets. For Class B Shares for EVERGREEN SHORT INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA, a
portion of the 12b-1 Fees equivalent to .25 of 1% of average net assets will be
shareholder servicing-related. Distribution-related 12b-1 Fees will be limited
to .75 of 1% of average net assets as permitted under the rules of the National
Association of Securities Dealers, Inc.
**CMG has agreed to limit the expenses (including the Adviser's fee, but
excluding taxes, interest, brokerage commissions, Rule 12b-1 distribution fees,
shareholder-service fees and extraordinary expenses) of EVERGREEN HIGH GRADE TAX
FREE FUND to .66 of 1% for a period of at least one year from the date of this
Prospectus and to consult with the Trustees of the Fund prior to discontinuing
such limitation after the one year period.
***Estimated annual expenses for EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND do
not reflect a fee waiver of .25 of 1% of average net assets for the year ended
August 31, 1994. Estimated expenses for EVERGREEN SHORT INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA do not reflect a fee waiver of .43 of 1% for the year ended
August 31, 1994.
Evergreen Asset has agreed to reimburse EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA to the extent
that their aggregate operating expenses (including the Adviser's fee, but
excluding taxes, interest, brokerage commissions, Rule 12b-1 distribution fees
and shareholder servicing fees and extraordinary expenses) exceed 1% of the
average net assets.
From time to time each Fund's adviser may, at its discretion, reduce or waive
its fees or reimburse these Funds for certain of their other expenses in order
to reduce their expense ratios. Each Fund's adviser may cease these voluntary
waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for its most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds." As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted under the
rules of the National Association of Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or life of the
fund if shorter for EVERGREEN HIGH GRADE TAX FREE FUND has been audited by KPMG
Peat Marwick LLP, the Fund's independent auditors, for EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA has, except as noted otherwise, been audited by Price
Waterhouse LLP, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP or Price Waterhouse LLP, as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
No Financial Highlights are shown for Class A or B of EVERGREEN
SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA since these classes did not have
any operations prior to February 28, 1995.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
CLASS A SHARES
CLASS Y SHARES
FEBRUARY 21, CLASS B SHARES FEBRUARY 28,
YEAR ENDED 1992* JANUARY 11, 1993* 1994*
DECEMBER 31, THROUGH YEAR ENDED THROUGH THROUGH
1994 1993 DECEMBER 31, 1992 DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................. $11.16 $10.42 $10.00 $11.16 $10.42 $10.93
Income (loss) from
investment operations:
Net investment income....... .52 .54 .51 .46 .47 .46
Net realized and unrealized
gain (loss) on
investments............... (1.37) .81 .42 (1.37) .81 (1.14)
Total from investment
operations.............. (.85) 1.35 .93 (.91) 1.28 (.68)
Less distributions to
shareholders from:
Net investment income....... (.52) (.54) (.51) (.46) (.47) (.46)
Net realized gains.......... -- (.07) -- -- (.07) --
Total distributions....... (.52) (.61) (.51) (.46) (.54) (.46)
Net asset value, end of
period.................... $9.79 $11.16 $10.42 $9.79 $11.16 $9.79
TOTAL RETURN+............... (7.71%) 13.25% 9.37% (8.24%) 12.41% (6.31%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)........... $57,676 $101,352 $90,738 $32,435 $41,030 $4,318
Ratios to average net
assets:
Expenses (a).............. 1.01% .85% .49%++ 1.58% 1.35%++ .76%++
Net investment
income (a).............. 5.04% 4.99% 5.79%++ 4.47% 4.44%++ 5.46%++
Portfolio turnover rate..... 53% 14% 7% 53% 14% 53%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income, exclusive of any
applicable state expense limitations, to average net assets would have been
the following:
<TABLE>
<CAPTION>
CLASS A SHARES
CLASS B SHARES CLASS Y SHARES
FEBRUARY 21, JANUARY 11, FEBRUARY 28,
YEAR ENDED 1992 THROUGH YEAR ENDED 1993 THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992 1994 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Expenses............................ 1.02% 1.07% 1.11% 1.59% 1.57% .77%
Net investment income............... 5.03% 4.77% 5.17% 4.46% 4.22% 5.45%
</TABLE>
5
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1995 YEAR ENDED AUGUST 31,
(UNAUDITED) 1994 1993 1992**
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period............................ $10.21 $10.58 $10.33 $10.00
Income (loss) from investment operations:
Net investment income........................................... .23 .47 .49 .51
Net realized and unrealized gain (loss) on investments.......... (.16) (.32) .25 .33
Total from investment operations.............................. .07 .15 .74 .84
Less distributions to shareholders from:
Net investment income........................................... (.23) (.47) (.49) (.51)
Net realized gains.............................................. -- (.03) -- --
In excess of net realized gains................................. -- (.02)(b) -- --
Total distributions........................................... (.23) (.52) (.49) (.51)
Net asset value, end of period.................................. $10.05 $10.21 $10.58 $10.33
TOTAL RETURN+................................................... .7% 1.4% 7.4% 8.6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)....................... $44,408 $53,417 $66,607 $54,470
Ratios to average net assets:
Expenses (a).................................................. .72%++ .58% .40% .17%
Net investment income (a)..................................... 4.54%++ 4.54% 4.73% 4.85%
Portfolio turnover rate......................................... 8% 32% 37% 57%
<CAPTION>
JULY 17, 1991*
THROUGH
AUGUST 31, 1991**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period............................ $10.00
Income (loss) from investment operations:
Net investment income........................................... .06
Net realized and unrealized gain (loss) on investments.......... --
Total from investment operations.............................. .06
Less distributions to shareholders from:
Net investment income........................................... (.06)
Net realized gains.............................................. --
In excess of net realized gains................................. --
Total distributions........................................... (.06)
Net asset value, end of period.................................. $10.00
TOTAL RETURN+................................................... .6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)....................... $4,025
Ratios to average net assets:
Expenses (a).................................................. 0%++
Net investment income (a)..................................... 4.93%++
Portfolio turnover rate......................................... --
</TABLE>
* Commencement of operations.
** On November 18, 1991, the Fund was changed to a diversified municipal bond
fund with a fluctuating net asset value per share from a non-diversified
money market fund with a stable net asset value per share. The shares
outstanding at August 31, 1991 and the related per share data are restated
to reflect both a 1 for 2 reverse share split on October 30, 1991 and a 1
for 5 reverse share split on August 19, 1992. Total return calculated after
November 18, 1991 reflects the fluctuation in net asset value per share.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 17, 1991
FEBRUARY 28, 1995 YEAR ENDED AUGUST 31, THROUGH AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Expenses......................... .84% .83% .81% .86% 1.40%
Net investment income............ 4.42% 4.29% 4.32% 4.16% 3.53%
</TABLE>
(b) Distributions in excess of realized gains were the result of certain book
and tax timing differences. These distributions did not represent a return
of capital for federal income tax purposes.
6
<PAGE>
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
<S> <C> <C>
JANUARY 5, 1995*
THROUGH
FEBRUARY 28, 1995
(UNAUDITED)
PER SHARE DATA
Net asset value, beginning of period....................................................... $ 9.97 $ 9.97
Income from investment operations:
Net investment income...................................................................... .07 .06
Net realized and unrealized gain on investments............................................ .09 .08
Total from investment operations......................................................... .16 .14
Less distributions to shareholders from net investment income.............................. (.07) (.06)
Net asset value, end of period............................................................. $10.06 $10.05
TOTAL RETURN+.............................................................................. 1.6% 1.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).................................................. $7,736 $2,564
Ratios to average net assets:
Expenses (a)............................................................................. .61%++ 1.41%++
Net investment income (a)................................................................ 3.81%++ 3.30%++
Portfolio turnover rate**.................................................................. 8% 8%
</TABLE>
* Commencement of class operations.
** Portfolio turnover rate is calculated for the six months period February 28,
1995.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A and Class B shares are not necessarily comparable to that of the
Class Y shares, and are not necessarily indicative of future ratios.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income, exclusive of any
applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
<S> <C> <C>
JANUARY 5, 1995
THROUGH
FEBRUARY 28, 1995
(UNAUDITED)
Expenses......................................................... .88% 1.98%
Net investment income............................................ 3.54% 2.73%
</TABLE>
7
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS ENDED NOVEMBER 2,
FEBRUARY 28, 1995 YEAR ENDED AUGUST 31, 1988* THROUGH
(UNAUDITED) 1994 1993** 1992** 1991** 1990** AUGUST 31, 1989**
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period........................... $10.09 $10.34 $10.00 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment
operations:
Net investment income.............. .20 .43 .41 .33 .47 .55 .51
Net realized and unrealized gain
(loss) on investments............ (.15) (.24) .34 -- -- -- --
Total from investment
operations..................... .05 .19 .75 .33 .47 .55 .51
Less distributions to shareholders
from:
Net investment income.............. (.20) (.43) (.41) (.33) (.47) (.55) (.51)
Net realized gains................. (.03) (.01) -- -- -- -- --
Total distributions.............. (.23) (.44) (.41) (.33) (.47) (.55) (.51)
Net asset value, end of period..... $9.91 $10.09 $10.34 $10.00 $10.00 $10.00 $10.00
TOTAL RETURN+...................... .6% 1.8% 7.6% 3.4% 4.8% 5.7% 5.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)......................... $23,426 $28,433 $30,136 $34,452 $42,022 $37,291 $28,266
Ratios to average net assets:
Expenses (a)..................... .79%++ .52% .30% .40% .37% .29% .24%++
Net investment income (a)........ 4.15%++ 4.20% 3.96% 3.36% 4.66% 5.52% 6.40%++
Portfolio turnover rate............ 13% 12% 37% -- -- -- --
</TABLE>
* Commencement of operations.
** On October 16, 1992, the Fund was converted to a short-intermediate
municipal fund with a fluctuating net asset value per share from a money
market fund with a stable net asset value per share. The shares outstanding
and the related per share data for the fiscal years ended August 31, 1990
through August 31, 1992 are restated to reflect the 1 for 10 reverse share
split on October 21, 1992. Total return calculated after October 16, 1992
reflects the fluctuation in net asset value per share.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED NOVEMBER 2, 1988
FEBRUARY 28, 1995 YEAR ENDED AUGUST 31, THROUGH AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses............................... .99% .95% .98% .84% .85% .88% .93%
Net investment income.................. 3.95% 3.77% 3.28% 2.92% 4.18% 4.93% 5.71%
</TABLE>
8
9
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen High Grade Tax Free Fund
The Evergreen High Grade Tax Free Fund seeks a high level of federally
tax free income that is consistent with preservation of capital. At least 65% of
the value of the total assets of Evergreen High Grade Tax Free Fund will be
invested in high grade bonds. High grade bonds mean: bonds insured by a
municipal bond insurance company which is rated AAA by Standard & Poor's Ratings
Group ("S&P") and/or Aaa by Moody's Investors Service, Inc. ("Moody's"); bonds
rated A or better by S&P or Moody's; or, if unrated, of comparable quality as
determined by the Fund's investment adviser. The insurance guarantees the timely
payment of principal and interest, but not the value of the municipal bonds or
the shares of the Fund. See the section "Investment Practices and Restrictions"
- - "Municipal Bond Insurance" for further information.
The Evergreen High Grade Tax Free Fund may also purchase instruments
having variable rates of interest. One example is variable amount demand master
notes. These notes represent a borrowing arrangement between a commercial paper
issuer (borrower) and an institutional lender, such as the Fund and are payable
upon demand. The underlying amount of the loan may vary during the course of the
contract, as may the interest on the outstanding amount, depending on a stated
short-term interest rate index.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Short-Intermediate Municipal Fund
The investment objective of Evergreen Short-Intermediate Municipal Fund
is to achieve as high a level of current income, exempt from Federal income tax
other than the Federal alternative minimum tax("AMT") for individuals and
corporations, as is consistent with preserving capital and providing liquidity.
Under normal circumstances, it is anticipated that the Fund will invest its
assets so that at least 80% of its annual interest income is exempt from Federal
income tax other than the AMT. The Fund will seek to achieve its objective by
investing substantially all of its assets in a diversified portfolio of short
and intermediate-term debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax other than the AMT. Such securities are
generally known as Municipal Securities (See "Investment Practices and
Restrictions" - "Municipal Securities" below). As a matter of policy, the
Trustees will not change the Fund's investment objective without shareholder
approval.
Under current tax law, a distinction is drawn between Municipal
Securities issued to finance certain "private activities" and other Municipal
Securities. Such private activity bonds include bonds issued to finance such
projects as airports, housing projects, resource recovery programs, solid waste
disposal facilities, student loan programs, and water and sewage projects.
Interest income from such "private activity bonds" ("AMT-Subject Bonds") becomes
an item of "tax preference" which is subject to the alternative minimum tax when
received by a person in a tax year during which he is subject to that tax.
Because interest income on AMT-Subject Bonds is taxable to certain investors, it
is expected, although there can be no guarantee, that such Municipal Securities
generally will provide somewhat higher yields than other Municipal Securities of
comparable quality and maturity. The Fund may invest up to 50% of its total
assets in AMT-Subject Bonds.
The Fund intends to maintain a dollar-weighted average portfolio
maturity of two to five years. The Fund may consider an obligation's maturity to
be shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Short-Intermediate Municipal Fund-California
The investment objective of Evergreen Short-Intermediate Municipal
Fund-California is to achieve as high a level of current income exempt from
Federal and California income taxes, as is consistent with preserving capital
and providing liquidity. The Fund will seek to achieve its objective by
investing at least 80% of the value of its assets in a diversified portfolio of
short and intermediate-term debt obligations issued by the State of California,
its political subdivisions and duly constituted authorities, the interest from
which is exempt from Federal and California income taxes. Such securities are
generally known as Municipal Securities (see "Investment Practices and
Restrictions" - "Municipal Securities" below).
Interest income on certain types of bonds issued after August 7, 1986,
to finance nongovernmental activities is an item of "tax preference" subject to
AMT . To the extent the 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 AMT 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, the
Fund will invest at least 80% of its net assets in Municipal Securities, the
interest from which is not subject to AMT .
The Fund intends to maintain a dollar-weighted average portfolio
maturity of two to five years. The Fund may consider an obligation's maturity to
be shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Except where noted, each Fund may engage in the investment practices
described below. Each Fund is also subject to certain investment restrictions
more fully described in the Statement of Additional Information.
General. Evergreen High Grade Tax Free Fund, Evergreen Short-Intermediate
Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will
invest in Municipal Securities so long as they are determined to be of high or
upper medium quality. Municipal Securities meeting this criteria include bonds
rated A or higher by S&P, Moody's or another nationally recognized statistical
rating organization ("SRO"); notes rated SP-1 or SP-2 by S&P or MIG-1 or MIG-2
by Moody's or rated VMIG-1 or VMIG-2 by Moody's in the case of variable rate
demand notes or having comparable ratings from another SRO; and commercial paper
rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's or having comparable
ratings from another SRO. Evergreen High Grade Tax Free Fund may also invest in
general obligation bonds which are rated BBB by S&P, Baa by Moody's or bear a
similar rating from another SRO. Medium grade bonds are more susceptible to
adverse economic conditions or changing circumstances than higher grade bonds.
However, like the higher rated bonds, these securities are considered to be
investment grade. For a description of such ratings see the Statement of
Additional Information. The Funds may also purchase Municipal Securities which
are unrated at the time of purchase, if such securities are determined by the
Fund's investment adviser to be of comparable quality. Certain Municipal
Securities (primarily variable rate demand notes) may be entitled to the benefit
of standby letters of credit or similar commitments issued by banks and, in such
instances, the Fund's investment adviser will take into account the obligation
of the bank in assessing the quality of such security. Investments by Evergreen
Short-Intermediate Municipal Fund-California in unrated securities are limited
to 20% of total assets.
The ability of the Funds to meet their investment objectives is
necessarily subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolios of the Funds will be affected by
general changes in interest rates which will result in increases or decreases in
the value of the obligations held by the Funds. Investors should recognize that,
in periods of declining interest rates, the yield of the Funds will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates, the yield of the Funds will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to the Funds from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of each Fund's portfolio, thereby
reducing the current yield of the Funds. In periods of rising interest rates,
the opposite can be expected to occur. In addition since Evergreen
Short-Intermediate Municipal Fund-California will invest primarily in California
Municipal Securities, there are certain specific factors and considerations
concerning California which may affect the credit and market risk of the
Municipal Securities that Evergreen Short-Intermediate Municipal Fund-California
purchases. These factors are described in the Appendix to this Prospectus.
Municipal Securities. As noted above, the Funds will invest substantially all of
their assets in Municipal Securities. These include Municipal Securities,
short-term municipal notes and tax exempt commercial paper. "Municipal
Securities" are debt obligations issued to obtain funds for various public
purposes that are exempt from Federal income tax in the opinion of issuer's
counsel. The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific source such as from the user
of the facility being financed. The term "Municipal Securities" also includes
"moral obligation" issues which are normally issued by special purpose
authorities. Industrial development bonds ("IDBs") and private activity bonds
("PABs") are in most cases revenue bonds and are not payable from the
unrestricted revenues of the issuer. The credit quality of IDBs and PABs is
usually directly related to the credit standing of the corporate user of the
facilities being financed. Participation interests are interests in Municipal
Securities, including IDBs and PABs, and floating and variable rate obligations
that are owned by banks. These interests carry a demand feature permitting the
holder to tender them back to the bank, which demand feature is backed by an
irrevocable letter of credit or guarantee of the bank. A put bond is a municipal
bond which gives the holder the unconditional right to sell the bond back to the
issuer at a specified price and exercise date, which is typically well in
advance of the bond's maturity date. "Short-term municipal notes" and "tax
exempt commercial paper" include tax anticipation notes, bond anticipation
notes, revenue anticipation notes and other forms of short-term loans. Such
notes are issued with a short-term maturity in anticipation of the receipt of
tax funds, the proceeds of bond placements and other revenues.
Municipal Bond Insurance. The Evergreen High Grade Tax Free Fund will require
municipal bond insurance when purchasing Municipal Securities which would not
otherwise meet the Fund's quality standards. The Evergreen High Grade Tax Free
Fund may also require insurance when, in the opinion of the Fund's investment
adviser, such insurance would benefit the Fund (for example, through improvement
of portfolio quality or increased liquidity of certain securities). The purpose
of municipal bond insurance is to guarantee the timely payment of principal at
maturity and interest.
Securities in the Evergreen High Grade Tax Free Fund's portfolio may be
insured in one of two ways: (1) by a policy applicable to a specific security,
obtained by the issuer of the security or by a third party ("Issuer-Obtained
Insurance") or (2) under master insurance policies issued by municipal bond
insurers, purchased by the Fund (the "Policies"). If a security's coverage is
Issuer-Obtained, then that security does not need to be covered in the Policies.
The Fund may purchase Policies from Municipal Bond Investors Assurance Corp.,
AMBAC Indemnity Corporation, and Financial Guaranty Insurance Company, or any
other municipal bond insurer which is rated Aaa by Moody's or AAA by S&P. A more
detailed description of these insurers may be found in the Statement of
Additional Information. Annual premiums for these Policies are paid by the Fund
and are estimated to range from 0.10% to 0.25% of the value of the municipal
securities covered under the Policies, with an average annual premium rate of
approximately 0.175%. While the insurance feature reduces financial risk, the
cost thereof and the restrictions on investments imposed by the guidelines in
the Policies reduce the yield to shareholders.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Certain of these obligations may carry a demand feature that gives
the Funds the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. The Funds will limit
the value of their investments in any floating or variable rate securities which
are not readily marketable to 10% or less of their total assets.
When-Issued Securities. The Funds may purchase securities on a "when-issued"
basis (i.e., for delivery beyond the normal settlement date at a stated price
and yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund do not expect that commitments to purchase
when-issued securities will normally exceed 25% of their total assets and
Evergreen High Grade Tax Free Fund does not expect that such commitments will
exceed 20% of its assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Stand-by Commitments. The Funds may also acquire "stand-by commitments" with
respect to Municipal Securities held in their portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at a Fund's option, specified Municipal
Securities at a specified price. Failure of the dealer to purchase such
Municipal Securities may result in a Fund incurring a loss or missing an
opportunity to make an alternative investment. Each Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, a Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
each Fund's portfolio will not exceed 10% of the value of the Fund's total
assets calculated immediately after each stand-by commitment is acquired. The
Funds will maintain cash or liquid high grade debt obligations in a segregated
account with its custodian in an amount equal to such commitments. The Funds
will enter into stand-by commitments only with banks and broker-dealers that, in
the judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. Evergreen High Grade Tax Free Fund and Evergreen
Short-Intermediate Municipal Fund-California may temporarily invest up to 20% of
their assets in taxable securities, and Evergreen Short-Intermediate Municipal
Fund may temporarily invest its assets so that not more than 20% of its annual
interest income will be derived from taxable securities, under any one or more
of the following circumstances: (a) pending investment of proceeds of sale of
Fund shares or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions. In addition, each such Fund may temporarily invest more
than 20% of its total assets in taxable securities for defensive purposes. Each
Fund may invest for defensive purposes during periods when each Fund's assets
available for investment exceed the available Municipal Securities that meet
each Fund's quality and other investment criteria. Taxable securities in which
the Funds may invest on a short-term basis include obligations of the United
States Government, its agencies or instrumentalities, including repurchase
agreements with banks or securities dealers involving such securities; time
deposits maturing in not more than seven days; other debt securities rated
within the two highest ratings assigned by any major rating service; commercial
paper rated in the highest grade by Moody's, S&P or any SRO; and certificates of
deposit issued by United States branches of United States banks with assets of
$1 billion or more.
Repurchase Agreements. The Funds may enter into repurchase agreements with
member banks of the Federal Reserve System, including State Street Bank and
Trust Company, the Funds' custodian ("State Street" or the "Custodian"), or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
United States Government securities. A repurchase agreement is an arrangement
pursuant to which a buyer purchases a security and simultaneously agrees to
resell it to the vendor at a price that results in an agreed-upon market rate of
return which is effective for the period of time (which is normally one to seven
days, but may be longer) the buyer's money is invested in the security. The
arrangement results in a fixed rate of return that is not subject to market
fluctuations during a Fund's holding period. Each Fund requires continued
maintenance of collateral with its Custodian in an amount equal to, or in excess
of, the market value of the securities, including accrued interest, which are
the subject of a repurchase agreement. In the event a vendor defaults on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which a
Fund enters into a repurchase agreement to evaluate these risks. Evergreen
Short-Intermediate Municipal Fund-California and Evergreen Short-Intermediate
Municipal Fund may not enter into repurchase agreements if, as a result, more
than 10% of either Fund's net assets would be invested in repurchase agreements
maturing in more than seven days and Evergreen High Grade Tax Free Fund may not
so invest more than 15% of its net assets.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable,
except that Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund may only invest up to 10% of their assets in
repurchase agreements with maturities longer than seven days. In the case of
Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, which have been determined to be
liquid, will not be considered by the Fund's investment adviser to be illiquid
or not readily marketable and, therefore, are not subject to the aforementioned
15% limit. Evergreen High Grade Tax Free Fund may invest up to 10% of its assets
in securities subject to restrictions on resale under the federal securities
laws. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by each Fund's investment adviser on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in a Fund having more than 15% of its assets invested in illiquid or not readily
marketable securities.
Other Investment Policies. The Funds may borrow funds and agree to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed upon date and price (a "reverse
repurchase agreement") for temporary or emergency purposes. In the case of
Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund borrowings may be in amounts up to 10% of the
value of each Fund's total assets at the time of such borrowing. Evergreen High
Grade Tax Free Fund may borrow in amounts up to one-third of its net assets. At
the time 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
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. Evergreen Short-Intermediate
Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will
not enter into reverse repurchase agreements exceeding 5% of the value of its
total assets and will not purchase any securities whenever any borrowings
(including reverse repurchase agreements) are outstanding.
In order to generate income and to offset expenses, the Funds may lend
portfolio securities to brokers, dealers and other financial organizations. Each
Fund's investment adviser will monitor the creditworthiness of such borrowers.
Loans of securities by a Fund, if and when made, may not exceed 30% of each
Fund's total assets, or in the case of Evergreen High Grade Tax Free Fund 15%,
and will be collateralized by cash, letters of credit or U.S. government
securities that are maintained at all times in an amount equal to at least 100
percent of the current market value of the loaned securities, including accrued
interest. While such securities are on loan, the borrower will pay a Fund any
income accruing thereon, and the Fund may invest the cash collateral, thereby
increasing its return. A Fund will have the right to call any such loan and
obtain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities which occurs during the term of the
loan would affect a Fund and its investors. A Fund may pay reasonable fees in
connection with such loans.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees").. Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by Evergreen
Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal
Fund-California as investment adviser. Evergreen Asset succeeded on June 30,
1994 to the advisory business of the same name, but under different ownership,
which was organized in 1971. Evergreen Asset, with its predecessors, has served
as investment adviser to the Evergreen mutual funds since 1971. Evergreen Asset
is a wholly-owned subsidiary of First Union National Bank of North Carolina
("FUNB"). The address of Evergreen Asset is 2500 Westchester Avenue, Purchase,
New York 10577. FUNB is a subsidiary of First Union Corporation ("First Union"),
one of the ten largest bank holding companies in the United States. Stephen A.
Lieber and Nola Maddox Falcone serve as the chief investment officers of
Evergreen Asset and, along with Theodore J. Israel, Jr., were the owners of
Evergreen Asset's predecessor and the former general partners of Lieber &
Company, which, as described below, provides certain subadvisory services to
Evergreen Asset in connection with its duties as investment adviser to the
Funds. The Capital Management Group of FUNB ("CMG") serves as investment adviser
to Evergreen High Grade Tax Free Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, and had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of Evergreen
Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal
Fund-California, subject to the authority of the Trustees. Under its investment
advisory agreement with Evergreen Short-Intermediate Municipal Fund-California
Evergreen Asset is entitled to receive an annual fee equal to .55 of 1% of the
Fund's average daily net assets. Under its investment advisory agreement with
Evergreen Short-Intermediate Municipal Fund, Evergreen Asset is entitled to
receive an annual fee equal to .50 of 1% of each Fund's average daily net
assets. The total expense ratios of Evergreen Short-Intermediate Municipal Fund
and Evergreen Short-Intermediate Municipal Fund-California for the fiscal period
ended August 31, 1994, are set forth in the section entitled "Financial
Highlights". CMG manages investments and supervises the daily business affairs
of Evergreen High Grade Tax Free Fund and, as compensation therefor, is entitled
to receive an annual fee equal to .50 of 1% of average daily net assets of
Evergreen High Grade Tax Free Fund. The total expense ratios of Evergreen High
Grade Tax Free Fund for the fiscal period ended December 31, 1994, are set forth
in the section entitled "Financial Highlights". Evergreen Asset serves as
administrator to Evergreen High Grade Tax Free Fund and is entitled to receive a
fee based on the average daily net assets of the Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .050% of the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
High Grade Tax Free Fund and is entitled to receive a fee from the Fund
calculated on the average daily net assets of the Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .0100% of the first $7 billion; .0075% on the next
$3 billion; .0050% on the next $15 billion; and .0040% on assets in excess of
$25 billion. The total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset serve as investment adviser as of March
31, 1995 were approximately $8 billion.
The portfolio manager of Evergreen High Grade Tax Free Fund is James T.
Colby, III. Mr. Colby is a Vice President of CMG and has been associated with
Evergreen Asset and its predecessor since 1992. He has served as portfolio
manager of the Fund since June, 1995 and, since that fund's inception in 1992,
was portfolio manager of Evergreen National Tax Free Fund, whose assets were
acquired by the Fund on July 7, 1995. Prior to joining Evergreen Asset, Mr.
Colby served as Vice President-Investments at American Express Company from 1987
to 1992. The portfolio manager for Evergreen Short-Intermediate Municipal
Fund-California and Evergreen Short-Intermediate Municipal Fund is Steven C.
Shachat. Mr. Shachat has been associated with Evergreen Asset and its
predecessor since prior to 1989 and has served as portfolio manager of these
Funds since their inception.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Short-Intermediate Municipal Fund-California and
Evergreen Short-Intermediate Municipal Fund. Lieber & Company will be reimbursed
by Evergreen Asset in connection with the rendering of services on the basis of
the direct and indirect costs of performing such services. There is no
additional charge to Evergreen Short-Intermediate Municipal Fund-California and
Evergreen Short-Intermediate Municipal Fund for the services provided by Lieber
& Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase,
New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of
First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A and Class B shares a Rule 12b-1 plan (each a "Plan" or collectively
the "Plans"). Under the Plans, each Fund may incur distribution-related and
shareholder servicing-related expenses which may not exceed an annual rate of
.75 of 1% of the aggregate average daily net assets attributable to each Fund's
Class A shares, 1.00% of the aggregate average daily net assets attributable to
the Class B shares of Evergreen Short-Intermediate Municipal Fund-California and
Evergreen Short-Intermediate Municipal Fund, and .75 of 1% of the aggregate
average daily net assets attributable to the Class B shares of Evergreen High
Grade Municipal Fund. Payments under the Plans adopted with respect to Class A
shares are currently voluntarily limited to .25 of 1% of each Fund's aggregate
average daily net assets attributable to Class A shares. The Plans provide that
a portion of the fee payable thereunder may constitute a service fee to be used
for providing ongoing personal services and/or the maintenance of shareholder
accounts. Evergreen High Grade Tax Free Fund has, in addition to the Plans
adopted with respect to its Class B shares, adopted a shareholder service plan
("Service Plan") relating to the Class B shares which permit the Fund to incur a
fee of up to .25 of 1% of the aggregate average daily net assets attributable to
the Class B shares for ongoing personal services and/or the maintenance of
shareholder accounts. Such service fee payments to financial intermediaries for
such purposes, whether pursuant to a Plan or Service Plan, will not to exceed
.25% of the aggregate average daily net assets attributable to each Class of
shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares and .75 of 1% of a
Fund's aggregate average daily net assets attributable to the Class B shares.
The Distribution Agreements provide that EFD will use the distribution fee
received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans (and in the case of
Evergreen High Grade Tax Free Fund, the Service Plan), in amounts up to .25 of
1% of a Fund's aggregate average daily net assets on an annual basis
attributable to Class B shares, to compensate organizations, which may include
EFD and each Fund's investment adviser or their affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans and Service Plans are in compliance with rules of the
National Association of Securities Dealers, Inc. which effectively limit the
annual asset-based sales charges and service fees that a mutual fund may pay on
a class of shares to .75 of 1% and .25 of 1%, respectively, of the average
annual net assets attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed with respect to
a class of shares by a mutual fund that also charges a service fee to 6.25% of
cumulative gross sales of shares of that class, plus interest at the prime rate
plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment plan . Share certificates are not issued for
Class A and Class B shares. In states where EFD is not registered as a
broker-dealer shares of a Fund will only be sold through other broker-dealers or
other financial institutions that are registered. See the Share Purchase
Application and Statement of Additional Information for more information. Only
Class A and Class B shares are offered through this Prospectus (see "General
Information" - "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .10 of 1% of the
aggregate average daily net assets attributable to Class A shares of Evergreen
Short-Intermediate Municipal Fund-California and Evergreen Short-Intermediate
Municipal Fund held by their clients, and .25 of 1% of aggregate average daily
net assets attributable to Class A shares of Evergreen High Grade Tax Free Fund
held by their clients. Certain purchases of Class A shares may qualify for
reduced sales charges in accordance with a Fund's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Privilege for Certain
Retirement Plans and Reinstatement Privilege. Consult the Share Purchase
Application and Statement of Additional Information for additional information
concerning these reduced sales charges.
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transactions in shares of the Funds.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which they convert to Class A shares). The higher fees mean a
higher expense ratio, so Class B shares pay correspondingly lower dividends and
may have a lower net asset value than Class A shares. See the Statement of
Additional Information for further details.
With respect to Class B Shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per Share, (2) Shares acquired
through reinvestment of dividends and capital gains, (3) Shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
securities in a Fund are valued at their current market value determined on the
basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair market
value. Certain financial intermediaries may require that you give instructions
earlier than 4:00 p.m.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. The compensation received by Dealers and agents may differ depending on
whether they sell Class A or Class B shares. There is no size limit on purchases
of Class A shares.
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B shares) next calculated after the Fund receives your
request in proper form. Proceeds generally will be sent to you within seven
days. However, for shares recently purchased by check, a Fund will not send
proceeds until it is reasonably satisfied that the check has been collected
(which may take up to 15 days). Once a redemption request has been telephoned or
mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
shares). Your financial intermediary is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m.(Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund by telephone should follow the
procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If a Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. A Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Funds reserve the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B shares are exchanged for
Class B shares of other Evergreen mutual funds. If you redeem shares, the CDSC
applicable to the Class B shares of the Evergreen mutual fund originally
purchased for cash is applied. Also, Class B shares will continue to age
following an exchange for purposes of conversion to Class A shares and
determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number the phone number on the front page of
this Prospectus.
Some services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Internal Revenue Code (the "Code"). While so
qualified, so long as each Fund distributes all of its investment company
taxable income and any net realized gains to shareholders, it is expected that
the Funds will not be required to pay any Federal income taxes. A 4%
nondeductible excise tax will be imposed on a Fund if it does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any
net realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
For Evergreen Short-Intermediate Municipal Fund-California, so long as
the Fund remains qualified under Subchapter M of the Code for federal purposes
and qualified as a diversified management investment company, then under current
California law, the Fund is entitled to pass through to its shareholders the
tax-exempt income it earns. To the extent that Fund dividends are derived from
earnings on California Municipal Securities, such dividends will be exempt from
California personal income taxes when received by the Fund's shareholders,
provided the Fund has complied with the requirement that at least 50% of its
assets be invested in California Municipal Securities. For California income tax
purposes, long-term capital gains distributions are taxable as ordinary income.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from Federal and, if applicable, state
taxation (including California), and the amount, if any, subject to Federal and
state taxation. Moreover, to the extent necessary, these statements will
indicate the amount of exempt-interest dividends which are a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes. The exemption of interest income for Federal income tax purposes does not
necessarily result in exemption under the income or other tax law of any state
or local taxing authority. Investors should consult their own tax advisers about
the status of distributions from the Funds in their states and localities. Each
Fund notifies shareholders annually as to the interest exempt from Federal taxes
earned by the Fund.
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Short-Intermediate
Municipal Fund-California and Evergreen Short-Intermediate Municipal Fund for
their most recent fiscal year is set forth below. A similar discussion relating
to Evergreen High Grade Municipal Fund is contained in the annual report of such
Fund for the fiscal year ended December 31, 1994.
Evergreen Short-Intermediate Municipal Fund. The Fund's total return for the
fiscal year ending August 31, 1994 was +1.42%, versus the Lehman Brothers 3-Year
Municipal Bond Index, which rose + 2.38%, and the Lehman Brothers 5-Year
Municipal Bond Index, which increased + 2.01%. As the economy picked up momentum
and the Federal Reserve started tightening, interest rates in the fixed-income
markets climbed in every maturity range. As a result, the Fund moved to a more
defensive position during the last half of the fiscal year in order to moderate
price volatility. The Fund's investment adviser reduced the Fund's weighted
average maturities and durations, and adjusted the holdings by selling
securities most sensitive to price declines in a rising environment such as
bonds trading at a discount. Proceeds were reinvested in premium-based, high
quality bonds. The strategy of the Fund as of August 31, 1994 was to remain
relatively short in the one to three-year range as we look to purchase
investment grade, non-callable bonds.
[CHART]
Evergreen Short-Intermediate Municipal Fund - California. The Fund's total
return for the fiscal year ending August 31, 1994 was 1.84%, versus the Lehman
Brothers 3-Year California Municipal Bond Index, which rose +2.38% and the
Lehman Brothers California Municipal Bond Index, which increased + 2.21%.
As the economy picked up momentum and the Federal Reserve started
tightening, interest rates in the fixed-income markets climbed in every maturity
range. As a result, the Fund moved to a more defensive position during the last
half of the fiscal year in order to moderate price volatility. The investment
adviser reduced the Fund's weighted average maturities and durations, and
adjusted the holdings by selling securities most sensitive to price declines in
a rising environment such as bonds trading at a discount. Proceeds were
reinvested in premium-based, high quality bonds. The strategy of the Fund
strategy as of August 31, 1994, is to remain relatively short in the one to
three-year range as we look to purchase investment grade, non callable bonds.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. Evergreen Short-Intermediate Municipal Fund and Evergreen
Short-Intermediate Municipal Fund - California are separate investment series of
Evergreen Municipal Trust, a Massachusetts business trust organized in 1988.
Evergreen High Grade Tax Free Fund is a separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Directors, that affect each series and class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen High Grade Tax Free Fund and which provides
certain sub-administrative services to Evergreen Asset in connection with its
role as investment adviser to Evergreen Short-Intermediate Municipal Fund and
Evergreen Short-Intermediate Municipal Fund - California, including providing
personnel to serve as officers of the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are not offered by this Prospectus and are only available to (i)
all shareholders of record in one or more of the Evergreen mutual funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A and Class B shares will be less than those payable with respect to Class Y
shares due to the distribution and distribution related expenses borne by Class
A and Class B shares and the fact that such expenses are not borne by Class Y
shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated Federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Total returns are based on the overall dollar or percentage change in
the value of a hypothetical investment in a Fund. A Fund's total return shows
its overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
Comparative performance information may also be used from time to time
in advertising or marketing a Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar and other industry publications. The Fund
may also advertise in items of sales literature an "actual distribution rate"
which is computed by dividing the total ordinary income distributed (which may
include the excess of short-term capital gains over losses) to shareholders for
the latest twelve month period by the maximum public offering price per share on
the last day of the period. Investors should be aware that past performance may
not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which each
Fund operates provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
APPENDIX -- CALIFORNIA RISK CONSIDERATIONS
The following information as to certain California risk factors is
given to investors in view of the policy of Evergreen Short-Intermediate
Municipal Fund-California of investing primarily in California state and
municipal issuers. The information is based primarily upon information derived
from public documents relating to securities offerings of California state and
municipal issuers, from independent municipal credit reports and historically
reliable sources but has not been independently verified by the Fund.
Changes in California constitutional and other laws during the last
several years have raised questions about the ability of California state and
municipal issuers to obtain sufficient revenue to pay their bond obligations. In
1978, California voters approved an amendment to the California Constitution
known as Proposition 13. Proposition 13 limits ad valorem taxes on real property
and restricts the ability of taxing entities to increase real property taxes.
Legislation passed subsequent to Proposition 13, however, provided for the
redistribution of California's General Fund surplus to local agencies, the
reallocation of revenues to local agencies, and the assumption of certain local
obligations by the state so as to help California municipal issuers to raise
revenue to pay their bond obligations. It is unknown, however, whether
additional revenue redistribution legislation will be enacted in the future and
whether, if enacted, such legislation would provide sufficient revenue for such
California issuers to pay their obligations. The state is also subject to
another constitutional amendment, Article XIIIB, which may have an adverse
impact on California state and municipal issuers. Article XIIIB restricts the
state from spending certain appropriations in excess of an appropriations limit
imposed for each state and local government entity. If revenues exceed such
appropriations limit, such revenues must be returned either as revisions in the
tax rates or fee schedules. Because of the uncertain impact of the
aforementioned statutes and cases, the possible inconsistencies in the
respective terms of the statutes and the impossibility of predicting the level
of future appropriations and applicability of related statutes to such
questions, it is not currently possible to assess the impact of such
legislation, cases and policies on the long-term ability of California state and
municipal issuers to pay interest or repay principal on their obligations.
California's economy is larger than many sovereign nations. During the
1980s, California experienced growth rates well in excess of the rest of the
nation. The state's major employment sectors are services, trade, and
manufacturing. Industrial concentration is in electronics, aerospace, and
non-electrical equipment. Also significant are agriculture and oil production.
Key sectors of California's economy have been severely affected by the
recession. Since May of 1990, job losses total over 850,000. Declines in the
aerospace and high technology sectors have been especially severe. The
continuing drive in population and labor force growth has produced higher
unemployment rates in the state. Although total job loss has declined, weakness
continues in key areas of California's economy, including government, real
estate and aerospace. Wealth levels still remain high in the state, although the
difference between state and national levels continues to narrow.
In July of 1994, both S&P and Moody's lowered the general obligation
bond ratings of the state of California. These revisions reflect the state's
heavy reliance on the short-term note market to finance its cash imbalance and
the likelihood that this exposure will persist for at least another two years.
For more information on these ratings revisions and the state's current budget,
please refer to the Statement of Additional Information.
Orange County Bankruptcy. On December 6, 1994, Orange County, California,
petitioned for bankruptcy based on losses in the Orange County Investment Fund
which at the time were estimated to be approximately $2 billion. At the time of
the petition, the Orange County Investment Fund held monies belonging to Orange
County as well as other municipal issuers located in Orange County and other
parts of California. Although the ultimate resolution of this matter is
uncertain, one possible result is that the ability of municipal issuers
investing in the Orange County Investment Fund to service some or all of their
outstanding debt obligations may be severely impaired.
As of December 6, 1994, Evergreen Short-Intermediate Municipal Fund -
California did not hold debt obligations of Orange County or other issuers that
the Fund is aware had invested in the Orange County Investment Fund. Although it
has no current intention to do so, if it deems it advisable, the Fund reserves
the right from time to time to make investments in municipal issuers who
maintain assets in the Orange County Investment Fund.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND-CALIFORNIA
Capital Mangement Group of First Union Bank, 201 South College Street,
Charlotte, North Carolina 28288
EVERGREEN HIGH GRADE TAX FREE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND,
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN HIGH GRADE TAX FREE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536119
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) TAX FREE FUNDS
EVERGREEN HIGH GRADE TAX FREE FUND
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
CLASS Y SHARES
The Evergreen Tax-Free Funds (the "Funds") are designed to provide
investors with income exempt from Federal income taxes. This Prospectus
provides information regarding the Class Y shares offered by the Funds.
Each Fund is, or is a series of, an open-end, diversified, management
investment company. This Prospectus sets forth concise information about
the Funds that a prospective investor should know before investing. The
address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 235-0064. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Advisers
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
APPENDIX -- California Risk Considerations
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND and
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA is Evergreen Asset
Management Corp. ("Evergreen Asset") which, with its predecessors, has served as
an investment adviser to the Evergreen Funds since 1971. Evergreen Asset is a
wholly-owned subsidiary of First Union National Bank of North Carolina ("FUNB"),
which in turn is a subsidiary of First Union Corporation, one of the ten largest
bank holding companies in the United States. The Capital Management Group of
FUNB ("CMG") serves as investment adviser to EVERGREEN HIGH GRADE TAX FREE FUND.
EVERGREEN HIGH GRADE TAX FREE FUND (formerly First Union High Grade Tax
Free Portfolio) seeks to provide a high level of federally tax-free income that
is consistent with preservation of capital.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND seeks as high a level of
current income, exempt from Federal income tax other than the alternative
minimum tax ("AMT"), as is consistent with preserving capital and providing
liquidity. The Fund invests substantially all of its assets in short and
intermediate-term municipal securities with a dollar weighted average portfolio
maturity of two to five years.
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA seeks as high a
level of current income exempt from Federal and California income taxes as is
consistent with preserving capital and providing liquidity. The Fund invests
substantially all of its assets in short and intermediate-term municipal
securities with a dollar weighted average portfolio maturity of two to five
years.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN HIGH GRADE TAX FREE FUND (A)
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C> <C> <C>
Advisory Fees .37%
After 1 Year $ 7
Administrative Fees .06%
After 3 Years $ 21
12b-1 Fees --
After 5 Years $ 37
Other Expenses .23%
After 10 Years $ 82
Total .66%
</TABLE>
EVERGREEN SHORT INTERMEDIATE FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES** EXAMPLE
<S> <C> <C> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 8
12b-1 Fees --
After 3 Years $ 26
Other Expenses .33%
After 5 Years $ 46
After 10 Years $ 103
Total .83%
</TABLE>
EVERGREEN SHORT INTERMEDIATE FUND -- CALIFORNIA
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES** EXAMPLE
<S> <C> <C> <C> <C> <C>
Advisory Fees .55%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 30
Other Expenses .40%
After 5 Years $ 53
After 10 Years $ 117
Total .95%
</TABLE>
3
<PAGE>
(a) Estimated annual operating expenses reflect the combination of Evergreen
National Tax Free Fund and First Union High Grade Tax Free Portfolio.
* CMG has agreed to limit the expenses (including the Advisor's fee, but
excluding taxes, interest, brokerage commissions, Rule 12b-1 distribution
fees, shareholder services fees and extraordinary expenses) of EVERGREEN HIGH
GRADE TAX FREE FUND to .66 of 1% for a period of at least one year from the
date of this Prospectus and to consult with the Trustees of the Funds prior
to discontinuing such limitation after the one year period.
** The annual operating expenses and examples do not reflect fee waivers and
expense reimbursements for the most recent fiscal period. Actual expenses for
Class Y Shares net of fee waivers and expense reimbursements for the fiscal
period ended August 31, 1994, were as follows:
<TABLE>
<S> <C>
EVERGREEN SHORT INTERMEDIATE FUND............................................... .58%
EVERGREEN SHORT INTERMEDIATE FUND -- CALIFORNIA................................. .52%
</TABLE>
Evergreen Asset has agreed to reimburse EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND and EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA to
the extent that their aggregate operating expenses (including the Adviser's fee,
but excluding taxes, interest, brokerage commissions, Rule 12b-1 distribution
fees and shareholder servicing fees and extraordinary expenses) exceed 1% of the
average net assets.
From time to time, each Fund's investment adviser may, at its descretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in Class Y will
bear directly or indirectly. The amounts set forth both in the tables and in the
examples are estimated amounts based on the experience of each Fund for the most
recent fiscal period. Such expenses have been restated to reflect current fee
arrangements. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds". As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN HIGH GRADE TAX FREE FUND has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors, for EVERGREEN SHORT
INTERMEDIATE MUNICIPAL FUND and EVERGREEN SHORT INTERMEDIATE MUNICIPAL
FUND -- CALIFORNIA has, except as noted otherwise, been audited by Price
Waterhouse LLP, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP or Price Waterhouse LLP, as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
No financial highlights are shown for Class A or B of EVERGREEN SHORT
INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA since these classes did not have any
operations prior to February 28, 1995.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN HIGH GRADE TAX FREE FUND
<TABLE>
<CAPTION>
CLASS A
SHARES CLASS B CLASS Y
SHARES SHARES
FEBRUARY 21, JANUARY 11, FEBRUARY 28,
YEAR ENDED DECEMBER 1992* THROUGH YEAR ENDED 1993* THROUGH 1994* THROUGH
31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992 1994 1993 1994
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.............................. $11.16 $10.42 $10.00 $11.16 $10.42 $10.93
Income (loss) from investment
operations:
Net investment income................. .52 .54 .51 .46 .47 .46
Net realized and unrealized gain
(loss) on investments............... (1.37) .81 .42 (1.37) .81 (1.14)
Total from investment operations.... (.85) 1.35 .93 (.91) 1.28 (.68)
Less distributions to shareholders
from:
Net investment income................. (.52) (.54) (.51) (.46) (.47) (.46)
Net realized gains.................... -- (.07) -- -- (.07) --
Total distributions................. (.52) (.61) (.51) (.46) (.54) (.46)
Net asset value, end of period........ $9.79 $11.16 $10.42 $9.79 $11.16 $9.79
TOTAL RETURN+......................... (7.7%) 13.3% 9.4% (8.2%) 12.4% (6.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)..................... $57,676 $101,352 $ 90,738 $ 32,435 $ 41,030 $4,318
Ratios to average net assets:
Expenses (a)........................ 1.01% .85% .49%++ 1.58% 1.35%++ .76%++
Net investment income (a)........... 5.04% 4.99% 5.79%++ 4.47% 4.44%++ 5.46%++
Portfolio turnover rate............... 53% 14% 7% 53% 14% 53%
</TABLE>
* Commencement of operations
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS
CLASS B SHARES Y SHARES
FEBRUARY 21, JANUARY 11, FEBRUARY 28,
YEAR ENDED 1992 THROUGH YEAR ENDED 1993 THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992 1994 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Expenses.................................. 1.02% 1.07% 1.11% 1.59% 1.57% .77%
Net investment income..................... 5.03% 4.77% 5.17% 4.46% 4.22% 5.45%
</TABLE>
5
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28,
1995 YEAR ENDED AUGUST 31,
(UNAUDITED) 1994 1993 1992**
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period......................... $10.21 $10.58 $10.33 $10.00
Income (loss) from investment operations:
Net investment income........................................ .23 .47 .49 .51
Net realized and unrealized gain (loss) on investments....... (.16) (.32) .25 .33
Total from investment operations........................... .07 .15 .74 .84
Less distributions to shareholders from:
Net investment income........................................ (.23) (.47) (.49) (.51)
Net realized gains........................................... -- (.03) -- --
In excess of net realized gains.............................. -- (.02)(b) -- --
Total distributions........................................ (.23) (.52) (.49) (.51)
Net asset value, end of period............................... $10.05 $10.21 $10.58 $10.33
TOTAL RETURN+................................................ .7% 1.4% 7.4% 8.6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).................... $44,408 $53,417 $66,607 $54,470
Ratios to average net assets:
Expenses (a)............................................... .72++ .58% .40% .17%
Net investment income (a).................................. 4.54%++ 4.54% 4.73% 4.85%
Portfolio turnover rate...................................... 8% 32% 37% 57%
<CAPTION>
JULY 17, 1991*
THROUGH
AUGUST 31, 1991**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period......................... $10.00
Income (loss) from investment operations:
Net investment income........................................ .06
Net realized and unrealized gain (loss) on investments....... --
Total from investment operations........................... .06
Less distributions to shareholders from:
Net investment income........................................ (.06)
Net realized gains........................................... --
In excess of net realized gains.............................. --
Total distributions........................................ (.06)
Net asset value, end of period............................... $10.00
TOTAL RETURN+................................................ .6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).................... $4,025
Ratios to average net assets:
Expenses (a)............................................... 0%++
Net investment income (a).................................. 4.93%++
Portfolio turnover rate...................................... --
</TABLE>
* Commencement of operations.
** On November 18, 1991, the Fund was changed to a diversified municipal bond
fund with a fluctuating net asset value per share from a non-diversified
money market fund with a stable net asset value per share. The shares
outstanding at August 31, 1991 and the related per share data are restated
to reflect both a 1 for 2 reverse share split on October 30, 1991 and a 1
for 5 reverse share split on August 19, 1992. Total return calculated after
November 18, 1991 reflects the fluctuation in net asset value per share.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, JULY 17, 1991
1995 YEAR ENDED AUGUST 31, THROUGH AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Expenses.............................. .84% .83% .81% .86% 1.40%
Net investment income................. 4.42% 4.29% 4.32% 4.16% 3.53%
</TABLE>
(b) Distributions in excess of net realized gains were the result of certain
book and tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
6
<PAGE>
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 5, 1995*
THROUGH FEBRUARY 28, 1995
(UNAUDITED)
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period....................................................... $9.97 $9.97
Income from investment operations:
Net investment income...................................................................... .07 .06
Net realized and unrealized gain on investments............................................ .09 .08
Total from investment operations......................................................... .16 .14
Less distributions to shareholders from net investment income.............................. (.07) (.06)
Net asset value, end of period............................................................. $10.06 $10.05
TOTAL RETURN+ 1.6% 1.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).................................................. $7,736 $2,564
Ratios to average net assets:
Expenses (a)............................................................................. .61%++ 1.41%++
Net investment income (a)................................................................ 3.81%++ 3.30%++
Portfolio turnover rate**.................................................................. 8% 8%
</TABLE>
* Commencement of class operations.
** Portfolio turnover rate is calculated for the six months period ended
February 28, 1995.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized. Due to the recent commencement of their offering, the ratios for
Class A and Class B shares are not necessarily comparable to that of the
Class Y shares, and are not necessarily indicative of future ratios.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed by or waived by the investment adviser, the
annualized ratios of expenses and net investment income, exclusive of any
applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JANUARY 5, 1995
THROUGH FEBRUARY 28, 1995
(UAUDITED)
<S> <C> <C>
Expenses......................................................... .88% 1.98%
Net investment income............................................ 3.54% 2.73%
</TABLE>
7
<PAGE>
EVERGREEN SHORT INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA -- CLASS Y SHARES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28,
1995 YEAR ENDED AUGUST 31,
(UNAUDITED) 1994 1993** 1992** 1991** 1990**
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period..... $10.09 $10.34 $10.00 $10.00 $10.00 $10.00
Income (loss) from investment operations:
Net investment income.................... .20 .43 .41 .33 .47 .55
Net realized and unrealized gain (loss)
on investments......................... (.15) (.24) .34 -- -- --
Total from investment operations....... .05 .19 .75 .33 .47 .55
Less distributions to shareholders from:
Net investment income.................... (.20) (.43) (.41) (.33) (.47) (.55)
Net realized gains....................... (.03) (.01) -- -- -- --
Total distributions.................... (.23) (.44) (.41) (.33) (.47) (.55)
Net asset value, end of period........... $9.91 $10.09 $10.34 $10.00 $10.00 $10.00
TOTAL RETURN+............................ .6% 1.8% 7.6% 3.4% 4.8% 5.7%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $23,426 $28,433 $30,136 $34,452 $42,022 $37,291
Ratios to average net assets:
Expenses (a)........................... .79++ .52% .30% .40% .37% .29%
Net investment income (a).............. 4.15++ 4.20% 3.96% 3.36% 4.66% 5.52%
Portfolio turnover rate.................. 13% 12% 37% -- -- --
<CAPTION>
NOVEMBER 2,
1988* THROUGH
AUGUST 31, 1989**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period..... $10.00
Income (loss) from investment operations:
Net investment income.................... .51
Net realized and unrealized gain (loss)
on investments......................... --
Total from investment operations....... .51
Less distributions to shareholders from:
Net investment income.................... (.51)
Net realized gains....................... --
Total distributions.................... (.51)
Net asset value, end of period........... $10.00
TOTAL RETURN+............................ 5.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $28,266
Ratios to average net assets:
Expenses (a)........................... .24%++
Net investment income (a).............. 6.40++
Portfolio turnover rate.................. --
</TABLE>
* Commencement of operations.
** On October 16, 1992, the Fund was converted to a short-intermediate
municipal fund with a fluctuating net asset value per share from a money
market fund with a stable net asset value per share. The shares outstanding
and the related per share data for the fiscal years ended August 31, 1990
through August 31, 1992 are restated to reflect the 1 for 10 reverse share
split on October 21, 1992. Total return calculated after October 16, 1992
reflects the fluctuation in net asset value per share.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FEBRUARY 28, NOVEMBER 2, 1988
1995 YEAR ENDED AUGUST 31, THROUGH AUGUST 31,
(UNAUDITED) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Expenses............ .99% .95% .98% .84% .85% .88% .93%
Net investment
income............ 3.95% 3.77% 3.28% 2.92% 4.18% 4.93% 5.71%
</TABLE>
8
<PAGE>
9
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen High Grade Tax Free Fund
The Evergreen High Grade Tax Free Fund seeks a high level of federally
tax free income that is consistent with preservation of capital. At least 65% of
the value of the total assets of Evergreen High Grade Tax Free Fund will be
invested in high grade bonds. High grade bonds mean: bonds insured by a
municipal bond insurance company which is rated AAA by Standard & Poor's Ratings
Group ("S&P") and/or Aaa by Moody's Investors Service, Inc. ("Moody's"); bonds
rated A or better by S&P or Moody's; or, if unrated, of comparable quality as
determined by the Fund's investment adviser. The insurance guarantees the timely
payment of principal and interest, but not the value of the municipal bonds or
the shares of the Fund. See the section "Investment Practices and Restrictions"
- - "Municipal Bond Insurance" for further information.
The Evergreen High Grade Tax Free Fund may also purchase instruments
having variable rates of interest. One example is variable amount demand master
notes. These notes represent a borrowing arrangement between a commercial paper
issuer (borrower) and an institutional lender, such as the Fund and are payable
upon demand. The underlying amount of the loan may vary during the course of the
contract, as may the interest on the outstanding amount, depending on a stated
short-term interest rate index.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Short-Intermediate Municipal Fund
The investment objective of Evergreen Short-Intermediate Municipal Fund
is to achieve as high a level of current income, exempt from Federal income tax
other than the Federal alternative minimum tax("AMT") for individuals and
corporations, as is consistent with preserving capital and providing liquidity.
Under normal circumstances, it is anticipated that the Fund will invest its
assets so that at least 80% of its annual interest income is exempt from Federal
income tax other than the AMT. The Fund will seek to achieve its objective by
investing substantially all of its assets in a diversified portfolio of short
and intermediate-term debt obligations issued by states, territories and
possessions of the United States and by the District of Columbia, and their
political subdivisions and duly constituted authorities, the interest from which
is exempt from Federal income tax other than the AMT. Such securities are
generally known as Municipal Securities (See "Investment Practices and
Restrictions" - "Municipal Securities" below). As a matter of policy, the
Trustees will not change the Fund's investment objective without shareholder
approval.
Under current tax law, a distinction is drawn between Municipal
Securities issued to finance certain "private activities" and other Municipal
Securities. Such private activity bonds include bonds issued to finance such
projects as airports, housing projects, resource recovery programs, solid waste
disposal facilities, student loan programs, and water and sewage projects.
Interest income from such "private activity bonds" ("AMT-Subject Bonds") becomes
an item of "tax preference" which is subject to the alternative minimum tax when
received by a person in a tax year during which he is subject to that tax.
Because interest income on AMT-Subject Bonds is taxable to certain investors, it
is expected, although there can be no guarantee, that such Municipal Securities
generally will provide somewhat higher yields than other Municipal Securities of
comparable quality and maturity. The Fund may invest up to 50% of its total
assets in AMT-Subject Bonds.
The Fund intends to maintain a dollar-weighted average portfolio
maturity of two to five years. The Fund may consider an obligation's maturity to
be shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
Evergreen Short-Intermediate Municipal Fund-California
The investment objective of Evergreen Short-Intermediate Municipal
Fund-California is to achieve as high a level of current income exempt from
Federal and California income taxes, as is consistent with preserving capital
and providing liquidity. The Fund will seek to achieve its objective by
investing at least 80% of the value of its assets in a diversified portfolio of
short and intermediate-term debt obligations issued by the State of California,
its political subdivisions and duly constituted authorities, the interest from
which is exempt from Federal and California income taxes. Such securities are
generally known as Municipal Securities (see "Investment Practices and
Restrictions" - "Municipal Securities" below).
Interest income on certain types of bonds issued after August 7, 1986,
to finance nongovernmental activities is an item of "tax preference" subject to
AMT . To the extent the 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 AMT 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, the
Fund will invest at least 80% of its net assets in Municipal Securities, the
interest from which is not subject to AMT .
The Fund intends to maintain a dollar-weighted average portfolio
maturity of two to five years. The Fund may consider an obligation's maturity to
be shorter than its stated maturity if the Fund has the right to sell the
obligation at a price approximating par value before its stated maturity date.
This is a liquidity put and is exercisable to the issuer or some third party.
The Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Except where noted, each Fund may engage in the investment practices
described below. Each Fund is also subject to certain investment restrictions
more fully described in the Statement of Additional Information.
General. Evergreen High Grade Tax Free Fund, Evergreen Short-Intermediate
Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will
invest in Municipal Securities so long as they are determined to be of high or
upper medium quality. Municipal Securities meeting this criteria include bonds
rated A or higher by S&P, Moody's or another nationally recognized statistical
rating organization ("SRO"); notes rated SP-1 or SP-2 by S&P or MIG-1 or MIG-2
by Moody's or rated VMIG-1 or VMIG-2 by Moody's in the case of variable rate
demand notes or having comparable ratings from another SRO; and commercial paper
rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by Moody's or having comparable
ratings from another SRO. Evergreen High Grade Tax Free Fund may also invest in
general obligation bonds which are rated BBB by S&P, Baa by Moody's or bear a
similar rating from another SRO. Medium grade bonds are more susceptible to
adverse economic conditions or changing circumstances than higher grade bonds.
However, like the higher rated bonds, these securities are considered to be
investment grade. For a description of such ratings see the Statement of
Additional Information. The Funds may also purchase Municipal Securities which
are unrated at the time of purchase, if such securities are determined by the
Fund's investment adviser to be of comparable quality. Certain Municipal
Securities (primarily variable rate demand notes) may be entitled to the benefit
of standby letters of credit or similar commitments issued by banks and, in such
instances, the Fund's investment adviser will take into account the obligation
of the bank in assessing the quality of such security. Investments by Evergreen
Short-Intermediate Municipal Fund-California in unrated securities are limited
to 20% of total assets.
The ability of the Funds to meet their investment objectives is
necessarily subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolios of the Funds will be affected by
general changes in interest rates which will result in increases or decreases in
the value of the obligations held by the Funds. Investors should recognize that,
in periods of declining interest rates, the yield of the Funds will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates, the yield of the Funds will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to the Funds from the
continuous sale of its shares will likely be invested in portfolio instruments
producing lower yields than the balance of each Fund's portfolio, thereby
reducing the current yield of the Funds. In periods of rising interest rates,
the opposite can be expected to occur. In addition since Evergreen
Short-Intermediate Municipal Fund-California will invest primarily in California
Municipal Securities, there are certain specific factors and considerations
concerning California which may affect the credit and market risk of the
Municipal Securities that Evergreen Short-Intermediate Municipal Fund-California
purchases. These factors are described in the Appendix to this Prospectus.
Municipal Securities. As noted above, the Funds will invest substantially all of
their assets in Municipal Securities. These include Municipal Securities,
short-term municipal notes and tax exempt commercial paper. "Municipal
Securities" are debt obligations issued to obtain funds for various public
purposes that are exempt from Federal income tax in the opinion of issuer's
counsel. The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific source such as from the user
of the facility being financed. The term "Municipal Securities" also includes
"moral obligation" issues which are normally issued by special purpose
authorities. Industrial development bonds ("IDBs") and private activity bonds
("PABs") are in most cases revenue bonds and are not payable from the
unrestricted revenues of the issuer. The credit quality of IDBs and PABs is
usually directly related to the credit standing of the corporate user of the
facilities being financed. Participation interests are interests in Municipal
Securities, including IDBs and PABs, and floating and variable rate obligations
that are owned by banks. These interests carry a demand feature permitting the
holder to tender them back to the bank, which demand feature is backed by an
irrevocable letter of credit or guarantee of the bank. A put bond is a municipal
bond which gives the holder the unconditional right to sell the bond back to the
issuer at a specified price and exercise date, which is typically well in
advance of the bond's maturity date. "Short-term municipal notes" and "tax
exempt commercial paper" include tax anticipation notes, bond anticipation
notes, revenue anticipation notes and other forms of short-term loans. Such
notes are issued with a short-term maturity in anticipation of the receipt of
tax funds, the proceeds of bond placements and other revenues.
Municipal Bond Insurance. The Evergreen High Grade Tax Free Fund will require
municipal bond insurance when purchasing Municipal Securities which would not
otherwise meet the Fund's quality standards. The Evergreen High Grade Tax Free
Fund may also require insurance when, in the opinion of the Fund's investment
adviser, such insurance would benefit the Fund (for example, through improvement
of portfolio quality or increased liquidity of certain securities). The purpose
of municipal bond insurance is to guarantee the timely payment of principal at
maturity and interest.
Securities in the Evergreen High Grade Tax Free Fund's portfolio may be
insured in one of two ways: (1) by a policy applicable to a specific security,
obtained by the issuer of the security or by a third party ("Issuer-Obtained
Insurance") or (2) under master insurance policies issued by municipal bond
insurers, purchased by the Fund (the "Policies"). If a security's coverage is
Issuer-Obtained, then that security does not need to be covered in the Policies.
The Fund may purchase Policies from Municipal Bond Investors Assurance Corp.,
AMBAC Indemnity Corporation, and Financial Guaranty Insurance Company, or any
other municipal bond insurer which is rated Aaa by Moody's or AAA by S&P. A more
detailed description of these insurers may be found in the Statement of
Additional Information. Annual premiums for these Policies are paid by the Fund
and are estimated to range from 0.10% to 0.25% of the value of the municipal
securities covered under the Policies, with an average annual premium rate of
approximately 0.175%. While the insurance feature reduces financial risk, the
cost thereof and the restrictions on investments imposed by the guidelines in
the Policies reduce the yield to shareholders.
Floating Rate and Variable Rate Obligations. Municipal Securities also include
certain variable rate and floating rate municipal obligations with or without
demand features. These variable rate securities do not have fixed interest
rates; rather, those rates fluctuate based upon changes in specified market
rates, such as the prime rate, or are adjusted at predesignated periodic
intervals. Certain of these obligations may carry a demand feature that gives
the Funds the right to demand prepayment of the principal amount of the security
prior to its maturity date. The demand obligation may or may not be backed by
letters of credit or other guarantees of banks or other financial institutions.
Such guarantees may enhance the quality of the security. The Funds will limit
the value of their investments in any floating or variable rate securities which
are not readily marketable to 10% or less of their total assets.
When-Issued Securities. The Funds may purchase securities on a "when-issued"
basis (i.e., for delivery beyond the normal settlement date at a stated price
and yield). A Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased by a Fund on a when-issued basis may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund do not expect that commitments to purchase
when-issued securities will normally exceed 25% of their total assets and
Evergreen High Grade Tax Free Fund does not expect that such commitments will
exceed 20% of its assets. The Funds do not intend to purchase when-issued
securities for speculative purposes but only in furtherance of their investment
objective.
Stand-by Commitments. The Funds may also acquire "stand-by commitments" with
respect to Municipal Securities held in their portfolio. Under a stand-by
commitment, a dealer agrees to purchase, at a Fund's option, specified Municipal
Securities at a specified price. Failure of the dealer to purchase such
Municipal Securities may result in a Fund incurring a loss or missing an
opportunity to make an alternative investment. Each Fund expects that stand-by
commitments generally will be available without the payment of direct or
indirect consideration. However, if necessary and advisable, a Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
each Fund's portfolio will not exceed 10% of the value of the Fund's total
assets calculated immediately after each stand-by commitment is acquired. The
Funds will maintain cash or liquid high grade debt obligations in a segregated
account with its custodian in an amount equal to such commitments. The Funds
will enter into stand-by commitments only with banks and broker-dealers that, in
the judgment of the Fund's investment adviser, present minimal credit risks.
Taxable Investments. Evergreen High Grade Tax Free Fund and Evergreen
Short-Intermediate Municipal Fund-California may temporarily invest up to 20% of
their assets in taxable securities, and Evergreen Short-Intermediate Municipal
Fund may temporarily invest its assets so that not more than 20% of its annual
interest income will be derived from taxable securities, under any one or more
of the following circumstances: (a) pending investment of proceeds of sale of
Fund shares or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) to maintain liquidity for the purpose of meeting
anticipated redemptions. In addition, each such Fund may temporarily invest more
than 20% of its total assets in taxable securities for defensive purposes. Each
Fund may invest for defensive purposes during periods when each Fund's assets
available for investment exceed the available Municipal Securities that meet
each Fund's quality and other investment criteria. Taxable securities in which
the Funds may invest on a short-term basis include obligations of the United
States Government, its agencies or instrumentalities, including repurchase
agreements with banks or securities dealers involving such securities; time
deposits maturing in not more than seven days; other debt securities rated
within the two highest ratings assigned by any major rating service; commercial
paper rated in the highest grade by Moody's, S&P or any SRO; and certificates of
deposit issued by United States branches of United States banks with assets of
$1 billion or more.
Repurchase Agreements. The Funds may enter into repurchase agreements with
member banks of the Federal Reserve System, including State Street Bank and
Trust Company, the Funds' custodian ("State Street" or the "Custodian"), or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
United States Government securities. A repurchase agreement is an arrangement
pursuant to which a buyer purchases a security and simultaneously agrees to
resell it to the vendor at a price that results in an agreed-upon market rate of
return which is effective for the period of time (which is normally one to seven
days, but may be longer) the buyer's money is invested in the security. The
arrangement results in a fixed rate of return that is not subject to market
fluctuations during a Fund's holding period. Each Fund requires continued
maintenance of collateral with its Custodian in an amount equal to, or in excess
of, the market value of the securities, including accrued interest, which are
the subject of a repurchase agreement. In the event a vendor defaults on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
the vendor becomes the subject of bankruptcy proceedings, a Fund might be
delayed in selling the collateral. Each Fund's investment adviser will review
and continually monitor the creditworthiness of each institution with which a
Fund enters into a repurchase agreement to evaluate these risks. Evergreen
Short-Intermediate Municipal Fund-California and Evergreen Short-Intermediate
Municipal Fund may not enter into repurchase agreements if, as a result, more
than 10% of either Fund's net assets would be invested in repurchase agreements
maturing in more than seven days and Evergreen High Grade Tax Free Fund may not
so invest more than 15% of its net assets.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable,
except that Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund may only invest up to 10% of their assets in
repurchase agreements with maturities longer than seven days. In the case of
Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, which have been determined to be
liquid, will not be considered by the Fund's investment adviser to be illiquid
or not readily marketable and, therefore, are not subject to the aforementioned
15% limit. Evergreen High Grade Tax Free Fund may invest up to 10% of its assets
in securities subject to restrictions on resale under the federal securities
laws. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by each Fund's investment adviser on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in a Fund having more than 15% of its assets invested in illiquid or not readily
marketable securities.
Other Investment Policies. The Funds may borrow funds and agree to sell
portfolio securities to financial institutions such as banks and broker-dealers
and to repurchase them at a mutually agreed upon date and price (a "reverse
repurchase agreement") for temporary or emergency purposes. In the case of
Evergreen Short-Intermediate Municipal Fund-California and Evergreen
Short-Intermediate Municipal Fund borrowings may be in amounts up to 10% of the
value of each Fund's total assets at the time of such borrowing. Evergreen High
Grade Tax Free Fund may borrow in amounts up to one-third of its net assets. At
the time 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
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. Evergreen Short-Intermediate
Municipal Fund and Evergreen Short-Intermediate Municipal Fund-California will
not enter into reverse repurchase agreements exceeding 5% of the value of its
total assets and will not purchase any securities whenever any borrowings
(including reverse repurchase agreements) are outstanding.
In order to generate income and to offset expenses, the Funds may lend
portfolio securities to brokers, dealers and other financial organizations. Each
Fund's investment adviser will monitor the creditworthiness of such borrowers.
Loans of securities by a Fund, if and when made, may not exceed 30% of each
Fund's total assets, or in the case of Evergreen High Grade Tax Free Fund 15%,
and will be collateralized by cash, letters of credit or U.S. government
securities that are maintained at all times in an amount equal to at least 100
percent of the current market value of the loaned securities, including accrued
interest. While such securities are on loan, the borrower will pay a Fund any
income accruing thereon, and the Fund may invest the cash collateral, thereby
increasing its return. A Fund will have the right to call any such loan and
obtain the securities loaned at any time on five days' notice. Any gain or loss
in the market price of the loaned securities which occurs during the term of the
loan would affect a Fund and its investors. A Fund may pay reasonable fees in
connection with such loans.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees").. Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by Evergreen
Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal
Fund-California as investment adviser. Evergreen Asset succeeded on June 30,
1994 to the advisory business of the same name, but under different ownership,
which was organized in 1971. Evergreen Asset, with its predecessors, has served
as investment adviser to the Evergreen mutual funds since 1971. Evergreen Asset
is a wholly-owned subsidiary of First Union National Bank of North Carolina
("FUNB"). The address of Evergreen Asset is 2500 Westchester Avenue, Purchase,
New York 10577. FUNB is a subsidiary of First Union Corporation ("First Union"),
one of the ten largest bank holding companies in the United States. Stephen A.
Lieber and Nola Maddox Falcone serve as the chief investment officers of
Evergreen Asset and, along with Theodore J. Israel, Jr., were the owners of
Evergreen Asset's predecessor and the former general partners of Lieber &
Company, which, as described below, provides certain subadvisory services to
Evergreen Asset in connection with its duties as investment adviser to the
Funds. The Capital Management Group of FUNB ("CMG") serves as investment adviser
to Evergreen High Grade Tax Free Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, and had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
Evergreen Asset manages investments, provides various administrative
services and supervises the daily business affairs of Evergreen
Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal
Fund-California, subject to the authority of the Trustees. Under its investment
advisory agreement with Evergreen Short-Intermediate Municipal Fund-California
Evergreen Asset is entitled to receive an annual fee equal to .55 of 1% of the
Fund's average daily net assets. Under its investment advisory agreement with
Evergreen Short-Intermediate Municipal Fund, Evergreen Asset is entitled to
receive an annual fee equal to .50 of 1% of each Fund's average daily net
assets. The total expense ratios of Evergreen Short-Intermediate Municipal Fund
and Evergreen Short-Intermediate Municipal Fund-California for the fiscal period
ended August 31, 1994, are set forth in the section entitled "Financial
Highlights". CMG manages investments and supervises the daily business affairs
of Evergreen High Grade Tax Free Fund and, as compensation therefor, is entitled
to receive an annual fee equal to .50 of 1% of average daily net assets of
Evergreen High Grade Tax Free Fund. The total expense ratios of Evergreen High
Grade Tax Free Fund for the fiscal period ended December 31, 1994, are set forth
in the section entitled "Financial Highlights". Evergreen Asset serves as
administrator to Evergreen High Grade Tax Free Fund and is entitled to receive a
fee based on the average daily net assets of the Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .050% of the first $7 billion; .035% on the next $3
billion; .030% on the next $5 billion; .020% on the next $10 billion; .015% on
the next $5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
High Grade Tax Free Fund and is entitled to receive a fee from the Fund
calculated on the average daily net assets of the Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .0100% of the first $7 billion; .0075% on the next
$3 billion; .0050% on the next $15 billion; and .0040% on assets in excess of
$25 billion. The total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset serve as investment adviser as of March
31, 1995 were approximately $8 billion.
The portfolio manager of Evergreen High Grade Tax Free Fund is James T.
Colby, III. Mr. Colby is a Vice President of CMG and has been associated with
Evergreen Asset and its predecessor since 1992. He has served as portfolio
manager of the Fund since June, 1995 and, since that fund's inception in 1992,
was portfolio manager of Evergreen National Tax Free Fund, whose assets were
acquired by the Fund on July 7, 1995. Prior to joining Evergreen Asset, Mr.
Colby served as Vice President-Investments at American Express Company from 1987
to 1992. The portfolio manager for Evergreen Short-Intermediate Municipal
Fund-California and Evergreen Short-Intermediate Municipal Fund is Steven C.
Shachat. Mr. Shachat has been associated with Evergreen Asset and its
predecessor since prior to 1989 and has served as portfolio manager of these
Funds since their inception.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Short-Intermediate Municipal Fund-California and
Evergreen Short-Intermediate Municipal Fund. Lieber & Company will be reimbursed
by Evergreen Asset in connection with the rendering of services on the basis of
the direct and indirect costs of performing such services. There is no
additional charge to Evergreen Short-Intermediate Municipal Fund-California and
Evergreen Short-Intermediate Municipal Fund for the services provided by Lieber
& Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase,
New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of
First Union.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
securities in a Fund are valued at their current market value determined on the
basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
market value.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from an investor's
account to reimburse the Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
A Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order, including orders in
connection with exchanges from the other Evergreen Funds. Although not currently
anticipated, each Fund reserves the right to suspend the offer of shares for a
period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Internal Revenue Code (the "Code"). While so
qualified, so long as each Fund distributes all of its investment company
taxable income and any net realized gains to shareholders, it is expected that
the Funds will not be required to pay any Federal income taxes. A 4%
nondeductible excise tax will be imposed on a Fund if it does not meet certain
distribution requirements by the end of each calendar year. Each Fund
anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any
net realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
For Evergreen Short-Intermediate Municipal Fund-California, so long as
the Fund remains qualified under Subchapter M of the Code for federal purposes
and qualified as a diversified management investment company, then under current
California law, the Fund is entitled to pass through to its shareholders the
tax-exempt income it earns. To the extent that Fund dividends are derived from
earnings on California Municipal Securities, such dividends will be exempt from
California personal income taxes when received by the Fund's shareholders,
provided the Fund has complied with the requirement that at least 50% of its
assets be invested in California Municipal Securities. For California income tax
purposes, long-term capital gains distributions are taxable as ordinary income.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from Federal and, if applicable, state
taxation (including California), and the amount, if any, subject to Federal and
state taxation. Moreover, to the extent necessary, these statements will
indicate the amount of exempt-interest dividends which are a specific preference
item for purposes of the Federal individual and corporate alternative minimum
taxes. The exemption of interest income for Federal income tax purposes does not
necessarily result in exemption under the income or other tax law of any state
or local taxing authority. Investors should consult their own tax advisers about
the status of distributions from the Funds in their states and localities. Each
Fund notifies shareholders annually as to the interest exempt from Federal taxes
earned by the Fund.
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Short-Intermediate
Municipal Fund-California and Evergreen Short-Intermediate Municipal Fund for
their most recent fiscal year is set forth below. A similar discussion relating
to Evergreen High Grade Municipal Fund is contained in the annual report of such
Fund for the fiscal year ended December 31, 1994.
Evergreen Short-Intermediate Municipal Fund. The Fund's total return for the
fiscal year ending August 31, 1994 was +1.42%, versus the Lehman Brothers 3-Year
Municipal Bond Index, which rose + 2.38%, and the Lehman Brothers 5-Year
Municipal Bond Index, which increased + 2.01%. As the economy picked up momentum
and the Federal Reserve started tightening, interest rates in the fixed-income
markets climbed in every maturity range. As a result, the Fund moved to a more
defensive position during the last half of the fiscal year in order to moderate
price volatility. The Fund's investment adviser reduced the Fund's weighted
average maturities and durations, and adjusted the holdings by selling
securities most sensitive to price declines in a rising environment such as
bonds trading at a discount. Proceeds were reinvested in premium-based, high
quality bonds. The strategy of the Fund as of August 31, 1994 was to remain
relatively short in the one to three-year range as we look to purchase
investment grade, non-callable bonds.
[CHART]
Evergreen Short-Intermediate Municipal Fund - California. The Fund's total
return for the fiscal year ending August 31, 1994 was 1.84%, versus the Lehman
Brothers 3-Year California Municipal Bond Index, which rose +2.38% and the
Lehman Brothers California Municipal Bond Index, which increased + 2.21%.
As the economy picked up momentum and the Federal Reserve started
tightening, interest rates in the fixed-income markets climbed in every maturity
range. As a result, the Fund moved to a more defensive position during the last
half of the fiscal year in order to moderate price volatility. The investment
adviser reduced the Fund's weighted average maturities and durations, and
adjusted the holdings by selling securities most sensitive to price declines in
a rising environment such as bonds trading at a discount. Proceeds were
reinvested in premium-based, high quality bonds. The strategy of the Fund
strategy as of August 31, 1994, is to remain relatively short in the one to
three-year range as we look to purchase investment grade, non callable bonds.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. Evergreen Short-Intermediate Municipal Fund and Evergreen
Short-Intermediate Municipal Fund - California are separate investment series of
Evergreen Municipal Trust, a Massachusetts business trust organized in 1988.
Evergreen High Grade Tax Free Fund is a separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Directors, that affect each series and class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen High Grade Tax Free Fund and which provides
certain sub-administrative services to Evergreen Asset in connection with its
role as investment adviser to Evergreen Short-Intermediate Municipal Fund and
Evergreen Short-Intermediate Municipal Fund - California, including providing
personnel to serve as officers of the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
mutual funds for which Evergreen Asset serves as investment adviser as of
December 30, 1994, (ii) certain institutional investors and (iii) investment
advisory clients of CMG, Evergreen Asset or their affiliates. The dividends
payable with respect to Class A and Class B shares will be less than those
payable with respect to Class Y shares due to the distribution and distribution
related expenses borne by Class A and Class B shares and the fact that such
expenses are not borne by Class Y shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period. This yield does not reflect gains or losses from selling
securities.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated Federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Total returns are based on the overall dollar or percentage change in
the value of a hypothetical investment in a Fund. A Fund's total return shows
its overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
Comparative performance information may also be used from time to time
in advertising or marketing a Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar and other industry publications. The Fund
may also advertise in items of sales literature an "actual distribution rate"
which is computed by dividing the total ordinary income distributed (which may
include the excess of short-term capital gains over losses) to shareholders for
the latest twelve month period by the maximum public offering price per share on
the last day of the period. Investors should be aware that past performance may
not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which each
Fund operates provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
APPENDIX -- CALIFORNIA RISK CONSIDERATIONS
The following information as to certain California risk factors is
given to investors in view of the policy of Evergreen Short-Intermediate
Municipal Fund-California of investing primarily in California state and
municipal issuers. The information is based primarily upon information derived
from public documents relating to securities offerings of California state and
municipal issuers, from independent municipal credit reports and historically
reliable sources but has not been independently verified by the Fund.
Changes in California constitutional and other laws during the last
several years have raised questions about the ability of California state and
municipal issuers to obtain sufficient revenue to pay their bond obligations. In
1978, California voters approved an amendment to the California Constitution
known as Proposition 13. Proposition 13 limits ad valorem taxes on real property
and restricts the ability of taxing entities to increase real property taxes.
Legislation passed subsequent to Proposition 13, however, provided for the
redistribution of California's General Fund surplus to local agencies, the
reallocation of revenues to local agencies, and the assumption of certain local
obligations by the state so as to help California municipal issuers to raise
revenue to pay their bond obligations. It is unknown, however, whether
additional revenue redistribution legislation will be enacted in the future and
whether, if enacted, such legislation would provide sufficient revenue for such
California issuers to pay their obligations. The state is also subject to
another constitutional amendment, Article XIIIB, which may have an adverse
impact on California state and municipal issuers. Article XIIIB restricts the
state from spending certain appropriations in excess of an appropriations limit
imposed for each state and local government entity. If revenues exceed such
appropriations limit, such revenues must be returned either as revisions in the
tax rates or fee schedules. Because of the uncertain impact of the
aforementioned statutes and cases, the possible inconsistencies in the
respective terms of the statutes and the impossibility of predicting the level
of future appropriations and applicability of related statutes to such
questions, it is not currently possible to assess the impact of such
legislation, cases and policies on the long-term ability of California state and
municipal issuers to pay interest or repay principal on their obligations.
California's economy is larger than many sovereign nations. During the
1980s, California experienced growth rates well in excess of the rest of the
nation. The state's major employment sectors are services, trade, and
manufacturing. Industrial concentration is in electronics, aerospace, and
non-electrical equipment. Also significant are agriculture and oil production.
Key sectors of California's economy have been severely affected by the
recession. Since May of 1990, job losses total over 850,000. Declines in the
aerospace and high technology sectors have been especially severe. The
continuing drive in population and labor force growth has produced higher
unemployment rates in the state. Although total job loss has declined, weakness
continues in key areas of California's economy, including government, real
estate and aerospace. Wealth levels still remain high in the state, although the
difference between state and national levels continues to narrow.
In July of 1994, both S&P and Moody's lowered the general obligation
bond ratings of the state of California. These revisions reflect the state's
heavy reliance on the short-term note market to finance its cash imbalance and
the likelihood that this exposure will persist for at least another two years.
For more information on these ratings revisions and the state's current budget,
please refer to the Statement of Additional Information.
Orange County Bankruptcy. On December 6, 1994, Orange County, California,
petitioned for bankruptcy based on losses in the Orange County Investment Fund
which at the time were estimated to be approximately $2 billion. At the time of
the petition, the Orange County Investment Fund held monies belonging to Orange
County as well as other municipal issuers located in Orange County and other
parts of California. Although the ultimate resolution of this matter is
uncertain, one possible result is that the ability of municipal issuers
investing in the Orange County Investment Fund to service some or all of their
outstanding debt obligations may be severely impaired.
As of December 6, 1994, Evergreen Short-Intermediate Municipal Fund -
California did not hold debt obligations of Orange County or other issuers that
the Fund is aware had invested in the Orange County Investment Fund. Although it
has no current intention to do so, if it deems it advisable, the Fund reserves
the right from time to time to make investments in municipal issuers who
maintain assets in the Orange County Investment Fund.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND, EVERGREEN SHORT-INTERMEDIATE
MUNICIPAL FUND-CALIFORNIA
Capital Mangement Group of First Union Bank, 201 South College Street,
Charlotte, North Carolina 28288
EVERGREEN HIGH GRADE TAX FREE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND,
EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND-CALIFORNIA
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN HIGH GRADE TAX FREE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
PROSPECTUS July 7, 1995
EVERGREEN(SM) STATE SPECIFIC TAX FREE FUNDS (Evergreen Logo appears here)
EVERGREEN FLORIDA MUNICIPAL BOND FUND
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
CLASS A SHARES
CLASS B SHARES
The Evergreen State Specific Tax-Free Funds (the "Funds") are
designed to provide investors with current income exempt from Federal
income tax and certain state income tax. This Prospectus provides
information regarding the Class A and Class B shares offered by the Funds.
Each Fund is, or is a series of, an open-end, non-diversified, management
investment company except for EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND which is diversified. This Prospectus sets forth concise information
about the Funds that a prospective investor should know before investing.
The address of the Funds is 2500 Westchester Avenue, Purchase, New York
10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 807-2940. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND WILL INVEST AT LEAST 65%
OF THE VALUE OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES CONSISTING OF HIGH
YIELD (I.E., HIGH RISK), MEDIUM, LOWER RATED AND UNRATED BONDS. SUCH
SECURITIES ARE COMMONLY CALLED JUNK BONDS AND ARE SUBJECT TO GREATER MARKET
FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL THAN HIGHER RATED
SECURITIES, LOWER QUALITY SECURITIES INVOLVE A GREATER RISK OF DEFAULT AND,
CONSEQUENTLY, SHARES OF THE EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND ARE SPECULATIVE SECURITIES.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 6
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 12
Investment Practices and Restrictions 14
MANAGEMENT OF THE FUNDS
Investment Adviser 18
Distribution Plans and Agreements 19
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 20
How to Redeem Shares 22
Exchange Privilege 23
Shareholder Services 24
Effect of Banking Laws 24
OTHER INFORMATION
Dividends, Distributions and Taxes 25
Management's Discussion of Fund Performance 26
General Information 27
APPENDIX
Florida Risk Considerations 29
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank ("CMG") serves
as investment adviser to Evergreen State Specific Tax Free Funds which include:
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND. First Union National Bank of North Carolina
("FUNB"), is a subsidiary of First Union Corporation, one of the ten largest
bank holding companies in the United States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND (formerly First Union Florida
Municipal Bond Portfolio, successor to ABT Florida Tax-Free Fund) seeks current
income exempt from federal income tax consistent with preservation of capital.
In addition, the Fund intends to qualify as an investment exempt from the
Florida state intangibles tax.
EVERGREEN GEORGIA MUNICIPAL BOND FUND (formerly First Union Georgia
Municipal Bond Portfolio) seeks current income exempt from federal income tax
and Georgia state income tax, consistent with preservation of capital.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND (formerly First Union North
Carolina Municipal Bond Portfolio) seeks current income exempt from federal
income tax and North Carolina state income tax, consistent with preservation of
capital. In addition, the Fund intends to qualify as an investment substantially
exempt from the North Carolina intangible personal property tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND (formerly First Union South
Carolina Municipal Bond Portfolio seeks current income exempt from federal
income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND (formerly First Union Virginia
Municipal Bond Portfolio) seeks current income exempt from federal income tax
and Virginia state income tax, consistent with preservation of capital.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND (successor to ABT
Florida High Income Municipal Bond Fund) seeks to provide a high level of
current income exempt from federal income tax. Under normal circumstances, the
Fund will invest at least 65% of the value of its total assets in municipal
securities consisting of high yield (i.e., high risk), medium, lower rated and
unrated bonds.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A and Class B Shares of a Fund. For
further information see "Purchase and Redemption of Fund Shares" and "General
Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None
Contingent Deferred Sales Charge (as a % of original purchase None 5% during the first year, 4% during the
price or redemption proceeds, whichever is lower) second year, 3% during the third and fourth
years, 2% during the fifth year, 1% during
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None
Exchange Fee None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return and (ii) redemption at the end of each period and,
additionally for Class B shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares assume deduction at the time of redemption (if
applicable) of the maximum contingent deferred sales charge applicable for that
time period, and (iii) the expenses for Class B Shares reflect the conversion to
Class A Shares eight years after purchase (years eight through ten, therefore,
reflect Class A expenses).
<TABLE>
<CAPTION>
EVERGREEN FLORIDA MUNICIPAL BOND FUND(A)
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES** at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .30% .30%
After 1 Year $ 53 $ 65 $ 15
Administrative Fees .06% .06%
After 3 Years $ 66 $ 76 $ 46
12b-1 Fees* .15% .75%
After 5 Years $ 80 $ 100 $ 80
Shareholder Service Fees -- .25%
After 10 Years $ 120 $ 140 $140
Other Expenses .10% .10%
Total .61% 1.46%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
Administrative Fees .06% .06%
After 3 Years $ 85 $ 93 $ 63
12b-1 Fees* .25% .75%
After 5 Years $ 113 $ 128 $108
Shareholder Service Fees -- .25%
After 10 Years $ 191 $ 204 $204
Other Expenses*** .44% .44%
Total 1.25% 2.00%
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .50%
.50% After 1 Year $ 59 $ 70 $ 20
Administrative Fees .06% .06%
After 3 Years $ 83 $ 90 $ 60
12b-1 Fees* .25% .75%
After 5 Years $ 109 $ 124 $104
Shareholder Service Fees -- .25%
After 10 Years $ 183 $ 196 $196
Other Expenses .36% .36%
Total 1.17% 1.92%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
Administrative Fees .06% .06%
After 3 Years $ 85 $ 93 $ 63
12b-1 Fees* .25% .75%
After 5 Years $ 113 $ 128 $108
Shareholder Service Fees -- .25%
After 10 Years $ 191 $ 204 $204
Other Expenses*** .44% .44%
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50%
After 1 Year $ 60 $ 70 $ 20
Administrative Fees .06% .06%
After 3 Years $ 85 $ 93 $ 63
12b-1 Fees* .25% .75%
After 5 Years $ 113 $ 128 $108
Shareholder Service Fees -- .25%
After 10 Years $ 191 $ 204 $204
Other Expenses*** .44% .44%
Total 1.25% 2.00%
</TABLE>
<TABLE>
<CAPTION>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND (B)
EXAMPLES
Assuming Assuming
ANNUAL OPERATING Redemption no
EXPENSES at End of Period Redemption
Class A Class B Class A Class B Class B
<S> <C> <C> <C> <C> <C> <C>
Advisory Fees** .30% .30%
After 1 Year $ 55 $ 66 $ 16
Administrative Fees .06% .06%
After 3 Years $ 72 $ 80 $ 50
12b-1 Fees* .25% 1.00%
After 5 Years $ 91 $ 106 $ 86
Other Expenses .21% .21%
After 10 Years $ 144 $ 157 $157
Total .82% 1.57%
</TABLE>
(a) Estimated annual operating expenses reflect the combination of FIRST UNION
FLORIDA MUNICIPAL BOND FUND and ABT Florida Tax-Fee Fund.
(b) Estimated annual operating expenses reflect the combination of EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND and ABT Florida High Income
Municipal Bond Fund. The amounts in the tables and examples are based on the
experience of ABT Florida High Income Municipal Bond Fund as restated to
reflect current fee arrangements.
*Class A Shares can pay up to .75 of 1% of average annual net assets as a 12b-1
Fee. For the forseeable future, the Class A Shares 12b-1 Fees will be limited to
.25 of 1% of average annual net assets. For Class B Shares of EVERGREEN FLORIDA
HIGH INCOME MUNICIPAL BOND FUND, a portion of the 12b-1 Fees equivalent to .25
of 1% of average annual assets will be shareholder servicing-related.
Distribution-related 12b-1 Fees will be limited to .75 of 1% of average annual
assets as permitted under the rules of the National Association of Securities
Dealers, Inc.
**EVERGREEN FLORIDA MUNICIPAL BOND FUND will not pay 12b-1 Fees to the extent
that the effect of such payment would be to cause the Fund's ratio of expenses
to average net assets for Class A Shares to exceed .61 of 1%.
4
<PAGE>
CMG has agreed to limit the Advisory Fee charged to EVERGREEN FLORIDA MUNICIPAL
BOND FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND to .30 of 1% of
average net assets for a period of at least one year.
From time to time each fund's adviser may, at its discretion, reduce or waive
its fees or reimburse these Funds for certain of their other expenses in order
to reduce their expense ratios. Each fund's adviser may cease these voluntary
waivers and reimbursements at any time.
The estimated annual operating expenses and examples do not reflect fee
waivers and expense reimbursements for the most recent fiscal year. Actual
expenses for Class A and B Shares net of fee waivers and expense reimbursements
for the year ended December 31, 1994 or April 30, 1995 as applicable were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
EVERGREEN FLORIDA MUNICIPAL BOND FUND .61% N/A
EVERGREEN GEORGIA MUNICIPAL BOND FUND .53% 1.13%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND .79% 1.37%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND .25% .87%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND .53% 1.12%
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND .60% N/A
</TABLE>
***Reflects agreements by CMG to limit aggregate operating expenses (including
the Advisory Fees, but excluding interest, taxes, brokerage commissions, Rule
12b-1 Fees, shareholder servicing fees and extraordinary expenses) of EVERGREEN
GEORGIA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and
EVERGREEN VIRGINIA MUNICIPAL BOND FUND to 1% of average net assets for the
foreseeable future. Absent such agreements, the estimated annual operating
expenses for the Funds would be as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND 1.78% 2.53%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND 4.91% 5.66%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND 2.25% 3.00%
</TABLE>
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for its most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds." As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted under the
rules of the National Association of Securities Dealers, Inc.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the fund if shorter for EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and
EVERGREEN VIRGINIA MUNICIPAL BOND FUND has been audited by KPMG Peat Marwick
LLP, each Fund's independent auditors for EVERGREEN FLORIDA MUNICIPAL BOND FUND
and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND has been audited by Tait,
Weller & Baker, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP or Tait, Weller & Baker as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN FLORIDA MUNICIPAL BOND FUND -- CLASS A SHARES*
<TABLE>
<CAPTION>
MAY 11, 1988**
THROUGH
YEAR ENDED APRIL 30, APRIL 30,
1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period......... $10.79 $11.27 $10.59 $10.43 $9.97 $10.30 $10.00
Income from investment operations:
Net investment income........................ .61 .63 .63 .69 .74 .66 .53
Net realized and unrealized gain (loss) on
investments................................ .12 (.40) .76 .25 .49 (.28) .25
Total from investment operations........... .73 .23 1.39 .94 1.23 .38 .78
Less distributions to shareholders from:
Net investment income........................ (.61) (.63) (.63) (.69) (.77) (.67) (.48)
Net realized gains........................... (.02) (.08) (.08) (.05) -- (.04) --
Paid-in capital.............................. -- -- -- (.04) -- -- --
Total distributions........................ (.63) (.71) (.71) (.78) (.77) (.71) (.48)
Net asset value, end of period............. $10.89 $10.79 $11.27 $10.59 $10.43 $9.97 $10.30
TOTAL RETURN+................................ 2.0% 1.9% 13.6% 9.3% 12.9% 3.7% 9.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).... $168,542 $199,612 $198,286 $147,996 $75,791 $7,286 $717
Ratios to average net assets:
Expenses................................... .61% .56% .58% .41%(a) .10%(a) .10%(a) .30%(a)++
Net investment income...................... 5.73% 5.37% 5.66% 6.12%(a) 6.55%(a) 6.15%(a) 5.30%(a)++
Portfolio turnover rate...................... 53% 32% 24% 24% 66% 82% 2%
</TABLE>
* The information in the table above reflects the operating history of ABT
Florida Tax Free Fund, the predecessor to EVEGREEN FLORIDA MUNICIPAL BOND
FUND, for the periods indicated.
** Commencement of operations.
+ Total return is calculated on net asset value and is not annualized. Initial
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
MAY 11, 1988
YEAR ENDED APRIL 30, THROUGH
1992 1991 1990 APRIL 30, 1989
<S> <C> <C> <C> <C>
Expenses.................................................... .68% .88% 5.14% 20.40%
Net investment income (loss)................................ 5.85% 5.77% 1.01% (14.80%)
</TABLE>
6
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS A, B, AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y
JULY 2, JULY 2, SHARES
1993* 1993* FEBRUARY 28,
YEAR ENDED THROUGH YEAR ENDED THROUGH 1994* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period......... $10.19 $10.00 $10.19 $10.00 $9.83
Income (loss) from investment operations.....
Net investment income........................ .48 .20 .43 .18 .42
Net realized and unrealized gain (loss) on
investments................................ (1.45) .19 (1.45) .19 (1.09)
Total from investment operations........... (.97) .39 (1.02) .37 (.67)
Less distributions to shareholders from:
Net investment income........................ (.48) (.20) (.43) (.18) (.42)
Net asset value, end of period............... $8.74 $10.19 $8.74 $10.19 $8.74
TOTAL RETURN+................................ (9.6%) 4.0% (10.2%) 3.7% (6.9%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)................................. $1,387 $817 $6,912 $3,692 $284
Ratios to average net assets:
Expenses (a)............................... .53% .25%++ 1.13% .75%++ .31%++
Net investment income (a).................. 5.26% 4.71%++ 4.66% 4.15%++ 5.68%++
Portfolio turnover rate...................... 147% 15% 147% 15% 147%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
JULY 2, 1993 JULY 2, 1993 FEBRUARY 28,
YEAR ENDED THROUGH YEAR ENDED THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
Expense................................... 3.61% 6.82% 4.21% 7.32% 3.39%
Net investment income (loss).............. 2.18% (1.86%) 1.58% (2.42%) 2.60%
</TABLE>
7
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES Y SHARES
JANUARY 11, JANUARY 11, FEBRUARY 28,
YEAR ENDED 1993* THROUGH YEAR ENDED 1993* THROUGH 1994* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........ $10.61 $10.00 $10.61 $10.00 $10.31
Income (loss) from investment operations:
Net investment income....................... .49 .46 .44 .42 .43
Net realized and unrealized gain (loss) on
investments............................... (1.45) .64 (1.45) .64 (1.15)
Total from investment operations.......... (.96) 1.10 (.1.01) 1.06 (.72)
Less distributions to shareholders from:
Net investment income....................... (.49) (.46) (.44) (.42) (.43)
Net realized gains.......................... -- (.03) -- (.03) --
Total distributions....................... (.49) (.49) (.44) (.45) (.43)
Net asset value, end of period.............. $9.16 $10.61 $9.16 $10.61 $9.16
TOTAL RETURN+............................... (9.1%) 11.3% (9.6%) 10.8% (7.0%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)... $7,979 $12,739 $ 44,616 $45,168 $642
Ratios to average net assets:
Expenses (a).............................. .79% .32%++ 1.37% .79%++ .59%++
Net investment income (a)................. 5.11% 4.91%++ 4.53% 4.47%++ 5.58%++
Portfolio turnover rate..................... 126% 57% 126% 57% 126%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund has borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
JANUARY 11, JANUARY 11, FEBRUARY 28,
YEAR ENDED 1993 THROUGH YEAR ENDED 1993 THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
Expenses................................ 1.18% 1.25% 1.76% 1.74% .98%
Net investment income................... 4.72% 3.98% 4.14% 3.52% 5.19%
</TABLE>
8
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
SHARES SHARES SHARES
JANUARY 3, JANUARY 3, FEBRUARY 28,
1994* THROUGH 1994* THROUGH 1994* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period......................................... $10.00 $10.00 $9.74
Income (loss) from investment operations:
Net investment income........................................................ .46 .41 .43
Net realized and unrealized (loss) on investments............................ (1.38) (1.38) (1.12)
Total from investment operations........................................... (.92) (.97) (.69)
Less distributions to shareholders from:
Net investment income........................................................ (.46) (.41) (.43)
Net asset value, end of period............................................... $8.62 $8.62 $8.62
TOTAL RETURN+................................................................ (9.3%) (9.8%) (7.1%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).................................... $312 $2,456 $92
Ratios to average net assets:
Expenses (a)............................................................... .25%++ .87%++ .00%++
Net investment income (a).................................................. 5.57%++ 4.88%++ 5.92%++
Portfolio turnover rate...................................................... 23% 23% 23%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS Y SHARES
JANUARY 3, JANUARY 3, FEBRUARY 28,
1994 1994 1994
THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994
<S> <C> <C> <C>
Expenses............................................................... 10.71% 11.33% 10.46%
Net investment income (loss)........................................... (4.89%) (5.58%) (4.54%)
</TABLE>
9
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JULY 2, JULY 2,
1993* 1993* CLASS Y SHARES
YEAR ENDED THROUGH YEAR ENDED THROUGH FEBRUARY 28, 1994*
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, THROUGH
1994 1993 1994 1993 DECEMBER 31, 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period..... $10.19 $10.00 $10.19 $10.00 $9.83
Income (loss) from investment operations:
Net investment income.................... .47 .20 .42 .17 .41
Net realized and unrealized gain (loss)
on investments......................... (1.34) .19 (1.34) .19 (.98)
Total from investment operations....... (.87) .39 (.92) .36 (.57)
Less distributions to shareholders from:
Net investment income.................... (.47) (.20) (.42) (.17) (.41)
Net asset value, end of period........... $8.85 $10.19 $8.85 $10.19 $8.85
TOTAL RETURN+............................ (8.6%) 3.9% (9.1%) 3.7% (5.8%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $1,606 $1,306 $3,817 $2,235 $344
Ratios to average net assets:
Expenses (a)........................... .53% .25%++ 1.12% .75%++ .28%++
Net investment income (a).............. 5.11% 4.64%++ 4.54% 4.25%++ 5.54%++
Portfolio turnover rate.................. 59% 0% 59% 0% 59%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS Y
CLASS A SHARES CLASS B SHARES SHARES
JULY 2, 1993 JULY 2, 1993 FEBRUARY 28,
YEAR ENDED THROUGH YEAR ENDED THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
Expenses.................................. 5.14% 7.75% 5.73% 8.25% 4.89%
Net investment income (loss).............. .50% (2.86%) (.07%) (3.25%) .93%
</TABLE>
10
<PAGE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND -- CLASS A SHARES*
<TABLE>
<CAPTION>
YEAR ENDED JUNE 17,
APRIL 30, 1992** THROUGH
1995 1994 APRIL 30, 1993
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period..................................................... $10.08 $10.36 $10.00
Income from investment operations:
Net investment income.................................................................... .65 .68 .61
Net realized and unrealized gain (loss) on investments................................... .08 (.26) .39
Total from investment operations....................................................... .73 .42 1.00
Less distributions to shareholders from:
Net investment income.................................................................... (.65) (.68) (.61)
Net realized gains....................................................................... -- (.02) (.03)
Total distributions.................................................................... (.65) (.70) (.64)
Net asset value, end of period........................................................... $10.16 $10.08 $10.36
TOTAL RETURN+............................................................................ 7.6% 3.3% 11.9%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................................ $65,043 $72,683 $33,541
Ratios to average net assets:
Expenses (a)........................................................................... .60% .14% .00++
Net investment income (a).............................................................. 6.52% 6.16% 5.92%++
Portfolio turnover rate.................................................................. 28% 31% 50%
</TABLE>
* The information in the table above reflects the operating history of ABT
Florida High Income Municipal Fund, the predecessor to EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND, for the periods indicated.
** Commencement of operations.
+ Total return is calculated on net asset value and is not annualized. Initial
sales load is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 17, 1992
APRIL 30, THROUGH
1995 1994 APRIL 30, 1993
<S> <C> <C> <C>
Expenses.......................................................... 1.26% 1.12% 1.12%
Net investment income............................................. 5.86% 5.18% 4.80%
</TABLE>
11
12
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
The Funds seek current income exempt from federal regular income tax
and, where applicable, state income taxes, consistent with preservation of
capital. In addition, the Evergreen Florida Municipal Bond Fund intends to
qualify as an investment exempt from the Florida state intangibles tax. Florida
does not currently tax personal income.
Each Fund's investment objective cannot be changed without shareholder
approval. While there is no assurance that each objective will be achieved, the
Funds will endeavor to do so by following the investment policies detailed
below. Unless otherwise indicated, the investment policies of a Fund may be
changed by the Trust's Board of Trustees ("Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective.
As a matter of fundamental investment policy, which may not be changed
without shareholder approval, each 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 Fund's shareholders. In addition, at least 65% of the value
of each Fund's total assets will be invested in municipal bonds of the
particular state after which the Fund is named. To qualify as an investment
exempt from the Florida state intangibles tax, the Evergreen Florida Municipal
Bond Fund's portfolio must consist entirely of investments exempt from the
Florida state intangibles tax on the last business day of the calendar year.
Each Fund seeks to achieve its investment objective by investing
principally in municipal bonds, including industrial development bonds, of its
designated state. In addition, the Funds may invest in obligations issued by or
on behalf of any state, territory, or possession of the United States, including
the District of Columbia, or their political subdivisions or agencies and
instrumentalities, the interest from which is exempt from federal (regular, if
applicable) income tax. It is likely that shareholders who are subject to the
alternative minimum tax will be required to include interest from a portion of
the municipal securities owned by a Fund in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
Municipal bonds are debt obligations issued by the state or local
entities to support a government's general financial needs or special projects,
such as housing projects or sewer works. Municipal bonds include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities for privately or
publicly owned corporations.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Revenue bonds are paid off only with the revenue
generated by the project financed by the bond or other specified sources of
revenue. For example, in the case of a bridge project, proceeds from the tolls
would go directly to retiring the bond issue. Thus, unlike general obligation
bonds, revenue bonds do not represent a pledge of credit or create any debt of
or charge against the general revenues of a municipality or public authority.
The municipal bonds in which the Funds will invest are subject to one
or more of the following quality standards: rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P") or, if unrated, are determined by the Fund's investment
adviser to be of comparable quality to such ratings; insured by a municipal bond
insurance company which is rated Aa by Moody's or AA by S&P; guaranteed at the
time of purchase by the U.S. government as to the payment of principal and
interest; or fully collateralized by an escrow of U.S. government securities.
Bonds rated BBB by S&P or Baa by Moody's have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. However, like the higher rated bonds, these securities are considered to
be investment grade. If any security owned by a Fund loses its rating or has its
rating reduced after the Fund has purchased it, the Fund is not required to sell
or otherwise dispose of the security, but may consider doing so. If ratings made
by Moody's or S&P change because of changes in those organizations or their
ratings systems, the Funds will try to use comparable ratings as standards in
accordance with the Funds' investment objectives. A description of the rating
categories is contained in an Appendix to the Statement of Additional
Information.
The Funds may also invest in:
participation interests in any of the above obligations.
(Participation interests may be purchased from financial institutions
such as commercial banks, savings and loan associations and insurance
companies, and give a Fund an undivided interest in particular
municipal securities);
variable rate municipal securities. (Variable rate securities
offer interest rates which are tied to a money market rate, usually a
published interest rate or interest rate index or the 91-day U.S.
Treasury bill rate. Many of these securities are subject to prepayment
of principal on demand by the Fund, usually in seven days or less); and
municipal leases issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. The
Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity
does not appropriate funds for future lease payments, the entity cannot
be compelled to make such payments. Furthermore, a lease may provide
that the certificate trustee cannot accelerate lease obligations upon
default. The trustee would only be able to enforce lease payments as
they become due. In the event of a default or failure of appropriation,
it is unlikely that the trustee would be able to obtain an acceptable
substitute source of payment or that the substitute source of payment
would generate tax-exempt income.
During periods when, in the Adviser's opinion, a temporary defensive
position in the market is appropriate, a Fund may temporarily invest in
short-term tax-exempt or taxable investments. These temporary investments
include: notes issued by or on behalf of municipal or corporate issuers;
obligations issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; other debt securities; commercial paper; bank certificates of
deposit; shares of other investment companies; and repurchase agreements. There
are no rating requirements applicable to temporary investments. However, the
Adviser will limit temporary investments to those it considers to be of
comparable quality to the Fund's primary investments.
Although the Funds are permitted to make taxable, temporary investments, there
is no current intention of generating income subject to federal regular income
tax, where applicable. However, certain temporary investments will generate
income which is subject to state taxes. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", below.
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida High Income Municipal Bond Fund seeks to provide a
high level of current income which is exempt from federal income taxes. The term
"high-level" indicates that the Fund seeks to achieve an income level that
exceeds that which an investor would expect from an investment grade portfolio
with similar maturity characteristics. Evergreen Florida High Income Municipal
Bond Fund invests primarily in high yield, medium and lower rated (Baa through C
by Moody's and BBB through D by S&P) and unrated municipal securities. To
varying degrees, medium and lower rated municipal securities, as well as unrated
municipal securities, are considered to have speculative characteristics and are
subject to greater market fluctuations and risk of loss of income and principal
than higher rated securities. To the extent that an investor realizes a yield in
excess of that which could be expected from a fund which invests primarily in
investment grade securities, the investor should expect to bear increased risk
due to the fact that the risk of principal and/or interest not being repaid with
respect to the high yield securities described above is significantly greater
than that which exists in connection with investment grade securities. In
assessing the risk involved in purchasing medium and lower rated and unrated
securities, the Fund's investment adviser will use nationally recognized
statistical rating organizations such as Moody's and S&P, and will also rely
heavily on credit analysis it develops internally. Under normal circumstances,
the Fund's dollar-weighted average maturity generally will be 15 years or more.
However, the Fund may invest in securities of any maturity, and if the Fund's
investment determines that market conditions warrant a shorter average maturity,
the Fund's investments will be adjusted accordingly.. In pursuit of its
investment objective, Evergreen Florida High Income Municipal Bond Fund will,
under normal market conditions, invest at least 65% in such medium and lower
rated municipal securities or unrated municipal securities of comparable quality
to such rated municipal bonds. Investors should note that such a policy is not a
fundamental policy of the Fund and shareholder approval is not necessary to
change such policy. There is no assurance that Evergreen Florida High Income
Municipal Bond Fund can achieve its investment objective.
The Fund will not invest in municipal securities which are in default,
i.e., securities rated D by S&P. Investments may also be made by Evergreen
Florida High Income Municipal Bond Fund in higher quality municipal bonds and,
for temporary defensive purposes, the Fund may invest less than 65% of its total
assets in the medium and lower quality municipal securities described above. The
Fund may assume a defensive position if, for example, yield spreads between
lower grade and investment grade municipal bonds are narrow and the yields
available on lower quality municipal securities do not justify the increased
risk associated with an investment in such securities or when there is a lack of
medium and lower quality issues in which to invest. Evergreen Florida High
Income Municipal Bond Fund may also invest primarily in higher quality Municipal
Obligations until its net assets reach a level that would permit the Fund to
begin investing in medium and lower rated municipal bonds and at the same time
maintain adequate diversification and liquidity. Investing in this manner may
result in yields lower than those normally associated with a fund that invests
primarily in medium and lower quality municipal securities.
During the most recent fiscal year completed by Evergreen Florida High
Income Municipal Bond Fund's predecessor, ended April 30, 1995, its holdings had
the following average credit quality characteristics:
Percent of
Rating Net Assets
Aaa or AAA 3.4%
Aa or AA ---
A 6.0
Baa or BBB 22.1
Ba or BB 1.5
Ba or BB 7.9
Non-rated 56.6
-----
Total 97.5%
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of bond counsel, exempt from federal income
taxes. It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below. Also, see
the Statement of Additional Information for further information in regard to
ratings.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit on
the maturity of the bonds purchased by the Funds. Because the prices of bonds
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by its designated state and
that state's political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities. An expanded
discussion of the risks associated with the purchase of the designated state's
municipal bonds is contained in the respective Statements of Additional
Information. Although the Funds, other than Evergreen Florida High Income
Municipal Bond Fund will not purchase securities rated below BBB by S&P or Baa
by Moody's (i.e., junk bonds), the Funds are not required to dispose of
securities that have been downgraded subsequent to their purchase. If the
municipal obligations held by a Fund (because of adverse economic conditions in
a particular state, for example) are downgraded, the Fund's concentration in
securities of that state may cause the Fund to be subject to the risks inherent
in holding material amounts of low-rated debt securities in its portfolio. As
stated above, Evergreen Florida High Income Municipal Bond Fund invests
primarily in high yield, medium and lower rated (Baa through C by Moody's and
BBB through D by S&P) and unrated securities. Additional risk factors relating
to the investment by Evergreen Florida High Income Municipal Bond Fund in high
yield, medium and lower rated (Baa through C by Moody's and BBB through D by
S&P) and unrated securities are discussed below.
Portfolio Turnover. A portfolio turnover rate of 100% would occur if all of a
Fund's portfolio securities were replaced in one year. The portfolio turnover
rate experienced by a Fund directly affects the transaction costs relating to
the purchase and sale of securities which a Fund bears directly. A high rate of
portfolio turnover will increase such costs. See the Statement of Additional
Information for further information regarding the practices of the Funds
affecting portfolio turnover.
Non-Diversification. Each of Evergreen Florida Municipal Bond Fund, Evergreen
Georgia Municipal Bond Fund, Evergreen North Carolina Municipal Bond Fund,
Evergreen South Carolina Municipal Bond Fund and Evergreen Virginia Municipal
Bond Fund is a non-diversified portfolio of an investment company and as such,
there is no limit on the percentage of assets which can be invested in any
single issuer. An investment in a Fund, therefore, will entail greater risk than
would exist in a diversified investment company because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Each of the Funds 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.
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Funds' risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Funds to sell the
security in the open market in the case of a default. In such a case, the Funds
may incur costs in disposing of the security which would increase Fund expenses.
The Adviser will monitor the creditworthiness of the firms with which the Funds
enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. The Funds may dispose of a commitment prior
to settlement if the Adviser deems it appropriate to do so. In addition, the
Funds may enter into transactions to sell their purchase commitments to third
parties at current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. The Funds may realize short-term
profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend their portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to
one-third of the value of their total assets. There is the risk that when
lending portfolio securities, the securities may not be available to a Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition of the
securities may be delayed pending court action.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. This is a short-term measure to
invest cash which has not yet been invested in other portfolio instruments and
is subject to the following limitations: (1) no Fund will own more than 3% of
the total outstanding voting stock of any one investment company, (2) no Fund
may invest more than 5% of its total assets in any one investment company and
(3) no Fund may invest more than 10% of its total assets in investment companies
in general. The Adviser will waive its investment advisory fee on assets
invested in securities of other open end investment companies.
Borrowing. 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.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purpose of the foregoing 15% limit. Securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Adviser to be illiquid or
not readily marketable and, therefore, are not subject to the aforementioned 15%
limit. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair a Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Adviser on an ongoing basis, subject to the oversight of the
Trustees. In the event that such a security is deemed to be no longer liquid, a
Fund's holdings will be reviewed to determine what action, if any, is required
to ensure that the retention of such security does not result in a Fund having
more than 15% of its assets invested in illiquid or not readily marketable
securities.
Unseasoned Issuers. The Funds will not invest more than 5% of the value of their
total assets in securities of issuers (or guarantors, where applicable) which
have records of less than three years of continuous operations, including the
operation of any predecessor.
Risk Factors Associated with Medium and Lower Rated and Unrated Municipal
Obligations. Evergreen Florida High Income Municipal Bond Fund will invest in
medium and lower rated or unrated municipal securities. The market for high
yield, high risk debt securities rated in the medium and lower rating
categories, or which are unrated, is relatively new and its growth has
paralleled a long economic expansion. Past experience may not, therefore,
provide an accurate indication of future performance of this market,
particularly during periods of economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on this
market, the value of high yield debt securities in the Fund's portfolio, the
Fund's net asset value and the ability of the bonds' issuers to repay principal
and interest, meet projected business goals and obtain additional financing,
than would be the case if investments by the Fund were limited to higher rated
securities. These circumstances also may result in a higher incidence of
defaults. Yields on medium or lower-rated municipal bonds may not fully reflect
the higher risks of such bonds. Therefore, the risk of a decline in market
value, should interest rates increase or credit quality concerns develop, may be
higher than has historically been experienced with such investments. An
investment in Evergreen Florida High Income Municipal Bond Fund may be
considered more speculative than investment in shares of another fund which
invests primarily in higher rated debt securities.
Prices of high yield debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments. Debt
securities with longer maturities, which may have higher yields, may increase or
decrease in value more than debt securities with shorter maturities. Market
prices of high yield debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may be
more volatile than securities which pay interest periodically and in cash. Where
Evergreen Florida High Income Municipal Bond Fund deems it appropriate and in
the best interests of its shareholders, it may incur additional expenses to seek
recovery on a debt security on which the issuer has defaulted and to pursue
litigation to protect the interests of security holders of its portfolio
entities.
Because the market for medium or lower rated securities may be thinner
and less active than the market for higher rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Unrated securities are usually not as attractive to as many buyers as
are rated securities, a factor which may make unrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by Evergreen Florida High Income Municipal Bond Fund
and may also limit the ability of the Fund to sell such securities at their fair
value either to meet redemption requests or in response to changes in the
economy or the financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of medium or lower rated debt securities, especially in a thinly
traded market. To the extent the Fund owns or may acquire illiquid or restricted
high yield securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Changes in values of debt securities which the Fund owns will
affect the Fund's net asset value per share. If market quotations are not
readily available for the Fund's lower rated or unrated securities, these
securities will be valued by a method that the Trustees believes accurately
reflects fair value. Valuation becomes more difficult and judgment plays a
greater role in valuing high yield debt securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
Special tax considerations are associated with investing in high yield
debt securities structured as zero coupon or pay-in-kind securities. A Fund
investing in such securities accrues income on these securities prior to the
receipt of cash payments. Evergreen Florida High Income Municipal Bond Fund must
distribute substantially all of its income to shareholders to qualify for pass
through treatment under the tax laws and may, therefore, have to dispose of
portfolio securities to satisfy distribution requirements.
While credit ratings are only one factor Evergreen Florida High Income
Municipal Bond Fund's investment adviser relies on in evaluating high yield debt
securities, certain risks are associated with using credit ratings. Credit
ratings evaluate the safety of principal and interest payments, not market value
risk. Credit rating agencies may fail to change in timely manner the credit
ratings to reflect subsequent events; however, the Fund's investment adviser
continuously monitors the issuers of high yield debt securities in the Fund's
portfolio in an attempt to determine if the issuers will have sufficient cash
flow and profits to meet required principal and interest payments. Achievement
of Evergreen Florida High Income Municipal Bond Fund's investment objective may
be more dependent upon the Fund's investment adviser and the credit analysis
capability of the Fund's investment adviser, than is the case for higher quality
debt securities. Credit ratings for individual securities may change from time
to time and Evergreen Florida High Income Municipal Bond Fund may retain a
portfolio security whose rating has been changed. See the Statement of
Additional Information for a description of bond and note ratings.
Transactions in Options and Futures. The Funds may engage in options and futures
transactions. Options and futures transactions are intended to enable a Fund to
manage market or interest rate risk, and the Funds do not use these transactions
for speculation or leverage. The Funds may attempt to hedge all or a portion of
their portfolios through the purchase of both put and call options on their
portfolio securities and listed put options on financial futures contracts for
portfolio securities. The Funds may also write covered call options on their
portfolio securities to attempt to increase their current income. The Funds will
maintain their positions in securities, option rights, and segregated cash
subject to puts and calls until the options are exercised, closed, or have
expired. An option position may be closed out only on an exchange which provides
a secondary market for an option of the same series. The Funds may purchase
listed put options on financial futures contracts. These options will be used
only to protect portfolio securities against decreases in value resulting from
market factors such as an anticipated increase in interest rates.
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds also may write straddles (combinations of covered
puts and calls on the same underlying security). The Funds may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option, the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds may also enter into financial futures contracts and write
options on such contracts. The Funds intend to enter into such contracts and
related options for hedging purposes. The Funds will enter into futures on
securities or index-based futures contracts in order to hedge against changes in
interest rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities during a designated month at whatever price
exists at that time. A futures contract on a securities index does not involve
the actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Funds do not make
payment or deliver securities upon entering into a futures contract. Instead,
they put down a margin deposit, which is adjusted to reflect changes in the
value of the contract and which remains in effect until the contract is
terminated.
The Funds may sell or purchase other financial futures contracts. When
a futures contract is sold by a Fund, the profit on the contract will tend to
rise when the value of the underlying securities declines and to fall when the
value of such securities increases. Thus, the Funds sell futures contracts in
order to offset a possible decline in the profit on their securities. If a
futures contract is purchased by a Fund, the value of the contract will tend to
rise when the value of the underlying securities increases and to fall when the
value of such securities declines. The Funds may enter into closing purchase and
sale transactions in order to terminate a futures contract and may buy or sell
put and call options for the purpose of closing out their options positions. The
Funds' ability to enter into closing transactions depends on the development and
maintenance of a liquid secondary market. There is no assurance that a liquid
secondary market will exist for any particular contract or at any particular
time. As a result, there can be no assurance that the Funds will be able to
enter into an offsetting transaction with respect to a particular contract at a
particular time. If the Funds are not able to enter into an offsetting
transaction, the Funds will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms, in
which case it would continue to bear market risk on the transaction.
Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest rate
risks, these investment devices can be highly volatile, and the Funds' use of
them can result in poorer performance (i.e., the Funds' return may be reduced).
The Funds' attempt to use such investment devices for hedging purposes may not
be successful. Successful futures strategies require the ability to predict
future movements in securities prices, interest rates and other economic
factors. When the Funds use financial futures contracts and options on financial
futures contracts as hedging devices, there is a risk that the prices of the
securities subject to the financial futures contracts and options on financial
futures contracts may not correlate perfectly with the prices of the securities
in the Funds' portfolios. This may cause the financial futures contract and any
related options to react to market changes differently than the portfolio
securities. In addition, the Adviser could be incorrect in its expectations and
forecasts about the direction or extent of market factors, such as interest
rates, securities price movements, and other economic factors. Even if the
Adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Adviser will consider liquidity
before entering into financial futures contracts or options on financial futures
contracts transactions, there is no assurance that a liquid secondary market on
an exchange will exist for any particular financial futures contract or option
on a financial futures contract at any particular time. The Funds' ability to
establish and close out financial futures contracts and options on financial
futures contract positions depends on this secondary market. If a Fund is unable
to close out its position due to disruptions in the market or lack of liquidity,
the Fund may lose money on the futures contract or option, and the losses to the
Fund could be significant.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). The Capital Management
Group of First Union National Bank of North Carolina ("CMG") serves as
investment adviser to Evergreen Florida Municipal Bond Fund, Evergreen Georgia
Municipal Bond Fund, Evergreen North Carolina Municipal Bond Fund, Evergreen
South Carolina Municipal Bond Fund, Evergreen Virginia Municipal Bond Fund and
Evergreen Florida High Income Municipal Bond Fund. First Union National Bank of
North Carolina ("FUNB") is a subsidiary of First Union Corporation ("First
Union"), one of the ten largest bank holding companies in the United States.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $74.2 billion in consolidated assets as of September 30,
1994. First Union and its subsidiaries provide a broad range of financial
services to individuals and businesses through offices in 36 states. The Capital
Management Group of FUNB manages or otherwise oversees the investment of over
$36 billion in assets belonging to a wide range of clients, including all the
series of Evergreen Investment Trust (formerly known as First Union Funds).
First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a
registered broker-dealer that is principally engaged in providing retail
brokerage services consistent with its federal banking authorizations. First
Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a
registered broker-dealer principally engaged in providing, consistent with its
federal banking authorizations, private placement, securities dealing, and
underwriting services.
CMG manages investments and supervises the daily business affairs of
Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund,
Evergreen North Carolina Municipal Bond Fund, Evergreen South Carolina Municipal
Bond Fund, Evergreen Virginia Municipal Bond Fund and Evergreen Florida High
Income Municipal Bond Fund and, as compensation therefor, is entitled to receive
an annual fee equal to .50 of 1% of average daily net assets of each Fund other
than Evergreen Florida High Income Municipal Bond Fund, from which it is
entitled to receive an annual fee equal to .60 of 1% of average daily net
assets. The total annualized operating expenses of Evergreen Florida Municipal
Bond Fund, Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina
Municipal Bond Fund, Evergreen South Carolina Municipal Bond Fund and Evergreen
Virginia Municipal Bond Fund and the total annualized operating expenses of ABT
Florida High Income Municipal Bond Fund, predecessor to Evergreen Florida High
Income Municipal Bond Fund, for the most recent fiscal year are set forth in the
section entitled "Financial Highlights". Evergreen Asset Management Corp.
("Evergreen Asset"), a subsidiary of FUNB, serves as administrator to each Fund
and is entitled to receive a fee based on the average daily net assets of each
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. Furman Selz Incorporated, the parent of Evergreen
Funds Distributor, Inc., distributor for the Evergreen group of mutual funds,
serves as sub-administrator for each Fund and is entitled to receive a fee from
each Fund calculated on the average daily net assets of each Funds at a rate
based on the total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: .0100% of the first $7 billion; .0075%
on the next $3 billion; .0050% on the next $15 billion; and .0040% on assets in
excess of $25 billion. The total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset serve as investment adviser as
of March 31, 1995 were approximately $8 billion.
Robert S. Drye is a Vice President of FUNB , and has been with FUNB
since 1968. Since 1989, Mr. Drye has served as a portfolio manager for several
of the series of Evergreen Investment Trust and for certain common trust funds.
Prior to 1989, Mr. Drye worked as a marketing specialist with First Union
Brokerage Services, Inc. Mr. Drye has managed the Evergreen South Carolina
Municipal Bond Fund since its inception in January 1994. In addition, Mr. Drye
has been the portfolio manager for the Evergreen Florida Municipal Bond Fund
since its inception in July 1993. Richard K. Marrone is a Vice President of FUNB
. Mr. Marrone joined FUNB in May 1993 with eleven years of experience managing
fixed income assets at Woodbridge Capital Management, a subsidiary of Comerica
Bank, N.A. Mr. Marrone is responsible for the portfolio management of several
series of Evergreen Investment Trust and certain common trust funds. Mr. Marrone
has served as portfolio manager of the Evergreen North Carolina Municipal Bond
Fund since May 1993, and portfolio manager of the Evergreen Florida High Income
Municipal Bond Fund and Evergreen Georgia Municipal Bond Fund since their
inception in July 1995 and July 1993, respectively. Charles E. Jeanne joined
FUNB, in July 1993. Prior to joining FUNB , Mr. Jeanne served as a
trader/portfolio manager for First American Bank where he was responsible for
individual accounts and common trust funds. Mr. Jeanne has been the portfolio
manager for the Evergreen Virginia Municipal Bond Fund since its inception in
1993.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A and Class B shares a Rule 12b-1 plan (each, a "Plan" or collectively
the "Plans"). Under the Plans, each Fund may incur distribution-related and
shareholder servicing-related expenses which may not exceed an annual rate of
.75 of 1% of the aggregate average daily net assets attributable to each Fund's
Class A shares, 1.00% of the aggregate average daily net assets attributable to
the Class B shares of Evergreen Florida High Income Municipal Fund, and .75 of
1% of the aggregate average daily net assets attributable to the Class B shares
of Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund,
Evergreen North Carolina Municipal Bond Fund, Evergreen South Carolina Municipal
Bond Fund and Evergreen Virginia Municipal Bond Fund. Payments under the Plans
adopted with respect to Class A shares are currently voluntarily limited to .25
of 1% of each Fund's aggregate average daily net assets attributable to Class A
shares. The Plans provide that a portion of the fee payable thereunder may
constitute a service fee to be used for providing ongoing personal services
and/or the maintenance of shareholder accounts. Evergreen Florida Municipal Bond
Fund, Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina Municipal
Bond Fund, Evergreen South Carolina Municipal Bond Fund and Evergreen Virginia
Municipal Bond Fund have, in addition to the Plans adopted with respect to their
Class B shares, adopted a shareholder service plan ("Service Plans") relating to
the Class B shares which permit each Fund to incur a fee of up to .25 of 1% of
the aggregate average daily net assets attributable to the Class B shares for
ongoing personal services and/or the maintenance of shareholder accounts. Such
service fee payments to financial intermediaries for such purposes, whether
pursuant to a Plan or Service Plans, will not to exceed .25% of the aggregate
average daily net assets attributable to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares and .75 of 1% of a
Fund's aggregate average daily net assets attributable to the Class B shares.
The Distribution Agreements provide that EFD will use the distribution fee
received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans (and in the case of
Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund,
Evergreen North Carolina Municipal Bond Fund, Evergreen South Carolina Municipal
Bond Fund and Evergreen Virginia Municipal Bond Fund, the Service Plans), in
amounts up to .25 of 1% of a Fund's aggregate average daily net assets on an
annual basis attributable to Class B shares, to compensate organizations, which
may include EFD and each Fund's investment adviser or their affiliates, for
personal services rendered to shareholders and/or the maintenance of shareholder
accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans and Service Plans are in compliance with rules of the
National Association of Securities Dealers, Inc. which effectively limit the
annual asset-based sales charges and service fees that a mutual fund may pay on
a class of shares to .75 of 1% and .25 of 1%, respectively, of the average
annual net assets attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed with respect to
a class of shares by a mutual fund that also charges a service fee to 6.25% of
cumulative gross sales of shares of that class, plus interest at the prime rate
plus 1% per annum.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment program. Share certificates are not issued for
Class A and Class B shares. In states where EFD is not registered as a
broker-dealer shares of a Fund will only be sold through other broker-dealers or
other financial institutions that are registered. See the Share Purchase
Application and Statement of Additional Information for more information. Only
Class A and Class B shares are offered through this Prospectus (see "General
Information" - "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transactions in shares of the Funds.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
aggregate average daily net assets attributable to Class A shares of each Fund
held by their clients. Certain purchases of Class A shares may qualify for
reduced sales charges in accordance with a Fund's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Privilege for Certain
Retirement Plans and Reinstatement Privilege. Consult the Share Purchase
Application and Statement of Additional Information for additional information
concerning these reduced sales charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which they convert to Class A shares) . The higher fees mean
a higher expense ratio, so Class B shares pay correspondingly lower dividends
and may have a lower net asset value than Class A shares. See the Statement of
Additional Information for further details.
With respect to Class B Shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per Share, (2) Shares acquired
through reinvestment of dividends and capital gains, (3) Shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
securities in a Fund are valued at their current market value determined on the
basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair market
value.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. The compensation received by Dealers and agents may differ depending on
whether they sell Class A or Class B shares. There is no size limit on purchases
of Class A shares.
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B shares) next calculated after the Fund receives your
request in proper form. Proceeds generally will be sent to you within seven
days. However, for shares recently purchased by check, a Fund will not send
proceeds until it is reasonably satisfied that the check has been collected
(which may take up to 15 days). Once a redemption request has been telephoned or
mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
shares). Your financial intermediary is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service. Certain financial
intermediaries may require that you give instructions earlier than 4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling by calling the phone number on the front page of this Prospectus
between the hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day
(i.e., any weekday exclusive of days on which the Exchange or State Street's
offices are closed). The Exchange is closed on New Year's Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Redemption requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. Such
redemption requests must include the shareholder's account name, as registered
with a Fund, and the account number. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
redemptions. Shareholders who are unable to reach a Fund or State Street by
telephone should follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B shares are exchanged for
Class B shares of other Evergreen mutual funds. If you redeem shares, the CDSC
applicable to the Class B shares of the Evergreen mutual fund originally
purchased for cash is applied. Also, Class B shares will continue to age
following an exchange for purposes of conversion to Class A shares and
determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number on the front of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Code. While so qualified, so long as each Fund
distributes all of its investment company taxable income and any net realized
gains to shareholders, it is expected that the Funds will not be required to pay
any Federal income taxes. A 4% nondeductible excise tax will be imposed on a
Fund if it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any
net realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
Set forth below are brief descriptions of the personal income tax status of an
investment in each of the Funds under Florida, Georgia, North Carolina, South
Carolina, and Virginia tax laws currently in effect. Income from a Fund is not
necessarily free from state income taxes in states other than its designated
state. State laws differ on this issue, and shareholders are urged to consult
their own tax advisers regarding the status of their accounts under state and
local laws.
Evergreen Florida Municipal Bond Fund and Evergreen Florida High Income
Municipal Bond Fund. Florida does not currently impose an income tax on
individuals. Thus, individual shareholders of the Funds will not be subject to
any Florida state income tax on distributions received from the Funds. However,
certain distributions will be taxable to corporate shareholders which are
subject to Florida corporate income tax. Florida currently imposes an
intangibles tax at the annual rate of 0.20% on certain securities and other
intangible assets owned by Florida residents. Certain types of tax exempt
securities of Florida issuers, U.S. government securities and tax exempt
securities issued by certain U.S. territories and possessions are exempt from
this intangibles tax. Shares of the Funds will also be exempt from the Florida
intangibles tax if the portfolio consists exclusively of securities exempt from
the intangibles tax on the last business day of the calendar year. If the
portfolio consists of any assets which are not so exempt on the last business
day of the calendar year, however, only the portion of the shares of the Funds
which relate to securities issued by the United States and its possessions and
territories will be exempt from the Florida intangibles tax, and the remaining
portion of such shares will be fully subject to the intangibles tax, even if
they partly relate to Florida tax exempt securities.
Evergreen Georgia Municipal Bond Fund. Under existing Georgia law, shareholders
of the Fund will not be subject to individual or corporate Georgia income taxes
on distributions from the Fund to the extent that such distributions represent
exempt-interest dividends for federal income tax purposes that are attributable
to (1) interest-bearing obligations issued by or on behalf of the State of
Georgia or its political subdivisions, or (2) interest on obligations of the
United States or of any other issuer whose obligations are exempt from state
income taxes under federal law. Distributions, if any, derived from capital
gains or other sources generally will be taxable for Georgia income tax purposes
to shareholders of the Fund who are subject to the Georgia income tax. For
purposes of the Georgia intangibles tax, Shares of the Fund likely are taxable
(at the rate of 10 cents per $1,000 in value of the Shares held on January 1 of
each year) to shareholders who are otherwise subject to such tax.
Evergreen North Carolina Municipal Bond Fund. Under existing North Carolina law,
shareholders of the Fund will not be subject to individual or corporate North
Carolina income taxes on distributions from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations issued by North
Carolina and political subdivisions thereof or (2) interest on obligations of
the United States or its territories or possessions. Distributions, if any,
derived from capital gains or other sources generally will be taxable for North
Carolina income tax purposes to shareholders of the Fund who are subject to the
North Carolina income tax.
Evergreen South Carolina Municipal Bond Fund. Under existing South Carolina law,
shareholders of the Fund will not be subject to individual or corporate South
Carolina income taxes on Fund distributions to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations of the State of
South Carolina, or any of its political subdivisions, (2) interest on
obligations of the United States, or (3) interest on obligations of any agency
or instrumentality of the United States that is prohibited by federal law from
being taxed by a state or any political subdivision of a state. Distributions,
if any, derived from capital gains or other sources, generally will be taxable
for South Carolina income tax purposes to shareholders of the Fund who are
subject to South Carolina income tax.
Evergreen Virginia Municipal Bond Fund. Under existing Virginia law,
shareholders of the Fund will not be subject to individual or corporate Virginia
income taxes on distributions received from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to interest earned on (1) obligations issued by
or on behalf of the Commonwealth of Virginia or any political subdivision
thereof, or (2) obligations issued by a territory or possession of the United
States or any subdivision thereof which federal law exempts from state income
taxes. Distributions, if any, derived from capital gains or other sources
generally will be taxable for Virginia income tax purposes to shareholders of
the Fund who are subject to Virginia income tax.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from Federal and if applicable, state
taxation, and the amount, if any, subject to Federal and state taxation.
Moreover, to the extent necessary, these statements will indicate the amount of
exempt-interest dividends which are a specific preference item for purposes of
the Federal individual and corporate alternative minimum taxes. The exemption of
interest income for Federal income tax purposes does not necessarily result in
exemption under the income or other tax law of any state or local taxing
authority. Investors should consult their own tax advisers about the status of
distributions from the Funds in their states and localities. Each Fund notifies
shareholders annually as to the interest exempt from Federal taxes earned by the
Fund.
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Florida Municipal Bond
Fund, Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina Municipal
Bond Fund, Evergreen South Carolina Municipal Bond Fund and Evergreen Virginia
Municipal Bond Fund is contained in the annual report of each Fund for the
fiscal year ended December 31, 1994. A similar discussion relating to ABT
Florida High Income Municipal Bond Fund, the predecessor of Evergreen Florida
High Income Municipal Bond Fund is contained in the annual report of such Fund
for the fiscal year ended April 30, 1995.
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. Evergreen Florida High Income Municipal Fund is a newly organized,
separate investment series of Evergreen Municipal Trust, a Massachusetts
business trust organized in 1988. Evergreen Florida Municipal Bond Fund,
Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina Municipal Bond
Fund, Evergreen South Carolina Municipal Bond Fund and Evergreen Virginia
Municipal Bond Fund are each separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Directors, that affect each series and class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are not offered by this Prospectus and are only available to (i)
all shareholders of record in one or more of the Evergreen mutual funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A and Class B shares will be less than those payable with respect to Class Y
shares due to the distribution and distribution related expenses borne by Class
A and Class B shares and the fact that such expenses are not borne by Class Y
shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period.
This yield does not reflect gains or losses from selling securities.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated Federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Total returns are based on the overall dollar or percentage change in
the value of a hypothetical investment in a Fund. A Fund's total return shows
its overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
Each Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Comparative performance information may also be used from time to time
in advertising or marketing a Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar and other industry publications. The Fund
may also advertise in items of sales literature an "actual distribution rate"
which is computed by dividing the total ordinary income distributed (which may
include the excess of short-term capital gains over losses) to shareholders for
the latest twelve month period by the maximum public offering price per share on
the last day of the period. Investors should be aware that past performance may
not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which each
Fund operates provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
APPENDIX A -- FLORIDA RISK CONSIDERATIONS
The following is a summary of economic factors which may affect the
ability of the municipal issuers of Florida Obligations to repay general
obligation and revenue bonds. Such information is derived from sources that are
generally available to investors and is believed by the Funds to be accurate,
but has not been independently verified and may not be complete. Under current
law, the State of Florida is required to maintain a balanced budget such that
current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the state. In addition, Florida imposes an ad
valorem tax as well as sales and use taxes. These taxes are the principal
sources of funds to meet state expenses, including repayment of, and interest
on, obligations backed solely by the full faith and credit of the state, without
recourse to any specific project or related revenue source.
On November 3, 1992, Florida voters approved an amendment to the state
constitution which limits the annual growth in the assessed valuation of
residential property and which, over time, could constrain the growth in
property taxes, a major revenue source for local governments. The amendment
restricts annual increases in assessed valuation to the lesser of 3% or the
Consumer Price Index. The amendment applies only to residential properties
eligible for the homestead exemption and does not affect the valuation of
rental, commercial, or industrial properties. When sold, residential property
would be reassessed at market value. The amendment became effective January 1,
1993. While no immediate ratings implications are expected, the amendment could
have a negative impact on the financial performance of local governments over
time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
Many of the bonds in which the Funds invest were issued by various
units of local government in the State of Florida. In addition, most of these
bonds are revenue bonds where the security interest of the bond holders
typically is limited to the pledge of revenues or special assessments flowing
from the project financed by the bonds. Projects include, but are not limited
to, water and waste water utilities, drainage systems, roadways, and other
development-related infrastructures. Therefore, the capacity of these issuers to
repay their obligations may be affected by variations in the Florida economy.
Since 1970, Florida has been one of the fastest growing states in the
nation. Average annual population growth over the last 20 years was 320,000.
During this period only California and Texas grew more rapidly. In terms of
total population, Florida moved from the ninth most populous state in 1970 to
fourth today.
This rapid and sustained pace of population growth has given rise to
sharp increases in construction activity and to the need for roads, drainage
systems, and utilities to serve the burgeoning population. In turn this has
driven the growth in the volume of revenue bond debt outstanding.
The pace of growth, however, has not been steady. During economic
expansions, Florida's population growth has exceeded 500,000 people per year,
but in recessions growth has slowed to 120,000 per year. The variations in
construction activity over the course of business cycles is also very large.
Although the amplitude of the swings during business cycles is large, the
duration of downturns in Florida's growth has been short. Historically,
depressed levels of growth have lasted only a year or two at most. Furthermore,
Florida's cycles have not been periods of growth or decline. Instead, what has
occurred are periods of more growth or less growth.
Florida's ability to meet increasing expenses will be dependent in part
upon the state's ability to foster business and economic growth. During the past
decade, Florida has experienced significant increases in the technology-based
and other light industries and in the service sector. This growth has
diversified the state's overall economy, which at one time was dominated by the
citrus and tourism industries. The state's economic and business growth could be
restricted, however, by the natural limitations of environmental resources and
the state's ability to finance adequate public facilities such as roads and
schools.
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND
FUND, EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536118
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) STATE SPECIFIC TAX FREE FUNDS (Evergreen logo appears here)
EVERGREEN FLORIDA MUNICIPAL BOND FUND
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
CLASS Y SHARES
The Evergreen State Specific Tax-Free Funds (the "Funds") are
designed to provide investors with current income from Federal income tax and
certain state income tax. This Prospectus provides information regarding
the Class Y shares offered by the Funds. Each Fund is, or is a series of,
an open-end, non-diversified, management investment company except for
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND which is diversified.
This Prospectus sets forth concise information about the Funds that a
prospective investor should know before investing. The address of the Funds
is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 235-0064. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND WILL INVEST AT LEAST 65%
OF THE VALUE OF ITS TOTAL ASSETS IN MUNICIPAL SECURITIES CONSISTING OF HIGH
YIELD (I.E., HIGH RISK), MEDIUM, LOWER RATED AND UNRATED BONDS. SUCH
SECURITIES ARE COMMONLY CALLED JUNK BONDS AND ARE SUBJECT TO GREATER MARKET
FLUCTUATIONS AND RISK OF LOSS OF INCOME AND PRINCIPAL THAN HIGHER RATED
SECURITIES, LOWER QUALITY SECURITIES INVOLVE A GREATER RISK OF DEFAULT AND,
CONSEQUENTLY, SHARES OF THE EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND
FUND ARE SPECULATIVE SECURITIES.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Adviser
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
APPENDIX
Florida Risk Considerations
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Capital Management Group of First Union National Bank ("CMG") serves
as investment adviser to Evergreen State Specific Tax Free Funds which include:
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND FUND,
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND AND EVERGREEN FLORIDA HIGH
INCOME MUNICIPAL BOND FUND. First Union National Bank of North Carolina
("FUNB"), is a subsidiary of First Union Corporation, one of the ten largest
bank holding companies in the United States.
EVERGREEN FLORIDA MUNICIPAL BOND FUND (formerly First Union Florida
Municipal Bond Portfolio, successor to ABT Florida Tax-Free Fund) seeks current
income exempt from federal income tax consistent with preservation of capital.
In addition, the Fund intends to qualify as an investment exempt from the
Florida state intangibles tax.
EVERGREEN GEORGIA MUNICIPAL BOND FUND (formerly First Union Georgia
Municipal Bond Portfolio) seeks current income exempt from federal income tax
and Georgia state income tax, consistent with preservation of capital.
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND (formerly First Union North
Carolina Municipal Bond Portfolio) seeks current income exempt from federal
income tax and North Carolina state income tax, consistent with preservation of
capital. In addition, the Fund intends to qualify as an investment substantially
exempt from the North Carolina intangible personal property tax.
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND (formerly First Union South
Carolina Municipal Bond Portfolio) seeks current income exempt from federal
income tax and South Carolina state income tax.
EVERGREEN VIRGINIA MUNICIPAL BOND FUND (formerly First Union Virginia
Municipal Bond Fund) seeks current income exempt from federal income tax and
Virginia state income tax, consistent with preservation of capital.
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND (successor to ABT
Florida High Income Municipal Bond Fund) seeks to provide a high level of
current income exempt from federal income taxes. Under normal circumstances, the
Fund will invest at least 65% of the value of its total assets in municipal
securities consisting of high yield (i.e., high risk), medium, lower rated and
unrated bonds.
THERE IS NO ASSURANCE THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN FLORIDA MUNICIPAL BOND FUND (A)
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING Class Y
EXPENSES
<S> <C> <C> <C>
Advisory Fees* .30%
After 1 Year $ 5
Administrative Fees .06%
After 3 Years $ 15
12b-1 Fees --
After 5 Years $ 26
Other Expenses .10%
After 10 Years $ 58
Total .46%
</TABLE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING Class Y
EXPENSES
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 10
Administrative Fees .06%
After 3 Years $ 32
12b-1 Fees --
After 5 Years $ 55
Other Expenses** .44%
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING Class Y
EXPENSES
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 9
Administrative Fees .06%
After 3 Years $ 29
12b-1 Fees --
After 5 Years $ 51
Other Expenses .36%
After 10 Years $ 113
Total .92%
</TABLE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING Class Y
EXPENSES
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 10
Administrative Fees .06%
After 3 Years $ 32
12b-1 Fees --
After 5 Years $ 55
Other Expenses** .44%
After 10 Years $ 122
Total 1.00%
</TABLE>
3
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING Class Y
EXPENSES
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 10
Administrative Fees .06%
After 3 Years $ 32
12b-1 Fees --
After 5 Years $ 55
Other Expenses** .44%
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND (B)
<TABLE>
<CAPTION>
EXAMPLE
ANNUAL OPERATING Class Y
EXPENSES
<S> <C> <C> <C>
Advisory Fees* .30%
After 1 Year $ 6
Administrative Fees .06%
After 3 Years $18
12b-1 Fees --
After 5 Years $32
Other Expenses .21%
After 10 Years $71
Total .57%
</TABLE>
(a) Estimated annual operating expenses reflect the combination of First Union
Florida Municipal Bond Fund and ABT Florida Tax-Free Fund.
(b) Estimated annual operating expenses reflect the combination of EVERGREEN
FLORIDA HIGH INCOME MUNICIPAL BOND FUND and ABT Florida High Income Municipal
Bond Fund. The amounts in the tables and examples are based on the experience of
ABT Florida High Income Municipal Bond Fund as restated to reflect current fee
arrangements.
The estimated annual operating expenses and examples do not reflect fee
waivers and reimbursements for the most recent fiscal year. Actual expenses for
Class Y Shares, net of fee waivers and expense reimbursements for the year ended
December 31, 1994 were as follows:
<TABLE>
<S> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND .31%
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND .59%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND .00%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND .28%
</TABLE>
* CMG has agreed to limit the Advisory fee charged to EVERGREEN FLORIDA
MUNICIPAL BOND FUND and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND to
.30 of 1% of average net assets for a period of at least one year.
** Reflects agreements by CMG to limit aggregate operating expenses (including
the Advisory Fees, but excluding interest, taxes, brokerage commissions, Rule
12b-1 Fees, shareholder servicing fees and extraordinary expenses) of
EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL
BOND FUND and EVERGREEN VIRGINIA MUNICIPAL BOND FUND to 1% of average net
assets for the foreseeable future. Absent such agreements, the estimated
annual operating expenses for the Funds would be as follows:
<TABLE>
<S> <C>
EVERGREEN GEORGIA MUNICIPAL BOND FUND 1.53%
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND 4.66%
EVERGREEN VIRGINIA MUNICIPAL BOND FUND 2.00%
</TABLE>
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such amounts have been restated
to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Funds see "Management
of the Funds". As a result of asset-based sales charges, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities Dealers,
Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN GEORGIA MUNICIPAL BOND FUND, EVERGREEN NORTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND and
EVERGREEN VIRGINIA MUNICIPAL BOND FUND has been audited by KPMG Peat Marwick
LLP, each Fund's independent auditors, for EVERGREEN FLORIDA MUNICIPAL BOND FUND
and EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND has been audited by Tait,
Weller & Baker, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP or Tait, Weller & Baker, as the case may be on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN FLORIDA MUNICIPAL BOND FUND -- CLASS A SHARES*
<TABLE>
<CAPTION>
MAY 11, 1988**
YEAR ENDED APRIL 30, THROUGH
1995 1994 1993 1992 1991 1990 APRIL 30, 1989
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......... $10.79 $11.27 $10.59 $10.43 $9.97 $10.30 $10.00
Income from investment operations:
Net investment income......................... .61 .63 .63 .69 .74 .66 .53
Net realized and unrealized gain (loss) on
investments................................. .12 (.40) .76 .25 .49 (.28) .25
Total from investment operations............ .73 .23 1.39 .94 1.23 .38 .78
Less distributions to shareholders from:
Net investment income......................... (.61) (.63) (.63) (.69) (.77) (.67) (.48)
Net realized gains............................ (.02) (.08) (.08) (.05) -- (.04) --
Paid-in capital............................... -- -- -- (.04) -- -- --
Total distributions......................... (.63) (.71) (.71) (.78) (.77) (.71) (.48)
Net asset value, end of period.............. $10.89 $10.79 $11.27 $10.59 $10.43 $9.97 $10.30
TOTAL RETURN+................................. 2.0% 1.9% 13.6% 9.3% 12.9% 3.7% 9.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..... $168,542 $199,612 $198,286 $147,996 $75,791 $7,286 $717
Ratios to average net assets:
Expenses.................................... .61% .56% .58% .41%(a) .10%(a) .10%(a) .30%(a)++
Net investment income....................... 5.73% 5.37% 5.66% 6.12%(a) 6.55%(a) 6.15%(a) 5.30%(a)++
Portfolio turnover rate....................... 53% 32% 24% 24% 66% 82% 2%
</TABLE>
* The information in the table above reflects the operating history of ABT
Florida Tax Free Fund, the predecessor to Evergreen Florida Municipal Bond
Fund, for the periods indicated.
** Commencement of operations.
+ Total return is calculated on net asset value and is not annualized. Initial
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
MAY 11, 1988
YEAR ENDED APRIL 30, THROUGH
1992 1991 1990 APRIL 30, 1989
<S> <C> <C> <C> <C>
Expenses.................................................................. .68% .88% 5.14% 20.40%
Net investment income (loss).............................................. 5.85% 5.77% 1.01% (14.80%)
</TABLE>
5
<PAGE>
EVERGREEN GEORGIA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES CLASS Y
JULY 2, JULY 2, SHARES
1993* 1993* FEBRUARY 28,
YEAR ENDED THROUGH YEAR ENDED THROUGH 1994* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period......... $10.19 $10.00 $10.19 $10.00 $9.83
Income (loss) from investment operations.....
Net investment income........................ .48 .20 .43 .18 .42
Net realized and unrealized gain (loss) on
investments................................ (1.45) .19 (1.45) .19 (1.09)
Total from investment operations........... (.97) .39 (1.02) .37 (.67)
Less distributions to shareholders from:
Net investment income........................ (.48) (.20) (.43) (.18) (.42)
Net asset value, end of period............... $8.74 $10.19 $8.74 $10.19 $8.74
TOTAL RETURN+................................ (9.6%) 4.0% (10.2%) 3.7% (6.9%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).... $1,387 $817 $6,912 $3,692 $284
Ratios to average net assets:
Expenses (a)............................... .53% .25%++ 1.13% .75%++ .31%++
Net investment income (a).................. 5.26% 4.71%++ 4.66% 4.15%++ 5.68%++
Portfolio turnover rate...................... 147% 15% 147% 15% 147%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
SHARES SHARES SHARES
JULY 6, 1993 JULY 2, 1993 FEBRUARY 28,
YEAR ENDED THROUGH YEAR ENDED THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
Expense................................... 3.61% 6.82% 4.21% 7.32% 3.39%
Net investment income (loss).............. 2.18% (1.86%) 1.58% (2.42%) 2.60%
</TABLE>
6
<PAGE>
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
SHARES SHARES SHARES
JANUARY 11, JANUARY 11, FEBRUARY 28,
YEAR ENDED 1993* THROUGH YEAR ENDED 1993* THROUGH 1994* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........ $10.61 $10.00 $10.61 $10.00 $10.31
Income (loss) from investment operations:
Net investment income....................... .49 .46 .44 .42 .43
Net realized and unrealized (loss) on
investments............................... (1.45) .64 (1.45) .64 (1.15)
Total from investment operations.......... (.96) 1.10 (1.01) 1.06 (.72)
Less distributions to shareholders from:
Net investment income....................... (.49) (.46) (.44) (.42) (.43)
Net realized gains.......................... -- (.03) -- (.03) --
Total distributions......................... (.49) (.49) (.44) (.45) (.43)
Net asset value, end of period.............. $9.16 $10.61 $9.16 $10.61 $9.16
TOTAL RETURN+............................... (9.1%) 11.3% (9.6%) 10.8% (7.0%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)... $7,979 $12,739 $ 44,616 $45,168 $642
Ratios to average net assets:
Expenses (a).............................. .79% .32%++ 1.37% .79%++ .59%++
Net investment income (a)................. 5.11% 4.91%++ 4.53% 4.47%++ 5.58%++
Portfolio turnover rate..................... 126% 57% 126% 57% 126%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund has borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
SHARES SHARES SHARES
JANUARY 11, JANUARY 11, FEBRUARY 28,
YEAR ENDED 1993 THROUGH YEAR ENDED 1993 THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
Expenses.................................. 1.18% 1.25% 1.76% 1.74% .98%
Net investment income..................... 4.72% 3.98% 4.14% 3.52% 5.19%
</TABLE>
7
<PAGE>
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
SHARES SHARES SHARES
JANUARY 3, JANUARY 3, FEBRUARY 28,
1994* THROUGH 1994* THROUGH 1994* THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period......................................... $10.00 $10.00 $9.74
Income (loss) from investment operations:
Net investment income........................................................ .46 .41 .43
Net realized and unrealized (loss) on investments............................ (1.38) (1.38) (1.12)
Total from investment operations........................................... (.92) (.97) (.69)
Less distributions to shareholders from:
Net investment income........................................................ (.46) (.41) (.43)
Net asset value, end of period............................................... $8.62 $8.62 $8.62
TOTAL RETURN+................................................................ (9.3%) (9.8%) (7.1%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted).................................... $312 $2,456 $92
Ratios to average net assets:
Expenses (a)............................................................... .25%++ .87%++ .00%++
Net investment income (a).................................................. 5.57%++ 4.88%++ 5.92%++
Portfolio turnover rate...................................................... 23% 23% 23%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
SHARES SHARES SHARES
JANUARY 3, 1994 JANUARY 3, 1994 FEBRUARY 28, 1994
THROUGH THROUGH THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1994 DECEMBER 31, 1994
<S> <C> <C> <C>
Expenses.................................................... 10.71% 11.33% 10.46%
Net investment income (loss)................................ (4.89%) (5.58%) (4.54%)
</TABLE>
8
<PAGE>
EVERGREEN VIRGINIA MUNICIPAL BOND FUND -- CLASS A, B AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B
SHARES SHARES
JULY 2, JULY 2, CLASS Y
1993* 1993* SHARES
YEAR ENDED THROUGH YEAR ENDED THROUGH FEBRUARY 28, 1994*
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, THROUGH
1994 1993 1994 1993 DECEMBER 31, 1994
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period..... $10.19 $10.00 $10.19 $10.00 $9.83
Income (loss) from investment operations:
Net investment income.................... .47 .20 .42 .17 .41
Net realized and unrealized gain (loss)
on investments......................... (1.34) .19 (1.34) .19 (.98)
Total from investment operations....... (.87) .39 (.92) .36 (.57)
Less distributions to shareholders from:
Net investment income.................... (.47) (.20) (.42) (.17) (.41)
Net asset value, end of period........... $8.85 $10.19 $8.85 $10.19 $8.85
TOTAL RETURN+............................ (8.6%) 3.9% (9.1%) 3.7% (5.8%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $1,606 $1,306 $3,817 $2,235 $344
Ratios to average net assets:
Expenses (a)........................... .53% .25%++ 1.12% .75%++ .28%++
Net investment income (a).............. 5.11% 4.64%++ 4.54% 4.25%++ 5.54%++
Portfolio turnover rate.................. 59% 0% 59% 0% 59%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS Y
SHARES SHARES SHARES
JULY 2, 1993 JULY 2, 1993 FEBRUARY 28,
YEAR ENDED THROUGH YEAR ENDED THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994 1993 1994
<S> <C> <C> <C> <C> <C>
Expenses.................................. 5.14% 7.75% 5.73% 8.25% 4.89%
Net investment income (loss).............. .50% (2.86%) (.07%) (3.25%) .93%
</TABLE>
9
<PAGE>
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND -- CLASS A SHARES*
<TABLE>
<CAPTION>
JUNE 17,
1992**
YEAR ENDED THROUGH
APRIL 30, APRIL
1995 1994 30, 1993
<S> <C> <C> <C>
PER SHARE DATA
Net asset value at beginning of period......................................................... $10.08 $10.36 $10.00
Income from investment operations:
Net investment income.......................................................................... .65 .68 .61
Net realized and unrealized gain (loss) on investments......................................... .08 (.26) .39
Total from investment operations............................................................. .73 .42 1.00
Less distributions to shareholders from:
Net investment income.......................................................................... (.65) (.68) (.61 )
Net realized gains............................................................................. -- (.02) (.03 )
Total distributions.......................................................................... (.65) (.70) (.64 )
Net asset value at end of period............................................................... $10.16 $10.08 $10.36
TOTAL RETURN+.................................................................................. 7.6% 3.3% 11.9%
RATIOS & SUPPLEMENTAL DATA
Net assets at end of period (000's omitted).................................................... $65,043 $72,683 $33,541
Ratios to average net assets:
Expenses (a)................................................................................. .60% .14% .00 ++
Net investment income (a).................................................................... 6.52% 6.16% 5.92% ++
Portfolio turnover rate........................................................................ 28% 31% 50%
</TABLE>
* The information in the table above reflects the operating history of ABT
Florida High Income Municipal Bond Fund, the predecessor to Evergreen Florida
High Income Municipal Bond Fund, for the periods indicated.
** Commencement of operations.
+ Total return is calculated on net asset value and is not annualized. Initial
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 17, 1992
APRIL 30, THROUGH
1995 1994 APRIL 30, 1993
<S> <C> <C> <C>
Expenses.................................................................................. 1.26% 1.12% 1.12%
Net investment income..................................................................... 5.86% 5.18% 4.80%
</TABLE>
10
<PAGE>
11
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
The Funds seek current income exempt from federal regular income tax
and, where applicable, state income taxes, consistent with preservation of
capital. In addition, the Evergreen Florida Municipal Bond Fund intends to
qualify as an investment exempt from the Florida state intangibles tax. Florida
does not currently tax personal income.
Each Fund's investment objective cannot be changed without shareholder
approval. While there is no assurance that each objective will be achieved, the
Funds will endeavor to do so by following the investment policies detailed
below. Unless otherwise indicated, the investment policies of a Fund may be
changed by the Trust's Board of Trustees ("Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective.
As a matter of fundamental investment policy, which may not be changed
without shareholder approval, each 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 Fund's shareholders. In addition, at least 65% of the value
of each Fund's total assets will be invested in municipal bonds of the
particular state after which the Fund is named. To qualify as an investment
exempt from the Florida state intangibles tax, the Evergreen Florida Municipal
Bond Fund's portfolio must consist entirely of investments exempt from the
Florida state intangibles tax on the last business day of the calendar year.
Each Fund seeks to achieve its investment objective by investing
principally in municipal bonds, including industrial development bonds, of its
designated state. In addition, the Funds may invest in obligations issued by or
on behalf of any state, territory, or possession of the United States, including
the District of Columbia, or their political subdivisions or agencies and
instrumentalities, the interest from which is exempt from federal (regular, if
applicable) income tax. It is likely that shareholders who are subject to the
alternative minimum tax will be required to include interest from a portion of
the municipal securities owned by a Fund in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
Municipal bonds are debt obligations issued by the state or local
entities to support a government's general financial needs or special projects,
such as housing projects or sewer works. Municipal bonds include industrial
development bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct or equip facilities for privately or
publicly owned corporations.
The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Revenue bonds are paid off only with the revenue
generated by the project financed by the bond or other specified sources of
revenue. For example, in the case of a bridge project, proceeds from the tolls
would go directly to retiring the bond issue. Thus, unlike general obligation
bonds, revenue bonds do not represent a pledge of credit or create any debt of
or charge against the general revenues of a municipality or public authority.
The municipal bonds in which the Funds will invest are subject to one
or more of the following quality standards: rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P") or, if unrated, are determined by the Fund's investment
adviser to be of comparable quality to such ratings; insured by a municipal bond
insurance company which is rated Aa by Moody's or AA by S&P; guaranteed at the
time of purchase by the U.S. government as to the payment of principal and
interest; or fully collateralized by an escrow of U.S. government securities.
Bonds rated BBB by S&P or Baa by Moody's have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
weakened capacity to make principal and interest payments than higher rated
bonds. However, like the higher rated bonds, these securities are considered to
be investment grade. If any security owned by a Fund loses its rating or has its
rating reduced after the Fund has purchased it, the Fund is not required to sell
or otherwise dispose of the security, but may consider doing so. If ratings made
by Moody's or S&P change because of changes in those organizations or their
ratings systems, the Funds will try to use comparable ratings as standards in
accordance with the Funds' investment objectives. A description of the rating
categories is contained in an Appendix to the Statement of Additional
Information.
The Funds may also invest in:
participation interests in any of the above obligations.
(Participation interests may be purchased from financial institutions
such as commercial banks, savings and loan associations and insurance
companies, and give a Fund an undivided interest in particular
municipal securities);
variable rate municipal securities. (Variable rate securities
offer interest rates which are tied to a money market rate, usually a
published interest rate or interest rate index or the 91-day U.S.
Treasury bill rate. Many of these securities are subject to prepayment
of principal on demand by the Fund, usually in seven days or less); and
municipal leases issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. The
Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity
does not appropriate funds for future lease payments, the entity cannot
be compelled to make such payments. Furthermore, a lease may provide
that the certificate trustee cannot accelerate lease obligations upon
default. The trustee would only be able to enforce lease payments as
they become due. In the event of a default or failure of appropriation,
it is unlikely that the trustee would be able to obtain an acceptable
substitute source of payment or that the substitute source of payment
would generate tax-exempt income.
During periods when, in the Adviser's opinion, a temporary defensive
position in the market is appropriate, a Fund may temporarily invest in
short-term tax-exempt or taxable investments. These temporary investments
include: notes issued by or on behalf of municipal or corporate issuers;
obligations issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; other debt securities; commercial paper; bank certificates of
deposit; shares of other investment companies; and repurchase agreements. There
are no rating requirements applicable to temporary investments. However, the
Adviser will limit temporary investments to those it considers to be of
comparable quality to the Fund's primary investments.
Although the Funds are permitted to make taxable, temporary investments, there
is no current intention of generating income subject to federal regular income
tax, where applicable. However, certain temporary investments will generate
income which is subject to state taxes. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", below.
Evergreen Florida High Income Municipal Bond Fund
Evergreen Florida High Income Municipal Bond Fund seeks to provide a
high level of current income which is exempt from federal income taxes. The term
"high-level" indicates that the Fund seeks to achieve an income level that
exceeds that which an investor would expect from an investment grade portfolio
with similar maturity characteristics. Evergreen Florida High Income Municipal
Bond Fund invests primarily in high yield, medium and lower rated (Baa through C
by Moody's and BBB through D by S&P) and unrated municipal securities. To
varying degrees, medium and lower rated municipal securities, as well as unrated
municipal securities, are considered to have speculative characteristics and are
subject to greater market fluctuations and risk of loss of income and principal
than higher rated securities. To the extent that an investor realizes a yield in
excess of that which could be expected from a fund which invests primarily in
investment grade securities, the investor should expect to bear increased risk
due to the fact that the risk of principal and/or interest not being repaid with
respect to the high yield securities described above is significantly greater
than that which exists in connection with investment grade securities. In
assessing the risk involved in purchasing medium and lower rated and unrated
securities, the Fund's investment adviser will use nationally recognized
statistical rating organizations such as Moody's and S&P, and will also rely
heavily on credit analysis it develops internally. Under normal circumstances,
the Fund's dollar-weighted average maturity generally will be 15 years or more.
However, the Fund may invest in securities of any maturity, and if the Fund's
investment determines that market conditions warrant a shorter average maturity,
the Fund's investments will be adjusted accordingly.. In pursuit of its
investment objective, Evergreen Florida High Income Municipal Bond Fund will,
under normal market conditions, invest at least 65% in such medium and lower
rated municipal securities or unrated municipal securities of comparable quality
to such rated municipal bonds. Investors should note that such a policy is not a
fundamental policy of the Fund and shareholder approval is not necessary to
change such policy. There is no assurance that Evergreen Florida High Income
Municipal Bond Fund can achieve its investment objective.
The Fund will not invest in municipal securities which are in default,
i.e., securities rated D by S&P. Investments may also be made by Evergreen
Florida High Income Municipal Bond Fund in higher quality municipal bonds and,
for temporary defensive purposes, the Fund may invest less than 65% of its total
assets in the medium and lower quality municipal securities described above. The
Fund may assume a defensive position if, for example, yield spreads between
lower grade and investment grade municipal bonds are narrow and the yields
available on lower quality municipal securities do not justify the increased
risk associated with an investment in such securities or when there is a lack of
medium and lower quality issues in which to invest. Evergreen Florida High
Income Municipal Bond Fund may also invest primarily in higher quality Municipal
Obligations until its net assets reach a level that would permit the Fund to
begin investing in medium and lower rated municipal bonds and at the same time
maintain adequate diversification and liquidity. Investing in this manner may
result in yields lower than those normally associated with a fund that invests
primarily in medium and lower quality municipal securities.
During the most recent fiscal year completed by Evergreen Florida High
Income Municipal Bond Fund's predecessor, ended April 30, 1995, its holdings had
the following average credit quality characteristics:
Percent of
Rating Net Assets
Aaa or AAA 3.4%
Aa or AA ---
A 6.0
Baa or BBB 22.1
Ba or BB 1.5
Ba or BB 7.9
Non-rated 56.6
-----
Total 97.5%
The Fund may purchase industrial development bonds only if the interest
on such bonds is, in the opinion of bond counsel, exempt from federal income
taxes. It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below. Also, see
the Statement of Additional Information for further information in regard to
ratings.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond yields are dependent on several factors including market
conditions, the size of an offering, the maturity of the bond, ratings of the
bond and the ability of issuers to meet their obligations. There is no limit on
the maturity of the bonds purchased by the Funds. Because the prices of bonds
fluctuate inversely in relation to the direction of interest rates, the prices
of longer term bonds fluctuate more widely in response to market interest rate
changes. A Fund's concentration in securities issued by its designated state and
that state's political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities. An expanded
discussion of the risks associated with the purchase of the designated state's
municipal bonds is contained in the respective Statements of Additional
Information. Although the Funds, other than Evergreen Florida High Income
Municipal Bond Fund will not purchase securities rated below BBB by S&P or Baa
by Moody's (i.e., junk bonds), the Funds are not required to dispose of
securities that have been downgraded subsequent to their purchase. If the
municipal obligations held by a Fund (because of adverse economic conditions in
a particular state, for example) are downgraded, the Fund's concentration in
securities of that state may cause the Fund to be subject to the risks inherent
in holding material amounts of low-rated debt securities in its portfolio. As
stated above, Evergreen Florida High Income Municipal Bond Fund invests
primarily in high yield, medium and lower rated (Baa through C by Moody's and
BBB through D by S&P) and unrated securities. Additional risk factors relating
to the investment by Evergreen Florida High Income Municipal Bond Fund in high
yield, medium and lower rated (Baa through C by Moody's and BBB through D by
S&P) and unrated securities are discussed below.
Portfolio Turnover. A portfolio turnover rate of 100% would occur if all of a
Fund's portfolio securities were replaced in one year. The portfolio turnover
rate experienced by a Fund directly affects the transaction costs relating to
the purchase and sale of securities which a Fund bears directly. A high rate of
portfolio turnover will increase such costs. See the Statement of Additional
Information for further information regarding the practices of the Funds
affecting portfolio turnover.
Non-Diversification. Each of Evergreen Florida Municipal Bond Fund, Evergreen
Georgia Municipal Bond Fund, Evergreen North Carolina Municipal Bond Fund,
Evergreen South Carolina Municipal Bond Fund and Evergreen Virginia Municipal
Bond Fund is a non-diversified portfolio of an investment company and as such,
there is no limit on the percentage of assets which can be invested in any
single issuer. An investment in a Fund, therefore, will entail greater risk than
would exist in a diversified investment company because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Each of the Funds 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.
Repurchase Agreements. The Funds may invest in repurchase agreements. Repurchase
agreements are agreements by which a Fund purchases a security (usually U.S.
government securities) for cash and obtains a simultaneous commitment from the
seller (usually a bank or broker/dealer) to repurchase the security at an
agreed-upon price and specified future date. The repurchase price reflects an
agreed-upon interest rate for the time period of the agreement. The Funds' risk
is the inability of the seller to pay the agreed-upon price on the delivery
date. However, this risk is tempered by the ability of the Funds to sell the
security in the open market in the case of a default. In such a case, the Funds
may incur costs in disposing of the security which would increase Fund expenses.
The Adviser will monitor the creditworthiness of the firms with which the Funds
enter into repurchase agreements.
When-Issued And Delayed Delivery Transactions. The Funds may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Funds purchase securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Funds to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Funds may pay more or less than the market value of the
securities on the settlement date. The Funds may dispose of a commitment prior
to settlement if the Adviser deems it appropriate to do so. In addition, the
Funds may enter into transactions to sell their purchase commitments to third
parties at current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. The Funds may realize short-term
profits or losses upon the sale of such commitments.
Lending Of Portfolio Securities. In order to generate additional income, the
Funds may lend their portfolio securities on a short-term or long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The Funds
will only enter into loan arrangements with creditworthy borrowers and will
receive collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the securities loaned. As a matter of fundamental
investment policy which cannot be changed without shareholder approval, the
Funds will not lend any of their assets except portfolio securities up to
one-third of the value of their total assets. There is the risk that when
lending portfolio securities, the securities may not be available to a Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition of the
securities may be delayed pending court action.
Investing In Securities Of Other Investment Companies. Each Fund may invest in
the securities of other investment companies. This is a short-term measure to
invest cash which has not yet been invested in other portfolio instruments and
is subject to the following limitations: (1) no Fund will own more than 3% of
the total outstanding voting stock of any one investment company, (2) no Fund
may invest more than 5% of its total assets in any one investment company and
(3) no Fund may invest more than 10% of its total assets in investment companies
in general. The Adviser will waive its investment advisory fee on assets
invested in securities of other open end investment companies.
Borrowing. 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.
Illiquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable.
Repurchase agreements with maturities longer than seven days will be included
for the purpose of the foregoing 15% limit. Securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Adviser to be illiquid or
not readily marketable and, therefore, are not subject to the aforementioned 15%
limit. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair a Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Adviser on an ongoing basis, subject to the oversight of the
Trustees. In the event that such a security is deemed to be no longer liquid, a
Fund's holdings will be reviewed to determine what action, if any, is required
to ensure that the retention of such security does not result in a Fund having
more than 15% of its assets invested in illiquid or not readily marketable
securities.
Unseasoned Issuers. The Funds will not invest more than 5% of the value of their
total assets in securities of issuers (or guarantors, where applicable) which
have records of less than three years of continuous operations, including the
operation of any predecessor.
Risk Factors Associated with Medium and Lower Rated and Unrated Municipal
Obligations. Evergreen Florida High Income Municipal Bond Fund will invest in
medium and lower rated or unrated municipal securities. The market for high
yield, high risk debt securities rated in the medium and lower rating
categories, or which are unrated, is relatively new and its growth has
paralleled a long economic expansion. Past experience may not, therefore,
provide an accurate indication of future performance of this market,
particularly during periods of economic recession. An economic downturn or
increase in interest rates is likely to have a greater negative effect on this
market, the value of high yield debt securities in the Fund's portfolio, the
Fund's net asset value and the ability of the bonds' issuers to repay principal
and interest, meet projected business goals and obtain additional financing,
than would be the case if investments by the Fund were limited to higher rated
securities. These circumstances also may result in a higher incidence of
defaults. Yields on medium or lower-rated municipal bonds may not fully reflect
the higher risks of such bonds. Therefore, the risk of a decline in market
value, should interest rates increase or credit quality concerns develop, may be
higher than has historically been experienced with such investments. An
investment in Evergreen Florida High Income Municipal Bond Fund may be
considered more speculative than investment in shares of another fund which
invests primarily in higher rated debt securities.
Prices of high yield debt securities may be more sensitive to adverse
economic changes or corporate developments than higher rated investments. Debt
securities with longer maturities, which may have higher yields, may increase or
decrease in value more than debt securities with shorter maturities. Market
prices of high yield debt securities structured as zero coupon or pay-in-kind
securities are affected to a greater extent by interest rate changes and may be
more volatile than securities which pay interest periodically and in cash. Where
Evergreen Florida High Income Municipal Bond Fund deems it appropriate and in
the best interests of its shareholders, it may incur additional expenses to seek
recovery on a debt security on which the issuer has defaulted and to pursue
litigation to protect the interests of security holders of its portfolio
entities.
Because the market for medium or lower rated securities may be thinner
and less active than the market for higher rated securities, there may be market
price volatility for these securities and limited liquidity in the resale
market. Unrated securities are usually not as attractive to as many buyers as
are rated securities, a factor which may make unrated securities less
marketable. These factors may have the effect of limiting the availability of
the securities for purchase by Evergreen Florida High Income Municipal Bond Fund
and may also limit the ability of the Fund to sell such securities at their fair
value either to meet redemption requests or in response to changes in the
economy or the financial markets. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of medium or lower rated debt securities, especially in a thinly
traded market. To the extent the Fund owns or may acquire illiquid or restricted
high yield securities, these securities may involve special registration
responsibilities, liabilities and costs, and liquidity and valuation
difficulties. Changes in values of debt securities which the Fund owns will
affect the Fund's net asset value per share. If market quotations are not
readily available for the Fund's lower rated or unrated securities, these
securities will be valued by a method that the Trustees believes accurately
reflects fair value. Valuation becomes more difficult and judgment plays a
greater role in valuing high yield debt securities than with respect to
securities for which more external sources of quotations and last sale
information are available.
Special tax considerations are associated with investing in high yield
debt securities structured as zero coupon or pay-in-kind securities. A Fund
investing in such securities accrues income on these securities prior to the
receipt of cash payments. Evergreen Florida High Income Municipal Bond Fund must
distribute substantially all of its income to shareholders to qualify for pass
through treatment under the tax laws and may, therefore, have to dispose of
portfolio securities to satisfy distribution requirements.
While credit ratings are only one factor Evergreen Florida High Income
Municipal Bond Fund's investment adviser relies on in evaluating high yield debt
securities, certain risks are associated with using credit ratings. Credit
ratings evaluate the safety of principal and interest payments, not market value
risk. Credit rating agencies may fail to change in timely manner the credit
ratings to reflect subsequent events; however, the Fund's investment adviser
continuously monitors the issuers of high yield debt securities in the Fund's
portfolio in an attempt to determine if the issuers will have sufficient cash
flow and profits to meet required principal and interest payments. Achievement
of Evergreen Florida High Income Municipal Bond Fund's investment objective may
be more dependent upon the Fund's investment adviser and the credit analysis
capability of the Fund's investment adviser, than is the case for higher quality
debt securities. Credit ratings for individual securities may change from time
to time and Evergreen Florida High Income Municipal Bond Fund may retain a
portfolio security whose rating has been changed. See the Statement of
Additional Information for a description of bond and note ratings.
Transactions in Options and Futures. The Funds may engage in options and futures
transactions. Options and futures transactions are intended to enable a Fund to
manage market or interest rate risk, and the Funds do not use these transactions
for speculation or leverage. The Funds may attempt to hedge all or a portion of
their portfolios through the purchase of both put and call options on their
portfolio securities and listed put options on financial futures contracts for
portfolio securities. The Funds may also write covered call options on their
portfolio securities to attempt to increase their current income. The Funds will
maintain their positions in securities, option rights, and segregated cash
subject to puts and calls until the options are exercised, closed, or have
expired. An option position may be closed out only on an exchange which provides
a secondary market for an option of the same series. The Funds may purchase
listed put options on financial futures contracts. These options will be used
only to protect portfolio securities against decreases in value resulting from
market factors such as an anticipated increase in interest rates.
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds also may write straddles (combinations of covered
puts and calls on the same underlying security). The Funds may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option, the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
A futures contract is a firm commitment by two parties: the seller, who
agrees to make delivery of the specific type of instrument called for in the
contract ("going short"), and the buyer, who agrees to take delivery of the
instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government. If a Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. A Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.
The Funds may also enter into financial futures contracts and write
options on such contracts. The Funds intend to enter into such contracts and
related options for hedging purposes. The Funds will enter into futures on
securities or index-based futures contracts in order to hedge against changes in
interest rates or securities prices. A futures contract on securities is an
agreement to buy or sell securities during a designated month at whatever price
exists at that time. A futures contract on a securities index does not involve
the actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Funds do not make
payment or deliver securities upon entering into a futures contract. Instead,
they put down a margin deposit, which is adjusted to reflect changes in the
value of the contract and which remains in effect until the contract is
terminated.
The Funds may sell or purchase other financial futures contracts. When
a futures contract is sold by a Fund, the profit on the contract will tend to
rise when the value of the underlying securities declines and to fall when the
value of such securities increases. Thus, the Funds sell futures contracts in
order to offset a possible decline in the profit on their securities. If a
futures contract is purchased by a Fund, the value of the contract will tend to
rise when the value of the underlying securities increases and to fall when the
value of such securities declines. The Funds may enter into closing purchase and
sale transactions in order to terminate a futures contract and may buy or sell
put and call options for the purpose of closing out their options positions. The
Funds' ability to enter into closing transactions depends on the development and
maintenance of a liquid secondary market. There is no assurance that a liquid
secondary market will exist for any particular contract or at any particular
time. As a result, there can be no assurance that the Funds will be able to
enter into an offsetting transaction with respect to a particular contract at a
particular time. If the Funds are not able to enter into an offsetting
transaction, the Funds will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms, in
which case it would continue to bear market risk on the transaction.
Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the Funds to manage market or interest rate
risks, these investment devices can be highly volatile, and the Funds' use of
them can result in poorer performance (i.e., the Funds' return may be reduced).
The Funds' attempt to use such investment devices for hedging purposes may not
be successful. Successful futures strategies require the ability to predict
future movements in securities prices, interest rates and other economic
factors. When the Funds use financial futures contracts and options on financial
futures contracts as hedging devices, there is a risk that the prices of the
securities subject to the financial futures contracts and options on financial
futures contracts may not correlate perfectly with the prices of the securities
in the Funds' portfolios. This may cause the financial futures contract and any
related options to react to market changes differently than the portfolio
securities. In addition, the Adviser could be incorrect in its expectations and
forecasts about the direction or extent of market factors, such as interest
rates, securities price movements, and other economic factors. Even if the
Adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of a Fund's futures position did not
correspond to changes in the value of its investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Adviser will consider liquidity
before entering into financial futures contracts or options on financial futures
contracts transactions, there is no assurance that a liquid secondary market on
an exchange will exist for any particular financial futures contract or option
on a financial futures contract at any particular time. The Funds' ability to
establish and close out financial futures contracts and options on financial
futures contract positions depends on this secondary market. If a Fund is unable
to close out its position due to disruptions in the market or lack of liquidity,
the Fund may lose money on the futures contract or option, and the losses to the
Fund could be significant.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). The Capital Management
Group of First Union National Bank of North Carolina ("CMG") serves as
investment adviser to Evergreen Florida Municipal Bond Fund, Evergreen Georgia
Municipal Bond Fund, Evergreen North Carolina Municipal Bond Fund, Evergreen
South Carolina Municipal Bond Fund, Evergreen Virginia Municipal Bond Fund and
Evergreen Florida High Income Municipal Bond Fund. First Union National Bank of
North Carolina ("FUNB") is a subsidiary of First Union Corporation ("First
Union"), one of the ten largest bank holding companies in the United States.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $74.2 billion in consolidated assets as of September 30,
1994. First Union and its subsidiaries provide a broad range of financial
services to individuals and businesses through offices in 36 states. The Capital
Management Group of FUNB manages or otherwise oversees the investment of over
$36 billion in assets belonging to a wide range of clients, including all the
series of Evergreen Investment Trust (formerly known as First Union Funds).
First Union Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a
registered broker-dealer that is principally engaged in providing retail
brokerage services consistent with its federal banking authorizations. First
Union Capital Markets Corp., a wholly-owned subsidiary of First Union, is a
registered broker-dealer principally engaged in providing, consistent with its
federal banking authorizations, private placement, securities dealing, and
underwriting services.
CMG manages investments and supervises the daily business affairs of
Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond Fund,
Evergreen North Carolina Municipal Bond Fund, Evergreen South Carolina Municipal
Bond Fund, Evergreen Virginia Municipal Bond Fund and Evergreen Florida High
Income Municipal Bond Fund and, as compensation therefor, is entitled to receive
an annual fee equal to .50 of 1% of average daily net assets of each Fund other
than Evergreen Florida High Income Municipal Bond Fund, from which it is
entitled to receive an annual fee equal to .60 of 1% of average daily net
assets. The total annualized operating expenses of Evergreen Florida Municipal
Bond Fund, Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina
Municipal Bond Fund, Evergreen South Carolina Municipal Bond Fund and Evergreen
Virginia Municipal Bond Fund and the total annualized operating expenses of ABT
Florida High Income Municipal Bond Fund, predecessor to Evergreen Florida High
Income Municipal Bond Fund, for the most recent fiscal year are set forth in the
section entitled "Financial Highlights". Evergreen Asset Management Corp.
("Evergreen Asset"), a subsidiary of FUNB, serves as administrator to each Fund
and is entitled to receive a fee based on the average daily net assets of each
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule: .050% of the
first $7 billion; .035% on the next $3 billion; .030% on the next $5 billion;
.020% on the next $10 billion; .015% on the next $5 billion; and .010% on assets
in excess of $30 billion. Furman Selz Incorporated, the parent of Evergreen
Funds Distributor, Inc., distributor for the Evergreen group of mutual funds,
serves as sub-administrator for each Fund and is entitled to receive a fee from
each Fund calculated on the average daily net assets of each Funds at a rate
based on the total assets of the mutual funds administered by Evergreen Asset
for which CMG or Evergreen Asset also serve as investment adviser, calculated in
accordance with the following schedule: .0100% of the first $7 billion; .0075%
on the next $3 billion; .0050% on the next $15 billion; and .0040% on assets in
excess of $25 billion. The total assets of the mutual funds administered by
Evergreen Asset for which CMG or Evergreen Asset serve as investment adviser as
of March 31, 1995 were approximately $8 billion.
Robert S. Drye is a Vice President of FUNB , and has been with FUNB
since 1968. Since 1989, Mr. Drye has served as a portfolio manager for several
of the series of Evergreen Investment Trust and for certain common trust funds.
Prior to 1989, Mr. Drye worked as a marketing specialist with First Union
Brokerage Services, Inc. Mr. Drye has managed the Evergreen South Carolina
Municipal Bond Fund since its inception in January 1994. In addition, Mr. Drye
has been the portfolio manager for the Evergreen Florida Municipal Bond Fund
since its inception in July 1993. Richard K. Marrone is a Vice President of FUNB
. Mr. Marrone joined FUNB in May 1993 with eleven years of experience managing
fixed income assets at Woodbridge Capital Management, a subsidiary of Comerica
Bank, N.A. Mr. Marrone is responsible for the portfolio management of several
series of Evergreen Investment Trust and certain common trust funds. Mr. Marrone
has served as portfolio manager of the Evergreen North Carolina Municipal Bond
Fund since May 1993, and portfolio manager of the Evergreen Florida High Income
Municipal Bond Fund and Evergreen Georgia Municipal Bond Fund since their
inception in July 1995 and July 1993, respectively. Charles E. Jeanne joined
FUNB, in July 1993. Prior to joining FUNB , Mr. Jeanne served as a
trader/portfolio manager for First American Bank where he was responsible for
individual accounts and common trust funds. Mr. Jeanne has been the portfolio
manager for the Evergreen Virginia Municipal Bond Fund since its inception in
1993.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the outstanding shares of that Class.
Shares are valued each day the New York Stock Exchange (the "Exchange") is open
as of the close of regular trading (currently 4:00 p.m. Eastern time). The
securities in a Fund are valued at their current market value determined on the
basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
market value.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from an investor's
account to reimburse the Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
A Fund cannot accept investments specifying a certain price or date and
reserves the right to reject any specific purchase order, including orders in
connection with exchanges from the other Evergreen Funds. Although not currently
anticipated, each Fund reserves the right to suspend the offer of shares for a
period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share on the last business day of each month,
unless otherwise requested by a shareholder in writing. If the transfer agent
does not receive a written request for subsequent dividends and/or distributions
to be paid in cash at least three full business days prior to a given record
date, the dividends and/or distributions to be paid to a shareholder will be
reinvested. If you elect to receive dividends and distributions in cash and the
U.S. Postal Service cannot deliver the checks, or if the checks remain uncashed
for six months, the checks will be reinvested into your account at the then
current net asset value.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
<PAGE>
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Income dividends are declared daily and paid monthly. Distributions of
any net realized gains of a Fund will be made at least annually. Shareholders
will begin to earn dividends on the first business day after shares are
purchased unless shares were not paid for, in which case dividends are not
earned until the next business day after payment is received. Each Fund has
qualified and intends to continue to qualify to be treated as a regulated
investment company under the Code. While so qualified, so long as each Fund
distributes all of its investment company taxable income and any net realized
gains to shareholders, it is expected that the Funds will not be required to pay
any Federal income taxes. A 4% nondeductible excise tax will be imposed on a
Fund if it does not meet certain distribution requirements by the end of each
calendar year. Each Fund anticipates meeting such distribution requirements.
The Funds will designate and pay exempt-interest dividends derived from
interest earned on qualifying tax-exempt obligations. Such exempt-interest
dividends may be excluded by shareholders of a Fund from their gross income for
Federal income tax purposes, however (1) all or a portion of such
exempt-interest dividends may be a specific preference item for purposes of the
Federal individual and corporate alternative minimum taxes to the extent that
they are derived from certain types of private activity bonds issued after
August 7, 1986, and (2) all exempt-interest dividends will be a component of the
"adjusted current earnings" for purposes of the Federal corporate alternative
minimum tax.
Dividends paid from taxable income, if any, and distributions of any
net realized short-term capital gains (whether from tax exempt or taxable
obligations) are taxable as ordinary income and long-term capital gain
distributions are taxable as long-term capital gains, even though received in
additional shares of the Fund, and regardless of the investors holding period
relating to the shares with respect to which such gains are distributed. Market
discount recognized on taxable and tax-exempt bonds is taxable as ordinary
income, not as excludable income. Under current law, the highest Federal income
tax rate applicable to net long-term gains realized by individuals is 28%. The
rate applicable to corporations is 35%.
Since each Fund's gross income is ordinarily expected to be tax exempt
interest income, it is not expected that the 70% dividends-received deduction
for corporations will be applicable. Specific questions should be addressed to
the investor's own tax adviser.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gains distributions (if any) and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, each investor must certify on the Share Purchase
Application, or on a separate form supplied by State Street, that the investor's
social security or taxpayer identification number is correct and that the
investor is not currently subject to backup withholding or is exempt from backup
withholding.
Set forth below are brief descriptions of the personal income tax status of an
investment in each of the Funds under Florida, Georgia, North Carolina, South
Carolina, and Virginia tax laws currently in effect. Income from a Fund is not
necessarily free from state income taxes in states other than its designated
state. State laws differ on this issue, and shareholders are urged to consult
their own tax advisers regarding the status of their accounts under state and
local laws.
Evergreen Florida Municipal Bond Fund and Evergreen Florida High Income
Municipal Bond Fund. Florida does not currently impose an income tax on
individuals. Thus, individual shareholders of the Funds will not be subject to
any Florida state income tax on distributions received from the Funds. However,
certain distributions will be taxable to corporate shareholders which are
subject to Florida corporate income tax. Florida currently imposes an
intangibles tax at the annual rate of 0.20% on certain securities and other
intangible assets owned by Florida residents. Certain types of tax exempt
securities of Florida issuers, U.S. government securities and tax exempt
securities issued by certain U.S. territories and possessions are exempt from
this intangibles tax. Shares of the Funds will also be exempt from the Florida
intangibles tax if the portfolio consists exclusively of securities exempt from
the intangibles tax on the last business day of the calendar year. If the
portfolio consists of any assets which are not so exempt on the last business
day of the calendar year, however, only the portion of the shares of the Funds
which relate to securities issued by the United States and its possessions and
territories will be exempt from the Florida intangibles tax, and the remaining
portion of such shares will be fully subject to the intangibles tax, even if
they partly relate to Florida tax exempt securities.
Evergreen Georgia Municipal Bond Fund. Under existing Georgia law, shareholders
of the Fund will not be subject to individual or corporate Georgia income taxes
on distributions from the Fund to the extent that such distributions represent
exempt-interest dividends for federal income tax purposes that are attributable
to (1) interest-bearing obligations issued by or on behalf of the State of
Georgia or its political subdivisions, or (2) interest on obligations of the
United States or of any other issuer whose obligations are exempt from state
income taxes under federal law. Distributions, if any, derived from capital
gains or other sources generally will be taxable for Georgia income tax purposes
to shareholders of the Fund who are subject to the Georgia income tax. For
purposes of the Georgia intangibles tax, Shares of the Fund likely are taxable
(at the rate of 10 cents per $1,000 in value of the Shares held on January 1 of
each year) to shareholders who are otherwise subject to such tax.
Evergreen North Carolina Municipal Bond Fund. Under existing North Carolina law,
shareholders of the Fund will not be subject to individual or corporate North
Carolina income taxes on distributions from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations issued by North
Carolina and political subdivisions thereof or (2) interest on obligations of
the United States or its territories or possessions. Distributions, if any,
derived from capital gains or other sources generally will be taxable for North
Carolina income tax purposes to shareholders of the Fund who are subject to the
North Carolina income tax.
Evergreen South Carolina Municipal Bond Fund. Under existing South Carolina law,
shareholders of the Fund will not be subject to individual or corporate South
Carolina income taxes on Fund distributions to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to (1) interest on obligations of the State of
South Carolina, or any of its political subdivisions, (2) interest on
obligations of the United States, or (3) interest on obligations of any agency
or instrumentality of the United States that is prohibited by federal law from
being taxed by a state or any political subdivision of a state. Distributions,
if any, derived from capital gains or other sources, generally will be taxable
for South Carolina income tax purposes to shareholders of the Fund who are
subject to South Carolina income tax.
Evergreen Virginia Municipal Bond Fund. Under existing Virginia law,
shareholders of the Fund will not be subject to individual or corporate Virginia
income taxes on distributions received from the Fund to the extent that such
distributions represent exempt-interest dividends for federal income tax
purposes that are attributable to interest earned on (1) obligations issued by
or on behalf of the Commonwealth of Virginia or any political subdivision
thereof, or (2) obligations issued by a territory or possession of the United
States or any subdivision thereof which federal law exempts from state income
taxes. Distributions, if any, derived from capital gains or other sources
generally will be taxable for Virginia income tax purposes to shareholders of
the Fund who are subject to Virginia income tax.
Statements describing the tax status of shareholders' dividends and
distributions will be mailed annually by the Funds. These statements will set
forth the amount of income exempt from Federal and if applicable, state
taxation, and the amount, if any, subject to Federal and state taxation.
Moreover, to the extent necessary, these statements will indicate the amount of
exempt-interest dividends which are a specific preference item for purposes of
the Federal individual and corporate alternative minimum taxes. The exemption of
interest income for Federal income tax purposes does not necessarily result in
exemption under the income or other tax law of any state or local taxing
authority. Investors should consult their own tax advisers about the status of
distributions from the Funds in their states and localities. Each Fund notifies
shareholders annually as to the interest exempt from Federal taxes earned by the
Fund.
A shareholder who acquires Class A shares of a Fund and sells or
otherwise disposes of such shares within 90 days of acquisition may not be
allowed to include certain sales charges incurred in acquiring such shares for
purposes of calculating gain and loss realized upon a sale or exchange of shares
of the Fund.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Florida Municipal Bond
Fund, Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina Municipal
Bond Fund, Evergreen South Carolina Municipal Bond Fund and Evergreen Virginia
Municipal Bond Fund is contained in the annual report of each Fund for the
fiscal year ended December 31, 1994. A similar discussion relating to ABT
Florida High Income Municipal Bond Fund, the predecessor of Evergreen Florida
High Income Municipal Bond Fund is contained in the annual report of such Fund
for the fiscal year ended April 30, 1995.
<PAGE>
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. Evergreen Florida High Income Municipal Fund is a newly organized,
separate investment series of Evergreen Municipal Trust, a Massachusetts
business trust organized in 1988. Evergreen Florida Municipal Bond Fund,
Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina Municipal Bond
Fund, Evergreen South Carolina Municipal Bond Fund and Evergreen Virginia
Municipal Bond Fund are each separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Directors, that affect each series and class in
substantially the same manner. Class A, B and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to the Funds.
Other Classes of Shares. Each Fund currently offers three classes of shares,
Class A, Class B and Class Y, and may in the future offer additional classes.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
mutual funds for which Evergreen Asset serves as investment adviser as of
December 30, 1994, (ii) certain institutional investors and (iii) investment
advisory clients of CMG, Evergreen Asset or their affiliates. The dividends
payable with respect to Class A and Class B shares will be less than those
payable with respect to Class Y shares due to the distribution and distribution
related expenses borne by Class A and Class B shares and the fact that such
expenses are not borne by Class Y shares.
Performance Information. A Fund's performance may be quoted in advertising in
terms of yield or total return. Both types of performance are based on
Securities and Exchange Commission ("SEC") formulas and are not intended to
indicate future performance.
Yield is a way of showing the rate of income a Fund earns on its
investments as a percentage of the Fund's share price. A Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, a Fund's yield may not equal its
distribution rate, the income paid to your account or the income reported in a
Fund's financial statements. To calculate yield, a Fund takes the interest
income it earned from its portfolio of investments (as defined by the SEC
formula) for a 30-day period (net of expenses), divides it by the average number
of shares entitled to receive dividends, and expresses the result as an
annualized percentage rate based on a Fund's share price at the end of the
30-day period.
This yield does not reflect gains or losses from selling securities.
A Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated Federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Total returns are based on the overall dollar or percentage change in
the value of a hypothetical investment in a Fund. A Fund's total return shows
its overall change in value including changes in share prices and assumes all a
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in a Fund's return, you should recognize that they are not the same
as actual year-by-year results. To illustrate the components of overall
performance, a Fund may separate its cumulative and average annual total returns
into income results and realized and unrealized gain or loss.
Each Fund may also quote tax-equivalent yields, which show the taxable
yields an investor would have to earn before taxes to equal the Fund's tax-free
yields. A tax-equivalent yield is calculated by dividing a Fund's tax-exempt
yield by the result of one minus a stated federal tax rate. If only a portion of
a Fund's income was tax-exempt, only that portion is adjusted in the
calculation.
Comparative performance information may also be used from time to time
in advertising or marketing a Fund's shares, including data from Lipper
Analytical Services, Inc., Morningstar and other industry publications. The Fund
may also advertise in items of sales literature an "actual distribution rate"
which is computed by dividing the total ordinary income distributed (which may
include the excess of short-term capital gains over losses) to shareholders for
the latest twelve month period by the maximum public offering price per share on
the last day of the period. Investors should be aware that past performance may
not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declaration of Trust under which each
Fund operates provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which have been incorporated by reference herein, do not contain
all the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
APPENDIX A -- FLORIDA RISK CONSIDERATIONS
The following is a summary of economic factors which may affect the
ability of the municipal issuers of Florida Obligations to repay general
obligation and revenue bonds. Such information is derived from sources that are
generally available to investors and is believed by the Funds to be accurate,
but has not been independently verified and may not be complete. Under current
law, the State of Florida is required to maintain a balanced budget such that
current expenses are met from current revenues. Florida does not currently
impose a tax on personal income but does impose taxes on corporate income
derived from activities within the state. In addition, Florida imposes an ad
valorem tax as well as sales and use taxes. These taxes are the principal
sources of funds to meet state expenses, including repayment of, and interest
on, obligations backed solely by the full faith and credit of the state, without
recourse to any specific project or related revenue source.
On November 3, 1992, Florida voters approved an amendment to the state
constitution which limits the annual growth in the assessed valuation of
residential property and which, over time, could constrain the growth in
property taxes, a major revenue source for local governments. The amendment
restricts annual increases in assessed valuation to the lesser of 3% or the
Consumer Price Index. The amendment applies only to residential properties
eligible for the homestead exemption and does not affect the valuation of
rental, commercial, or industrial properties. When sold, residential property
would be reassessed at market value. The amendment became effective January 1,
1993. While no immediate ratings implications are expected, the amendment could
have a negative impact on the financial performance of local governments over
time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds.
Many of the bonds in which the Funds invest were issued by various
units of local government in the State of Florida. In addition, most of these
bonds are revenue bonds where the security interest of the bond holders
typically is limited to the pledge of revenues or special assessments flowing
from the project financed by the bonds. Projects include, but are not limited
to, water and waste water utilities, drainage systems, roadways, and other
development-related infrastructures. Therefore, the capacity of these issuers to
repay their obligations may be affected by variations in the Florida economy.
Since 1970, Florida has been one of the fastest growing states in the
nation. Average annual population growth over the last 20 years was 320,000.
During this period only California and Texas grew more rapidly. In terms of
total population, Florida moved from the ninth most populous state in 1970 to
fourth today.
This rapid and sustained pace of population growth has given rise to
sharp increases in construction activity and to the need for roads, drainage
systems, and utilities to serve the burgeoning population. In turn this has
driven the growth in the volume of revenue bond debt outstanding.
The pace of growth, however, has not been steady. During economic
expansions, Florida's population growth has exceeded 500,000 people per year,
but in recessions growth has slowed to 120,000 per year. The variations in
construction activity over the course of business cycles is also very large.
Although the amplitude of the swings during business cycles is large, the
duration of downturns in Florida's growth has been short. Historically,
depressed levels of growth have lasted only a year or two at most. Furthermore,
Florida's cycles have not been periods of growth or decline. Instead, what has
occurred are periods of more growth or less growth.
Florida's ability to meet increasing expenses will be dependent in part
upon the state's ability to foster business and economic growth. During the past
decade, Florida has experienced significant increases in the technology-based
and other light industries and in the service sector. This growth has
diversified the state's overall economy, which at one time was dominated by the
citrus and tourism industries. The state's economic and business growth could be
restricted, however, by the natural limitations of environmental resources and
the state's ability to finance adequate public facilities such as roads and
schools.
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN FLORIDA MUNICIPAL BOND FUND, EVERGREEN GEORGIA MUNICIPAL BOND
FUND, EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND, EVERGREEN SOUTH
CAROLINA MUNICIPAL BOND FUND, EVERGREEN VIRGINIA MUNICIPAL BOND FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536126
STATEMENT OF ADDITIONAL INFORMATION
July 7, 1995
THE EVERGREEN TAX FREE FUNDS
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen Florida Municipal Bond Fund (formerly First Union Florida
Municipal Bond Portfolio) ("Florida Municipal Bond")
Evergreen Georgia Municipal Bond Fund (formerly First Union Georgia
Municipal Bond Portfolio) ("Georgia Municipal Bond")
Evergreen North Carolina Municipal Bond Fund (formerly First Union North
Carolina Municipal Bond Portfolio) ("North Carolina Municipal Bond")
Evergreen South Carolina Municipal Bond Fund (formerly First Union
South Carolina Municipal Bond Portfolio) ("South Carolina Municipal Bond")
Evergreen Virginia Municipal Bond Fund (formerly First Union Virginia
Municipal Bond Portfolio)("Virginia Municipal Bond")
Evergreen Florida High Income Municipal Bond Fund ("Florida High Income")
Evergreen High Grade Tax Free Fund (formerly First Union High Grade Tax Free
Portfolio) ("High Grade")
Evergreen Short-Intermediate Municipal Fund ("Short-Intermediate")
Evergreen Short-Intermediate Municipal Fund-California ("Short-Intermediate-CA")
This Statement of Additional Information pertains to all classes of shares of
the Funds listed below. It is not a prospectus and should be read in conjunction
with the Prospectus dated July 7, 1995 for the Fund in which you are making or
contemplating an investment. The Evergreen Tax Free Funds are offered through
four separate prospectuses: one offering Class A and Class B shares, and a
separate prospectus offering Class Y shares of Florida Municipal Bond, Georgia
Municipal Bond, North Carolina Municipal Bond, South Carolina Municipal Bond,
Virginia Municipal Bond and Florida High Income; and one offering Class A and
Class B shares and a separate prospectus offering Class Y shares of High Grade,
Short- Intermediate and Short-Intermediate-CA. Copies of each Prospectus may be
obtained without charge by calling the number listed above.
TABLE OF CONTENTS
Page
Investment Objectives and Policies................................
Investment Restrictions...........................................
Non-Fundamental Operating Policies................................
Management........................................................
Investment Adviser................................................
Distribution Plans................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Purchase of Shares................................................
Performance Information...........................................
Financial Statements..............................................
Appendix A - Note, Bond And Commercial Paper Ratings Appendix B - Additional
Information Concerning California Appendix C - Additional Information Concerning
Florida Appendix D - Additional Information Concerning Georgia Appendix E -
Additional Information Concerning North Carolina Appendix F - Additional
Information Concerning South Carolina Appendix G - Additional Information
Concerning Virginia
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objective
and Policies" in each Fund's Prospectus)
The investment objective of each Fund and a description of the securities in
which each Fund may invest is set forth under "Description of the Funds -
Investment Objective and Policies" in the relevant Prospectus. The investment
objectives of Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High
Grade are fundamental and cannot be changed without the approval of
shareholders. The following expands the discussion in the Prospectus regarding
certain investments of each Fund.
Additional Information Regarding Investments that each Fund May Make
Participation Interests (All Funds)
Participation interests may take the form of participations, beneficial
interests, in a trust, partnership interests, or any other form of indirect
ownership that allows a Fund to treat the income from the investments as exempt
from federal and state tax. The financial institutions from which a Fund
purchases participation interests frequently provide or secure from another
financial institution irrevocable letters of credit or guarantees and give a
Fund the right to demand payment of the principal amounts of the participation
interests plus accrued interest on short notice (usually within seven days).
Variable Rate Municipal Securities (All Funds)
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital appreciation or
depreciation is less for variable rate municipal securities than for fixed
income obligations.
Many municipal securities with variable interest rates purchased by a Fund
are subject to repayment of principal (usually within seven days) on the Fund's
demand. The terms of these variable rate demand instruments require payment of
principal obligations by the issuer of the participation interests or a
guarantor of either issuer. All variable rate municipal securities will meet the
quality standards for a Fund. The Fund's investment adviser has been instructed
by the Board of Trustees (the "Trustees") to monitor the pricing, quality, and
liquidity of the variable rate municipal securities, including participation
interests held by a Fund, on the basis of published financial information and
reports of the rating agencies and other analytical services.
Municipal Leases (All Funds)
When determining whether municipal leases purchased by a Fund will be
classified as a liquid or illiquid security, the Trustees have directed each
Fund's investment adviser to consider certain factors, such as: the frequency of
trades and quotes for the security; the volatility of quotations and trade
prices for the security, the number of dealers willing to purchase or sell the
security and the number of potential purchasers; dealer undertakings to make a
market in the security; the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer); the rating of the security
and the financial condition and prospects of the issuer of the security; whether
the lease can be terminated by the lessee; the potential recovery, if any, from
a sale of the leased property upon termination of the lease; the lessee's
general credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will discontinue
appropriating funding for the lease property because the property is no longer
deemed essential to its operations (e.g., the potential for an "event of
nonappropriation"); any credit enhancement or legal recourse provided upon an
event of nonappropriation or other termination of the lease; and such other
factors as may be relevant to the Fund's ability to dispose of the security.
<PAGE>
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for a Fund. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of a Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Funds (other than
High Grade, Short-Intermediate and Short-Intermediate-CA) do not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
Short-Intermediate and Short-Intermediate-CA do not expect that commitments to
purchase when-issued securities will normally exceed 25% of their total assets
and High Grade does not expect that such commitments will exceed 20% of its
total assets.
Futures and Options Transactions (All Funds Except High Grade,
Short-Intermediate and Short-Intermediate-CA)
A Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts and options on financial futures contracts.
Additionally, a Fund may buy and sell call and put options on portfolio
securities. The Funds do not intend to invest more than 5% of their assets in
options and futures.
Purchasing Put Options on Financial Futures Contracts
A Fund may purchase listed put and call options on financial futures
contracts for U.S. government securities. Unlike entering directly into a
futures contract, which requires the purchaser to buy a financial instrument on
a set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the specified price.
A Fund may purchase put options on futures to protect portfolio securities
against decreases in value resulting from an anticipated increase in market
interest rates. Generally, if the hedged portfolio securities decrease in value
during the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the Fund will
normally close out its option by selling an identical option. If the hedge is
successful, the proceeds received by a Fund upon the sale of the second option
will be large enough to offset both the premium paid by the Fund for the
original option plus the realized decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option. To do so, it would
simultaneously enter into a futures contract of the type underlying the option
(for a price less than the strike price of the option) and exercise the option.
A Fund would then deliver the futures contract in return for payment of the
strike price. If a Fund neither closes out nor exercises an option, the option
will expire on the date provided in the option contract, and the premium paid
for the contract will be lost.
Writing Call Options on Financial Futures Contracts
In addition to purchasing put options on futures, a Fund may write listed
call options on futures contracts for U.S. government securities to hedge its
portfolio against an increase in market interest rates. When a Fund writes a
call option on a futures contract, it is undertaking the obligation of assuming
a short futures position (selling a futures contract) at the fixed strike price
at any time during the life of the option, if the option is exercised. As market
interest rates rise, causing the prices of futures to go down, a Fund's
obligation under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position to
increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that the
Fund keeps the premium received for the option. This premium can offset the drop
in value of a Fund's fixed income portfolio which is occurring as interest rates
rise.
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Prior to the expiration of a call written by a Fund, or exercise of it by
the buyer, a Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of the second option will be less than the premium
received by the Fund for the initial option. The net premium income of a Fund
will then offset the decrease in value of the hedged securities.
Writing Put Options on Financial Futures Contracts
A Fund may write listed put options on financial futures contracts for U.S.
government securities to hedge its portfolio against a decrease in market
interest rates. When a Fund writes a put option on a futures contract, it
receives a premium for undertaking the obligation to assume a long futures
position (buying a futures contract) at a fixed price at any time during the
life of the option. As market interest rates decrease, the market price at any
time during the life of the option. As market interest rates decrease, the
market price of the underlying futures contract normally increases.
As the market value of the underlying futures contract increases, the buyer
of the put option has less reason to exercise the put because the buyer can sell
the same futures contract at a higher price in the market. The premium received
by a Fund can then be used to offset the higher prices of portfolio securities
to be purchased in the future due to the decrease in the market interest rates.
Prior to the expiration of the put option or its exercise by the buyer, a
Fund may close out the option by buying an identical option. If the hedge is
successful, the cost of buying the second option will be less than the premium
received by the Fund for the initial option.
Purchasing Call Options on Financial Futures Contracts
An additional way in which a Fund may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures contract
for U.S. government securities. When a Fund purchases a call option on a futures
contract, it is purchasing the right (not the obligation) to assume a long
futures position (buy a futures contract) at a fixed price at any time during
the life of the option. As market interest rates fall, the value of the
underlying futures contract will normally increase, resulting in an increase in
value of the Fund's option position. When the market price of the underlying
futures contract increases above the strike price plus premium paid, the Fund
could exercise its option and buy the futures contract below market price.
Prior to the exercise or expiration of the call option a Fund could sell an
identical call option and close out its position. If the premium received upon
selling the offsetting call is greater than the premium originally paid, the
Fund has completed a successful hedge.
Limitation on Open Futures Positions
A Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the value
of the open positions (marked to market) exceeds the current market value of its
securities portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, a Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract
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which is returned to the Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied. A Fund may not purchase or sell
futures contracts or related options if immediately thereafter the sum of the
amount of margin deposits on the Fund's existing futures positions and premiums
paid for related options would exceed 5% of the market value of the Fund's total
assets.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin", equal to the daily change in value
of the futures contract. This process is known as "marking to market". Variation
margin does not represent a borrowing or loan by a Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, the
Fund will mark-to-market its open futures positions.
A Fund is also required to deposit and maintain margin when it writes call
options on futures contracts.
Purchasing and Writing Put and Call Options on Portfolio Securities (All Funds,
except High Grade, Short-Intermediate and Short-Intermediate-CA)
A Fund may purchase put and call options on portfolio securities to protect
against price movements in particular securities. A put option gives the Fund,
in return for a premium, the right to sell the underlying security to the writer
(seller) at a specified price during the term of the option. A call option gives
the Fund, in return for a premium, the right to buy the underlying security from
the seller.
A Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the writers or buyers of
the options since options on the portfolio securities held by the Fund are to
traded on an exchange. A Fund purchases and writes options only with investment
dealers and other financial institutions (such as commercial banks or savings
and loan associations) deemed creditworthy by the Fund's adviser.
Over-the-counter options are two party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options are
third party contracts with standardized strike prices and expiration dates and
are purchased from a clearing corporation. Exchange traded options have a
continuous liquid market while over-the-counter options may not.
Repurchase Agreements (All Funds)
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or other
securities to a Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price within one year from the date of
acquisition. A Fund or its custodian will take possession of the securities
subject to repurchase agreements. To the extent that the original seller does
not repurchase the securities from a Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that such a
defaulting seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. Each Fund believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. A Fund may only enter into repurchase agreements with banks
and other recognized financial institutions, such as broker/dealers, which are
found by the Fund's investment adviser to be creditworthy pursuant to guidelines
established by the Trustees.
Reverse Repurchase Agreements (All Funds)
A Fund may enter into reverse repurchase agreements. These transactions are
similar to borrowing cash. In a reverse repurchase agreement, a Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a
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stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make market daily and maintained until the
transaction is settled.
Lending of Portfolio Securities (All Funds)
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 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.
Restricted Securities (All Funds)
A Fund may invest in restricted securities. Restricted securities are any
securities in which a Fund may otherwise invest pursuant to its investment
objectives and policies but which are subject to restrictions on resale under
federal securities laws. A Fund will not invest more than 15% (10% for High
Grade) of the value of its net assets in restricted securities; however, certain
restricted securities which the Trustees deem to be liquid will be excluded from
this 15% limitation.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange Commission
("SEC") Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule 144A. Each Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities (eligible for resale
under Rule 144A) for determination by the Trustees. The Trustees consider the
following criteria in determining the liquidity of certain restricted
securities:
(i) the frequency of trades and quotes for the security;
(ii) the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
(iii) dealer undertakings to make a market in the security; and
(iv) the nature of the security and the nature of the marketplace trades.
Municipal Bond Insurance (High Grade)
The Fund may purchase two types of municipal bond insurance policies
("Policies") issued by municipal bond insurers. One type of Policy covers
certain municipal securities only during the period in which they are in the
Fund's portfolio. In the event that a municipal security covered by such a
Policy is sold by the Fund, the insurer of the relevant Policy will be liable
only for those payments of interest and principal which are then due and owing
at the time of sale.
The other type of Policy covers municipal securities not only while they
remain in the Fund's portfolio but also until their final maturity, even if they
are sold out of the Fund's portfolio, so that the coverage may benefit all
subsequent holders of those
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municipal securities. The Fund will obtain insurance which covers municipal
securities until final maturity even after they are sold out of the Fund's
portfolio only if, in the judgment of the investment adviser, the Fund would
receive net proceeds from the sale of those securities, after deducting the cost
of such permanent insurance and related fees, significantly in excess of the
proceeds it would receive if such municipal securities were sold without
insurance. Payments received from municipal bond insurers may not be tax-exempt
income to shareholders of the Fund.
Depending upon the characteristics of the municipal security held by the
Fund, the annual premiums for the Policies are estimated to range from 0.10% to
0.25% of the value of the municipal securities covered under the Policies, with
an average annul premium rate of approximately 0.175%.
The Fund may purchase Policies from Municipal Bond Investors Assurance
Corp. ("MBIA"), AMBAC Indemnity Corporation ("AMBAC"), Financial Guaranty
Insurance Company ("FGIC"), each as described under "Municipal Bond Insurers",
or any other municipal bond insurer which is rated at least Aa by Moody's or AA
by S&P. Each Policy guarantees the payment of principal and interest on those
municipal securities it insures. The Policies will have the same general
characteristics and features. A municipal security will be eligible for coverage
if it meets certain requirements set forth in a Policy. In the event interest or
principal on an insured municipal security is not paid when due, the insurer
covering the security will be obligated under its Policy to make such payment
not later than 30 days after it has been notified by the Fund that such
non-payment has occurred.
MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on
securities insured by their Policies so long as such securities remain in the
Fund's portfolio, nor may MBIA, AMBAC, or FGIC cancel their Policies for any
reason except failure to pay premiums when due. MBIA, AMBAC, and FGIC will
reserve the right at any time upon 90 days' written notice to the Fund to refuse
to insure any additional municipal securities purchased by the Fund after the
effective date of such notice. The Trustees will reserve the right to terminate
any of the Policies if it determines that the benefits to the Fund of having its
portfolio insured under such Policy are not justified by the expense involved.
Additionally, the Trustees reserve the right to enter into contracts with
insurance carriers other than MBIA, AMBAC, or FGIC, if such carriers are rated
Aaa by Moody's or AAA by S&P.
Under the Policies, municipal bond insurers unconditionally guarantee to
the Fund the timely payment of principal and interest on the insured municipal
securities when and as such payments shall become due but shall not be paid by
the issuer, except that in the event of any acceleration of the due date of the
principal by reason of mandatory or optional redemption (other than acceleration
by reason of mandatory sinking fund payments), default or otherwise, the
payments guaranteed will be made in such amounts and at such times as payments
of principal would have been due had there not been such acceleration. The
municipal bond insurers will be responsible for such payments less any amounts
received by the Fund from any trustee for the municipal bond holders or from any
other source. The Policies do not guarantee payment on an accelerated basis, the
payment of any redemption premium, the value for the Shares of the Fund, or
payments of any tender purchase price upon the tender of the municipal
securities. The Policies also do not insure against nonpayment of principal of
or interest on the securities resulting from the insolvency, negligence or any
other act or omission of the trustee or other paying agent for the securities.
However, with respect to small issue industrial development municipal bonds and
pollution control revenue municipal bonds covered by the Policies, the municipal
bond insurers guarantee the full and complete payments required to be made by or
on behalf of an issuer of such municipal securities if there occurs any change
in the tax-exempt status of interest on such municipal securities, including
principal, interest or premium payments, if any, as and when required to be made
by or on behalf of the issuer pursuant to the terms of such municipal
securities. A when-issued municipal security will be covered under the Policies
upon the settlement date of the original issue of such when-issued municipal
securities. In determining whether to insure municipal securities held by the
Fund, each municipal bond insurer has applied its own standard, when corresponds
generally to the standards it has established for determining the insurability
of new issues of municipal securities. This insurance is intended to reduce
financial risk, but the cost thereof and
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compliance with investment restrictions imposed under the Policies and these
guidelines will reduce the yield to shareholders of the Fund.
If a Policy terminates as to municipal securities sold by the Fund on the
date of sale, in which event municipal bond insurers will be liable only for
those payments of principal and interest that are then due and owing, the
provision for insurance will not enhance the marketability of securities held by
the Fund, whether or not the securities are in default or subject to significant
risk of default, unless the option to obtain permanent insurance is exercised.
On the other hand, since issuer-obtained insurance will remain in effect as long
as the insured municipal securities are outstanding, such insurance may enhance
the marketability of municipal securities covered thereby, but the exact effect,
if any, on marketability cannot be estimated. The Fund generally intends to
retain any securities that are in default or subject to significant risk of
default and to place a value on the insurance, which ordinary will be the
difference between the market value of the defaulted security and the market
value of similar securities of minimum high grade (i.e., rated A by Moody's or
S&P) that are not in default. To the extent that the Fund holds defaulted
securities, it may be limited in its ability to manage its investment and to
purchase other municipal securities. Except as described above with respect to
securities that are in default or subject to significant risk of default, the
Fund will not place any value on the insurance in valuing the municipal
securities that it holds.
Municipal Bond Insurers (High Grade)
Municipal bond insurance may be provided by one or more of the following
insurers or any other municipal bond insurer which is rated at least Aa by
Moody's or AA by S&P.
Municipal Bond Investors Assurance Corp. (High Grade)
Municipal Bond Investors Assurance Corp. is a wholly-owned subsidiary of
MBIA, Inc., a Connecticut insurance company, which is owned by AEtna Life and
Casualty, Credit Local DeFrance CAECL, S.A., The Fund American Companies, and
the public. The investors of MBIA, Inc., are not obligated to pay the
obligations of MBIA. MBIA, domiciled in New York, is regulated by the New York
State Insurance Department and licensed to do business in various states. The
address of MBIA is 113 King Street, Armonk, New York, 10504, and its telephone
number is (914) 273-4345. S&P has rated the claims-paying ability of MBIA AAA.
AMBAC Indemnity Corporation (High Grade)
AMBAC Indemnity Corporation is a Wisconsin-domiciled stock insurance
company, regulated by the Insurance Department of Wisconsin, and licensed to do
business in various states. AMBAC is a wholly-owned subsidiary of AMBAC, Inc., a
financial holding company which is owned by the public. Copies of certain
statutorily required filings of AMBAC can be obtained from AMBAC. The address of
AMBAC's administrative offices is One State Street Plaza, 17th Floor, New York,
New York, 10004, and its telephone number is (212) 668-0340.
S&P has rated the claims-paying ability of AMBAC AAA.
Financial Guaranty Insurance Company (High Grade)
Financial Guaranty Insurance Company is a wholly-owned subsidiary of FGIC
corporation, a Delaware holding company. FGIC Corporation is wholly-owned by
General Electric Capital Corporation. The investors of FGIC Corporation are not
obligated to pay the debts of or the claims against Financial Guaranty.
Financial Guaranty is subject to regulation by the state of New York Insurance
Department and is licensed to do business in various states. The address of
Financial Guaranty is 115 Broadway, New York, New York, 10006, and its telephone
number is (212) 312-3000. S&P has rated the claims-paying ability of Financial
Guaranty AAA.
Municipal Bonds
The two principal classifications of municipal bonds are "general
obligation" bonds and "revenue bonds". General obligation bonds are secured by
the issuer's pledge of its full faith, credit and unlimited taxing power for the
payment of principal and interest. Revenue or special tax bonds are payable only
from the revenues derived from a particular
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facility or class of facilities or projects or, in a few cases, from the
proceeds of a special excise or other tax, but are not supported by the issuer's
power to levy general taxes. There are, of course, variations in the security of
municipal bonds, both within a particular classification and between
classifications, depending on numerous factors. The yields of municipal bonds
depend on, among other things, general money market conditions, general
conditions of the municipal bond market, size of a particular offering, the
maturity of the obligations and rating of the issue.
Since the Fund may invest in industrial development bonds, the Funds may
not be appropriate investment for entities which are "substantial users" of
facilities financed by industrial development bonds or for investors who are
"related persons". Generally, an individual will not be a "related person" under
the Code unless such investors or his immediate family (spouse, brothers,
sisters and lineal descendants) own directly or indirectly in the aggregate more
than 50 percent of the value of the equity of a corporation or partnership which
is a "substantial user" of a facility financed from proceeds of "industrial
development bonds". A "substantial user" of such facilities is defined generally
as a "non-exempt person who regularly uses a part of a facility" financed from
the proceeds of industrial development bonds.
As set forth in the Prospectus, the Code establishes new unified volume
caps for most "private purpose" municipal bonds (such as industrial development
bonds and obligations to finance low-interest mortgages on owner-occupied
housing and student loans). The unified volume cap is not expected to affect
adversely the availability of Municipal Obligations for investment by the Funds;
however, it is possible that proposals will be introduced before Congress to
further restrict or eliminate the federal income tax exemption for interest on
Municipal Obligations. Any such proposals, if enacted, could adversely affect
the availability of municipal bonds for investment by the Funds and the value of
each Fund's portfolio might be affected. In that event, each Fund might
reevaluate its investment policies and restrictions and consider recommending to
its shareholders changes in both.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT RESTRICTIONS
.........Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1........Concentration of Assets in Any One Issuer
.........None of Florida High Income, Short-Intermediate or
Short-Intermediate-CA may 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 each 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.
With respect to 75% of the value of its total assets, High Grade 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.
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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 if 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 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........Ten Percent Limitation on Securities of Any One Issuer
.........Short-Intermediate-CA, Florida High Income*, and Short-Intermediate may
not purchase more than 10% of any class of securities (voting securities in the
case of Florida High Income* and Short-Intermediate) of any one issuer other
than the U.S. government and its agencies or instrumentalities.
3........Investment for Purposes of Control or Management
.........None of Florida High Income, Short-Intermediate or
Short-Intermediate-CA may invest in companies for the purpose of exercising
control or management.
4........Purchase of Securities on Margin
.........None of Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond, Florida
High Income*, High Grade, Short-Intermediate or Short-Intermediate-CA may
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.
5........Unseasoned Issuers
.........None of Florida Municipal Bond*, Georgia Municipal Bond*, North
Carolina Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal
Bond* or High Grade* will invest more than 5% of its total assets in industrial
development bonds (and, in the case of High Grade, other municipal securities)
where the principal and interest are the responsibility of companies (or
guarantors, where applicable) with less than three years of continuous
operations, including the operation of any predecessor.
.........None of Florida High Income*, Short-Intermediate or
Short-Intermediate-CA may invest more than 5% of its total assets in securities
of unseasoned issuers (taxable securities of unseasoned issuers for
Short-Intermediate and Short-Intermediate-CA) that have been in continuous
operation for less than three years, including operating periods of their
predecessors, except that no such limitation shall apply to the extent that (i)
each Fund may invest in obligations issued or guaranteed by the U.S. government
and its agencies or instrumentalities, (ii) Short-Intermediate and
Short-Intermediate-CA may invest in municipal securities, and (iii) Florida High
Income* may invest in municipal bonds.
6........Underwriting
.........None of Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond, High
Grade Florida High Income*, Short-Intermediate or Short-Intermediate-CA may
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.
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7........Interests in Oil, Gas or Other Mineral Exploration or Development
Programs
.........Neither Florida High Income, Short-Intermediate nor
Short-Intermediate-CA may purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.
.........Florida Municipal Bond*, Georgia Municipal Bond*, North Carolina
Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal Bond*, or
High Grade will not purchase interests in or sell oil, gas or other mineral
exploration or development programs or leases, although they may purchase the
securities of issuers which invest in or sponsor such programs.
8........Concentration in Any One Industry
.........Neither Short-Intermediate nor Short-Intermediate-CA may 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 and to municipal
securities, or (ii) with respect to Short-Intermediate-CA to certificates of
deposit and bankers' acceptances issued by domestic branches of U.S. banks.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond, High
Grade and Florida High Income 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 its
assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or instruments secured by theses
money market instruments, such as repurchase agreements.
9........Warrants
.........None of Florida High Income*, Short-Intermediate or
Short-Intermediate-CA may invest more than 5% of its total 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.
10.......Ownership by Trustees/Officers
.........None of Florida Municipal Bond*, Georgia Municipal Bond*, North
Carolina Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal
Bond*, High Grade*, Florida High Income*, Short-Intermediate or
Short-Intermediate-CA may 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.
11.......Short Sales
.........High Grade and Florida High Income* 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
exchangeable 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.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond,
Short-Intermediate and Short- Intermediate-CA will not sell any securities short
or maintain a short position.
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12.......Lending of Funds and Securities
.........None of Florida High Income, Short-Intermediate or
Short-Intermediate-CA may lend its funds to other persons, provided that each
Fund may purchase issues of debt securities, acquire privately negotiated loans
made to municipal borrowers and enter into repurchase agreements.
.........Neither Florida High Income* nor Short-Intermediate may 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.
.........Short-Intermediate-CA 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.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond and Virginia Municipal Bond will
not lend any of their assets, except portfolio securities up to one-third of the
value of their 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.
.........High Grade 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.
13.......Commodities
.........Florida High Income* 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).
.........Neither Short-Intermediate nor Short-Intermediate-CA may purchase, sell
or invest in commodities, commodity contracts or financial futures contracts.
.........High Grade will not purchase or sell commodities or commodity
contracts.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond and Virginia Municipal Bond will
not purchase or sell commodities. However, each Fund may purchase put and call
options on portfolio securities and on financial futures contracts. In addition,
each Fund reserves the right to hedge its portfolio by entering into financial
futures contracts and to sell puts and calls on financial futures contracts.
14.......Real Estate
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond and Virginia Municipal Bond will
not buy or sell real estate, including limited partnership interests, although
each Fund may invest in municipal bonds secured by real estate or interests in
real estate.
.........Florida High Income* 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.
-12-
<PAGE>
.........High Grade 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.
.........Neither Short-Intermediate nor Short-Intermediate-CA may 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.
15.......Borrowing, Senior Securities, Reverse Repurchase Agreements
.........Neither Short-Intermediate nor Short-Intermediate-CA nor Florida High
Income may 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 each 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, provided that
Short-Intermediate and Short-Intermediate-CA will not purchase any securities at
any time when borrowings, including reverse repurchase agreements, are
outstanding. No Fund will enter into reverse repurchase agreements exceeding 5%
of the value of its total assets.
.........Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High
Grade 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. No Fund will purchase any securities while borrowings in excess
of 5% of its total assets are outstanding. No Fund will borrow money or engage
in reverse repurchase agreements for investment leverage purposes. None of
Florida Municipal Bond*, Georgia Municipal Bond*, North Carolina Municipal
Bond*, South Carolina Municipal Bond*, Virginia Municipal Bond* or High Grade
will 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.
16.......Joint Trading
.........Florida High Income 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
.........Neither Short-Intermediate nor Short-Intermediate-CA may 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.......Investing in Securities of Other Investment Companies
.........Florida Municipal Bond*, Georgia Municipal Bond*, North Carolina
Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal Bond* and
High Grade 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.
-13-
<PAGE>
.........Florida High Income*, Short-Intermediate* and Short-Intermediate-CA*
may not purchase the securities of other investment companies, except to the
extent such purchases are not prohibited by applicable law.
19.......Restricted Securities
.........High Grade will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Federal securities laws.
20.......Investment in Municipal Securities
.........Neither Short-Intermediate nor Short-Intermediate-CA may invest more
than 20% of its total assets in securities other than, in the case of
Short-Intermediate, municipal securities, and in the case of
Short-Intermediate-CA, California municipal securities (as described under
"Description of the Funds - Investment Objective and Policies" in the Funds'
Prospectus), unless extraordinary circumstances dictate a more defensive
posture.
.........Florida High Income 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.
NON FUNDAMENTAL OPERATING POLICIES
.........Certain Funds have adopted additional non-fundamental operating
policies. Operating policies may be changed by the Board of Trustees without a
shareholder vote.
1........Securities Issued by Government Units; Industrial Development Bonds
.........Short-Intermediate has determined not to invest more than 25% of its
total assets (i) in securities issued by governmental units located in any one
state, territory or possession of the United States (but this limitation does
not apply to project notes backed by the full faith and credit of the U.S.
Government) or (ii) industrial development bonds not backed by bank letters of
credit. In addition, Short-Intermediate-CA has determined not to invest more
than 25% of its total assets in industrial development bonds not backed by bank
letters of credit.
2........Illiquid Securities.
.........Florida Municipal Bond*, Georgia Municipal Bond*, North Carolina
Municipal Bond*, South Carolina Municipal Bond*, Virginia Municipal Bond*, High
Grade, Short-Intermediate* and Short-Intermediate-CA* may not invest more than
15% (10% in the case of High Grade) of their net assets in illiquid securities
and other securities which are not readily marketable, including repurchase
agreements which have a maturity of longer than seven days, but excluding
certain securities and municipal leases determined by the Trustees to be liquid.
3........Other. In order to comply with certain state blue sky limitations:
-----
...........Each of Short-Intermediate and Short-Intermediate-CA interprets
fundamental investment restriction 7 to prohibit investments in oil, gas and
mineral leases.
...........Each of Short-Intermediate and Short-Intermediate-CA interprets
fundamental investment restriction 14 to prohibit investment in real estate
limited partnerships which are not readily marketable.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
-14-
<PAGE>
The Funds (other than Short-Intermediate, Short-Intermediate-CA and Florida
High Income) have no present intention to borrow money or invest in reverse
repurchase agreements in excess of 5% of the value of their net assets during
the coming fiscal year. The Funds did not invest more than 5% of their net
assets in securities of other investment companies in the last fiscal year, and
have no present intent to do so during the coming year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items".
.........High Grade does not intend to invest more than 25% of the value of its
assets in any issuer in a single state.
MANAGEMENT
The Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
Laurence B. Ashkin (67), 180 East Pearson Street, Chicago, IL-Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.
Foster Bam*(68), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (70), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Robert J. Jeffries (72), 2118 New Bedford Drive, Sun City Center, FL-Trustee.
Corporate consultant since 1967.
Gerald M. McDonnell (55), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (56), 4419 Parkview Drive, Charlotte, NC-Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.
William Walt Pettit*(39), Holcomb and Pettit, P.A., 207 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990; Attorney, Clontz and Clontz from 1980 to 1990.
Russell A. Salton, III, M.D. (47), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (35), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
Except for Messrs. Ashkin, Bam and Jeffries, who are not Trustees of
Evergreen Investment Trust (formerly first Union Funds), the Trustees and
officers listed above hold the same positions with a total of ten registered
investment companies offering a total of thirty-one investment funds within the
Evergreen mutual fund complex.
-15-
<PAGE>
- --------
* Mr. Bam and Mr. Pettit may each be deemed to be an "interested person"
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act").
The officers of the Trusts are all officers and/or employees of Furman
Selz Incorporated. Furman Selz Incorporated is the parent of Evergreen Funds
Distributor, Inc., the distributor of each Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee
who is an "affiliated person" of either First Union National Bank of North
Carolina or Evergreen Asset Management Corp. or their affiliates. See
"Investment Adviser." Currently, none of the Trustees is an "affiliated person"
as defined in the 1940 Act. The Trusts pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses (and $50 for each telephone conference meeting) as follows:
Name of Trust/Fund Annual Retainer Meeting Fee
Evergreen Municipal Trust - 4,000**
Florida High Income 100
Short-Intermediate 100
Short-Intermediate-CA 100
Evergreen Investment Trust - 9,000** 1,500**
Florida Municipal Bond
Georgia Municipal Bond
North Carolina Municipal Bond
South Carolina Municipal Bond
Virginia Municipal Bond
High Grade
- ------------------------
* Allocated among the Evergreen Money Market Fund, which is not a series fund,
and Evergreen Municipal Trust which offers four investment series, the Evergreen
Tax Exempt Money Market Fund, Evergreen Short-Intermediate Municipal Fund,
Evergreen Short-Intermediate Fund-CA, and Evergreen National Tax-Free Fund.
** Evergreen Investment Trust pays an annual retainer to each trustee and a
per-meeting fee that are allocated among its fifteen series. Additionally, each
member of the Audit Committee receives $200 for attendance at each meeting of
the of the Audit Committee and an additional fee is paid to the Chairman of the
Board of $2,000.
Set forth below for each of the Trustees is the aggregate compensation
paid to such Trustees by each Trust for the fiscal year ended December 31, 1994
(fiscal year ended August 31, 1994 for Short-Intermediate and
Short-Intermediate-CA and April 30, 1995 for Florida High Income).
Total
Compensation
Aggregate Compensation From Trust From Trusts
& Fund
Name of Municipal Investment Complex Paid
Person Trust* Trust** to Trustees
Laurence Ashkin $1,489 $29,800
Foster Bam 1,489 29,850
James S. Howell 494 $14,900 26,900
Robert J.
Jeffries 1,489 29,800
Gerald M.
-16-
<PAGE>
McDonnell 694 11,900 26,100
Thomas L.
McVerry 694 11,900 26,150
William Walt
Pettit 694 11,900 26,100
Russell A.
Salton, III, M.D. 694 11,900 26,100
Michael S.
Scofield 694 11,700 25,650
* Florida High Income commenced operations on June 30, 1995 and, therefore,
compensation with regard to such Fund is not included in this table.
** Formerly known as First Union Funds.
The number and percent of outstanding shares of of each Fund owned by
officers and Trustees as a group on June 15, 1995, is as follows:
No. of Shares Owned
By Officers and Ownership by Officers and
Trustees Trustees as a % of Class
Name of Fund as a Group
Florida Municipal Bond -0- -0-
Georgia Municipal Bond -0- -0-
North Carolina Municipal Bond -0- -0-
South Carolina Municipal Bond -0- -0-
Virginia Municipal Bond -0- -0-
Florida High Income -0- -0-
High Grade 457,268 - Class Y 17.40%
Short-Intermediate 98,659 - Class Y 2.40%
Short-Intermediate-CA -0- -0-
Set forth below is information with respect to each person, who, to
each Fund's knowledge, owned beneficially or of record more than 5% of a class
of each Fund's total outstanding shares and their aggregate ownership of the
Fund's total outstanding shares as of June 15, 1995.
Name of No. of % of
Name and Address Fund/Class Shares Class/Fund
- ---------------- ---------- ------ ----------
First Union National Bank North Carolina
Trust Accounts Municipal Bond/Y 80,095 86.09%/13.64%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank North Carolina
Trust Accounts Municipal Bond/Y 12,932 13.90%/2.22%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina
7RK0124218 Municipal Bond/A 16,326 29.21%/3.80%
Thomas B. Carr and
Louise R. Carr
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
-17-
<PAGE>
Fubs & Co. Febo South Carolina
Charles Dean Turner Municipal Bond/A 5,559 9.95%/1.32%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina
Mildred R. Robards Municipal Bond/A 5,484 9.76%/1.27%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina
Warren A. Ransom, Jr. Municipal Bond/A 5,057 9.05%/1.18%
Laurie P. Ransom
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina
Virginia S. Herring Municipal Bond/A 4,064 7.27%/.95%
Oren L. Herring, Jr. JTWROS
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina
Joan B. Sawyer Municipal Bond/A 3,917 7.01%/.91%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina
First Union National Bank- Municipal Bond/A 3,139 5.62%/.73%
SC F/B/O
David Edmiston Loan Acct
Attn: Loan Officer
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo South Carolina
Ruby B. Motsinger Municipal Bond/B 25,356 7.34%/6.13%
Joseph Glenn Motsinger
Melvin L. Motsinger
Hilda M. Thompson
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank South Carolina
Trust Accounts Municipal Bond/B 27,447 99.96%/6.38%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Duff M. Green Virginia
638 Kings Highway Municipal Bond/A 21,170 10.14%/2.71%
Fredrickburg, VA 22405-3156
Fubs & Co. Febo Virginia
Judith Z. Watson Municipal Bond/A 12,196 5.84%/1.56%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Virginia
Howard S. Barger Municipal Bond/A 10,968 5.26%/1.41%
Dorothy M. Barger
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Virginia
Earl Wilson Watts, Jr., M.D. Municipal Bond/A 10,516 5.04%/1.35%
and Barbara A. Watts
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
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<PAGE>
Fubs & Co. Febo Virginia
Harry S. Williams Municipal Bond/B 27,125 5.32%/3.48%
Patsy Williams
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Virginia
Trust Accounts Municipal Bond/Y 33,900 55.30%/4.35%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Virginia
Trust Accounts Municipal Bond/Y 27,395 44.69%/3.51%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Florida
Lisa L. Speer Trust Municipal Bond/A 58,750 6.75%/1.50%
Richard W. Baker Trustee
UAD 12/21/90 C/O First Union
National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Florida
Trust Accounts Municipal Bond/Y 279,801 84.42%/7.17%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Florida
Trust Accounts Municipal Bond/Y 51,623 15.58%/1.32%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Georgia
Samuel A. Barber Municipal Bond/A 14,516 7.00%/1.40%
Velma H. Barber
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Georgia
Mrs. Ralph Marlet Municipal Bond/A 12,793 6.13%/1.23%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Georgia
Trust Accounts Municipal Bond/Y 31,394 75.12%/3.02%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank Georgia
Trust Accounts Municipal Bond/Y 10,388 24.86%/1.00%
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo High Grade/A 24,437 7.34%/1.39%
John A. Ptacek Trust
John A. Ptacek TTEE
U/A/D 09/10/91
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo High Grade/A 245,558 73.76%/3.90%
Kenneth G. May
Phyllis E. May JT TEN
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
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<PAGE>
Fubs & Co. Febo High Grade/B 22,559 9.52%/1.36%
John Rullan and
Rose Rullan
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo High Grade/B 12,831 5.41%/1.20%
Alvin W. Morland and
Gretchen B. Morland
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo High Grade/B 19,704 8.31%/1.31%
Alma Harrison
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo High Grade/B 24,605 10.38%/1.39%
James C. Smith
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank High Grade/Y 423,880 90.14%/6.72%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
First Union National Bank High Grade/Y 48,358 9.86%/.74%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001
Foster & Foster High Grade/Y 424,877 19.64%/16.74%
P.O. Box 1669
Greenwich, CT 06836-1669
Alden R. Carlson High Grade/Y 120,950 5.59%/1.92%
Marilyn M. Carlson JT TEN
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Short-Intermediate/A 102,468 17.92%/11.95%
Manuel Garcia and
Adeline Garcia
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Short-Intermediate/A 49,212 8.61%/.94%
International Gem Society Inc.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. Febo Short-Intermediate/A 250,305 43.77%/4.77%
First Union National Bank-
FL F/B/O
International Gem Society Inc
Att: Susan Weiner
"Loan Account"
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Fubs & Co. FBO Short-Intermediate/B 35,470 6.31%/.68%
Mark E. Smith
Melissa A. Smith JT TEN
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<PAGE>
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001
Stephen A. Lieber Short-Intermediate-CA/Y 1 100%/0%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
Stephen A. Lieber Short-Intermediate-CA/Y 1 100%/0%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577
INVESTMENT ADVISER
(See also "Management of the Fund" in each Fund's Prospectus)
The investment adviser of Short-Intermediate and Short-Intermediate-CA
is Evergreen Asset Management Corp., a New York corporation, with offices at
2500 Westchester Avenue, Purchase, New York or ("Evergreen Asset" or the
"Adviser."). Evergreen Asset is owned by First Union National Bank of North
Carolina ("FUNB" or the "Adviser") which, in turn, is a subsidiary of First
Union Corporation ("First Union"), a bank holding company headquartered in
Charlotte, North Carolina. The investment adviser of Florida Municipal Bond,
Georgia Municipal Bond, North Carolina Municipal Bond, South Carolina Municipal
Bond, Virginia Municipal Bond, Florida High Income and High Grade is FUNB which
provides investment advisory services through its Capital Management Group. The
Directors of Evergreen Asset are Richard K. Wagoner and Barbara I. Colvin. The
executive officers of Evergreen Asset are Stephen A. Lieber, Chairman and
Co-Chief Executive Officer, Nola Maddox Falcone, President and Co-Chief
Executive Officer, Theodore J. Israel, Jr., Executive Vice President, Joseph J.
McBrien, Senior Vice President and General Counsel, and George R. Gaspari,
Senior Vice President and Chief Financial Officer.
On June 30, 1994, Evergreen Asset and Lieber and Company ("Lieber")
were acquired by First Union through certain of its subsidiaries. Evergreen
Asset was acquired by FUNB, a wholly-owned subsidiary (except for directors'
qualifying shares) of First Union, by merger into EAMC Corporation ("EAMC") a
wholly-owned subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset
Management Corp." and succeeded to the business of Evergreen Asset.
Contemporaneously with the succession of EAMC to the business of Evergreen Asset
and its assumption of the name "Evergreen Asset Management Corp.", Short-
Intermediate and Short-Intermediate-CA entered into a new investment advisory
agreement with EAMC and into a distribution agreement with Evergreen Funds
Distributor, Inc. (the "Distributor"), a subsidiary of Furman Selz Incorporated.
At that time, EAMC also entered into a new sub-advisory agreement with Lieber
pursuant to which Lieber provides certain services to Evergreen Asset in
connection with its duties as investment adviser.
The partnership interests in Lieber, a New York general partnership,
were acquired by Lieber I Corp. and Lieber II Corp., which are both wholly-owned
subsidiaries of FUNB. The business of Lieber is being continued. The new
advisory and sub-advisory agreements were approved by the shareholders of
Short-Intermediate and Short-Intermediate-CA at their meeting held on June 23,
1994, and became effective on June 30, 1994. Florida High Income, which
commenced operations on June 30, 1995, entered into an advisory agreement with
FUNB on June 30, 1995.
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<PAGE>
Under its Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registration under the Securities Act of 1933,
as amended, and the 1940 Act, printing prospectuses (for existing shareholders)
as they are updated, state qualifications, share certificates, mailings,
brokerage, custodian and stock transfer charges, printing, legal and auditing
expenses, expenses of shareholder meetings and reports to shareholders.
Notwithstanding the foregoing, each Adviser will pay the costs of printing and
distributing prospectuses used for prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
FLORIDA MUNICIPAL
BOND Year Ended Year Ended
12/31/94 12/31/93
Advisory Fee $171,732 $31,835
------- ------
Waiver ($171,732) ($31,835)
Net Advisory Fee 0 0
========== ==========
GEORGIA MUNICIPAL
BOND Year Ended Year Ended
12/31/94 12/31/93
Advisory Fee $36,674 $5,416
------- ------
Waiver ($36,674) ($5,416)
Net Advisory Fee 0 0
======== =========
NORTH CAROLINA
MUNICIPAL BOND Year Ended Year Ended
12/31/94 12/31/93
Advisory Fee $287,040 $170,496
------- -------
Waiver ($193,158) ($170,496)
Net Advisory Fee $93,882 0
========== ==========
SOUTH CAROLINA
MUNICIPAL BOND Year Ended
12/31/94
Advisory Fee $8,905
--------
Waiver ($8,905)
Net Advisory Fee $ 0
========
VIRGINIA
MUNICIPAL BOND Year Ended Year Ended
12/31/94 12/31/93
Advisory Fee $24,942 $4,283
------- -----
Waiver ($24,942) ($4,283)
Net Advisory Fee 0 0
======== ========
HIGH GRADE Year Ended Year Ended Year Ended
12/31/94 12/31/93 12/31/92
Advisory Fee $599,854 $643,946 $356,258
------- ------- -------
Waiver ($16,091) ($280,300) ($269,964)
Net Advisory Fee $583,763 $363,646 $86,294
========= ========== =========
SHORT-INTERMEDIATE Year Ended Year Ended Year Ended
8/31/94 8/31/93 8/31/92
Advisory Fee $301,565 $313,180 $135,976
------- ------- -------
Waiver ($150,194) ($256,324) ($124,013)
Net Advisory Fee $151,371 $56,856 $11,963
======== ======== ========
Expense
Reimbursement $ 0 $ 0 $63,773
-------- ------- ------
SHORT-INTERMEDIATE-
CA Year Ended Year Ended Year Ended
8/31/94 8/31/93 8/31/92
Advisory Fee $164,447 $158,025 $213,131
------- ------- -------
Waiver ($129,952) ($150,551) ($170,867)
Net Advisory Fee $34,495 $7,474 $42,264
======= ======= ========
Expense
Reimbursement 0 $44,957 0
------- ------ -------
Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High
Grade commenced operations on July 2, 1993, July 2, 1993, January 11, 1993,
January 4, 1994, July 2, 1993 and February 21, 1992, respectively, and,
therefore, the first year's figures set forth in the table above reflect for
Florida Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond
and Virginia Municipal Bond investment advisory fees paid for the period from
commencement of operations through December 31, 1993, with respect to South
Carolina Municipal Bond, December 31, 1994 and, with respect to High Grade,
December 31, 1992.
Expense Limitations
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Each Adviser's fee will be reduced by, or the Adviser will reimburse
the Funds (except Short-Intermediate and Short-Intermediate-CA, which have
specific percentage limitations described below) for any amount necessary to
prevent such expenses (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, but inclusive of the Adviser's fee) from exceeding the
most restrictive of the expense limitations imposed by state securities
commissions of the states in which the Funds' shares are then registered or
qualified for sale. Reimbursement, when necessary, will be made monthly in the
same manner in which the advisory fee is paid. Currently the most restrictive
state expense limitation is 2.5% of the first $30,000,000 of the Fund's average
daily net assets, 2% of the next $70,000,000 of such assets and 1.5% of such
assets in excess of $100,000,000.
With respect to Short-Intermediate and Short-Intermediate CA, Evergreen
Asset has agreed to reimburse each Fund to the extent that the Fund's aggregate
operating expenses (including the Adviser's fee but excluding interest, taxes,
brokerage commissions and extraordinary expenses, and, for Class A and Class C
shares Rule 12b-1 distribution fees and shareholder servicing fees payable)
exceed 1% of its average daily net assets for any fiscal year.
The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignment. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder. The Investment Advisory Agreements with respect to Florida High
Income, Short-Intermediate and Short-Intermediate-CA were approved by each
Fund's shareholders on June 23, 1994, became effective on June 30, 1994, (June
30, 1995 with respect to Florida High Income) and will continue in effect until
June 30, 1996, (June 30, 1997 with respect to Florida High Income) and
thereafter from year to year provided that their continuance is approved
annually by a vote of a majority of the Trustees of each Trust including a
majority of those Trustees who are not parties thereto or "interested persons"
(as defined in the 1940 Act) of any such party, cast in person at a meeting duly
called for the purpose of voting on such approval or a majority of the
outstanding voting shares of each Fund. With respect to Florida Municipal Bond,
Georgia Municipal Bond, North Carolina Municipal Bond, South Carolina Municipal
Bond, Virginia Municipal Bond and High Grade, the Investment Advisory Agreement
dated February 28, 1985 and amended from time to time thereafter was last
approved by the Trustees of Evergreen Investment Trust (formerly, First Union
Funds) on April 20, 1995 and it will continue from year to year with respect to
each Fund provided that such continuance is approved annually by a vote of a
majority of the Trustees of Evergreen Investment Trust including a majority of
those Trustees who are not parties thereto or "interested persons" of any such
party cast in person at a meeting duly called for the purpose of voting on such
approval or by a vote of a majority of the outstanding voting securities of each
Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.
Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions
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occur, the Adviser attempts to allocate the securities, both as to price and
quantity, in accordance with a method deemed equitable to each Fund and
consistent with their different investment objectives. In some cases,
simultaneous purchases or sales could have a beneficial effect, in that the
ability of one Fund to participate in volume transactions may produce better
executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sales transactions to be effected between each Fund and the
other registered investment companies for which either Evergreen Asset or FUNB
acts as investment adviser or between the Fund and any advisory clients of
Evergreen Asset, FUNB or Lieber & Company. Each Fund may from time to time
engage in such transactions but only in accordance with these procedures and if
they are equitable to each participant and consistent with each participant's
investment objectives.
Prior to July 1, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the fiscal year ended December 31, 1994, and for the period
from July 2, 1993 (commencement of operations) to December 31, 1993, Florida
Municipal Bond incurred $75,397 and $24,932, respectively, in administrative
service costs, all of which were voluntarily waived. For the fiscal year ended
December 31, 1994, and for the period from July 2, 1993 (commencement of
operations) to December 31, 1993, Georgia Municipal Bond incurred $75,479 and
$24,931, respectively, in administrative service costs, all of which were
voluntarily waived. For the fiscal year ended December 31, 1994, and for the
period from January 11, 1993 (commencement of operations) to December 31, 1993,
North Carolina Municipal Bond incurred $75,476 and $48,493, respectively, in
administrative service costs, of which $28,121 and $48,493 were voluntarily
waived. For the period January 3, 1994 (commencement of operations) to December
31, 1994, South Carolina Municipal Bond incurred $104,356 in administrative
service costs, all of which was voluntarily waived. For the fiscal year ended
December 31, 1994, and for the period from July 2, 1993 (commencement of
operations) to December 31, 1993, Virginia Municipal Bond incurred $75,479 and
$24,931, respectively, in administrative service costs, all of which were
voluntarily waived. For the fiscal years ended December 31, 1994, 1993, and for
the period from February 21, 1992 (commencement of operations) to December 31,
1992, High Grade incurred $101,004, $112,663, and $65,451 in administrative
service costs, of which $0, $0 and $25,395 were voluntarily waived,
respectively.
Commencing July 1, 1995, Evergreen Asset will provide administrative
services to each of the portfolios of Evergreen Investment Trust for a fee based
on the average daily net assets of each fund administered by Evergreen Asset for
which Evergreen Asset or FUNB also serves as investment adviser, calculated
daily and payable monthly at the following annual rates: .050% on the first $7
billion; .035% on the next $3 billion; .030% on the next $5 billion; .020% on
the next $10 billion; .015% on the next $5 billion; and .010% on assets in
excess of $30 billion. Furman Selz Incorporated, the parent of the Distributor,
serves as sub-administrator to Florida Municipal Bond, Georgia Municipal Bond,
North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal
Bond and High Grade and is entitled to receive a fee from each Fund calculated
on the average daily net assets of each Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which FUNB or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .0100% of the first $7 billion; .0075% on the next $3
billion; .0050% on the next $15 billion; and .0040% on assets in excess of $25
billion. The total assets of mutual funds administered by Evergreen Asset for
which Evergreen Asset or FUNB serves as investment adviser as of March 31, 1995
were approximately $7.95 billion.
DISTRIBUTION PLANS
Reference is made to "Management of the Fund - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A and B shares and are charged as class expenses, as
accrued. The distribution fees attributable to the Class B shares are designed
to permit an investor to purchase such shares through broker-dealers without the
assessment of a front-end sales charge, while at the same
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<PAGE>
time permitting the Distributor to compensate broker-dealers in connection with
the sale of such shares. In this regard the purpose and function of the combined
contingent deferred sales charge and distribution services fee on the Class B
shares are the same as those of the front-end sales charge and distribution fee
with respect to the Class A shares in that in each case the sales charge and/or
distribution fee provide for the financing of the distribution of the Fund's
shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A and Class B shares (each a "Plan" and
collectively, the "Plans"), the Treasurer of each Fund reports the amounts
expended under the Plan and the purposes for which such expenditures were made
to the Trustees of each Trust for their review on a quarterly basis. Also, each
Plan provides that the selection and nomination of Trustees who are not
"interested persons" of each Trust (as defined in the 1940 Act) are committed to
the discretion of such disinterested Trustees then in office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Securities and Exchange Commission
make payments for distribution services to the Distributor; the latter may in
turn pay part or all of such compensation to brokers or other persons for their
distribution assistance.
Short-Intermediate and Short-Intermediate-CA commenced offering Class A
or B shares on January 3, 1995 and Florida High Income commenced offering Class
A and Class B shares on June 30, 1995. Each Plan with respect to such Funds
became effective on December 30, 1994 (June 30, 1995 with respect to Florida
High Income) and was initially approved by the sole shareholder of each Class of
shares of each Fund with respect to which a Plan was adopted on that date and by
the unanimous vote of the Trustees of each Trust, including the disinterested
Trustees voting separately, at a meeting called for that purpose and held on
December 13, 1994 (April 20, 1995 with respect to Florida High Income). The
Distribution Agreements between each Fund and the Distributor, pursuant to which
distribution fees are paid under the Plans by each Fund with respect to its
Class A, and Class B shares were also approved at the December 13, 1994 (April
20, 1995 with respect to Florida High Income) meeting by the unanimous vote of
the Trustees, including the disinterested Trustees voting separately. Each Plan
and Distribution Agreement will continue in effect for successive twelve-month
periods provided, however, that such continuance is specifically approved at
least annually by the Trustees of each Trust or by vote of the holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
that Class, and, in either case, by a majority of the Trustees of the Trust who
are not parties to the Agreement or interested persons, as defined in the 1940
Act, of any such party (other than as Trustees of the Trust) and who have no
direct or indirect financial interest in the operation of the Plan or any
agreement related thereto.
Prior to July 7, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for Florida Municipal Bond,
Georgia Municipal Bond, North Carolina Municipal Bond, South Carolina Municipal
Bond, Virginia Municipal Bond and High Grade as well as other portfolios of
Evergreen Investment Trust. The Distribution Agreements between each Fund and
the Distributor pursuant to which distribution fees are paid under the Plans by
each Fund with respect to its Class A and Class B shares were approved on April
20, 1995 by the unanimous vote of the Trustees including the disinterested
Trustees voting separately.
The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A and Class B shares. The
Plans are designed to (i) stimulate brokers to provide distribution and
administrative support services to each Fund and holders of Class A and Class B
shares and (ii) stimulate administrators to render administrative support
services to the Fund and holders of Class A and Class B shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to providing office space, equipment, telephone facilities, and various
personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A and Class B shares; assisting clients in changing dividend
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<PAGE>
options, account designations, and addresses; and providing such other services
as the Fund reasonably requests for its Class A and Class B shares.
In addition to the Plans, Florida Municipal Bond, Georgia Municipal
Bond, North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia
Municipal Bond and High Grade have each adopted a Shareholder Services Plan
whereby shareholder servicing agents may receive fees from the Fund for
providing services which include, but are not limited to, distributing
prospectuses and other information, providing shareholder assistance, and
communicating or facilitating purchases and redemptions of Class B shares of the
Fund.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. With respect to Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade, amendments to
the Shareholder Services Plan require a majority vote of the disinterested
Trustees but do not require a shareholders vote. Any Plan, Shareholder Services
Plan or Distribution Agreement may be terminated (a) by a Fund without penalty
at any time by a majority vote of the holders of the outstanding voting
securities of the Fund, voting separately by Class or by a majority vote of the
Trustees who are not "interested persons" as defined in the 1940 Act, or (b) by
the Distributor. To terminate any Distribution Agreement, any party must give
the other parties 60 days' written notice; to terminate a Plan only, the Fund
need give no notice to the Distributor. Any Distribution Agreement will
terminate automatically in the event of its assignment.
For the fiscal year ended December 31, 1994, Florida Municipal Bond
incurred $23,034 in distribution service fees on behalf of Class A shares. For
the fiscal year ended December 31, 1994, Georgia Municipal Bond incurred $3,045
in distribution service fees on behalf of Class A shares. For the fiscal year
ended December 31, 1994, North Carolina Municipal Bond incurred $24,761 in
distribution service fees on behalf of Class A shares. For the period from
January 3, 1994 (commencement of operations) to December 31, 1994 South Carolina
Municipal Bond incurred $393 in distribution services fees on behalf of Class A
shares. For the fiscal year ended December 31, 1994, Virginia Municipal Bond
incurred $4,028 in distribution services fees on behalf of Class A shares. For
the fiscal year ended December 31, 1994, High Grade incurred $197,562 in
distribution services fees on behalf of Class A shares.
For the fiscal year ended December 31, 1994, Florida Municipal Bond
incurred $178,862 in distribution service fees on behalf of Class B shares. For
the fiscal year ended December 31, 1994, Georgia Municipal Bond incurred $44,866
in distribution services fees on behalf of Class B shares. For the fiscal year
ended December 31, 1994, North Carolina Municipal Bond incurred $353,880 in
distribution services fees on behalf of Class B shares. For the period from
January 3, 1994 (commencement of operations) to December 31, 1994, South
Carolina Municipal Bond incurred $11,793 in distribution services fees for Class
B shares. For the fiscal year ended December 31, 1994, Virginia Municipal Bond
incurred $24,447 in distribution services fees on behalf of Class B shares. For
the fiscal year ended December 31, 1994, High Grade incurred $287,858 in
distribution services fees on behalf of Class B shares.
Shareholder Services Plans
For the period ended December 31, 1994, Florida Municipal Bond incurred
shareholder services fees of $19,489 on behalf of Class B shares; Georgia
Municipal Bond incurred
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shareholder services fees of $5,407 on behalf of Class B shares; North Carolina
Municipal Bond incurred shareholder services fees of $35,677 on behalf of Class
B shares; South Carolina Municipal Bond incurred shareholder service fees of
$1,833 on behalf of Class B shares; Virginia Municipal Bond incurred shareholder
service fees of $2,897 on behalf of Class B shares; and High Grade incurred
shareholder service fees of $26,443 on behalf of Class B shares.
ALLOCATION OF BROKERAGE
Decisions regarding each Fund's portfolio are made by its Adviser,
subject to the supervision and control of the Trustees. Orders for the purchase
and sale of securities and other investments are placed by employees of the
Adviser, all of whom, in the case of Evergreen Asset, are associated with
Lieber. In general, the same individuals perform the same functions for the
other funds managed by the Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
It is anticipated that most of the Funds purchase and sale transactions
will be with the issuer or an underwriter or with major dealers in such
securities acting as principals. Such transactions are normally on a net basis
and generally do not involve payment of brokerage commissions. However, the cost
of securities purchased from an underwriter usually includes a commission paid
by the issuer to the underwriter. Purchases or sales from dealers will normally
reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. A Fund will also consider such factors as the price of the securities and
the size and difficulty of execution of the order. If these objectives may be
met with more than one firm, the Fund will also consider the availability of
statistical and investment data and economic facts and opinions helpful to the
Fund. To the extent that receipt of these services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
Except with respect to North Carolina Municipal Bond, the transactions
in which the Funds engage do not involve the payment of brokerage commissions
and are executed with dealers other than Lieber. For the fiscal year ended
December 31, 1994, and for the period from January 11, 1993 (commencement of
operations) to December 31, 1993, North Carolina Municipal Bond paid $1,250 and
$0, respectively, in commissions on brokerage transactions.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; (b) derive less than 30% of its gross
income from the sale or other disposition of securities, options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
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regulated investment companies). By so qualifying, a Fund is not subject to
Federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.
Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the
forthcoming distribution. Those purchasing just prior to a distribution will
then receive what is in effect a return of capital upon the distribution which
will nevertheless be taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers to a
Fund and to certify as to its correctness and certain other shareholders may be
subject to a 31% Federal income tax backup withholding requirement on dividends,
distributions of capital gains and redemption proceeds paid to them by the Fund.
If the withholding provisions are applicable, any such dividends or capital gain
distributions to these shareholders, whether taken in cash or reinvested in
additional shares, and any redemption proceeds will be reduced by the amounts
required to be withheld. Investors may wish to consult their own tax advisers
about the applicability of the backup withholding provisions.
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The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to Federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations
To the extent that the Fund distributes exempt interest dividends to a
shareholder, interest on indebtedness incurred or continued by such shareholder
to purchase or carry shares of the Fund is not deductible. Furthermore, entities
or persons who are "substantial users" (or related persons) of facilities
financed by "private activity" bonds (some of which were formerly referred to as
"industrial development" bonds) should consult their tax advisers before
purchasing shares of the Fund. "Substantial user" is defined generally as
including a "non-exempt person" who regularly uses in its trade or business a
part of a facility financed from the proceeds of industrial development bonds.
The percentage of the total dividends paid by a Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
NET ASSET VALUE
The following information supplements that set forth in each Prospectus
under the subheading "How to Buy Shares - How the Funds Value Their Shares" in
the Section entitled "Purchase and Redemption of Shares".
The public offering price of shares of a Fund is its net asset value,
plus, in the case of Class A shares, a sales charge which will vary depending on
the purchase alternative chosen by the investor, as more fully described in the
Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales Charge
Alternative. " On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in which a Fund
invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any weekday,
exclusive of national holidays on which the Exchange is closed and Good Friday.
For each Fund, securities for which the primary market is on a domestic or
foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked prices and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
-29-
<PAGE>
The respective per share net asset values of the Class A, Class B and
Class Y shares are expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the Class B shares may
be lower than the per share net asset value of the Class A shares (and, in turn,
that of Class A shares may be lower than Class Y shares) as a result of the
greater daily expense accruals, relative to Class A and Class Y shares, of Class
B shares relating to distribution services fees (and, with respect to Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade, shareholder
service fee) and, to the extent applicable, transfer agency fees and the fact
that Class Y shares bear no additional distribution, shareholder service or
transfer agency related fees. While it is expected that, in the event each Class
of shares of a Fund realizes net investment income or does not realize a net
operating loss for a period, the per share net asset values of the three classes
will tend to converge immediately after the payment of dividends, which
dividends will differ by approximately the amount of the expense accrual
differential among the Classes, there is no assurance that this will be the
case. In the event one or more Classes of a Fund experiences a net operating
loss for any fiscal period, the net asset value per share of such Class or
Classes will remain lower than that of Classes that incurred lower expenses for
the period.
PURCHASE OF SHARES
The following information supplements that set forth in each Prospectus
under the heading "Purchase and Redemption of Shares - How To Buy Shares."
General
Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value plus an initial sales charge at the time of
purchase (the "front-end sales charge alternative"), or with a contingent
deferred sales charge (the deferred sales charge alternative"), as described
below. Class Y shares which, as described below, are not offered to the general
public, are offered without any front-end or contingent sales charges. Shares of
each Fund are offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Distributor ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with the
Distributor ("selected agents"), or (iii) the Distributor. The minimum for
initial investments is $1,000; there is no minimum for subsequent investments.
The subscriber may use the Share Purchase Application available from the
Distributor for his or her initial investment. Sales personnel of selected
dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A or Class B shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
-30-
<PAGE>
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing Class Y shares of a Fund are not issued except upon written request
to the Fund by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen certificates. No
certificates are issued for fractional shares, although such shares remain in
the shareholder's account on the records of a Fund, or for Class A or B shares
of any Fund.
Alternative Purchase Arrangements
Each Fund issues three classes of shares: (i) Class A shares, which are
sold to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; and (iii) Class Y shares, which are offered only to (a) persons who
at or prior to December 30, 1994 owned shares in a mutual fund advised by
Evergreen Asset, (b) certain investment advisory clients of the Advisers and
their affiliates, and (c) institutional investors. The three classes of shares
each represent an interest in the same portfolio of investments of the Fund,
have the same rights and are identical in all respects, except that (I) only
Class A and Class B shares are subject to a Rule 12b-1 distribution fee, (II)
Class B shares of Florida Municipal Bond, Georgia Municipal Bond, North Carolina
Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High
Grade and subject to a shareholder service fee, (III) Class A shares bear the
expense of the front-end sales charge and Class B shares bear the expense of the
deferred sales charge, (IV) Class B shares bear the expense of a higher Rule
12b-1 distribution services fee and shareholder service fee than Class A shares
and higher transfer agency costs, (V) with the exception of Class Y shares, each
Class of each Fund has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services (and, to the extent
applicable, shareholder service) fee is paid which relates to a specific Class
and other matters for which separate Class voting is appropriate under
applicable law, provided that, if the Fund submits to a simultaneous vote of
Class A and Class B shareholders an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect to the Class A
shares, the Class A shareholders and the Class B shareholders will vote
separately by Class, and (VI) only the Class B shares are subject to a
conversion feature. Each Class has different exchange privileges and certain
different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, shareholder service) fee and contingent deferred sales
charges on Class B shares prior to conversion would be less than the front-end
sales charge and accumulated distribution services fee on Class A shares
purchased at the same time, and to what extent such differential would be offset
by the higher return of Class A shares. Class B shares will normally not be
suitable for the investor who qualifies to purchase Class A shares at the lowest
applicable sales charge. For this reason, the Distributor will reject any order
(except orders for Class B shares from certain retirement plans) for more than
$2,500,000 for Class B shares.
Class A shares are subject to a lower distribution services fee and no
shareholder service fee and, accordingly, pay correspondingly higher dividends
per share than Class B shares. However, because front-end sales charges are
deducted at the time of purchase, investors purchasing Class A shares would not
have all their funds invested initially and,
-31-
<PAGE>
therefore, would initially own fewer shares. Investors not qualifying for
reduced front-end sales charges who expect to maintain their investment for an
extended period of time might consider purchasing Class A shares because the
accumulated continuing distribution (and, to the extent applicable, shareholder
service) charges on Class B shares may exceed the front-end sales charge on
Class A shares during the life of the investment. Again, however, such investors
must weigh this consideration against the fact that, because of such front-end
sales charges, not all their funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares in order to have all their funds
invested initially, although remaining subject to higher continuing distribution
services (and, to the extent applicable, shareholder service) fees and being
subject to a contingent deferred sales charge for a seven-year period. For
example, based on current fees and expenses, an investor subject to the 4.75%
front-end sales charge would have to hold his or her investment approximately
seven years for the Class B distribution services (and, to the extent
applicable, shareholders service) fees, to exceed the front-end sales charge
plus the accumulated distribution services fee of Class A shares. In this
example, an investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares. This example does not take into
account the time value of money, which further reduces the impact of the Class B
distribution services (and, to the extent applicable, shareholder service) fees
on the investment, fluctuations in net asset value or the effect of different
performance assumptions.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B and Class Y
shares. On an ongoing basis, the Trustees, pursuant to their fiduciary duties
under the 1940 Act and state laws, will seek to ensure that no such conflict
arises.
Front-end Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing the
front-end sales charge alternative is the net asset value plus a sales charge as
set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
<TABLE>
<CAPTION>
Net Per Share Offering
Asset Sales Price
Value Charge Date Per Share
<S> <C> <C> <C> <C>
Florida
Municipal
Bond $ 8.92 $.45 12/31/94 $ 9.37
Georgia
Municipal
Bond $ 8.74 $.44 12/31/94 $ 9.18
North Carolina
Municipal Bond $ 9.16 $.46 12/31/94 $ 9.62
South Carolina
Municipal Bond $ 8.62 $.43 12/31/94 $ 9.05
Virginia
Municipal
Bond $ 8.85 $.44 12/31/94 $ 9.29
-32-
<PAGE>
Florida
High Income $10.00 $ 6/23/95 $10.50
High Grade $ 9.79 $.49 12/31/94 $10.28
Short-
Intermediate $10.21 $.51 8/31/94 $10.72
Short-
Intermediate-
CA $10.09 $.50 8/31/94 $10.59
</TABLE>
Prior to January 3, 1995, shares of the Funds other than Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade were offered
exclusively on a no-load basis and, accordingly, no underwriting commissions
were paid in respect of sales of shares of the Funds or retained by the
Distributor. In addition, since Class B shares were not offered prior to January
3, 1995, contingent deferred sales charges have been paid to the Distributor
with respect to Class B shares only since January 3, 1995.
With respect to Florida Municipal Bond, Georgia Municipal Bond, North
Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond
and High Grade for the periods indicated, the following commissions were paid to
and amounts were retained by Federated Securities Corp., which, prior to July 7,
1995, was the principal underwriter of portfolios of Evergreen Investment Trust:
Year Ended Period from July 2, 1993
12/31/94 to December 31, 1993
Florida Municipal
Bond Fund
Commissions Received 2,000 132,000
Commissions Retained --- 20,000
Georgia Municipal Bond
Commissions Received 103,000 15,000
Commissions Retained 6,000 2,000
Virginia Municipal Bond
Commissions Received 62,000 49,000
Commissions Retained 6,000 7,000
* * * * * * * * * * * *
North Carolina Municipal
Bond
Period from
Year Ended January 11, 1993
12/31/94 to December 31, 1993
Commissions Received 210,000 35,000
Commissions Retained 3,000 5,000
* * * * * * * * * * * *
South Carolina Municipal
Bond
Period from January 3, 1994
to December 31, 1994
Commissions Received 34,000
Commissions Retained 5,000
-33-
<PAGE>
* * * * * * * * * * * *
High Grade
Period from
Year Ended Year Ended February 21, 1992
12/31/94 12/31/93 to December 31, 1992
---------- ---------- --------------------
Commissions Received 82,000 549,000 ---
Commissions Retained 5,000 82,000
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
mutual funds other than money market funds into a single "purchase", if the
resulting "purchase" totals at least $100,000. The term "purchase" refers to:
(i) a single purchase by an individual, or to concurrent purchases, which in the
aggregate are at least equal to the prescribed amounts, by an individual, his or
her spouse and their children under the age of 21 years purchasing shares for
his, her or their own account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company which has not
been in existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen mutual fund. Currently, the
Evergreen mutual funds include:
Evergreen Fund
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Total Return Fund
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Tax Exempt Money Market Fund
Evergreen Money Market Fund
Evergreen Foundation Fund
Evergreen Florida High Income Fund
Evergreen Aggressive Growth Fund
Evergreen Balanced Fund*
Evergreen Utility Fund*
Evergreen Value Fund*
Evergreen U.S. Government Fund*
Evergreen Fixed Income Fund*
Evergreen Managed Bond Fund*
Evergreen Emerging Markets Growth Fund*
Evergreen International Equity Fund*
Evergreen Treasury Money Market Fund*
Evergreen Florida Municipal Bond 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*
* Prior to July 7, 1995, each Fund was named "First Union" instead of
"Evergreen."
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<PAGE>
Prospectuses for the Evergreen mutual funds may be obtained without
charge by contacting the Distributor or the Advisers at the address or telephone
number shown on the front cover of this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the
previous day) of (a) all Class A and Class B shares of the
Fund held by the investor and (b) all such shares of any other
Evergreen mutual fund held by the investor; and
(iii) the net asset value of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned Class A or B shares of an Evergreen
mutual fund worth $200,000 at their then current net asset value and,
subsequently, purchased Class A shares of a Fund worth an additional $100,000,
the sales charge for the $100,000 purchase would be at the 3.00% rate applicable
to a single $300,000 purchase of shares of the Fund, rather than the 3.75% rate.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Statement of Intention. Class A investors may also obtain the reduced
sales charges shown in the Prospectus by means of a written Statement of
Intention, which expresses the investor's intention to invest not less than
$100,000 within a period of 13 months in Class A shares (or Class A and Class B
shares) of the Fund or any other Evergreen mutual fund. Each purchase of shares
under a Statement of Intention will be made at the public offering price or
prices applicable at the time of such purchase to a single transaction of the
dollar amount indicated in the Statement of Intention. At the investor's option,
a Statement of Intention may include purchases of Class A or B shares of the
Fund or any other Evergreen mutual fund made not more than 90 days prior to the
date that the investor signs a Statement of Intention; however, the 13-month
period during which the Statement of Intention is in effect will begin on the
date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen mutual funds under a single Statement
of Intention. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in shares of the Fund or any other
Evergreen mutual fund, to qualify for the 3.75% sales charge on the total amount
being invested (the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial investment
under a Statement of Intention is 5% of such amount. Shares purchased with the
first 5% of such amount will be held in escrow (while remaining registered in
the name of the investor) to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased, and such escrowed shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will be released.
To the extent that an investor purchases more than the dollar amount indicated
on the Statement of Intention and qualifies for a further reduced sales charge,
the sales charge
-35-
<PAGE>
will be adjusted for the entire amount purchased at the end of the 13-month
period. The difference in sales charge will be used to purchase additional
shares of the Fund subject to the rate of sales charge applicable to the actual
amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in Class A shares of the Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting a Fund at the address or telephone number
shown on the cover of this Statement of Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain
qualified and non-qualified benefit and savings plans may make shares of the
Evergreen mutual funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative". The Advisers may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen mutual funds available to
their participants.
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except that no loss will
be recognized to the extent that the proceeds are reinvested in shares of the
Fund. The reinstatement privilege may be used by the shareholder only once,
irrespective of the number of shares redeemed or repurchased, except that the
privilege may be used without limit in connection with transactions whose sole
purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of Additional
Information.
Sales at Net Asset Value. In addition to the categories of investors
set forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trust; present or former trustees of other investment companies
managed by the Advisers; present or retired full-time employees of the Adviser;
officers, directors and present or retired full-time employees of the Adviser,
the Distributor, and their affiliates; officers, directors and present and
full-time employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively "relatives") of any such
person; or any trust, individual retirement account or retirement plan account
for the benefit of any such person or relative; or the estate of any such person
or relative, if such shares are purchased for investment purposes (such shares
may not be resold except to the Fund); (iii) certain employee benefit plans for
employees of the Adviser, the Distributor. and their affiliates; (iv) persons
participating in a fee-based program, sponsored and maintained by a registered
broker-dealer and approved by the Distributor, pursuant to which such persons
pay an asset-based fee to such broker-dealer, or its affiliate or agent, for
service in the nature of investment advisory or administrative services. These
provisions are intended to provide additional job-related incentives to persons
who serve the Funds or work for companies associated with the Funds and selected
dealers and agents of the Funds. Since these persons are in a position to have a
basic understanding of the nature of an investment company as well as a general
familiarity with the Fund, sales to these persons, as compared to sales in the
normal channels of distribution, require substantially less sales effort.
Similarly, these provisions extend the privilege of purchasing shares at net
asset value to certain classes of institutional investors who, because of their
investment sophistication, can be expected to require significantly less than
normal sales effort on the part of the Funds and the Distributor.
-36-
<PAGE>
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee (and, with respect to Florida Municipal Bond, Georgia Municipal
Bond, North Carolina Municipal Bond, South Carolina Municipal Bond, Virginia
Municipal Bond and High Grade, the shareholder service fee) enables the Fund to
sell the Class B shares without a sales charge being deducted at the time of
purchase. The higher distribution services fee (and, with respect to Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade, the shareholder
service fee) incurred by Class B shares will cause such shares to have a higher
expense ratio and to pay lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within seven years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed, that the redemption is first of any Class A
shares in the shareholder's Fund account, second of Class B shares held for over
eight years or Class B shares acquired pursuant to reinvestment of dividends or
distributions and third of Class B shares held longest during the eight-year
period.
To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 50 Class B shares, 10
Class B shares will not be subject to charge because of dividend reinvestment.
With respect to the remaining 40 Class B shares, the charge is applied only to
the original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, of the $600 of the shares redeemed $400 of the
redemption proceeds (40 shares x $10 original purchase price) will be charged at
a rate of 4.0% (the applicable rate in the second year after purchase for a
contingent deferred sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after
the end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee imposed on Class B
shares. Such conversion will be on the basis of the relative net asset values of
the two classes, without the imposition of any sales load, fee or other charge.
The purpose of the conversion feature is to reduce the distribution services fee
paid by holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
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For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee (and, with respect to Florida
Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond, South
Carolina Municipal Bond, Virginia Municipal Bond and High Grade, shareholder
service fee) and transfer agency costs with respect to Class B shares does not
result in the dividends or distributions payable with respect to other Classes
of a Fund's shares being deemed "preferential dividends" under the Code, and
(ii) the conversion of Class B shares to Class A shares does not constitute a
taxable event under Federal income tax law. The conversion of Class B shares to
Class A shares may be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further conversions of Class
B shares would occur, and shares might continue to be subject to the higher
distribution services fee (and, in the case of Evergreen Florida Municipal Bond
Fund, Evergreen Georgia Municipal Bond Fund, Evergreen North Carolina Municipal
Bond Fund, Evergreen South Carolina Municipal Bond Fund, Evergreen Virginia
Municipal Bond Fund and High Grade, the shareholder services fee) for an
indefinite period which may extend beyond the period ending eight years after
the end of the calendar month in which the shareholder's purchase order was
accepted.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
GENERAL INFORMATION ABOUT THE FUNDS
(See also "Other Information - General Information" in each Fund's Prospectus)
Capitalization and Organization
The Evergreen Florida High Income Municipal Bond, Evergreen
Short-Intermediate Municipal Fund and Evergreen Short-Intermediate Municipal
Fund-California are each separate series of Evergreen Municipal Trust, a
Massachusetts business trust. Florida High Income, which is a newly created
series of Evergreen Municipal Trust, acquired substantially all of the assets of
ABT Florida High Income Municipal Bond Fund (the"ABT Fund") on June 30, 1995.
The Evergreen Florida Municipal Bond Fund, Evergreen Georgia Municipal Bond
Fund, Evergreen North Carolina Municipal Bond Fund, Evergreen South Carolina
Municipal Bond Fund, Evergreen Virginia Municipal Bond Fund and Evergreen High
Grade Tax Free Fund, respectively, are each separate series of Evergreen
Investment Trust, a Massachusetts business trust. On July 7, 1995, First Union
Funds changed its name to Evergreen Investment Trust. On December 14, 1992, The
Salem Funds changed its name to First Union Funds. The above-named Trusts are
individually referred to in this Statement of Additional Information as the
"Trust" and collectively as the "Trusts." Each Trust is governed by a board of
trustees. Unless otherwise stated, references to the "Board of Trustees" or
"Trustees" in this Statement of Additional Information refer to the Trustees of
all the Trusts.
Florida High Income, Short-Intermediate and Short-Intermediate-CA may issue
an unlimited number of shares of beneficial interest with a $0.0001 par value.
Florida Municipal Bond, Georgia Municipal Bond, North Carolina Municipal Bond,
South Carolina Municipal Bond, Virginia Municipal Bond and High Grade may issue
an unlimited number of shares of beneficial interest without par value. All
shares of these Funds have equal rights and privileges. Each share is entitled
to one vote, to participate equally in dividends and distributions declared by
the Funds and on liquidation to their proportionate share of the assets
remaining after satisfaction of outstanding liabilities. Shares of these Funds
are fully paid, nonassessable and fully transferable when issued and have no
pre-emptive, conversion or exchange rights. Fractional shares have
proportionally the same rights, including voting rights, as are provided for a
full share.
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Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Fund or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more Funds. Any issuance of shares of another series or class would be governed
by the 1940 Act and the law of the State of Massachusetts. If shares of another
series of a Trust were issued in connection with the creation of additional
investment portfolios, each share of the newly created portfolio would normally
be entitled to one vote for all purposes. Generally, shares of all portfolios
would vote as a single series on matters, such as the election of Trustees, that
affected all portfolios in substantially the same manner. As to matters
affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related an other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of each Fund. The rights of the holders of
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
permitting the issuance and sale of multiple classes of shares representing
interests in each Fund. In the event a Fund were to issue additional Classes of
shares other than those described herein, no further relief from the Securities
and Exchange Commission would be required.
Distributor
Evergreen Funds Distributor, Inc. (the "Distributor"), 230 Park Avenue,
New York, New York 10169, serves as each Fund's principal underwriter, and as
such may solicit orders from the public to purchase shares of any Fund. The
Distributor is not obligated to sell any specific amount of shares and will
purchase shares for resale only against orders for shares. Under the Agreement
between the Fund and the Distributor, the Fund has agreed to indemnify the
Distributor, in the absence of its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations thereunder, against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended.
Counsel
Sullivan & Worcester, Washington, D.C., serves as counsel to the Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors
of Florida High Income, Short-Intermediate and Short-Intermediate-CA.
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KPMG Peat Marwick LLP has been selected to be the independent auditors
of Florida Municipal Bond, Georgia Municipal Bond, North Carolina Municipal
Bond, South Carolina Municipal Bond, Virginia Municipal Bond and High Grade.
PERFORMANCE INFORMATION
Total Return
From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for recent one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by the Securities
and Exchange Commission, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of such
investment at the end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales charge
applicable to purchases of Fund shares is assumed to have been paid. The Fund
will include performance data for Class A, Class B, and Class Y shares in any
advertisement or information including performance data of the Fund.
With respect to Short-Intermediate and Short-Intermediate-CA, the
shares of each Fund outstanding prior to January 3, 1995 have been reclassified
as Class Y shares. With respect to Florida High Income, the Fund is the
successor of the ABT Fund and the information presented is with respect to the
ABT Fund's Class A shares, the only outstanding class. The average annual
compounded total return for each Class of shares offered by the Funds for the
most recently completed one, five and ten year fiscal periods is set forth in
the table below.
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FLORIDA MUNICIPAL 1 Year
BOND Ended From inception*
12/31/94 to 12/31/94
Class A -13.49% -5.86%
Class B -14.20% -5.84%
Class Y -- -6.54%
GEORGIA MUNICIPAL 1 Year
BOND Ended From inception**
12/31/94 to 12/31/94
Class A -13.94% -7.16%
Class B -14.66% -7.15%
Class Y -- -6.87%
NORTH CAROLINA 1 Year
MUNICIPAL BOND Ended From inception***
12/31/94 to 12/31/94
Class A -13.44% -1.89%
Class B -14.16% -2.01%
Class Y -- -7.03%
SHORT-INTERMEDIATE 1 Year From 11/18/91
Ended (inception)
8/31/94 to 8/31/94
Class A -3.40% 3.95%
Class B -3.41% 4.81
Class Y 1.42% 5.79%
SHORT-INTERMEDIATE- 1 Year From 10/16/92
CA Ended (inception)
8/31/94 to 8/31/94
Class A -3.00% 2.12%
Class B -3.04% 2.74%
Class Y 1.84% 4.79%
SOUTH CAROLINA From inception-
MUNICIPAL BOND to 12/31/94
Class A -13.64%
Class B -14.31
Class Y -7.14
VIRGINIA MUNICIPAL 1 Year From inception--
BOND Ended to 12/31/94
Class A -12.96% -6.05%
Class B -13.63% -0.64%
Class Y -- -5.82%
HIGH GRADE 1 Year
Ended From inception---
12/31/94 to 12/31/94
Class A -12.12% -3.03%
Class B -12.81% -0.48%
Class Y -- -6.31%
FLORIDA HIGH 1 Year From June 17, 1992
INCOME Ended (inception) to
12/31/94 12/31/94
Class A -9.43% -3.42%
Class B
Class Y
* Inception date: Class A - July 5, 1993; Class B - July 1, 1993; Class Y -
February 28, 1994.
** Inception date: Class A - July 1, 1993; Class B - July 1, 1993; Class Y -
February 28, 1994.
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*** Inception date: Class A - January 12, 1993; Class B - January 12, 1993;
Class Y - February 28, 1994.
- - Inception date: Class A - January 3, 1994; Class B - January 3, 1994; Class Y
- - February 28, 1994.
- -- Inception date: Class A - July 7, 1993; Class B - July 1, 1993; Class Y -
February 28, 1994.
- --- Inception date: Class A - February 25, 1992; Class B - January 12, 1993;
Class Y - February 28, 1994.
The performance numbers for Short-intermediate and
Short-Intermediate-CA for the Class A, and Class B shares are hypothetical
numbers based on the performance for Class Y shares as adjusted for any
applicable front-end sales charge or contingent deferred sales charge. For
Florida High Income the performance numbers for the Class B and Class Y shares
are hypothetical numbers based upon the performance for the Class A shares as
adjusted for any applicable contingent deferred sales charge.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal invested in a Fund is
not fixed and will fluctuate in response to prevailing market conditions.
YIELD CALCULATIONS
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = 2[(a-b+1)6-1]
cd
Where a = Interest earned during the period
b = Expenses accrued for the period (net of reimbursements) c = The
average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond funds. Gains and
losses generally are excluded from the calculation. Income calculated for
purposes of determining a Fund's yield differs from income as determined for
other accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rate of distributions a Fund paid over the same
period, or the net investment income reported in a Fund's financial statements.
Tax Equivalent Yield
The Funds invest principally in obligations the interest from which is
exempt from federal income tax other than the AMT. In addition, the securities
in which state-specific Funds invest will also, to the extent practicable, be
exempt from such state's income taxes. However, from time to time the Funds may
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make investment which generate taxable income. A Fund's tax-equivalent yield is
the rate an investor would have to earn from a fully taxable investment in order
to equal the Fund's yield after taxes. Tax-equivalent yields are calculated by
dividing a Fund's yield by the result of one minus a stated federal or combined
federal and state tax rate. (If only a portion of the Fund's yield is
tax-exempt, only that portion is adjusted in the calculation.) Of course, no
assurance can be given that a Fund will achieve any specific tax-exempt yield.
If only a portion of the Fund's yield is tax-exempt, only that portion is
adjusted in the calculation. Of course, no assurance can be given that the Fund
will achieve any specific tax-exempt yield.
The following formula is used to calculate Tax Equivalent Yield without taking
into account state tax:
Fund's Yield
1 - Fed Tax Rate
The following formula is used to calculate Tax Equivalent Yield taking into
account state tax:
Fund's Yield
1 - Fed Tax Rate + (State Tax Rate - [State Tax Rate x Fed Tax Rate])
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The tax exempt and tax equivalent yields of each Fund for the
thirty-day period ended December 31, 1994 (August 31, 1994 with respect to
Short-Intermediate and Short-Intermediate- CA and April 30, 1995 with respect to
Florida High Income and Florida Municipal Bond) for each Class of shares offered
by the Funds is set forth in the table below. The table assumes the following
combined federal and state tax rate: California - 36%; Florida - 28%; Georgia -
34%; North Carolina - 28%; South Carolina - 35%; Virginia - 33/25%.
Yield Tax Equivalent Yield
Florida High Income*
Class A 6.46% 8.97%
Class B -- --
Class Y -- --
Short-Intermediate**
Class A -- --
Class B -- --
Class Y 4.23% 5.88%
Short-Intermediate-CA**
Class A -- --
Class B -- --
Class Y 4.10% 7.19%
Florida Municipal Bond*
Class A 4.98% 6.92%
Class B -- --
Class Y -- --
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Georgia Municipal Bond
Class A 5.90% 8.94%
Class B 5.46% 8.27%
Class Y 6.45% 9.77%
North Carolina
Municipal Bond
Class A 5.43% 7.54%
Class B 4.96% 6.89%
Class Y 5.96% 8.28%
South Carolina
Municipal Bond
Class A 5.97% 9.18%
Class B 5.52% 8.49%
Class Y 6.53% 10.05%
Virginia Municipal
Bond
Class A 5.50% 8.30%
Class B 5.03% 7.59%
Class Y 6.00% 9.06%
High Grade
Class A 5.33% 7.40%
Class B 4.85% 6.74%
Class Y 5.85% 8.13%
* Florida High Income and Florida Tax Free yields are based on the Class A SEC
yield of the ABT Florida High Income Fund and ABT Florida Tax Free Fund. Florida
High Income and Florida Tax Free acquired the net assets of ABT Florida High
Income Fund and ABT Florida Tax Free Fund, respectively, on June 30, 1995 and
are the successors to such funds for accounting purposes.
**The Class A and B Shares of Short-Intermediate and Short-Intermediate-CA had
not yet commenced operations at August 31, 1994.
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
GENERAL
From time to time, a Fund may quote its performance in advertising and
other types of literature as compared to the performance of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, Lehman
Brothers General Obligations Municipal Bond Index or any other commonly quoted
index of common stock or municipal bond prices. The Standard & Poor's 500
Composite Stock Price Index and the Dow Jones Industrial Average are unmanaged
indices of selected common stock prices. The Lehman Brothers General Obligations
Municipal Bond Index is an unmanaged index of state general obligation debt
issues which are rated A or better and represent a variety of coupon ranges. A
Fund's performance may also be compared to those of other mutual funds having
similar objectives. This comparative performance would be expressed as a ranking
prepared by Lipper Analytical Services, Inc. or similar independent services
monitoring mutual fund performance. A Fund's performance will be calculated by
assuming, to the extent applicable, reinvestment of all capital gains
distributions and income dividends paid. Any such comparisons may be useful to
investors who wish to compare a Fund's past performance with that of its
competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statement filed by the Trusts with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
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at a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
FINANCIAL STATEMENTS
Each Fund's financial statements appearing in their most current fiscal
year Annual Report (or in the case of Florida High Income, its balance sheet as
of June 23, 1995) to shareholders and the report thereon of the independent
auditors appearing therein, namely Price Waterhouse LLP (in the case of Florida
High Income, Short-Intermediate and Short-Intermediate-CA), or KPMG Peat Marwick
LLP (in the case of Florida Municipal Bond, Georgia Municipal Bond, North
Carolina Municipal Bond, South Carolina Municipal Bond, Virginia Municipal Bond
and High Grade) are incorporated by reference in this Statement of Additional
Information. The Annual Reports to Shareholders for each Fund, which contain the
referenced statements, are available upon request and without charge.
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APPENDIX A - NOTE, BOND AND COMMERCIAL PAPER RATINGS
NOTE RATINGS
Moody's Investors Service, Inc.: MIG-1 -- the best quality. MIG-2 -- high
quality, with margins of protection ample though not so large as in the
preceding group. MIG-3 -- favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less well
established.
Standard & Poor's Ratings Group, Inc.: SP-1 -- Very strong or strong
capacity to pay principal and interest. SP-2 -- Satisfactory capacity to pay
principal and interest.
BOND RATINGS
Moody's Investors Service: Aaa -- judged to be the best quality, carry
the smallest degree of investment risk; Aa -- judged to be of high quality by
all standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as medium grade
obligations which are neither highly protected nor poorly secured. Moody's
Investors Service also applies numerical indicators, 1, 2 and 3, to rating
categories Aa through Baa. The modifier 1 indicates that the security is in the
higher end of its rating category; the modifier 2 indicates a mid-range ranking;
and 3 indicates a ranking toward the lower end of the category.
Standard & Poor's Ratings Group: AAA -- highest grade obligations,
possesses the ultimate degree of protection as to principal and interest; AA --
also qualify as high grade obligations, and in the majority of instances differ
from AAA issues only in small degree; A -- regarded as upper medium grade, have
considerable investment strength but are not entirely free from adverse effects
of changes in economic and trade conditions, interest and principal are regarded
as safe; BBB -- regarded as having adequate capacity to pay interest and repay
principal but are more susceptible than higher rated obligations to the adverse
effects of changes in economic and trade conditions. Standard & Poor's Ratings
Group applies indicators "+", no character, and "-" to the above rating
categories AA through BBB. The indicators show relative standing within the
major rating categories.
Duff & Phelps: AAA - highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which may vary very slightly from time to time because of economic
conditions; A -- average credit quality with adequate protection factors, but
with greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch Investors Service: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with a very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions; and BBB -- satisfactory credit quality with adequate ability with
regard to interest and principal, and likely to be affected by adverse changes
in economic conditions and circumstances. The indicators "+" and "-" to the AA,
A and BBB categories indicate the relative position of a credit within those
rating categories.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries
the smallest degree of investment risk. The modifiers 1, 2 and 3 are used to
denote relative strength within this highest classification.
Standard & Poor's Ratings Group: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
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Duff & Phelps: Duff 1 is the highest commercial paper rating category
utilized by Duff & Phelps which uses + or - to denote relative strength within
this classification. Duff 2 represents good certainty of timely payment, with
minimal risk factors. Duff 3 represents satisfactory protection factors, with
risk factors larger and subject to more variation.
Fitch Investors Service: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1 -- very strong credit quality, with only slightly less
degree of assurance for timely payment than F-1+; F-2 -- good credit quality,
carrying a satisfactory degree of assurance for timely payment.
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APPENDIX B - ADDITIONAL INFORMATION CONCERNING CALIFORNIA
The following information as to certain California risk factors is
given to investors in view of Short-Intermediate-CA's policy of investing
primarily in California state and municipal issuers. The information is based
primarily upon information derived from public documents relating to securities
offerings of California state and municipal issuers, from independent municipal
credit reports and historically reliable sources, but has not been independently
verified by the Fund
On June 6, 1978, California voters approved Proposition 13, which added
Article XIIIA to the California Constitution. The principal thrust of Article
XIIIA is to limit the amount of ad valorem taxes on real property to one percent
of the full cash value as determined by the county assessor. The assessed
valuation of all real property may be increased, but not in excess of two
percent per year, or decreased to reflect the rate of inflation or deflation as
shown by the consumer price index. Article XIIIA requires a vote of two thirds
of the qualified electorate to impose special taxes, and completely prohibits
the imposition of any additional ad valorem, sales or transaction tax on real
property (other than ad valorem taxes to repay general obligation bonds issued
to acquire or improve real property), and requires the approval of two-thirds of
all members of the State Legislature to change any state tax laws resulting in
increased tax revenues.
On November 6, 1979, California voters approved the initiative seeking
to amend the California Constitution entitled "Limitation of Government
Appropriations" which added Article XIIIB to the California Constitution. Under
Article XIIIB state and local governmental entities have an annual
appropriations limit and may not spend certain monies which are called
appropriations subject to limitations (consisting of tax revenues, state
subventions and certain other funds) in an amount higher than the appropriations
limit. Generally, the appropriations limit is to be based on certain 1978-79
expenditures, and is to be adjusted annually to reflect changes in consumer
prices, population and services provided by these entities.
Decreased in state and local revenues in future fiscal years as a
consequence of these initiatives may continue to result in reductions in
allocations of state revenues to California municipal issuers or reduce the
ability of such California issuers to pay their obligations.
With the apparent onset of recovery in California's economy, revenue
growth over the next few years could recommence at levels that would enable
California to restore fiscal stability. The political environment, however,
combined with pressures on the state's financial flexibility, may frustrate its
ability to reach this goal. Strong interests in long-established state programs
ranging from low-cost public higher education access to welfare and health
benefits join with the more recently emerging pressure for expanded prison
construction and a heightened awareness and concern over the state's business
climate.
Adopted on July 8, 1994, the fiscal 1994 budget is designed to address
California's accumulated deficit over a 22-month period. In order to balance the
budget and generate sufficient cash to retire the $4 billion deficit Revenue
Anticipation Warrant and a $3 billion Revenue Anticipation Note to be issued in
July 1995, the state's fiscal plan relies upon aggressive assumptions of federal
aid, projected at about $760 million in fiscal year 1995 and $2.8 billion in
fiscal year 1995, to compensate the state for its costs of providing service to
illegal immigrants. These assumptions, combined with fiscal year 1996
constitutionally mandated increases in spending for K-14 education, and
continued growth in social services and corrections expenditures, are risky. To
offset this risk, the state has enacted a Budget Adjustment Law, known as the
"trigger" legislation, which established a set of backup budget adjustment
mechanisms to address potential shortfalls in cash. The trigger mechanism will
be in effect for both fiscal years 1995 and 1996.
In July of 1994, S&P and Moody's lowered the general obligation bond
rating of the state of California. The rating agencies explained their actions
by citing the state's continuing deferral of substantial portions of its
estimated $3.8 billion accumulated deficit; continuing structural budgetary
constraints including a funding guarantee for K-14 education; overly optimistic
expectation of federal aid to balance fiscal year 1995's budget and fiscal
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year 19996's cash flow projections; and reliance upon a trigger mechanism to
reduce spending if the plan's federal aid assumptions prove to be inflated.
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APPENDIX C - ADDITIONAL INFORMATION CONCERNING FLORIDA
Florida Municipal Bond and Florida High Income Fund invest in
obligations of Florida issuers, which results in each Fund's performance being
subject to risks associated with the overall conditions present within the
state. The following information is a brief summary of the recent prevailing
economic conditions and a general summary of the state's financial status. This
information is based on official statements relating to securities that have
been offered by Florida issuers and from other sources believed to be reliable,
but should not be relied upon as a complete description of all relevant
information.
Florida is the twenty-second largest state, with an area of 54,136
square miles and a water area of 4,424 square miles. The state is 447 miles long
and 361 miles wide with a tidal shoreline of almost 2,300 miles. According to
the U.S. Census Bureau, Florida moved past Illinois in 1986 to become the fourth
most populous state, and as of 1990, had an estimated population of 13.2
million.
Services and trade continue to be the largest components of the Florida
economy, reflecting the importance of tourism as well as the need to serve
Florida's rapidly growing population. Agriculture is also an important part of
the economy, particularly citrus fruits. Oranges have been the principal crop,
accounting for 70% of the nation's output. Manufacturing, although of less
significance, is a rapidly growing component of the economy. The economy also
has substantial insurance, banking, and export participation. Unemployment rates
have historically been below national averages, but have recently risen above
the national rate.
Section 215.32 of the Florida Statutes provides that financial
operations of the State of Florida covering all receipts and expenditures be
maintained through the use of three funds - the General Revenue Fund, the Trust
Fund and the Working Capital Fund. The General Fund receives the majority of
state tax revenues. The Working Capital Fund receives revenues in excess of
appropriations and its balances are freely transferred to the General Revenue
Fund as necessary. In November, 1992, Florida voters approved a constitutional
amendment requiring the state of fund a Budget Stabilization Fund to 5% of
general revenues, with funding to be phased in over five years beginning in
fiscal 1995. The Working Capital Fund will become the Budget Stabilization Fund.
Major sources of tax revenues to the General Revenue Fund are the sales and use
tax, corporate income tax and beverage tax. The over- dependence on the
sensitive sales tax creates vulnerability to recession. Accordingly, financial
operations have been strained during the past few years, but the state has
responded in a timely manner to maintain budgetary control.
The state is highly vulnerable to hurricane damage. Hurricane Andrew
devastated portions of southern Florida in August, 1992, costing billions of
dollars in emergency relief, damage, and repair costs. However, the overall
financial condition of the major issuers of municipal bond debt in the state
were relatively unaffected by Hurricane Andrew, due to federal disaster
assistance payments and the overall level of private insurance. However, it is
possible that single revenue-based local bond issues could be severely impacted
by storm damage in certain circumstances.
Florida's debt structure is complex. Most state debt is payable from
specified taxes and additionally secured by the full faith and credit of the
state. Under the general obligation pledge, to the extent specified taxes are
insufficient, the state is unconditionally required to make payment on bonds
from all non-dedicated taxes.
Each Fund's concentration in securities issued by the state and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
state or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the state; and the underlying condition of the state, and its
municipalities.
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APPENDIX D - ADDITIONAL INFORMATION CONCERNING GEORGIA
Because Georgia Municipal Bond will ordinarily invest 80% or more of
its net assets in Georgia obligations, it is more susceptible to factors
affecting Georgia issuers than is a comparable municipal bond fund not
concentrated in the obligations of issuers located in a single state.
Georgia's rating reflects the state's positive economic trends,
conservative financial management, improved financial position, and low debt
burden. The state's recovery from the recent economic recession has been steady;
the rate of recovery is better than regional trends, albeit half the rate of
earlier recoveries. While this recovery does not meet the explosive patterns set
in past cycles, recent state data reveal that Georgia ranks among the top five
states in the nation in employment and total population growth. Stronger
economic trends and conservative revenue forecasting resulted in the
continuation of improved financial results for the fiscal year ended June 30,
1994. The state's general fund closed fiscal 1994 with a total fund balance
position of $480.6 million, of which $249.5 million was in the revenue shortfall
reserve fund (3% of revenues), marking the second consecutive year of build-up
in that reserve. The mid-year adjustment reserve was fully funded at $89.1
million. The state's adopted budget fiscal 1995, called for an increase in state
spending to $9.8 billion, up 6.5% from the prior period. Estimating that
economic growth will be in the 6%-8% range for the second straight year, the
budget report forecasted general fund revenues to grow to $9.4 billion, an
increase of $490.0 million, or 5.5% above actual fiscal 1994 levels. Sales and
income taxes account for the majority of that increase, despite a $100 million
cut in personal income taxes. Additional revenues provided by lottery proceeds
($240 million) and indigent-care trust fund monies support the remaining
spending. Revenues for the first three months of the current year are running
nearly 8.4% above fiscal 1994 levels. Most of the increase is attributable to
the growth in personal and corporate income and sales taxes. As a result, the
state anticipates that fiscal 1995 will once again produce positive financial
results.
Except for the major building projects necessary for the 1996 Summer
Olympics, it appears unlikely that areas in and around metropolitan Atlanta will
experience the building construction rates of the mid to late 1980's. It further
appears that many of Georgia's other cities are poised to participate in the
recovery that inevitably will take place.
The classification of the Fund under the Investment Company Act of 1940
as a "non-diversified" investment company allows the Fund to invest more than 5%
of its assets in the securities of any issuer, subject to satisfaction of
certain tax requirements. Because of the relatively small number of issues of
Georgia obligations, the Fund is likely to invest a greater percentage of its
assets in the securities of a single issuer than is an investment company which
invests in a broad range of municipal obligations. Therefore, the Fund would be
more susceptible than a diversified investment company to any single adverse
economic or political occurrence or development affecting Georgia issuers. The
Fund will also be subject to an increase risk of loss if the issuer is unable to
make interest or principal payments or if the market value of such securities
declines. It is also possible that there will not be sufficient availability of
suitable Georgia tax-exempt obligations for the Fund to achieve its objective of
providing income exempt from Georgia income tax.
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APPENDIX E - ADDITIONAL INFORMATION CONCERNING NORTH CAROLINA
Because North Carolina Municipal Bond will ordinarily invest 80% or
more of its net assets in North Carolina obligations, it is more susceptible to
factors affecting North Carolina (or the "State") issuers than is a comparable
municipal bond fund not concentrated in the obligations of issuers located in a
single state.
North Carolina has an economy dependent on manufacturing and
agriculture; however, diversification into trade and service areas is occurring.
Historically, textiles and furniture dominated industry lines, but increased
activity in financial services, research, and high technology manufacturing is
now apparent. Tobacco remains the primary agricultural commodity. Economic
development continues, and long-term personal income trends indicate gains,
although wealth levels remain below those of the nation. Employment growth
accelerated over the past two years, and unemployment rates remain below those
of the nation.
North Carolina is characterized by moderate debt levels (albeit with
growing capital needs), favorable economic performance, and financial strengths
exhibited over the past several years. North Carolina is one of only several
states expected to sustain favorable economic expansion throughout the 1990s,
according to the U.S. Bureau of Economic Analysis indicators. Economic growth in
the State is bolstered by a lower-than-average cost of living, income levels at
about 90% of U.S. averages - though it is much higher in the metropolitan
centers - and a highly respected public and private higher education system,
including the University of North Carolina at Chapel Hill and Duke University in
Durham.
The North Carolina State Constitution requires that the total
expenditures of the State for a fiscal period shall not exceed the total of
receipts during the fiscal period and the surplus remaining in the State
Treasury at the beginning of the period. In certain of the past several years,
the State has had to restrict expenditures to comply with the State
Constitution. The State has long record of sound financial operations, and while
the revenue system is narrow, the budget balancing law is strong and appropriate
curbs are made when necessary.
The state's finances, which enjoyed surpluses and adequate reserves
throughout the 1980s, began reflecting economic downturn in fiscal 1990.
Reserves were fully depleted during the recession, but through a combination of
tax and spending actions and more recently, with the aid of economic recovery,
have now been fully restored.
Financial operations have been restored to their historically healthy
position after a period of strain between fiscal years 1990 and 1992. Available
unreserved balances and budget stabilization reserve totaled $440 million at the
end of fiscal 1994 equivalent to 4.1% of annual expenditures. On a budgetary
basis, fiscal 1994 ended with an $887.5 million balance; however, a portion of
this balance has been appropriated for fiscal 1995 operations. Conservative
revenue assumptions and sound budgeting practices should result in a similar
balance at the end of 1995. The restoration of adequate reserve levels confirms
the state's longstanding commitment to a sound financial position.
Debt ratios are among the lowest in the country. State debt ratios will
remain below national medians even after all of the $300 million of currently
authorized debt is issued.
Payout is rapid.
North Carolina ranks among the top ten states in terms of economic
growth, as measured by job and personal income growth. Diversification into
financial services, research, and high technology manufacturing is reducing
historical dependence on agriculture, textiles, and furniture manufacturing.
As of December 31, 1994, general obligations of the State of North
Carolina were rated Aaa/AAA/AAA by Moody's, S&P and Fitch Investors Service
("Fitch"), respectively. There can be no assurance that the economic conditions
on which these ratings are based will continue or that particular bond issues
may not be adversely affected by changes in economic, political or other
conditions.
North Carolina obligations also include obligations of the governments
of Puerto Rico, the Virgin Islands and Guam to the extent these obligations are
exempt from North
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<PAGE>
Carolina State personal income taxes. The Fund will not invest more than 5% of
its net assets in the obligations of each of the Virgin Islands and Guam, but
may invest without limitation in the obligations of Puerto Rico. Accordingly,
the Fund may be adversely affected by local political and economic conditions
and developments within Puerto Rico affecting the issuers of such obligations.
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<PAGE>
APPENDIX F - ADDITIONAL INFORMATION CONCERNING SOUTH CAROLINA
The State of South Carolina has an economy dominated from the early
1920s to the present by textile industry, with over one of every three
manufacturing workers directly or indirectly related to the textile industry.
However, since 1950 the economic bases of the State have become more
diversified, as the trade and service sectors and durable goods manufacturing
industries have developed. Currently, Moody's rates South Carolina general
obligations bonds "Aaa" and S&P rates such bonds "AA+." There can be no
assurance that the economic conditions on which those ratings are based will
continue or that particular bond issues may not be adversely affected by changes
in the economic or political conditions.
The South Carolina State Constitution mandates a balanced budget. If a
deficit occurs, the General Assembly must account for it in the succeeding
fiscal year. In addition, if a deficit appears likely, the State Budget and
Control Board (the "State Board") may reduce appropriations during the current
fiscal year as necessary to prevent the deficit. The State Constitution limits
annual increases in State appropriations to the average growth rate of the
economy of the State and annual increases in the number of State employees to
the average growth of the population of the State.
The State Constitution requires a General Reserve Fund ("General Fund")
that equals three percent of General Fund revenue for the latest fiscal year.
When deficits have occurred, the State has funded them out of the General Fund.
The State Constitution also requires a Capital Reserve Fund ("Capital Fund")
equal to two percent of General Fund revenue. Before March 1st of each year, the
Capital Fund must be used to offset mid-year budget reductions before mandating
cuts in operating appropriations, and after March 1st, the Capital Fund may be
appropriated by a special vote of the General Assembly to finance previously
authorized capital improvements or other nonrecurring purposes. Monies in the
Capital Fund not appropriated or any appropriation for a particular project or
item that has been reduced due to application of the monies to a year-end
deficit must go back to the General Fund.
The effects of the most recent military base-closing and consolidation
legislation is having a negative effect on several sections of the State,
particularly the Charleston area. During 1995, the Charleston Naval Base and
Shipyard will begin closing down. The Navy has estimated that up to 38,000 jobs
will be lost over the next several years.
South Carolina Municipal Bond's concentration in securities issued by
the State or its subdivisions provides a greater level of risk than an
investment company which is diversified across a larger geographic area. For
example, the passage of the North American Free Trade Agreement could result in
increased competition for the State's textile industry due to the availability
of less-expensive foreign labor.
Presently, South Carolina subjects bonds issued by other states to its
income tax. If this tax was declared unconstitutional, the value of bonds in the
Fund could decline a small but measurable amount. Also, the Fund could become
slightly less attractive to potential future investors.
The Fund's investment adviser believes that the information summarized
above describes some of the more significant matters relating to the Fund. The
sources of the information are the official statements of issuers located in
South Carolina, other publicly available documents, and oral statements from
various State agencies. The Fund's investment adviser has not independently
verified any of the information contained in the official statement, other
publicly available documents, or oral statements from various State agencies.
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<PAGE>
APPENDIX G - ADDITIONAL INFORMATION CONCERNING VIRGINIA
Virginia Municipal Bond invests in obligations of Virginia issuers,
which results in the Fund's performance being subject to risks associated with
the overall conditions present within the State. The following information is a
brief summary of the recent prevailing economic conditions and a general summary
of the State's financial status. This information is based on official
statements relating to securities that have been offered by Virginia issuers and
from other sources believed to be reliable, but should not be relied upon as a
complete description of all relevant information.
Virginia's credit strength is derived from a diversified economy,
relatively low unemployment rates, strong financial management, and low debt
burden. The State's economy benefits significantly from its proximity to
Washington D.C. Government is the State's third- largest employment sector,
comprising 21% of total employment. Other important sectors of the economy
include shipbuilding, tourism, construction, and agriculture.
Virginia is a very conservative debt issuer and has maintained debt
levels that are low in relation to its substantial resources. Conservative
policies also dominate the State's financial operations, and the State
administration continually demonstrates its ability and willingness to adjust
financial planning and budgeting to preserve financial balance. For example,
economic weakness in the State and the region caused personal income and sales
and corporate tax collections to fall below projected forecasts and placed the
State under budgetary strain. The State reacted by reducing its revenue
expectations for the 1990-92 biennium and preserved financial balance through a
series of transfers, appropriation reductions, and other budgetary revisions.
Management's actions resulted in a modest budget surplus for fiscal 1992, and
another modest surplus was reported for fiscal 1993, which ended June 30th. The
1994 Virginia budget experienced a significant surplus due to an improving
economy, including job growth of 3.0%/year overall. Overall, Virginia has a
stable credit outlook due mainly to its diverse economy and resource base, as
well as a conservative approach to financial operations. Revenue growth for 1994
was 6%. Budgets for 1995 and 1996 call for revenue growth of 6.1% and 5.8%,
respectively.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
State or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the State; and the underlying fiscal condition of the State,
its countries, and its municipalities.
Virginia faces some economic uncertainties with respect to
defense-cutbacks. Although Virginia's unemployment rate of 4.9% (as of August,
1994) is well below the national rate of 5.9%, the State has been able to make
some gains in the services, government, and construction sectors when
manufacturing and trade were down slightly.
The effects of the most recent base-closing legislation were muted
because of consolidation from out-of-state bases to Virginia installations.
While military operations at the Pentagon are unlikely to be threatened, another
round of base-closings scheduled for 1995 may jeopardize a number of Virginia
installations.
******************************************************************************
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: Incorporated into the Statement of
Additional Information by reference to the Annual Reports of
(1) Evergreen Value Fund (formerly, First Union Value
Portfolio), (2) Evergreen Fixed Income Fund (formerly, First
Union Fixed Income Portfolio), (3) Evergreen High Grade Tax
Free Fund (formerly, First Union High Grade Tax Free
Portfolio), (4) Evergreen Treasury Money Market Fund
(formerly, First Union Treasury Money Market Portfolio), (5)
Evergreen Balanced Fund (formerly, First Union Balanced
Portfolio), (6) Evergreen Managed Bond Fund (formerly, First
Union Managed Bond Portfolio), (7) Evergreen North Carolina
Municipal Bond Fund (formerly, First Union North Carolina
Municipal Bond Portfolio), (8) Evergreen U.S. Government Fund
(formerly, First Union U.S. Government Portfolio), (9)
Evergreen Florida Municipal Bond Fund (formerly, First Union
Florida Municipal Bond Portfolio), (10) Evergreen Georgia
Municipal Bond Fund (formerly, First Union Georgia Municipal
Bond Portfolio), (11) Evergreen Virginia Municipal Bond Fund
(formerly, First Union Virginia Municipal Bond Portfolio),
(12) Evergreen Utility Fund (formerly, First Union Utility
Portfolio), (13) Evergreen South Carolina Municipal Bond Fund
(formerly, First Union South Carolina Municipal Bond
Portfolio); (14) Evergreen Emerging Markets Growth Fund
(formerly, First Union Emerging Markets Growth Portfolio); and
(15) Evergreen International Equity Fund (formerly, First
Union International Equity Portfolio).
(b) Exhibits:
(1) Copy of Declaration of Trust of the Registrant (1);
(i) Copy of Amendment to Declaration of Trust (14);
(ii) Copy of Form of Amendment to Declaration of Trust +
(2) Copy of By-Laws of the Registrant (1);
(i) Copy of amendment to the By-Laws of the
Registrant (3);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (19);
(5) Conformed copy of Investment Advisory Contract of the
Registrant (21);
(i) Conformed copy of Sub-Advisory Agreement
between First Union National Bank of North
Carolina and Marvin & Palmer Associates, Inc.(21);
(ii) Conformed copy of Sub-Advisory Agreement
between First Union National Bank of North
Carolina and Boston International
Advisors, Inc. (21);
(6) Conformed copy of Distributor's Contract of the
Registrant +;
(i) Conformed copy of the previous Distributors
Contract of the Registrant (21);
(7) Conformed copy of Administrative Agreement of the
Registrant +;
(7a) Conformed copy of Sub-Administrator Agreement of the
Registrant +;
(8) Conformed copy of Custodian Contract of the
Registrant (21);
(9) Conformed copy of the Fund Accounting and Shareholder
Recordkeeping Agreement of the Registrant (20);
(i) Conformed copy of the previous
Transfer Agency and Service Agreement of the
Registrant (21);
(ii) Conformed copy of Shareholder Services
Plan (21);
(iii) Conformed copy of Shareholder Services
Agreement (21);
(10) Copy of Opinion and Consent of Counsel as to
legality of shares being registered (8);
(11) Copy of Consent of Independent Auditors; +
(12) Not applicable;
(13) Copy of Initial Capital Understanding (1);
(14) Model Plans used in establishment of Retirement
Plans (2);
(15) (i) Distribution Plan;
(a) Copy of First Union Emerging Markets
Growth Portfolio and First Union
International Equity Portfolio -
Class B Investment Shares (21);
(i) Copy of First Union South
Carolina Municipal Bond Portfolio -
Class B Investment Shares (21);
(ii) Copy of First Union Virginia
Municipal Bond Portfolio, First Union
Georgia Municipal Bond Portfolio,
First Union Florida Municipal Bond
Portfolio - Class B Investment Shares (21);
(iii) Copy of First Union Utility
Portfolio - Class B Investment Shares (21);
(b) First Union Funds - Class C
Investment Shares (17);
(i) Conformed copy of Exhibit to
Class C Investment Shares (21);
(c) Conformed copy of First Union Funds -
Class D Investment Shares (21);
(ii) Rule 12b-1 Agreement (14);
(iii) Copy of Amendment Number 5 to 12b-1 Agreement(21);
(16) Copy of Schedules for Computation of Fund
Performance Data (20.);
(i) Copy of Schedules for Computation of Fund
Performance Data for First Union Emerging
Markets Growth Portfolio and First Union
International Equity Portfolio; +
(17) Copy of Financial Data Schedules; +
(18) Not applicable;
(19) Conformed copy of the Power of Attorney (19).
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A. (File Nos. 2-94560 and 811-4154).
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A (File Nos. 2-94560 and 811-4154).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 filed on July 30, 1990 on Form N-1A (File Nos. 2-94560
and 811-4154).
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 filed on August 26, 1992 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(14) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 filed on April 15, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(15) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 filed on April 30, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(16) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 filed on June 14, 1993 on Form N-1A (File Nos. 2-94560
and 811-4154).
(17) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 filed on November 2, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(18) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 filed on December 29, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(19) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 filed on February 25, 1994 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(20) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 36 filed on June 28, 1994 on Form N-1A (File Nos. 2-94560
and 811-4154).
(21) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 38 filed on December 30, 1994 on Form N-1A (File Nos. 2-
94560 and 811-4154).
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of June 15, 1995
Shares of beneficial interest
(no par value)
First Union Value Fund
a) Y Shares 94
b) Class A Investment Shares 20,638
c) Class B Investment Shares 13,497
d) Class C Investment Shares 88
First Union Fixed Income Fund
a) Y Shares 6
b) Class A Investment Shares 2,189
c) Class B Investment Shares 1,493
d) Class C Investment Shares 31
First Union High Grade Tax Free Fund
(formerly, First Union Insured Tax Free Portfolio)
a) Y Shares 15
b) Class A Investment Shares 3,078
c) Class B Investment Shares 1,733
First Union Treasury Money Market Fund
a) Y Shares 7
b) Class A Investment Shares 3,730
First Union Balanced Fund
a) Y Shares 6
b) Class A Investment Shares 4,385
c) Class B Investment Shares 10,389
d) Class C Investment Shares 48
First Union Managed Bond Fund
a) Y Shares 64
First Union North Carolina Municipal Bond Fund
a) Y Shares 19
b) Class A Investment Shares 568
c) Class B Investment Shares 2,365
First Union U.S. Government Fund
a) Y Shares 8
b) Class A Investment Shares 2,114
c) Class B Investment Shares 13,019
d) Class C Investment Shares 0
First Union Florida Municipal Bond Fund
a) Y Shares 21
b) Class A Investment Shares 393
c) Class B Investment Shares 1,151
First Union Georgia Municipal Bond Fund
a) Y Shares 6
b) Class A Investment Shares 132
c) Class B Investment Shares 498
First Union Virginia Municipal Bond Fund
a) Y Shares 9
b) Class A Investment Shares 125
c) Class B Investment Shares 280
First Union Utility Fund
a) Y Shares 7
b) Class A Investment Shares 832
c) Class B Investment Shares 3,375
d) Class C Investment Shares 26
First Union South Carolina Municipal Bond Fund
a) Y Shares 8
b) Class A Investment Shares 31
c) Class B Investment Shares 141
First Union Emerging Markets Growth Fund
a) Y Shares 6
b) Class A Investment Shares 321
c) Class B Investment Shares 431
d) Class C Investment Shares 14
First Union International Equity Fund
a) Y Shares 5
b) Class A Investment Shares 904
c) Class B Investment Shares 1,432
d) Class C Investment Shares 50
Item 27. Indemnification: (1.)
- --------------------------------------
(1.) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 35 filed on February 25, 1994 on Form N-1A
(File Nos. 2-94560 and 811-4154).
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Management of the
Funds-Investment Adviser" in Part A.
The Trustees and principal executive officers of the Fund's
Investment Adviser, and the Directors of the Fund's Manager,
are set forth in the following tables:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
BOARD OF DIRECTORS
Ben Mayo Boddie Raymond A. Bryan, Jr.
Chairman & CEO Chairman & CEO
Boddie-Noell Enterprises, Inc. T.A. Loving Company
P.O. Box 1908 P.O. Drawer 919
Rocky Mount, NC 27802 Goldsboro, NC 27530
John F.A.V. Cecil John W. Copeland
President President
Biltmore Dairy Farms, Inc. Ruddick Corporation
P.O. Box 5355 2000 Two First Union Center
Asheville, NC 28813 Charlotte, NC 28282
John Crosland, Jr. J. William Disher
Chairman of the Board Chairman & President
The Crosland Group, Inc. Lance Incorporated
135 Scaleybark Road P.O. Box 32368
Charlotte, NC 28209 Charlotte, NC 28232
Frank H. Dunn Malcolm E. Everett, III
Chairman and CEO President
First Union National Bank First Union National Bank
of North Carolina of North Carolina
One First Union Center 310 S. Tryon Street
Charlotte, NC 28288-0006 Charlotte, NC 28288-0156
James F. Goodmon Shelton Gorelick
President & Chief President
Executive Officer SGIC, Inc.
Capitol Broadcasting 741 Kenilworth Ave., Suite 200
Company, Inc. Charlotte, NC 28204
2619 Western Blvd.
Raleigh, NC 27605
Charles L. Grace James E. S. Hynes
President Chairman
Cummins Atlantic, Inc. Hynes Sales Company, Inc.
P.O. Box 240729 P.O. Box 220948
Charlotte, NC 28224-0729 Charlotte, NC 28222
Daniel W. Mathis Earl N. Phillips, Jr.
Vice Chairman President
First Union National Bank First Factors Corporation
of North Carolina P.O. Box 2730
One First Union Center High Point, NC 27261
Charlotte, NC 28288-0009
J. Gregory Poole, Jr. John P. Rostan, III
Chairman & President Senior Vice President
Gregory Poole Equipment Company Waldensian Bakeries, Inc.
P.O. Box 469 P.O. Box 220
Raleigh, NC 27602 Valdese, NC 28690
Nelson Schwab, III Charles M. Shelton, Sr.
Chairman & CEO Chairman & CEO
Paramount Parks The Shelton Companies, Inc
8720 Red Oak Boulevard, Suite 315 3600 One First Union Center
Charlotte, NC 28217 Charlotte, NC 28202
George Shinn Harley F. Shuford, Jr.
Owner and Chairman President and CEO
Shinn Enterprises, Inc. Shuford Industries
One Hive Drive P.O. Box 608
Charlotte, NC 28217 Hickory, NC 28603
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
EXECUTIVE OFFICERS
James Maynor, President, First Union Mortgage Corporation; Austin
A. Adams, Executive Vice President; Howard L. Arthur, Senior Vice
President; Robert T. Atwood, Executive Vice President and Chief
Financial Officer; Marion A. Cowell, Jr., Executive Vice
President, Secretary and General Counsel; Edward E. Crutchfield,
Jr., Chairman, CEO, First Union Corporation; Frank H. Dunn, Jr.,
Chairman and CEO; Malcolm E. Everett, III, President; John R.
Georgius, President, First Union Corporation; James Hatch, Senior
Vice President and Corporate Controller; Don R. Johnson,
Executive Vice President; Mark Mahoney, Senior Vice President;
Barbara K. Massa, Senior Vice President; Daniel W. Mathis, Vice
Chairman; H. Burt Melton, Executive Vice President; Malcolm T.
Murray, Jr., Executive Vice President; Alvin T. Sale, Executive
Vice President; Louis A. Schmitt, Jr., Executive Vice President;
Ken Stancliff, Senior Vice President and Corporate Treasurer;
Richard K. Wagoner, Executive Vice President and General Fund
Officer.
All of the Executive Officers are located at the following
address: First Union National Bank of North Carolina, One First
Union Center, Charlotte, NC 28288.
(b) For a description of the other business of the sub-adviser to
First Union Emerging Markets Growth Portfolio ("Emerging
Makrets Growth Fund"), see the section entitled "Management of
First Union Funds-Sub-Advisers-Emerging Markets Growth Fund"
in Part A.
The Principals and principal executive officers of the
Emerging Markets Growth Fund's Sub-Adviser, and the Members of
the Advisory Board of the Sub-Adviser, are set forth in the
following tables. Unless otherwise noted, the position listed
under Other Stubstantial Business, Profession, Vocation or
Employment is with Marvin & Palmer Associates, Inc.:
MARVIN & PALMER ASSOCIATES, INC.
Other Substantial
Position With Business, Profession,
Name the Sub-Adviser Vocation or Employment
---- --------------- ----------------------
David F. Marvin, CFA Chairman Portfolio Manager-
Americas & Currency
Stanley Palmer, CFA President Portfolio Manager-
Non-U.S.
Karen T. Buckley Senior Vice President and
Chief Financial Officer
Jon A. Stiklorius Senior Vice President
Eugene J. Mulvaney Senior Vice President
Terry B. Mason Vice President Portfolio Manager-
Non-U.S.
Jay F. Middleton Vice President Portfolio Manager-
Americas
Todd D. Marvin Vice President Portfolio Manager-
Non-U.S.
William Nord Vice President
Robert P. Sanna Vice President
David L. Schaen Vice President
Raymond J. Deschenes Vice President
ADVISORY BOARD MEMBERS
Irving S. Shapiro Paul Craig Roberts
William C. Lickle The Hon. Charles J. Pilliod, Jr.
Charles L. Brown Dr.-Ing. Klaus G. Lederer
Alexander F. Giacco The Rt. Hon. Lord Moore, P.C.
(c) For a description of the other business of the sub-adviser to
First Union International Equity Portfolio ("International
Equity Fund"), see the section entitled "Management of First
Union Funds-Sub-Advisers-International Equity Fund" in Part A.
The Trustees and principal executive officers of the
International Equity Fund's Sub-Adviser, and the Directors and
officers of the Fund's Sub-Adviser, are set forth in the
following tables. Unless otherwise noted, the position listed
under Other Substantial Business, Profession, Vocation or
Employment is with Boston International Advisors, Inc.:
BOSTON INTERNATIONAL ADVISORS, INC.
Other Substantial
Position With Business, Profession,
Name the Sub-Adviser Vocation or Employment
---- --------------- ----------------------
Lyle H. Davis President and
Managing Director
Robert E. Denneen, Jr. Vice President Portfolio Manager
Dennis J. Fogarty Vice President Research Associate
Maureen A. Ghublikian Managing Director
Norman H. Meltz Vice President &
Managing Director
Patricia A. Thompson Vice President &
Treasurer
David A. Umstead Managing Director
BOARD OF DIRECTORS
George A. Chamberlain, III Philip A. Cooper
Lyle H. Davis Norman H. Meltz
David A. Umstead
Item 29. Principal Underwriters
Evergreen Funds Distributor, Inc. The Director and principal
executive officers are:
Director Michael C. Petrycki
Officers Robert A. Hering President
Michael C. Petrycki Vice President
Gordon Forrester Vice President
Lawrence Wagner VP, Chief Financial Officer
Steven D. Blecher VP, Treasurer, Secretary
Elizabeth Q. Solazzo Assistant Secretary
Thalia M. Cody Assistant Secretary
Evergreen Funds Distributor, Inc. acts as Distributor for the
following registered investment companies or separate series thereof:
The Evergreen Fund
The Evergreen Real Estate Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
The Evergreen Total Return Fund
The Evergreen American Retirement Trust:
The Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
The Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
The Evergreen Municipal Trust:
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Florida High Income Municipal Bond Fund
Evergreen Tax Exempt Money Market Fund
The Evergreen Money Market Fund
Evergreen Investment Trust
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Fixed Income Fund
Evergreen Managed Bond Fund
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond 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
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase NY 10577
First Union National Bank of North Carolina One First Union Center,
301 S. College Street, Charlotte, North Carolina 28288
State Street Bank and Fund Company P.O. Box 8609, Boston, MA 02266-8609
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
____________________
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
has duly caused this Post-Effective Amendment No. 40 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 5th day of July,
1995.
Evergreen Investment Trust
by /s/John J. Pileggi
-----------------------------
John J. Pileggi, Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 40 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
- ----------- ----- ----
/s/ John J. Pileggi
- ------------------------------- Vice President and June 30, 1995
John J. Pileggi Assistant Treasurer
/s/ James S. Howell
- ------------------------------- Trustee June 30, 1995
James S. Howell
/s/ Gerald M. McDonnell
- ------------------------------- Trustee June 30, 1995
Gerald M. McDonnell
/s/ Thomas L. McVerry
- ------------------------------- Trustee June 30, 1995
Thomas L. McVerry
/s/ William Walt Pettit
- ------------------------------- Trustee June 30, 1995
William Walt Pettit
/s/ Russell A. Salton, III, M.D
- ------------------------------- Trustee June 30, 1995
Russell A. Salton, III, M.D
/s/ Michael S. Scofield
- ------------------------------- Trustee June 30, 1995
Michael S. Scofield
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
1 Form of Amendment to Declaration of Trust
6 Distribution Agreement
7 Administration Agreement
7a Sub-Administrator Agreement
11 Consent of Independent
Accountants
16 Performance Quotation Computation
17 Financial Data Schedules
Other Exhibits:
Performance Schedule
December 31, 1994 Annual Report
<PAGE>
FIRST UNION FUNDS
Certificate of Amendment
The undersigned, being the Secretary of First Union Funds (hereinafter
referred to as the "Trust"), a trust with transferable shares of the type
commonly called a Massachusetts business trust, DOES HEREBY CERTIFY that,
pursuant to the authority conferred upon the Trustees of the Trust by Article
IX, Section 7 of the Agreement and Declaration of Trust, dated August 30, 1984,
and as amended on December 30, 1988 and December 18, 1992, (and as so amended,
referred to as the "Declaration of Trust"), and by the affirmative vote of a
Majority of the Trustees at a meeting duly called and held on June 15, 1995, the
Declaration of Trust is hereby amended as follows:
1. Effective July 7, 1995, Section 1 of Article 1 from the Declaration
of Trust is amended to change the name of the Trust to be "Evergreen Investment
Trust";
2. Effective July 7, 1995, the names of the portfolios of the Trust set
forth in the left-hand column below are amended to be the new names set forth in
the right-hand column below.
Old Name New Name
First Union U.S. Government Portfolio Evergreen U.S. Government Fund
First Union Balanced Portfolio Evergreen Balanced Fund
First Union Utility Portfolio Evergreen Utility Fund
First Union Value Portfolio Evergreen Value Fund
First Union Fixed Income Portfolio Evergreen Fixed Income Fund
First Union Managed Bond Portfolio Evergreen Managed Bond Fund
First Union Emerging Markets Growth
Portfolio Evergreen Emerging Markets Growth Fund
First Union International Equity Evergreen International Equity Fund
Portfolio
First Union Treasury Money Market Evergreen Treasury Money Market Fund
Portfolio
First Union Florida Municipal Bond
Portfolio Evergreen Florida Municipal Bond Fund
First Union Georgia Municipal Bond
Portfolio Evergreen Georgia Municipal Bond Fund
First Union North Carolina Municipal Evergreen North Carolina Municipal
Bond Portfolio Bond Fund
First Union South Carolina Municipal Evergreen South Carolina Municipal
Bond Portfolio Bond Fund
First Union Virginia Municipal Bond
Portfolio Evergreen Virginia Municipal Bond Fund
First Union High Grade Tax Free Evergreen High Grade Tax Free Fund
Portfolio
IN WITNESS WHEREOF, the undersigned has set his/her hand and seal this
_____ day of _____, 199_.
__________________________
Secretary
ACKNOWLEDGMENT
STATE OF MASSACHUSETTS )
) ss.
COUNTY OF SUFFOLK ) __________, 199__
Then personally appeared the above-named ______________ and
acknowledged the foregoing instrument to be his/her free act and deed.
Before me
___________________________________
Notary Public
My commission expires: ____________
DISTRIBUTION AGREEMENT
WHEREAS, Evergreen Investment Trust (the "Trust"), has adopted one or
more Plans of Distribution with respect to certain Classes of shares of its
separate investment series (each a "Plan", or collectively the "Plans") pursuant
to Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act") which Plans authorize the Trust on behalf of the Funds to enter into
agreements regarding the distribution of such Classes of shares (the "Shares")
of the separate investment series of the Trust (the "Funds") set forth on
Exhibit A; and
WHEREAS, the Trust has agreed that Evergreen Funds Distributor, Inc. (the
"Distributor"), a Delaware corporation, shall act as the distributor of the
Shares; and
WHEREAS, the Distributor agrees to act as distributor of the Shares for the
period of this Distribution Agreement (the "Agreement");
NOW, THEREFORE, in consideration of the agreements hereinafter contained,
it is agreed as follows:
1. Services as Distributor
1.1. The Distributor agrees to use appropriate efforts to promote each
Fund and to solicit orders for the purchase of Shares and will undertake such
advertising and promotion as it believes reasonable in connection with such
solicitation The services to be performed hereunder by the Distributor are
described in more detail in Section 7 hereof. . In the event that the Trust
establishes additional investment series with respect to which it desires to
retain Evergreen Funds Distributor, Inc. to act as distributor for one or more
Classes hereunder, it shall promptly notify the Distributor in writing. If the
Distributor is willing to render such services it shall notify the Trust in
writing whereupon such portfolio shall become a Fund and its designated Classes
of shares of beneficial interest shall become Shares hereunder.
1.2. All activities by the Distributor and its agents and employees as
the distributor of Shares shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act by the Securities and Exchange Commission (the
"Commission") or any securities association registered under the Securities
Exchange Act of 1934, as amended.
1.3 In selling the Shares, the Distributor shall use its best efforts
in all respects duly to conform with the requirements of all Federal and state
laws relating to the sale of such securities. Neither the Distributor, any
selected dealer or any other person is authorized by the Trust to give any
information or to make any representations, other than those contained in the
Trust's registration statement (the "Registration Statement") or related Fund
prospectus and statement of additional information ("Prospectus and Statement of
Additional Information") and any sales literature specifically approved by the
Trust.
1.4 The Distributor shall adopt and follow procedures, as approved by
the officers of the Trust, for the confirmation of sales to investors and
selected dealers, the collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the National Association of
Securities Dealers, Inc. (the "NASD"), as such requirements may from time to
time exist.
1.5. The Distributor will transmit any orders received by it for
purchase or redemption of Shares to the transfer agent and custodian for the
applicable Fund.
1.6. Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Trust's officers may decline to accept any orders for, or make any
sales of Shares until such time as those officers deem it advisable to accept
such orders and to make such sales.
1.7. The Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others. The
Distributor shall offer and sell Shares only to such selected dealers as are
members, in good standing, of the NASD.
1.8 The Distributor agrees to adopt compliance standards, in a form
satisfactory to the Trust, governing the operation of the multiple class
distribution system under which Shares are offered.
2. Duties of the Trust.
2.1. The Trust agrees at its own expense to execute any and all
documents and to furnish, at its own expense, any and all information and
otherwise to take all actions that may be reasonably necessary in connection
with the qualification of Shares for sale in such states as the Trust and the
Distributor may designate.
2.2. The Trust shall furnish from time to time, for use in connection
with the sale of Shares such information with respect to the Funds and the
Shares as the Distributor may reasonably request; and the Trust warrants that
any such information shall be true and correct. Upon request, the Trust shall
also provide or cause to be provided to the Distributor: (a) unaudited
semi-annual statements of each Fund's books and accounts, (b) quarterly earnings
statements of each Fund, (c) a monthly itemized list of the securities in each
Fund, (d) monthly balance sheets as soon as practicable after the end of each
month, and (e) from time to time such additional. information regarding each
Fund's financial condition as the Distributor may reasonably request.
3. Representations of the Trust.
3.1. The Trust represents to the Distributor that it is registered
under the 1940 Act and that the Shares of each of the Funds have been registered
under the Securities Act of 1933, as amended (the "Securities Act"). The Trust
will file such amendments to its Registration Statement as may be required and
will use its best efforts to ensure that such Registration Statement remains
accurate.
4. Indemnification.
4.1. The Trust shall indemnify and hold harmless the Distributor and
each person, if any, who controls the Distributor within the meaning of Section
15 of the Securities Act against any loss, liability, claim, damage or expense
(including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damage or expense and reasonable counsel fees incurred in
connection therewith), which the Distributor or such controlling person may
incur under the Securities Act or under common law or otherwise, arising out of
or based upon any untrue statement, or alleged untrue statement, of a material
fact contained in the Registration Statement, as from time to time amended or
supplemented, any prospectus or annual or interim report to shareholders of the
Trust, or arising out of or based upon any omission, or alleged omission, to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Trust in
connection therewith by or on behalf of the Distributor; provided, however, that
in no case (i) is the indemnity of the Trust in favor of the Distributor and any
such controlling persons to be deemed to protect such Distributor or any such
controlling persons thereof against any liability to the Trust or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of the reckless disregard of their
obligations and duties under this Agreement; or (ii) is the Trust to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or such controlling persons, as the case maybe, shall have notified
the Trust in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon the Distributor or such controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Trust of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. The Trust will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if the Trust elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Trust elects to assume the defense
of any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Trust does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or-defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
The Trust shall promptly notify the Distributor of the commencement of any
litigation or proceed against it or any of its officers or directors in
connection with the issuance or sale of any of the shares.
4.2. The Distributor shall indemnify and hold harmless the Trust and
each of its directors and officers and each person, if any, who controls the
Trust against any loss, liability, claim, damage or expense described in the
foregoing indemnity contained in paragraph 4.1, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to the Trust in writing by or on behalf of the Distributor
for use in connection with the Registration Statement, as from time to time
amended, or the annual or interim reports to shareholders. In case any action
shall be brought against the Trust or any persons so indemnified, in respect of
which indemnity may be sought against the Distributor, the Distributor shall
have the rights and duties given to the Trust, and the Trust and each person so
indemnified shall have the rights and duties given to the Distributor by the
provisions of paragraph 4.1.
5. Offering of Shares.
5.1. None of the Shares shall be offered by either the Distributor or
the Trust under any of the provisions of this Agreement, and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust, if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus and statement of
additional information as required by Section 10(b) (2) of the Securities Act,
as amended, is not on file with the Commission; provided, however, that nothing
contained in this paragraph 5.1 shall in any way restrict or have any
application to or bearing upon the Trust's obligation to repurchase Shares from
any shareholder in accordance with the provisions of the prospectus of each Fund
or the Trust's prospectus or Declaration of Trust.
6. Amendments to Registration Statement and Other Material Events.
6.1. The Trust agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor: (a) of any
request or action taken by the Commission which is material to the Distributor's
obligations hereunder or (b) any material fact of which the Trust becomes aware
which affects the Distributor's obligations hereunder.
For purposes of this section, informal requests by or acts of
the Staff of the Commission shall not be deemed actions of or requests by the
Commission.
7. Compensation of Distributor.
7.1. (a) As promptly as possible after the first Business Day (as
defined in the Prospectus) of each month this Agreement is in effect, the Trust
shall compensate the Distributor for its distribution services rendered during
the previous month (but not prior to the Commencement Date); by making payment
to the Distributor in the amounts set forth on Exhibit A annexed hereto with
respect to each Class of Shares of each Fund to which this Agreement is
applicable. The compensation by the Trust of the Distributor is authorized
pursuant to the Plan or Plans adopted by the Trust pursuant to Rule 12b-l under
the 1940 Act.
(b) Under this Agreement, the Distributor shall: (i) make
payments to securities dealers and others engaged in the sale of Shares; (ii)
make payments of principal and interest in connection with the financing of
commission payments made by the Distributor in connection with the sale of
Shares (iii) incur the expense of obtaining such support services, telephone
facilities and shareholder services as may reasonably be required in connection
with its duties hereunder; (iv) formulate and implement marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (v)
prepare, print and distribute sales literature; (vi) prepare, print and
distribute Prospectuses of the Funds and reports for recipients other than
existing shareholders of the Funds; and (vii) provide to the Trust such
information, analyses and opinions with respect to marketing and promotional
activities as the Trust may, from time to time, reasonably request.
(c) The Distributor shall prepare and deliver reports to the
Treasurer of the Trust on a regular, at least monthly, basis, showing the
distribution expenditures incurred by the Distributor in connection with its
services rendered pursuant to this Agreement and the Plan and the purposes
therefor, as well as any supplemental reports as the Trustees, from time to
time, may reasonably request.
(d) The Distributor may retain as a sales charge the difference
between the current offering price of Shares, as set forth in the current
prospectus for each Fund, and net asset value, less any reallowance that is
payable in accordance with the sales charge schedule in effect at any given time
with respect to the Shares
(e) The Distributor may retain any contingent deferred sales
charge ("CDSCs") payable with respect to the redemption of any Shares, provided
however, that any CDSCs received by the Distributor shall first be applied by
the Distributor or its assignee to any outstanding amounts payable or which may
in the future be payable by the Distributor or its assignee under financing
arrangements entered into in connection with the payment of commissions on the
sale of Shares.
(f) The Distributor may sell, assign, pledge or hypothecate its
rights to receive compensation hereunder. The Trust acknowledges that, in
connection with the financing of commission payments made by the Distributor in
connection with the sale of Shares, the Distributor may sell and assign, and/or
has sold and assigned, to Mutual Fund Funding 1994-1 the Distributor's interest
in certain items of compensation payable to the Distributor hereunder, and that
Mutual Fund Funding 1994-1 in turn may pledge or assign, and/or has assigned,
such interest to First Union Corporation as lender to secure such financing. It
is understood that an assignee may not further sell, assign, pledge, or
hypothecate its right to receive such reimbursement unless such sale,
assignment, pledge or hypothecation has been approved by the vote of the Board
of the Trust, including a majority of the Disinterested Trustees, cast in person
at a meeting called for the purpose of voting on such approval.
(g) In addition to the foregoing, and in respect of its services
hereunder and for similar services rendered to other investment companies for
which First Union National Bank of North Carolina (the "Investment Adviser")
serves as investment adviser, the Investment Adviser may pay to the Distributor
an additional fee to be paid in such amount and manner as the Investment Adviser
and Distributor may agree from time to time.
8. Confidentiality, Non-Exclusive Agency.
8.1. The Distributor agrees on behalf of itself and its employees to
treat confidentially and as proprietary information of the Trust all records and
other information relative to the Funds and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and to obtain approval in writing by
the Trust, which approval shall not be unreasonably withheld and may not be
withheld where the Distributor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Trust.
9. Term.
9.1. This Agreement shall continue until June 30, 1996 and thereafter
for successive annual periods, provided such continuance is specifically
approved at least annually by (i) a vote of the majority of the Trustees of the
Trust and (ii) a vote of the majority of those Trustees of the Trust who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan, in this Agreement or any agreement
related to the Plan (the "Independent Trustees") by vote cast in person at a
meeting called for the purpose of voting on such approval. This Agreement is
terminable at any time, with respect to the Trust, without penalty, (a) on not
less than 60 days' written notice by vote of a majority of the Independent
Trustees, or by vote of the holders of a majority of the outstanding voting
securities of the Trust, or (b) upon not less than 60 days' written notice by
the Distributor. This Agreement may remain in effect with respect to a Fund even
if it has been terminated in accordance with this paragraph with respect to one
or more other Funds of the Trust. This Agreement will also terminate
automatically in the event of its assignment. (As used in this Agreement, the
terms "majority of the outstanding voting securities", "interested persons", and
"assignment" shall have the same meaning as such terms have in the 1940 Act.)
10. Miscellaneous.
10.1. This Agreement shall be governed by the laws of the State
of New York.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their constructions or effect.
10.3 The obligations of the Trust hereunder are not personally binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust and only the Trust's
property shall be bound.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the 7th day of July, 1995.
EVERGREEN FUNDS DISTRIBUTOR, INC. EVERGREEN INVESTMENT TRUST
By: /s/Gordon Forrester By: /s/ John J. Pileggi
Title: Gordon Forrester, Vice President Title: John J. Pileggi, President
<PAGE>
EXHIBIT A
To Distribution Agreement between Evergreen Funds Distributor, Inc.and
FIRST UNION FUNDS
FUNDS AND CLASSES COVERED BY THIS AGREEMENT:
Evergreen Value Fund CLASS A SHARES Evergreen Balanced Fund CLASS A SHARES
CLASS B SHARES CLASS B SHARES
CLASS C SHARES CLASS C SHARES
Evergreen International CLASS A SHARES Evergreen Emerging CLASS A SHARES
Equity Fund CLASS B SHARES Markets Growth Fund CLASS B SHARES
CLASS C SHARES CLASS C SHARES
Evergreen Utility Fund CLASS A SHARES Evergreen Value Fund CLASS A SHARES
CLASS B SHARES CLASS B SHARES
CLASS C SHARES CLASS C SHARES
Evergreen U.S. CLASS A SHARES Evergreen Fixed Income CLASS A SHARES
Government Fund CLASS B SHARES Fund CLASS B SHARES
CLASS C SHARES CLASS C SHARES
Evergreen Managed CLASS A SHARES Evergreen Florida CLASS A SHARES
Bond Fund CLASS B SHARES Municipal Bond Fund CLASS B SHARES
Evergreen Georgia CLASS A SHARES Evergreen North Carolina CLASS A SHARES
Municipal Bond Fund CLASS B SHARES Municipal Bond Fund CLASS B SHARES
Evergreen South Carolina CLASS A SHARES Evergreen Virginia CLASS A SHARES
Municipal Bond Fund CLASS B SHARES Municipal Bond Fund CLASS B SHARES
Evergreen High Grade CLASS A SHARES Evergreen Treasury CLASS A SHARES
Tax Free Fund CLASS B SHARES Money Market Fund
Distribution Fees
1. During the term of this Agreement, the Trust will pay to the Distributor a
quarterly fee with respect to each of the Funds and Classes of Shares thereof
listed above. This fee will be computed at the annual rate of .25 of 1% of the
average net asset value on an annual basis of Class A Shares of each Fund; and
.75 of 1% of the average net asset value on an annual basis of Class B and Class
C Shares of each Fund.
2. For the quarterly period in which the Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the quarter.
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to
the Distribution Agreement between the parties dated June 30, 1995 to be
executed by their officers designated below as of the 30th day of June, 1995.
EVERGREEN FUNDS DISTRIBUTOR, INC. EVERGREEN INVESTMENT TRUST
By: /s/Gordon Forrester By: /s/ John J. Pileggi
Title: Gordon Forrester, Vice President Title: John J. Pileggi, President
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this __th
day of _____ 1995 between First Union Funds, a Massachusetts business trust
(herein called the "Trust"), and Evergreen Asset Management Corp., a New York
corporation (herein called "EAMC").
WHEREAS, the Trust is a Massachusetts business trust
consisting of one or more portfolios which operates as an open-end management
investment company and is so registered under the Investment Company Act of
1940; and
WHEREAS, the Trust desires to retain EAMC as its Administrator
to provide it with administrative services, and EAMC is willing to render such
services.
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Trust hereby appoints EAMC as
Administrator of the Trust and each of its portfolios on the terms and
conditions set forth in this Agreement; and EAMC hereby accepts such appointment
and agrees to perform the services and duties set forth in Section 2 of this
Agreement in consideration of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Trustees of the Trust, EAMC will hereafter
provide facilities, equipment and personnel to carry out the following
administrative services for operation of the business and affairs of the Trust
and each of its portfolios:
(a) prepare, file and maintain the Trust's governing documents,
including the Declaration of Trust (which has previously been prepared and
filed), the By- laws, minutes of meetings of Trustees and shareholders, and
proxy statements for meetings of shareholders;
(b) prepare and file with the Securities and Exchange Commission and
the appropriate state securities authorities the registration statements for the
Trust and the Trust's shares and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements, and such other
documents as may be necessary or convenient to enable the Trust to make a
continuous offering of its shares;
(c) prepare, negotiate and administer contracts on behalf of the Trust
with, among others, the Trust's distributor, custodian and transfer agent;
(d) supervise the Trust's fund accounting agent in the maintenance of
the Trust's general ledger and in the preparation of the Trust's financial
statements, including oversight of expense accruals and payments and the
determination of the net asset value of the Trust's assets and of the Trust's
shares, and of the declaration and payment of dividends and other distributions
to shareholders;
(e) calculate performance data of the Trust for dissemination to
information services covering the investment company industry;
(f) prepare and file the Trust's tax returns;
(g) examine and review the operations of the Trust's custodian and
transfer agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) prepare various shareholder reports;
(j) assist with the design, development and operation of new portfolios
of the Trust;
(k) coordinate shareholder meetings;
(l) provide general compliance services; and
(m) advise the Trust and its Trustees on matters concerning the Trust
and its affairs.
The foregoing, along with any additional services that EAMC shall agree
in writing to perform for the Trust hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any duties,
functions, or services to be performed for the Trust by the Trust's investment
adviser, distributor, custodian or transfer agent pursuant to their agreements
with the Trust.
3. Expenses. EAMC shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide the Administrative Services to the Trust. The Trust shall
be responsible for all other expenses incurred by EAMC on behalf of the Trust,
including without limitation postage and courier expenses, printing expenses,
registration fees, filing fees, fees of outside counsel and independent
auditors, insurance premiums, fees payable to Trustees who are not EAMC
employees, and trade association dues.
4. Compensation. For the Administrative Services provided, the Trust
hereby agrees to pay and EAMC hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee, calculated daily and
payable monthly, at an annual rate determined in accordance with the table
below.
Aggregate Daily Net Assets of
Funds Administered by EAMC
For Which EAMC or First Union
Administrative National Bank of North Carolina
Fee Serve as Investment Adviser
.050% on the first $7 billion
.035% on the next $3 billion
.030% on the next $5 billion
.020% on the next $10 billion
.015% on the next $5 billion
.010% on assets in excess of $30 billion
Each portfolio of the Trust shall pay a portion of the administrative fee equal
to the rate determined above times that portfolios average annual daily net
assets.
5. Responsibility of Administrator. EAMC shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. EAMC shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Any person, even though also an officer,
director, partner, employee or agent of EAMC, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with the duties of EAMC hereunder) to be
rendering such services to or acting solely for the Trust and not as an officer,
director, partner, employee or agent or one under the control or direction of
EAMC even though paid by EAMC.
6. Duration and Termination.
(a) This Agreement shall be in effect until July____, 1997, and shall
continue in effect from year to year thereafter, provided it is approved, at
least annually, by a vote of a majority of Trustees of the Trust including a
majority of the disinterested Trustees.
(b) This Agreement may be terminated at any time, without payment of
any penalty, on sixty (60) day's prior written notice by a vote of a majority of
the Trust's Trustees or by EAMC.
7. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. Notices. Notices of any kind to be given to the Trust hereunder by
EAMC shall be in writing and shall be duly given if delivered to the Trust and
to its investment adviser at the following address: First Union National Bank of
North Carolina, One First Union Center, Charlotte, NC 28288. Notices of any kind
to be given to EAMC hereunder by the Trust shall be in writing and shall be duly
given if delivered to EAMC at 2500 Westchester Avenue, Purchase, New York 10577,
Attention: General Counsel.
9. Limitation of Liability. EAMC is hereby expressly put on notice of
the limitation of liability as set forth in Article IX of the Declaration of
Trust and agrees that the obligations pursuant to this Agreement of a particular
portfolio and of the Trust with respect to that particular portfolio be limited
solely to the assets of that particular portfolio, and EAMC shall not seek
satisfaction of any such obligation from the assets of any other portfolio, the
shareholders of any portfolio, the Trustees, officers, employees or agents of
the Trust, or any of them.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provison of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section 5
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by New
York law; provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
FIRST UNION FUNDS
By____________________
Its:__________________
Attest:_________________
Its:_______________________
EVERGREEN ASSET MANAGEMENT CORP.
By_________________________________________
Its:_______________________________________
Attest:________________________
Its:___________________________
SUB-ADMINISTRATOR AGREEMENT
This Sub-Administrator Agreement is made as of this 7th day of
July, 1995 between First Union Funds, a Massachusetts business trust (herein
called the "Trust"), and Furman Selz Incorporated, a New York corporation
(herein called "Furman").
WHEREAS, the Trust is a Massachusetts business trust
consisting of one or more portfolios which operates as an open-end management
investment company and is so registered under the Investment Company Act of
1940; and
WHEREAS, the Trust has appointed Evergreen Asset Management
Corp. ("EAMC") as administrator to the Trust and desires to retain Furman as its
Sub-Administrator to provide it with certain additional administrative services
not provided for under its arrangement with EAMC ("Sub-Administrative
Services"), and Furman is willing to render such services.
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Sub-Administrator. The Trust hereby appoints Furman
as Sub-Administrator of the Trust and each of its portfolios on the terms and
conditions set forth in this Agreement; and Furman hereby accepts such
appointment and agrees to perform the services and duties set forth in Section 2
of this Agreement in consideration of the compensation provided for in Section 4
hereof.
2. Services and Duties. As Sub-Administrator, and subject to the
supervision and control of the Trustees of the Trust, Furman will hereafter
provide facilities, equipment and personnel to carry out the following
Sub-Administrative services to assist in the operation of the business and
affairs of the Trust and each of its portfolios:
(a) provide individuals reasonably acceptable to the Trustees of the
Trust for nomination, appointment or election as officers of the Trust
and who will be responsible for the management of certain of the
Trust's affairs as determined from time to time by the Trustees;
(b) review filings with the Securities and Exchange Commission and
state securities authorities that have been prepared on behalf of the
Trust by the administrator and take such actions as may be reasonably
requested by the administrator to effect such filings;
(c) verify, authorize and transmit to the Trust's Custodian, Transfer
Agent and Dividend Disbursing Agent all necessary instructions for the
disbursement of cash, issuance of shares, tender and receipt of
portfolio securities, payment of expenses and payment of dividends; and
(d) advise the Trust and its Trustees on matters concerning the Trust
and its affairs.
Furman may, in addition, agree in writing to perform additional
Sub-Administrative Services for the Trust. Sub-Administrative Services shall not
include any duties, functions, or services to be performed for the Trust by the
Trust's investment adviser, administrator, distributor, custodian or transfer
agent pursuant to their agreements with the Trust.
3. Expenses. Furman shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide the Sub-Administrative Services to the Trust. The Trust
shall be responsible for all other expenses incurred by Furman on behalf of the
Trust, including without limitation postage and courier expenses, printing
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, insurance premiums, fees payable to Trustees who are not
Furman employees, and trade association dues.
4. Compensation. For the Sub-Administrative Services provided, the
Trust hereby agrees to pay and Furman hereby agrees to accept as full
compensation for its services rendered hereunder a sub-administrative fee,
calculated daily and payable monthly at an annual rate determined in accordance
with the table below.
Aggregate Daily Net Assets of
Sub-Administrative Funds Administered by EAMC
Fee as a % of For Which EAMC or First Union
Average Annual National Bank of North Carolina
Daily Net Assets Serve as Investment Adviser
.0100% on the first $7 billion
.0075% on the next $3 billion
.0050% on the next $15 billion
.0040% on assets in excess of $25 billion
Each portfolio of the Trust shall pay a portion of the sub-administrative fee
equal to the rate determined above times that portfolio's average annual daily
net assets.
5. Responsibility of Sub-Administrator. Furman shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Furman shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Any person, even though also an officer,
director, partner, employee or agent of Furman, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with the duties of Furman hereunder) to be
rendering such services to or acting solely for the Trust and not as an officer,
director, partner, employee or agent or one under the control or direction of
Furman even though paid by Furman.
6. Duration and Termination.
(a) This Agreement shall be in effect until July____, 1997, and shall
continue in effect from year to year thereafter, provided it is approved, at
least annually, by a vote of a majority of Trustees of the Trust, including a
majority of the disinterested Trustees.
(b) This Agreement may be terminated at any time, without payment of
any penalty, on sixty (60) day's prior written notice by a vote of a majority of
the Trust's Trustees or by Furman.
7. Amendment. No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
8. Notices. Notices of any kind to be given to the Trust hereunder by Furman
shall be in writing and shall be duly given if delivered to the Trust and to its
investment adviser at the following address: First Union National Bank of North
Carolina, One First Union Center, Charlotte, NC 28288. Notices of any kind to be
given to Furman hereunder by the Trust shall be in writing and shall be duly
given if delivered to Furman at 237 Park Avenue, New York, New York 10022,
Attention: General Counsel.
9. Limitation of Liability. Furman is hereby expressly put on notice of the
limitation of liability as set forth in Article IX of the Declaration of Trust
and agrees that the obligations pursuant to this Agreement of a particular
portfolio and of the Trust with respect to that particular portfolio be limited
solely to the assets of that particular portfolio, and Furman shall not seek
satisfaction of any such obligation from the assets of any other portfolio, the
shareholders of any portfolio, the Trustees, officers, employees or agents of
the Trust, or any of them.
10. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provison of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby. Subject to the provisions of Section 5 hereof, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
FIRST UNION FUNDS
By____________________
Its:____________________
Attest:_________________
Its:____________________
FURMAN SELZ INCORPORATED
By_________________________________________
Its:_______________________________________
Attest:________________________
Its:___________________________
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg
SK
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
First Union Funds:
With respect to the Prospectuses and Statements of Additional
Information included in this Post Effective Amendment No. 40 to the Registration
Statement on Form N-1A of Evergreen Investment Trust, formerly First Union
Funds, we consent to the use of our reports, dated February 13, 1995,
incorporated by reference and to the references to our Firm under the headings
"Financial Highlights" in Part A of the Registration Statement and "Financial
Statements" in Part B of the Registration Statement.
o First Union Money Market Portfolio;
o First Union Tax Free Money Market Portfolio;
o First Union Treasury Money Market Portfolio;
o First Union Fixed Income Portfolio;
o First Union Managed Bond Portfolio'
o First Union U.S. Government Portfolio;
o First Union Balanced Portfolio;
o First Union Unity Portfolio;
o First Union Value Portfolio;
o First Union Emerging Markets Growth Portfolio;
o First Union International Equity Portfolio;
o First Union Florida Municipal Bond Portfolio;
o First Union Georgia Municipal Bond Portfolio;
o First Union North Carolina Municipal Bond Portfolio;
o First Union South Carolina Municipal Bond Portfolio;
o First Union Virginia Municipal Bond Portfolio; and
o First Union High Grade Tax Free Portfolio.
By: KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
July 5, 1995
<TABLE>
<CAPTION>
Exhibit 16 (i) under Form N-1A
Exhibit 99 under Item 601/Reg.
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Emerging - A Price/
Share= $10.00
Return Since Inception
ending 12/31/94 NAV= $10.00
FYE: December 31
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Begin Capital Reinvest
Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period
Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares
Price
Value
9/5/94 100.000 0.000000000 0.00000 $10.00 100.000
$10.00
$1,000.00
12/31/94 100.000 0.000000000 0.00000 $8.17 100.000
$8.17
$817.00
$1,000 (1+T) = End Value
T = -18.30%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Emerging - B Price/
Share= $10.50
Return Since Inception
ending 12/31/94 NAV= $10.00
FYE: December 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest
Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares
Price
Value
9/5/94 95.238 0.000000000 0.00000 $10.00 95.238
$10.00
$952.38
12/31/94 95.238 0.000000000 0.00000 $8.17 95.238
$8.17
$778.10
$1,000 (1+T) = End Value
T = -22.19%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Emerging - C Price/
Share= $10.00
Return Since Inception
ending 12/31/94 NAV= $10.00
FYE: December 31
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Begin Capital Reinvest
Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period
Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares
Price
Value
9/5/94 100.000 0.000000000 0.00000 $10.00 100.000
$10.00
$1,000.00
12/31/94 100.000 0.000000000 0.00000 $8.16 100.000
$7.75
$775.00
$1,000 (1+T) = End Value
T = -22.50%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Emerging - D Price/
Share= $10.00
Return Since Inception
ending 12/31/94 NAV= $10.00
FYE: December 31
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Begin Capital Reinvest
Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period
Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares
Price
Value
9/5/94 100.000 0.000000000 0.00000 $10.00 100.000
$10.00
$1,000.00
12/31/94 100.000 0.000000000 0.00000 $8.16 100.000
$8.08
$808.00
$1,000 (1+T) = End Value
T = -19.20%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Int'l Eq - A Price/
Share= $10.00
Return Since Inception
ending 12/31/94 NAV= $10.08
FYE: December 31
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Begin Capital Reinvest
Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period
Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares
Price
Value
9/2/94 100.000 0.000000000 0.00000 $10.08 100.000
$10.08
$1,008.00
12/21/94 100.000 0.006000000 0.00140 $9.35 100.079
$9.35
$935.74
12/31/94 100.079 0.000000000 0.00000 $9.49 100.079
$9.49
$949.75
$1,000 (1+T) = End Value
T = -5.02%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Int'l Eq - B Price/
Share= $10.50
Return Since Inception
ending 12/31/94 NAV= $10.00
FYE: December 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares Price Value
9/1/94 95.238 0.000000000 0.00000 $10.00 95.238
$10.00
$952.38
12/21/94 95.238 0.001000000 0.00140 $9.35 95.263
$9.35
$890.70
12/31/94 95.263 0.000000000 0.00000 $9.49 95.263
$9.49
$904.04
$1,000 (1+T) = End Value
T = -9.60%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Int'l Eq - C Price/
Share= $10.00
Return Since Inception
ending 12/31/94 NAV= $10.00
FYE: December 31
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Begin Capital Reinvest
Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period
Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares
Price
Value
9/1/94 100.000 0.000000000 0.00000 $10.00 100.000
$10.00
$1,000.00
12/21/94 100.000 0.000000000 0.00140 $9.35 100.015
$9.35
$935.14
12/31/94 100.015 0.000000000 0.00000 $9.48 100.015
$9.01
$901.13
$1,000 (1+T) = End Value
T = -9.89%
</TABLE>
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
First Un. Int'l Eq - D Price/
Share= $10.00
Return Since Inception
ending 12/31/94 NAV= $10.00
FYE: December 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest
Ending Total
DECLARED: ANNUALLY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: ANNUALLY Dates Shares /Share /Share /Share Shares
Price
Value
9/1/94 100.000 0.000000000 0.00000 $10.00 100.000
$10.00
$1,000.00
12/21/94 100.000 0.000000000 0.00140 $9.35 100.015
$9.35
$935.14
12/31/94 100.015 0.000000000 0.00000 $9.48 100.015
$9.39
$939.14
$1,000 (1+T) = End Value
T = -6.09%
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> Evergreen Balanced Fund Class A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 906,344,902
<INVESTMENTS-AT-VALUE> 923,650,524
<RECEIVABLES> 7,421,951
<ASSETS-OTHER> 28,949
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 931,101,424
<PAYABLE-FOR-SECURITIES> 3,397,140
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,790,923
<TOTAL-LIABILITIES> 11,188,063
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 902,497,045
<SHARES-COMMON-STOCK> 3,671,118
<SHARES-COMMON-PRIOR> 2,901,446
<ACCUMULATED-NII-CURRENT> 495,614
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (384,920)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,305,622
<NET-ASSETS> 41,009,712
<DIVIDEND-INCOME> 16,691,618
<INTEREST-INCOME> 25,575,851
<OTHER-INCOME> 0
<EXPENSES-NET> 6,774,853
<NET-INVESTMENT-INCOME> 35,492,616
<REALIZED-GAINS-CURRENT> 15,321,171
<APPREC-INCREASE-CURRENT> (72,298,630)
<NET-CHANGE-FROM-OPS> (21,484,843)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,519,114
<DISTRIBUTIONS-OF-GAINS> 699,327
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,428,629
<NUMBER-OF-SHARES-REDEEMED> 845,164
<SHARES-REINVESTED> 186,207
<NET-CHANGE-IN-ASSETS> 59,259,731
<ACCUMULATED-NII-PRIOR> 340,833
<ACCUMULATED-GAINS-PRIOR> (456)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,621,512
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,774,853
<AVERAGE-NET-ASSETS> 922,366,159
<PER-SHARE-NAV-BEGIN> 12.070
<PER-SHARE-NII> 0.430
<PER-SHARE-GAIN-APPREC> (0.710)
<PER-SHARE-DIVIDEND> 0.430
<PER-SHARE-DISTRIBUTIONS> 0.190
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.170
<EXPENSE-RATIO> 89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> Evergreen Balanced Fund Class B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 906,344,902
<INVESTMENTS-AT-VALUE> 923,650,524
<RECEIVABLES> 7,421,951
<ASSETS-OTHER> 28,949
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 931,101,424
<PAYABLE-FOR-SECURITIES> 3,397,140
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,790,923
<TOTAL-LIABILITIES> 11,188,063
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 902,497,045
<SHARES-COMMON-STOCK> 8,947,916
<SHARES-COMMON-PRIOR> 5,420,479
<ACCUMULATED-NII-CURRENT> 495,614
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (384,920)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,305,622
<NET-ASSETS> 100,051,739
<DIVIDEND-INCOME> 16,691,618
<INTEREST-INCOME> 25,575,851
<OTHER-INCOME> 0
<EXPENSES-NET> 6,774,853
<NET-INVESTMENT-INCOME> 35,492,616
<REALIZED-GAINS-CURRENT> 15,321,171
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> Evergreen Balanced Fund Class C
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 906,344,902
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<ACCUMULATED-GAINS-PRIOR> (456)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> Evergreen Balanced Fund Y Shares
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> Dec-31-1994
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<SHARES-COMMON-PRIOR> 62,962,620
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<OVERDISTRIBUTION-GAINS> 0
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<ACCUMULATED-GAINS-PRIOR> (456)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> Evergreen Emerging Markets Growth Fund Class A
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 9,824,308
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<EXPENSES-NET> 40,180
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<PER-SHARE-NAV-BEGIN> 10.000
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<PER-SHARE-GAIN-APPREC> (1.830)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> Evergreen Emerging Markets Growth Fund Class B
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 9,824,308
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<TOTAL-ASSETS> 8,475,705
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<TOTAL-LIABILITIES> 52,252
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,991,162
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<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3,717
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (103,062)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,468,364)
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<INTEREST-INCOME> 23,839
<OTHER-INCOME> 0
<EXPENSES-NET> 40,180
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<NUMBER-OF-SHARES-REDEEMED> 8,277
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<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> (0.020)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> Evergreen Emerging Markets Growth Fund Class C
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 9,824,308
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<ACCUMULATED-NET-GAINS> (103,062)
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<ACCUM-APPREC-OR-DEPREC> (1,468,364)
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<EXPENSES-NET> 40,180
<NET-INVESTMENT-INCOME> 3,717
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<PER-SHARE-NAV-BEGIN> 10.000
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> Evergreen Emerging Markets Growth Fund Y Shares
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 9,824,308
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<TOTAL-LIABILITIES> 52,252
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<OTHER-INCOME> 0
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<AVERAGE-NET-ASSETS> 7,222,755
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.010
<PER-SHARE-GAIN-APPREC> (1.840)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> Evergreen Fixed Income Fund Class A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 403,108,910
<INVESTMENTS-AT-VALUE> 378,307,627
<RECEIVABLES> 5,596,256
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<TOTAL-ASSETS> 383,904,411
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<OTHER-ITEMS-LIABILITIES> 1,615,293
<TOTAL-LIABILITIES> 1,615,293
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<SHARES-COMMON-STOCK> 2,009,397
<SHARES-COMMON-PRIOR> 2,193,753
<ACCUMULATED-NII-CURRENT> 219,997
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,974,370)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (24,801,283)
<NET-ASSETS> 19,126,757
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 29,194,972
<OTHER-INCOME> 0
<EXPENSES-NET> 2,781,015
<NET-INVESTMENT-INCOME> 26,413,957
<REALIZED-GAINS-CURRENT> (6,020,616)
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<NET-CHANGE-FROM-OPS> (10,769,593)
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<DISTRIBUTIONS-OF-INCOME> 1,390,210
<DISTRIBUTIONS-OF-GAINS> 1,063
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 496,948
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<NET-CHANGE-IN-ASSETS> (25,897,070)
<ACCUMULATED-NII-PRIOR> 43,154
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 2,022,773
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,781,015
<AVERAGE-NET-ASSETS> 404,221,272
<PER-SHARE-NAV-BEGIN> 10.420
<PER-SHARE-NII> 0.650
<PER-SHARE-GAIN-APPREC> (0.910)
<PER-SHARE-DIVIDEND> 0.640
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<EXPENSE-RATIO> 75
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> Evergreen Fixed Income Fund Class B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 403,108,910
<INVESTMENTS-AT-VALUE> 378,307,627
<RECEIVABLES> 5,596,256
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<TOTAL-ASSETS> 383,904,411
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<SHARES-COMMON-PRIOR> 849,941
<ACCUMULATED-NII-CURRENT> 219,997
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (24,801,283)
<NET-ASSETS> 17,624,970
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<NET-INVESTMENT-INCOME> 26,413,957
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<DISTRIBUTIONS-OF-GAINS> 679
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<NUMBER-OF-SHARES-SOLD> 1,377,400
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<NET-CHANGE-IN-ASSETS> (25,897,070)
<ACCUMULATED-NII-PRIOR> 43,154
<ACCUMULATED-GAINS-PRIOR> 65,625
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 2,022,773
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<GROSS-EXPENSE> 2,781,015
<AVERAGE-NET-ASSETS> 404,221,272
<PER-SHARE-NAV-BEGIN> 10.440
<PER-SHARE-NII> 0.580
<PER-SHARE-GAIN-APPREC> (0.920)
<PER-SHARE-DIVIDEND> 0.560
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<EXPENSE-RATIO> 150
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 11
<NAME> Evergreen Fixed Income Fund Class C
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 403,108,910
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<RECEIVABLES> 5,596,256
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</TABLE>
<TABLE> <S> <C>
<S> <C>
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<SERIES>
<NUMBER> 12
<NAME> Evergreen Fixed Income Fund Y Shares
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</TABLE>
<TABLE> <S> <C>
<S> <C>
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<SERIES>
<NUMBER> 13
<NAME> Evergreen Florida Municipal Bond Fund Class A
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</TABLE>
<TABLE> <S> <C>
<S> <C>
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<SERIES>
<NUMBER> 14
<NAME> Evergreen Florida Municipal Bond Fund Class B
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</TABLE>
<TABLE> <S> <C>
<S> <C>
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<SERIES>
<NUMBER> 15
<NAME> Evergreen Florida Municipal Bond Fund Y Shares
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 16
<NAME> Evergreen Georgia Municipal Bond Fund Class A
<PERIOD-TYPE> 12-MOS
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<INVESTMENTS-AT-COST> 8,195,670
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 17
<NAME> Evergreen Georgia Municipal Bond Fund Class B
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 18
<NAME> Evergreen Georgia Municipal Bond Fund Y Shares
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 19
<NAME> Evergreen High Grade Tax Free Fund Class A
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 20
<NAME> Evergreen High Grade Tax Free Fund Class B
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 96,691,204
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<ACCUM-APPREC-OR-DEPREC> (3,976,541)
<NET-ASSETS> 32,434,792
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7,261,577
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<EXPENSES-NET> 1,421,839
<NET-INVESTMENT-INCOME> 5,839,738
<REALIZED-GAINS-CURRENT> (912,236)
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<NET-CHANGE-FROM-OPS> (10,691,343)
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<DISTRIBUTIONS-OF-INCOME> 1,722,197
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<NUMBER-OF-SHARES-SOLD> 619,543
<NUMBER-OF-SHARES-REDEEMED> 1,088,820
<SHARES-REINVESTED> 102,516
<NET-CHANGE-IN-ASSETS> (47,952,744)
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<PER-SHARE-NAV-BEGIN> 11.160
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 21
<NAME> Evergreen High Grade Tax Free Fund Y Shares
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 96,691,204
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<NET-ASSETS> 4,318,440
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<DISTRIBUTIONS-OF-INCOME> 140,034
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<NUMBER-OF-SHARES-SOLD> 532,658
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<SHARES-REINVESTED> 1,287
<NET-CHANGE-IN-ASSETS> (47,952,744)
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<AVERAGE-NET-ASSETS> 120,153,198
<PER-SHARE-NAV-BEGIN> 10.920
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<PER-SHARE-GAIN-APPREC> (1.130)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 22
<NAME> Evergreen International Equity Fund Class A
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 33,619,561
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (32,131)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 2,544,906
<DIVIDEND-INCOME> 133,535
<INTEREST-INCOME> 22,775
<OTHER-INCOME> 0
<EXPENSES-NET> 91,351
<NET-INVESTMENT-INCOME> 64,959
<REALIZED-GAINS-CURRENT> (27,654)
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<NUMBER-OF-SHARES-SOLD> 271,932
<NUMBER-OF-SHARES-REDEEMED> 4,068
<SHARES-REINVESTED> 65
<NET-CHANGE-IN-ASSETS> 32,139,527
<ACCUMULATED-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 22,659,955
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> (0.520)
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<EXPENSE-RATIO> 126
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 23
<NAME> Evergreen International Equity Fund Class B
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 33,619,561
<INVESTMENTS-AT-VALUE> 32,529,132
<RECEIVABLES> 1,454,068
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<TOTAL-LIABILITIES> 2,357,572
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<PAID-IN-CAPITAL-COMMON> 33,215,142
<SHARES-COMMON-STOCK> 589,954
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 50,645
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (32,131)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,094,129)
<NET-ASSETS> 5,602,374
<DIVIDEND-INCOME> 133,535
<INTEREST-INCOME> 22,775
<OTHER-INCOME> 0
<EXPENSES-NET> 91,351
<NET-INVESTMENT-INCOME> 64,959
<REALIZED-GAINS-CURRENT> (27,654)
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<DISTRIBUTIONS-OF-GAINS> 811
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<NUMBER-OF-SHARES-SOLD> 601,778
<NUMBER-OF-SHARES-REDEEMED> 11,910
<SHARES-REINVESTED> 86
<NET-CHANGE-IN-ASSETS> 32,139,527
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<AVERAGE-NET-ASSETS> 22,659,955
<PER-SHARE-NAV-BEGIN> 10.000
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<PER-SHARE-GAIN-APPREC> (0.500)
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<EXPENSE-RATIO> 202
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 24
<NAME> Evergreen International Equity Fund Class C
<PERIOD-TYPE> 4-MOS
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<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 33,619,561
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<ACCUMULATED-NET-GAINS> (32,131)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,094,129)
<NET-ASSETS> 162,663
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<INTEREST-INCOME> 22,775
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<EXPENSES-NET> 91,351
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<DISTRIBUTIONS-OF-GAINS> 24
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<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> 32,139,527
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<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> (0.540)
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<EXPENSE-RATIO> 201
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<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 25
<NAME> Evergreen International Equity Fund Y Shares
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 33,619,561
<INVESTMENTS-AT-VALUE> 32,529,132
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<PER-SHARE-NAV-BEGIN> 10.000
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<PER-SHARE-GAIN-APPREC> (0.510)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 26
<NAME> Evergreen Managed Bond Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 94,045,952
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<RECEIVABLES> 1,686,686
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<TOTAL-ASSETS> 90,338,232
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<TOTAL-LIABILITIES> 19,977
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<PAID-IN-CAPITAL-COMMON> 97,083,445
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<SHARES-COMMON-PRIOR> 10,423,512
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<ACCUMULATED-NET-GAINS> (1,447,263)
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<NET-ASSETS> 90,318,255
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<NET-INVESTMENT-INCOME> 6,992,027
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<NUMBER-OF-SHARES-SOLD> 2,292,625
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<NET-CHANGE-IN-ASSETS> (18,748,815)
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<GROSS-EXPENSE> 741,832
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<PER-SHARE-NAV-BEGIN> 10.460
<PER-SHARE-NII> 0.660
<PER-SHARE-GAIN-APPREC> (1.110)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 27
<NAME> Evergreen Money Market Fund Class A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 117,348,946
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<RECEIVABLES> 774,341
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<TOTAL-ASSETS> 118,389,337
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<TOTAL-LIABILITIES> 504,767
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<SHARES-COMMON-PRIOR> 88,171,593
<ACCUMULATED-NII-CURRENT> 0
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 95,759,773
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,704,152
<OTHER-INCOME> 0
<EXPENSES-NET> 659,620
<NET-INVESTMENT-INCOME> 4,044,532
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<NUMBER-OF-SHARES-SOLD> 397,451,193
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<SHARES-REINVESTED> 3,171,491
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<GROSS-EXPENSE> 1,035,455
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<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.040
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 30
<NAME> Evergreen North Carolina Municipal Bond Fund Class A
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 58,054,613
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<TOTAL-ASSETS> 57,514,773
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<SHARES-COMMON-PRIOR> 1,200,415
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<NET-ASSETS> 7,978,824
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<EXPENSES-NET> 726,686
<NET-INVESTMENT-INCOME> 2,665,427
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<NET-CHANGE-FROM-OPS> (6,173,092)
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<DISTRIBUTIONS-OF-INCOME> 503,283
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<DISTRIBUTIONS-OTHER> 0
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<NAME> Evergreen North Carolina Municipal Bond Fund Class B
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<NAME> Evergreen North Carolina Municipal Bond Fund Y Shares
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<TABLE> <S> <C>
<S> <C>
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<NUMBER> 33
<NAME> Evergreen South Carolina Municipal Bond Fund Class A
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<TABLE> <S> <C>
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<NUMBER> 34
<NAME> Evergreen South Carolina Municipal Bond Port Class B
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<NAME> Evergreen South Carolina Municipal Bond Fund Y Shares
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<TABLE> <S> <C>
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<SERIES>
<NUMBER> 38
<NAME> Evergreen Treasury Money Market Fund Class A
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<SERIES>
<NUMBER> 39
<NAME> Evergreen Treasury Money Market Fund Y Shares
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<TABLE> <S> <C>
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<SERIES>
<NUMBER> 40
<NAME> Evergreen U.S. Government Fund Class A
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<TABLE> <S> <C>
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<NAME> Evergreen U.S. Government Fund Class B
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<NET-ASSETS> 195,570,908
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<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 17,693,192
<REALIZED-GAINS-CURRENT> (5,468,380)
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<NUMBER-OF-SHARES-SOLD> 4,261,379
<NUMBER-OF-SHARES-REDEEMED> 7,017,488
<SHARES-REINVESTED> 765,338
<NET-CHANGE-IN-ASSETS> (54,895,564)
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 10.050
<PER-SHARE-NII> 0.610
<PER-SHARE-GAIN-APPREC> (0.980)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 42
<NAME> Evergreen U.S. Government Fund Class C
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 257,279,633
<INVESTMENTS-AT-VALUE> 233,072,226
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (24,207,407)
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<NET-INVESTMENT-INCOME> 17,693,192
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<NUMBER-OF-SHARES-SOLD> 29,225
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<SHARES-REINVESTED> 99
<NET-CHANGE-IN-ASSETS> (54,895,564)
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<PER-SHARE-NII> 0.200
<PER-SHARE-GAIN-APPREC> (0.320)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 43
<NAME> Evergreen U.S. Government Fund Y Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 257,279,633
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<ACCUM-APPREC-OR-DEPREC> (24,207,407)
<NET-ASSETS> 15,595,022
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<NET-INVESTMENT-INCOME> 17,693,192
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<NUMBER-OF-SHARES-SOLD> 1,020,057
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<SHARES-REINVESTED> 96,545
<NET-CHANGE-IN-ASSETS> (54,895,564)
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<PER-SHARE-NAV-BEGIN> 10.050
<PER-SHARE-NII> 0.690
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 44
<NAME> Evergreen Utility Fund Class A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 40,728,944
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<NET-ASSETS> 4,190,305
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<SHARES-REINVESTED> 17,247
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<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.450
<PER-SHARE-GAIN-APPREC> (1.010)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 45
<NAME> Evergreen Utility Fund Class B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 40,728,944
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 28,792,123
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<EXPENSES-NET> 323,813
<NET-INVESTMENT-INCOME> 1,350,527
<REALIZED-GAINS-CURRENT> (93,656)
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<NET-CHANGE-FROM-OPS> (1,139,399)
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<SHARES-REINVESTED> 85,030
<NET-CHANGE-IN-ASSETS> 38,311,726
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<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.390
<PER-SHARE-GAIN-APPREC> (1.010)
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<EXPENSE-RATIO> 127
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 46
<NAME> Evergreen Utility Fund Class C
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 40,728,944
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<NET-ASSETS> 127,883
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<INTEREST-INCOME> 261,177
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<EXPENSES-NET> 323,813
<NET-INVESTMENT-INCOME> 1,350,527
<REALIZED-GAINS-CURRENT> (93,656)
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<DISTRIBUTIONS-OF-INCOME> 1,182
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<SHARES-REINVESTED> 130
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<PER-SHARE-NAV-BEGIN> 9.330
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<PER-SHARE-GAIN-APPREC> (0.330)
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 47
<NAME> Evergreen Utility Fund Y Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 40,728,944
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<NET-ASSETS> 5,201,415
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<DISTRIBUTIONS-OTHER> 5,477
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<SHARES-REINVESTED> 20,357
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<PER-SHARE-NAV-BEGIN> 9.510
<PER-SHARE-NII> 0.370
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 48
<NAME> Evergreen Value Fund Class A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 802,372,539
<INVESTMENTS-AT-VALUE> 807,634,310
<RECEIVABLES> 4,234,547
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<TOTAL-ASSETS> 811,869,600
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<TOTAL-LIABILITIES> 11,252,827
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<SHARES-COMMON-STOCK> 11,360,202
<SHARES-COMMON-PRIOR> 10,774,671
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (434,532)
<ACCUMULATED-NET-GAINS> (443,010)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 188,807,184
<DIVIDEND-INCOME> 27,496,851
<INTEREST-INCOME> 2,443,286
<OTHER-INCOME> 0
<EXPENSES-NET> 6,384,245
<NET-INVESTMENT-INCOME> 23,555,892
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<ACCUMULATED-NII-PRIOR> 0
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 49
<NAME> Evergreen Value Fund Class B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 802,372,539
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<SHARES-COMMON-STOCK> 6,274,003
<SHARES-COMMON-PRIOR> 3,400,580
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<OVERDISTRIBUTION-NII> (434,532)
<ACCUMULATED-NET-GAINS> (443,010)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,261,771
<NET-ASSETS> 104,298,562
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<INTEREST-INCOME> 2,443,286
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<EXPENSES-NET> 6,384,245
<NET-INVESTMENT-INCOME> 23,555,892
<REALIZED-GAINS-CURRENT> 37,989,054
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<NET-CHANGE-FROM-OPS> 14,756,988
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<DISTRIBUTIONS-OF-INCOME> 1,952,154
<DISTRIBUTIONS-OF-GAINS> 4,906,369
<DISTRIBUTIONS-OTHER> 24,340
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<SHARES-REINVESTED> 393,979
<NET-CHANGE-IN-ASSETS> 87,593,169
<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 17.630
<PER-SHARE-NII> 0.420
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</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 50
<NAME> Evergreen Value Fund Class C
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 802,372,539
<INVESTMENTS-AT-VALUE> 807,634,310
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<NET-INVESTMENT-INCOME> 23,555,892
<REALIZED-GAINS-CURRENT> 37,989,054
<APPREC-INCREASE-CURRENT> (46,787,958)
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,060
<DISTRIBUTIONS-OF-GAINS> 22,671
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<NUMBER-OF-SHARES-SOLD> 27,701
<NUMBER-OF-SHARES-REDEEMED> 34
<SHARES-REINVESTED> 1,540
<NET-CHANGE-IN-ASSETS> 87,593,169
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (131,832)
<OVERDISTRIB-NII-PRIOR> (635,325)
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 18.280
<PER-SHARE-NII> 0.190
<PER-SHARE-GAIN-APPREC> (0.810)
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<RETURNS-OF-CAPITAL> 0.040
<PER-SHARE-NAV-END> 16.610
<EXPENSE-RATIO> 168
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 51
<NAME> Evergreen Value Fund Y Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 802,372,539
<INVESTMENTS-AT-VALUE> 807,634,310
<RECEIVABLES> 4,234,547
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<TOTAL-ASSETS> 811,869,600
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 796,232,544
<SHARES-COMMON-STOCK> 30,516,178
<SHARES-COMMON-PRIOR> 26,269,966
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (434,532)
<ACCUMULATED-NET-GAINS> (443,010)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,261,771
<NET-ASSETS> 507,025,990
<DIVIDEND-INCOME> 27,496,851
<INTEREST-INCOME> 2,443,286
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> 23,555,892
<REALIZED-GAINS-CURRENT> 37,989,054
<APPREC-INCREASE-CURRENT> (46,787,958)
<NET-CHANGE-FROM-OPS> 14,756,988
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 15,879,870
<DISTRIBUTIONS-OF-GAINS> 24,431,670
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,949,430
<NUMBER-OF-SHARES-REDEEMED> 8,880,310
<SHARES-REINVESTED> 2,177,091
<NET-CHANGE-IN-ASSETS> 87,593,169
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> (635,325)
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<AVERAGE-NET-ASSETS> 771,316,305
<PER-SHARE-NAV-BEGIN> 17.630
<PER-SHARE-NII> 0.560
<PER-SHARE-GAIN-APPREC> (0.200)
<PER-SHARE-DIVIDEND> 0.560
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<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 52
<NAME> Evergreen Virginia Municipal Bond Fund Class A
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 6,328,243
<INVESTMENTS-AT-VALUE> 5,918,576
<RECEIVABLES> 128,923
<ASSETS-OTHER> 11,176
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<TOTAL-ASSETS> 6,058,675
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<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 181,494
<SHARES-COMMON-PRIOR> 128,122
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (258,553)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (409,667)
<NET-ASSETS> 1,605,460
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 282,191
<OTHER-INCOME> 0
<EXPENSES-NET> 45,279
<NET-INVESTMENT-INCOME> 236,912
<REALIZED-GAINS-CURRENT> (258,553)
<APPREC-INCREASE-CURRENT> (435,700)
<NET-CHANGE-FROM-OPS> (457,341)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 82,301
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 86,681
<NUMBER-OF-SHARES-REDEEMED> 40,827
<SHARES-REINVESTED> 7,518
<NET-CHANGE-IN-ASSETS> 2,226,205
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24,942
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 275,294
<AVERAGE-NET-ASSETS> 5,045,735
<PER-SHARE-NAV-BEGIN> 10.190
<PER-SHARE-NII> 0.470
<PER-SHARE-GAIN-APPREC> (1.340)
<PER-SHARE-DIVIDEND> 0.470
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.850
<EXPENSE-RATIO> 53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 53
<NAME> Evergreen Virginia Municipal Bond Fund Class B
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 6,328,243
<INVESTMENTS-AT-VALUE> 5,918,576
<RECEIVABLES> 128,923
<ASSETS-OTHER> 11,176
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,058,675
<PAYABLE-FOR-SECURITIES> 247,561
<SENIOR-LONG-TERM-DEBT> 0
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,435,061
<SHARES-COMMON-STOCK> 431,550
<SHARES-COMMON-PRIOR> 219,346
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (258,553)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (409,667)
<NET-ASSETS> 3,817,255
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 282,191
<OTHER-INCOME> 0
<EXPENSES-NET> 45,279
<NET-INVESTMENT-INCOME> 236,912
<REALIZED-GAINS-CURRENT> (258,553)
<APPREC-INCREASE-CURRENT> (435,700)
<NET-CHANGE-FROM-OPS> (457,341)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 148,091
<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 13,100
<NET-CHANGE-IN-ASSETS> 2,226,205
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24,942
<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 5,045,735
<PER-SHARE-NAV-BEGIN> 10.190
<PER-SHARE-NII> 0.420
<PER-SHARE-GAIN-APPREC> (1.340)
<PER-SHARE-DIVIDEND> 0.420
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.850
<EXPENSE-RATIO> 112
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 54
<NAME> Evergreen Virginia Municipal Bond Fund Y Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 6,328,243
<INVESTMENTS-AT-VALUE> 5,918,576
<RECEIVABLES> 128,923
<ASSETS-OTHER> 11,176
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,058,675
<PAYABLE-FOR-SECURITIES> 247,561
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 291,834
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 38,906
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
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<ACCUMULATED-NET-GAINS> (258,553)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (409,667)
<NET-ASSETS> 344,126
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<INTEREST-INCOME> 282,191
<OTHER-INCOME> 0
<EXPENSES-NET> 45,279
<NET-INVESTMENT-INCOME> 236,912
<REALIZED-GAINS-CURRENT> (258,553)
<APPREC-INCREASE-CURRENT> (435,700)
<NET-CHANGE-FROM-OPS> (457,341)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,520
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42,022
<NUMBER-OF-SHARES-REDEEMED> 3,209
<SHARES-REINVESTED> 93
<NET-CHANGE-IN-ASSETS> 2,226,205
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<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
