<PAGE>
PROSPECTUS August 30, 1996
EVERGREEN(Service Mark) INCOME FUNDS (Evergreen Logo)
EVERGREEN U.S. GOVERNMENT FUND
EVERGREEN SHORT-INTERMEDIATE BOND FUND
EVERGREEN INTERMEDIATE-TERM BOND FUND
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES 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 August
30, 1996 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 OTHER OBLIGATIONS
OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, ARE NOT INSURED OR
OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY, AND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(Service 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 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 11
Investment Practices and Restrictions 13
MANAGEMENT OF THE FUNDS
Investment Adviser 17
Portfolio Managers 18
Distribution Plans and Agreements 18
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 19
How to Redeem Shares 22
Exchange Privilege 23
Shareholder Services 24
Effect of Banking Laws 25
OTHER INFORMATION
Dividends, Distributions and Taxes 25
General Information 26
</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 serves as
investment adviser to the Evergreen Income Funds which include: EVERGREEN
SHORT-INTERMEDIATE BOND FUND, EVERGREEN U.S. GOVERNMENT FUND, EVERGREEN
INTERMEDIATE-TERM BOND FUND and EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND. First Union National Bank of North Carolina is a subsidiary of
First Union Corporation, the sixth largest bank holding company in the United
States.
EVERGREEN SHORT-INTERMEDIATE BOND FUND (formerly Evergreen Fixed Income
Fund and previously known as 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.
EVERGREEN INTERMEDIATE-TERM BOND FUND (formerly The FFB Lexicon
Fund -- Fixed Income Fund) seeks to maximize current yield consistent with the
preservation of capital.
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND (formerly The FFB
Lexicon Fund -- Intermediate-Term Government Securities Fund) seeks to preserve
principal value and maintain a high degree of liquidity while providing current
income.
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
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as 4.75% for U.S. None
a % of offering price) Govt., 3.25%
for others
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 years, 2%
proceeds, whichever is lower) during the fifth year, 1% during the sixth
year and 0% after the sixth 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 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 A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50% .50% After 1 Year $ 57 $ 68 $ 28 $ 18 $ 18
12b-1 Fees* .25% .75% .75% After 3 Years $ 78 $ 85 $ 55 $ 55 $ 55
Shareholder Service Fees -- .25% .25% After 5 Years $ 100 $ 114 $ 94 $ 94 $ 94
Other Expenses .24% .24% .24% After 10 Years $ 163 $ 176 $ 205 $ 176 $205
Total .99% 1.74% 1.74%
</TABLE>
EVERGREEN SHORT-INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES at End of Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50% .50% After 1 Year $ 55 $ 67 $ 27 $ 17 $ 17
12b-1 Fees* .10% .75% .75% After 3 Years $ 72 $ 83 $ 53 $ 53 $ 53
Shareholder Service Fees -- .25% .25% After 5 Years $ 90 $ 112 $ 92 $ 92 $ 92
Other Expenses .19% .19% .19% After 10 Years $ 142 $ 165 $ 200 $ 165 $ 200
Total .79% 1.69% 1.69%
</TABLE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES** at End of Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .60% .60% .60% After 1 Year $ 59 $ 69 $ 29 $ 19 $ 19
12b-1 Fees* .25% .75% .75% After 3 Years $ 82 $ 89 $ 59 $ 59 $ 59
Shareholder Service Fees -- .25% .25% After 5 Years $ 108 $ 122 $ 102 $ 102 $ 102
Other Expenses .28% .28% .28% After 10 Years $ 180 $ 191 $ 220 $ 191 $ 220
Total 1.13% 1.88% 1.88%
</TABLE>
3
<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption Assuming no
ANNUAL OPERATING EXPENSES** at End of Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .60% .60% .60% After 1 Year $ 59 $ 69 $ 29 $ 19 $ 19
12b-1 Fees* .25% .75% .75% After 3 Years $ 83 $ 90 $ 60 $ 60 $ 60
Shareholder Service Fees -- .25% .25% After 5 Years $ 109 $ 123 $ 103 $ 103 $ 103
Other Expenses .31% .31% .31% After 10 Years $ 184 $ 195 $ 223 $ 195 $ 223
Total 1.16% 1.91% 1.91%
</TABLE>
*Class A Shares can pay up to .75 of 1% of average assets as a 12b-1 fee for
Evergreen U.S. Government Fund and Evergreen Short-Intermediate Bond Fund and
.50 of 1% of average assets for Evergreen Intermediate-Term Bond Fund and
Evergreen Intermediate-Term Government Securities Fund. For the foreseeable
future, the Class A Shares 12b-1 fees will be limited to .10 of 1% of average
net assets for Evergreen Short-Intermediate Bond Fund and .25 of 1% of average
net assets for Evergreen U.S. Government Fund, Evergreen Intermediate-Term Bond
Fund and Evergreen Intermediate-Term Government Fund. For the fiscal periods
ended June 30, 1996, Class A 12b-1 fees were limited to .10 of 1% of average net
assets for Evergreen Intermediate-Term Bond Fund, Evergreen Intermediate-Term
Government Fund and Evergreen Short-Intermediate Bond Fund.
**The estimated annual operating expenses and examples do not reflect fee
waivers and expense reimbursements. Actual expenses for Class A, B and C Shares
net of fee waivers and expense reimbursements for the most recent fiscal period
ended were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
EVERGREEN INTERMEDIATE-TERM BOND FUND .82% 1.80% 1.80%
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND .81% 1.80% 1.80%
</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 for Evergreen U.S. Government Fund and
Evergreen Short-Intermediate Bond Fund are estimated amounts based on the
experience of each Fund for the year ended June 30, 1996. The amounts set forth
both in the tables and examples for Evergreen Intermediate-Term Bond Fund and
Evergreen Intermediate-Term Government Securities Fund are based on the
experience of each fund for ten-month period ended June 30, 1996. Such expenses
have been restated to reflect current fee arrangements. 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 that 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 periods or the life of
the Fund if shorter for EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN
U.S. GOVERNMENT FUND has been audited by KPMG Peat Marwick LLP, each Fund's
independent auditors. For EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND, the information in the tables for
the ten month period ended June 30,1996, has been audited by KPMG Peat Marwick
LLP. Information for the four fiscal periods prior to June 30, 1996, or the life
of the Fund if shorter, have been audited by Arthur Andersen LLP, the Fund's
predecessor 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 -- CLASS A SHARES
<TABLE>
<CAPTION>
JANUARY 11,
YEAR SIX MONTHS 1993*
ENDED ENDED YEAR ENDED THROUGH
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................. $9.65 $9.07 $10.05 $10.00
Income (loss) from investment operations:
Net investment income.............................................. .63 .33 .66 .68
Net realized and unrealized gain (loss) on investments............. (.23 ) .58 (.98) .05
Total from investment operations................................. .40 .91 (.32) .73
Less distributions to shareholders from net investment income........ (.63 ) (.33) (.66) (.68)
Net asset value, end of period....................................... $9.42 $9.65 $9.07 $10.05
TOTAL RETURN+........................................................ 4.3% 10.2% (3.2%) 7.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................ $20,345 $22,445 $23,706 $38,851
Ratios to average net assets:
Expenses........................................................... .99% 1.04%++** .96%** .68%++**
Net investment income.............................................. 6.61% 7.07%++** 6.97%** 6.93%++**
Portfolio turnover rate.............................................. 23% 0% 19% 39%
</TABLE>
# The Fund changed its fiscal year end from December 31 to June 30.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge is not reflected.
++ Annualized.
** 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 would have been the following:
<TABLE>
<CAPTION>
JANUARY 11,
SIX MONTHS 1993*
ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1995# 1994 1993
<S> <C> <C> <C>
Expenses.................................................................... 1.05% 1.00% .99%
Net investment income....................................................... 7.06% 6.93% 6.62%
</TABLE>
5
<PAGE>
EVERGREEN U.S. GOVERNMENT FUND -- CLASS B AND CLASS C SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
JANUARY 11, SIX SEPTEMBER 2,
YEAR SIX MONTHS 1993* YEAR MONTHS 1994*
ENDED ENDED YEAR ENDED THROUGH ENDED ENDED THROUGH
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period...... $9.65 $9.07 $10.05 $10.00 $9.65 $9.07 $9.39
Income (loss) from investment operations:
Net investment income................... .56 .29 .61 .63 .56 .29 .20
Net realized and unrealized gain (loss)
on investments........................ (.23) .58 (.98) .05 (.23) .58 (.32)
Total from investment operations...... .33 .87 (.37) .68 .33 .87 (.12)
Less distributions to shareholders from
net
investment income....................... (.56) (.29) (.61) (.63) (.56) (.29) (.20)
Net asset value, end of period............ $9.42 $9.65 $9.07 $10.05 $9.42 $9.65 $9.07
TOTAL RETURN+............................. 3.5% 9.8% (3.8%) 6.9% 3.5% 9.8% (1.3%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................ $165,988 $192,490 $195,571 $236,696 $649 $350 $266
Ratios to average net assets:
Expenses................................ 1.74% 1.79%++** 1.54%** 1.19%++** 1.74% 1.79%++** 1.71%++**
Net investment income................... 5.85% 6.32%++** 6.42%** 6.44%++** 5.87% 6.36%++** 6.70%++**
Portfolio turnover rate................... 23% 0% 19% 39% 23% 0% 19%
</TABLE>
# The Fund changed its fiscal year end from December 31 to June 30.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
** 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 would have been the following:
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
JANUARY 11, SEPTEMBER 2,
SIX MONTHS 1993* SIX MONTHS 1994*
ENDED YEAR ENDED THROUGH ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, DECEMBER 31,
1995# 1994 1993 1995# 1994
<S> <C> <C> <C> <C> <C>
Expenses......................................... 1.80% 1.58% 1.50% 1.80% 1.75%
Net investment income............................ 6.31% 6.38% 6.13% 6.34% 6.66%
</TABLE>
6
<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
MAY 2, FEBRUARY 9, APRIL 10
TEN MONTHS 1995* 1996* 1996*
ENDED THROUGH THROUGH THROUGH
JUNE 30, AUGUST 31, JUNE 30, JUNE 30,
1996# 1995 1996# 1996#
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.............................. $10.15 $9.95 $10.38 $10.01
Income (loss) from investment operations:
Net investment income........................................... .46 .19 .18 .11
Net realized and unrealized gain (loss) on investments.......... (.16) .20 (.39) (.02)
Total from investment operations................................ .30 .39 (.21) .09
Less distributions to shareholders from:
Net investment income........................................... (.46) (.19) (.18) (.11)
Net realized gains.............................................. -- -- -- --
Total distributions........................................... (.46) (.19) (.18) (.11)
Net asset value, end of period.................................... $9.99 $10.15 $9.99 $9.99
TOTAL RETURN+..................................................... 3.0% 3.9% (2.0%) 0.9%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)......................... $497 $9 $359 $32
Ratios to average net assets:
Expenses**...................................................... .81%++ .80%++ 1.80%++ 1.80%++
Net investment income**......................................... 5.49%++ 5.42%++ 4.62%++ 4.47%++
Portfolio turnover rate........................................... 28% 45% 28% 28%
</TABLE>
* Commencement of class operations.
# The Fund changed its fiscal year end from August 31 to June 30.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
** 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 would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
MAY 2, FEBRUARY 9, APRIL 10
TEN MONTHS 1995* 1996* 1996*
ENDED THROUGH THROUGH THROUGH
JUNE 30, AUGUST 31, JUNE 30, JUNE 30,
1996# 1995 1996# 1996#
<S> <C> <C> <C> <C>
Expenses.......................................................... 1.06% 1.34% 1.91% 1.91%
Net investment income............................................. 5.24% 4.88% 4.51% 4.36%
</TABLE>
7
<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
TEN MAY 2, JANUARY 30, APRIL 29,
MONTHS 1995* 1996* 1996*
ENDED THROUGH THROUGH THROUGH
JUNE 30, AUGUST 31, JUNE 30, JUNE 30,
1996# 1995 1996# 1996#
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................. $10.30 $9.98 $10.68 $10.15
Income (loss) from investment operations:
Net investment income.............................................. .48 .18 .20 .08
Net realized and unrealized gain (loss) on investments............. (.20) .33 (.58) (.05)
Total from investment operations................................... .28 .51 (.38) .03
Less distributions to shareholders from:
Net investment income.............................................. (.48) (.19) (.20) (.08)
Net realized gains................................................. -- -- -- --
Total distributions.............................................. (.48) (.19) (.20) (.08)
Net asset value, end of period....................................... $10.10 $10.30 $10.10 $10.10
TOTAL RETURN+........................................................ 2.7% 5.2% (3.5%) 0.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................ $2,943 $160 $402 $25
Ratios to average net assets:
Expenses**......................................................... .82%++ .80%++ 1.80%++ 1.80%++
Net investment income**............................................ 6.30%++ 5.53%++ 5.18%++ 5.30%++
Portfolio turnover rate.............................................. 52% 73% 52% 52%
</TABLE>
* Commencement of class operations.
# The Fund changed its fiscal year end from August 31 to June 30.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
** 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 would have been the following:
<TABLE>
<CAPTION>
CLASS B CLASS C
CLASS A SHARES SHARES SHARES
TEN MAY 2, JANUARY 30, APRIL 29,
MONTHS 1995* 1996* 1996*
ENDED THROUGH THROUGH THROUGH
JUNE 30, AUGUST 31, JUNE 30, JUNE 30,
1996# 1995 1996# 1996#
<S> <C> <C> <C> <C>
Expenses................................................................ 1.10% 1.38% 1.89% 1.88%
Net investment income................................................... 6.02% 4.95% 5.09% 5.22%
</TABLE>
8
<PAGE>
EVERGREEN SHORT-INTERMEDIATE BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
NINE
YEAR SIX MONTHS MONTHS YEAR
ENDED ENDED YEAR ENDED ENDED ENDED
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, MARCH 31,
1996 1995## 1994 1993 1992 1991 1990# 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period........................ $10.02 $9.52 $10.42 $10.41 $10.54 $9.99 $9.72 $9.50
Income (loss) from investment
operations:
Net investment income......... .63 .32 .65 .65 .71 .73 .55 .79
Net realized and unrealized
gain (loss) on
investments................. (.19 ) .50 (.91) .19 (.06) .60 .24 .20
Total from investment
operations................ .44 .82 (.26) .84 .65 1.33 .79 .99
Less distributions to
shareholders from:
Net investment income......... (.64 ) (.32) (.64) (.65) (.67) (.70) (.52) (.77)
Net realized gains............ -- -- -- (.18) (.11) (.07) -- --
In excess of net investment
income...................... -- -- -- -- -- (.01) -- --
Total distributions......... (.64 ) (.32) (.64) (.83) (.78) (.78) (.52) (.77)
Net asset value, end of
period........................ $9.82 $10.02 $9.52 $10.42 $10.41 $10.54 $9.99 $9.72
TOTAL RETURN+................... 4.5% 8.8% (2.6%) 8.3% 6.4% 13.7% 8.3% 10.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)...................... $18,630 $18,898 $19,127 $22,865 $21,488 $17,680 $11,765 $6,496
Ratios to average net assets:
Expenses...................... .79% .77%++ .75% .93% .90% .80%(a) 1.01%(a)++ 1.00%(a)
Net investment income......... 6.35% 6.58%++ 6.46% 6.15% 6.79% 7.30%(a) 7.53%(a)++ 7.57%(a)
Portfolio turnover rate......... 76% 34% 48% 73% 66% 53% 27% 32%
<CAPTION>
JANUARY 28,
1989*
THROUGH
MARCH 31,
1989
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period........................ $9.70
Income (loss) from investment
operations:
Net investment income......... .10
Net realized and unrealized
gain (loss) on
investments................. (.14)
Total from investment
operations................ (.04)
Less distributions to
shareholders from:
Net investment income......... (.16)
Net realized gains............ --
In excess of net investment
income...................... --
Total distributions......... (.16)
Net asset value, end of
period........................ $9.50
TOTAL RETURN+................... (.3%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)...................... $11,580
Ratios to average net assets:
Expenses...................... 1.78%++
Net investment income......... 6.10%++
Portfolio turnover rate......... 18%
</TABLE>
* Commencement of class operations.
# The Fund changed its fiscal year end from March 31 to December 31.
## The Fund changed its fiscal year end from December 31 to June 30.
+ Total return is calculated on net asset value per share for the periods
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 would have been the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED 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>
9
<PAGE>
EVERGREEN SHORT-INTERMEDIATE BOND FUND -- CLASS B AND CLASS C SHARES
<TABLE>
<CAPTION>
CLASS B SHARES CLASS C SHARES
JANUARY 25, SEPTEMBER 6,
YEAR SIX MONTHS 1993* YEAR SIX MONTHS 1994*
ENDED ENDED YEAR ENDED THROUGH ENDED ENDED THROUGH
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, DECEMBER 31,
1996 1995# 1994 1993 1996 1995# 1994
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....... $10.04 $9.54 $10.44 $10.57 $10.05 $9.55 $9.85
Income (loss) from investment operations:
Net investment income.................... .55 .28 .58 .58 .55 .26 .18
Net realized and unrealized gain (loss)
on investments......................... (.19 ) .50 (.92) .05 (.20) .50 (.30)
Total from investment operations....... .36 .78 (.34) .63 .35 .76 (.12)
Less distributions to shareholders from:
Net investment income.................... (.56 ) (.28) (.56) (.58) (.56) (.26) (.18)
Net realized gains....................... -- -- -- (.18) -- -- --
Total distributions.................... (.56 ) (.28) (.56) (.76) (.56) (.26) (.18)
Net asset value, end of period............. $9.84 $10.04 $9.54 $10.44 $9.84 $10.05 $9.55
TOTAL RETURN+.............................. 3.6% 8.3% (3.3%) 6.1% 3.5% 8.2% (1.3%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)................................. $21,006 $17,366 $17,625 $8,876 $1,155 $527 $512
Ratios to average net assets:
Expenses................................. 1.69% 1.67%++ 1.50% 1.57%++ 1.69% 1.67%++ 1.65%++
Net investment income.................... 5.45% 5.68%++ 5.75% 5.42%++ 5.46% 5.69%++ 5.87%++
Portfolio turnover rate.................... 76% 34% 48% 73% 76% 34% 48%
</TABLE>
# The Fund changed its fiscal year end from December 31 to June 30.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Contingent deferred sales charges are not
reflected.
++ Annualized.
10
<PAGE>
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 Fund's 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 Board of Trustees of Evergreen Investment Trust, or The Evergreen
Lexicon Fund as the case may be, (the "Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective. In addition to the investment policies detailed
below, each Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions".
EVERGREEN SHORT-INTERMEDIATE BOND FUND
The objective of EVERGREEN SHORT-INTERMEDIATE BOND FUND is to attain a
high level of current income, with capital growth as a secondary objective,
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 Fund's 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 Fund's investment adviser
will consider such factors as the condition and growth potential of various
11
<PAGE>
economies and securities markets, currency and taxation considerations and other
pertinent financial, social, national and political factors. (See "Investment
Practices and Restrictions " -- "Foreign Investments".)
EVERGREEN U.S. GOVERNMENT FUND
The investment objective of EVERGREEN U.S. GOVERNMENT FUND is to achieve
a high level of current income consistent with stability of principal. The Fund
will invest in debt instruments issued or guaranteed by the U.S. government, its
agencies, or instrumentalities ("U.S. government securities"), and is suitable
for conservative investors seeking high current yields plus relative safety. It
permits an investor to participate in a portfolio that benefits from active
management of a blend of securities and maturities to maximize the opportunities
and minimize the risks created by changing interest rates.
In addition to U.S. government securities, the Fund may invest in:
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
Fund's 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 and commercial
paper which matures in 270 days or less so long as at least two of its ratings
are high quality ratings by nationally recognized statistical rating
organizations. 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, Inc. 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 of 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 weaken such bonds' prospects for principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered to be investment grade. (See the description of the rating categories
contained in the Statement of Additional Information.
EVERGREEN INTERMEDIATE-TERM BOND FUND
The investment objective of the EVERGREEN INTERMEDIATE-TERM BOND FUND is
to maximize current yield consistent with the preservation of capital.
12
<PAGE>
The Fund will invest its assets in U.S. Treasury obligations; obligations
issued or guaranteed as to principal and interest by agencies and
instrumentalities of the U.S. government; receipts evidencing separately traded
principal and interest components of U.S. government obligations; corporate
bonds and debentures rated, at the time of purchase, A or better by S&P or
Moody's or, if unrated determined to be of comparable quality by the investment
adviser; mortgage-backed securities and asset-backed securities rated, at the
time of purchase, at least AA by S&P or Aa by Moody's, commercial paper rated
A-1 or better by Moody's or P-1 or better by S&P or, if unrated, determined to
be of comparable quality at the time of investment as determined by the
investment adviser; short-term bank obligations including certificates of
deposit; time deposits and bankers' acceptances of U.S. commercial banks or
savings and loan institutions with assets of at least $1 billion as of the end
of their most recent fiscal year; U.S. dollar denominated securities of the
government of Canada and its provincial and local governments; U.S. dollar
denominated securities issued or guaranteed by foreign governments, their
political subdivisions, agencies or instrumentalities; U.S. dollar denominated
obligations of supranational entities; and repurchase agreements involving any
of the foregoing securities; and U.S. dollar denominated securities of other
foreign issuers. A description of the rating categories is contained in the
Statement of Additional Information.
The Fund will maintain an average weighted maturity of approximately five
to fifteen years, although under normal conditions the investment adviser
expects the Fund to maintain an average weighted maturity of five to ten years.
The investment adviser may vary the average maturity substantially in
anticipation of a change in the interest rate environment.
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The investment objective of EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND is to preserve principal value and maintain a high degree of
liquidity while providing current income.
The Fund invests exclusively in U.S. Treasury obligations, obligations
issued or guaranteed as to principal and interest by agencies and
instrumentalities of the U.S. government, receipts evidencing separately traded
principal and interest components of U.S. government obligations, obligations of
supranational entities and repurchase agreements involving any of such
obligations. No more than 35% of the Fund's assets may be invested in receipts,
obligations of supranational entities and repurchase agreements involving such
securities.
The Fund will maintain an average weighted remaining maturity of
approximately three to ten years, although under normal conditions the
investment adviser expects to maintain an average maturity of three to six
years. No remaining maturity will exceed ten years. The investment adviser may
vary the average maturity substantially in anticipation of a change in the
interest rate environment.
The U.S. government obligations that the Fund may acquire include
securities representing an interest in a pool of mortgage loans that are issued
or guaranteed by a U.S. government agency. The primary issuers of these
mortgage-backed securities are the Government National Mortgage Association, the
Federal National Mortgage Association, and the Federal Home Loan Mortgage
Corporation. The only agency which may actually guarantee principal or interest
is the Government National Mortgage Association. Mortgage-backed securities are
in most cases "pass through" instruments through which the holder receives a
share of all interest and principal payments from the mortgages underlying the
certificates. The mortgage backing these securities include conventional thirty-
year fixed rate mortgages. However, due to scheduled and unscheduled principal
payments on the underlying loans, these securities have a shorter average
maturity and, therefore, less principal volatility than comparable bonds. During
periods of declining interest rates, prepayment of mortgages underlying
mortgage-backed securities can be expected to accelerate. When the mortgage
obligations are prepaid, the Fund will reinvest the prepaid amounts in
securities, the yield of which reflects interest rates prevailing at the time.
For purposes of complying with the Fund's investment policy of acquiring
securities with remaining maturity of ten years or less, the investment adviser
will use the expected life of a mortgage-backed security.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond prices move inversely to interest rates, i.e. as interest
rates decline the values of the bonds increase, and vice versa. The longer the
maturity of a bond, the greater the exposure to market price fluctuations. The
same market factors are reflected in the share price or net asset value of bond
funds which will vary with interest rates. In addition, certain of the
obligations in which each Fund may invest may be variable or floating rate
instruments, which may involve a conditional or unconditional demand feature,
and may include variable amount master demand notes. While these types of
instruments may, to a certain degree, offset the risk to principal associated
with rising interest rates, they would not be expected to appreciate in a
falling interest rate environment.
13
<PAGE>
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of 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 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 Fund to sell the
security in the open market in the case of a default. In such a case, a Fund may
incur costs in disposing of the security which would increase Fund expenses. The
Funds 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 SHORT-INTERMEDIATE
BOND FUND, the EVERGREEN INTERMEDIATE-TERM BOND FUND and the EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES 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. EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S.
GOVERNMENT 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 SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT 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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
may write (i.e., sell) covered call and put options. By writing a call option, a
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, a Fund
14
<PAGE>
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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
may also enter into currency and other financial futures contracts and write
options on such contracts. The Funds intend to enter into such contracts and
related options for hedging purposes. The Funds will enter into futures on
securities, currencies, or index-based futures contracts in order to hedge
against changes in interest 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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
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
15
<PAGE>
Funds use financial futures contracts and options on financial futures contracts
as hedging devices, there is a risk that the prices of the securities subject to
the financial futures contracts and options on financial futures contracts may
not correlate perfectly with the prices of the securities in the Funds'
portfolios. This may cause the financial futures contract and any related
options to react to market changes differently than the portfolio securities. In
addition, the Funds investment 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 investments. In these events, the
Funds may lose money on the financial futures contracts or the options on
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment 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 Funds may invest are
debt obligations which are generally issued at a discount and payable in full at
maturity, and which do not provide for current payments of interest prior to
maturity. Zero-coupon securities usually trade at a deep discount from their
face or par value and are subject to greater market value fluctuations from
changing interest rates than debt obligations of comparable maturities which
make current distributions of interest. As a result, the net asset value of
shares of the Funds may fluctuate over a greater range than shares of other
mutual funds investing in securities making current distributions of interest
and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly by
the U.S. Treasury or other short-term debt obligations, and longer-term bonds or
notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment banking firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are owned ostensibly by the
bearer or holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities". Under the
STRIPS program, the Funds will be able to have their beneficial ownership of
U.S. Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidence
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
Foreign Investments. EVERGREEN SHORT-INTERMEDIATE BOND FUND may invest in
foreign securities or securities denominated in or indexed to foreign currencies
and EVERGREEN INTERMEDIATE-TERM BOND FUND may invest in U.S. dollar denominated
securities of foreign issuers. In addition, EVERGREEN SHORT-INTERMEDIATE BOND
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.
16
<PAGE>
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 the Funds receive from the reinvestment of
such prepayments, or any scheduled principal payments, may be lower than the
yield on the original mortgage security. As a consequence, mortgage securities
may be a less effective means of "locking in" interest rates than other types of
debt securities having the same stated maturity and may also have less potential
for capital appreciation. For certain types of asset pools, such as CMOs,
prepayments may be allocated to one tranche of securities ahead of other
tranches, in order to reduce the risk of prepayment for the other tranches.
Prepayments may result in a capital loss to the Funds to the extent that
the prepaid mortgage securities were purchased at a market premium over their
stated amount. Conversely, the prepayment of mortgage securities purchased at a
market discount from their stated principal amount will accelerate the
recognition of interest income by the Funds which would be taxed as ordinary
income when distributed to the shareholders. The credit characteristics of
asset-backed securities also differ in a number of respects from those of
traditional debt securities. The credit quality of most asset-backed securities
depends primarily upon the credit quality of the assets underlying such
securities, how well the entity issuing the securities is insulated from the
credit risk of the originator or any other affiliated entities, and the amount
and quality of any credit enhancement to such securities.
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 SHORT-INTERMEDIATE BOND 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. This restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933. The
EVERGREEN SHORT-INTERMEDIATE BOND FUND, the EVERGREEN INTERMEDIATE-TERM BOND
FUND and the EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES 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. 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.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund is organized. The Capital Management Group of First Union
National Bank of North Carolina ("CMG") serves as
17
<PAGE>
investment adviser to each Fund. First Union National Bank of North Carolina
("FUNB") is a subsidiary of First Union Corporation ("First Union"), the sixth
largest bank holding company in the United States. First Union is headquartered
in Charlotte, North Carolina, and had $139.9 billion in consolidated assets as
of June 30, 1996. First Union and its subsidiaries provide a broad range of
financial services to individuals and businesses throughout the United States.
CMG manages or otherwise oversees the investment of over $42.1 billion in assets
belonging to a wide range of clients, including all the series of Evergreen
Investment Trust (formerly known as First Union Funds), the two series of The
Evergreen Lexicon Fund (formerly The FFB Lexicon Fund) and the two series of
Evergreen Tax-Free Trust (formerly FFB Funds Trust). 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. Prior to January 1, 1996, First Fidelity Bank, N.A. ("First Fidelity")
served as investment adviser to EVERGREEN INTERMEDIATE-TERM BOND FUND and
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND. CMG succeeded to the
mutual funds advisory business of First Fidelity in connection with the
acquisition of First Fidelity Bancorporation by a subsidiary of First Union.
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 the average daily net assets of EVERGREEN SHORT-INTERMEDIATE
BOND FUND and EVERGREEN U.S. GOVERNMENT FUND and .60 of 1% of the average daily
net assets of EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND. The total annualized operating
expenses of each Fund for the fiscal period ended June 30, 1996, expressed as a
percentage of average net assets on an annual basis, 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 LLC, an affiliate 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 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
were approximately $15.2 billion as of June 30, 1996.
PORTFOLIO MANAGERS
Thomas L. Ellis, a Vice President of FUNB, has been the portfolio manager
of EVERGREEN SHORT-INTERMEDIATE BOND FUND since its inception in 1988. Prior to
joining FUNB in 1985, Mr. Ellis had seventeen years investment management and
sales experience, including eleven years marketing short and medium-term
obligations to institutional investors, and three years as head trader of First
Boston Corporation. Rollin C. Williams, a Vice President of FUNB, has been the
portfolio manager of EVERGREEN U.S. GOVERNMENT FUND since its inception in 1992.
Mr. Williams, who has over twenty-four years investment management experience,
was Head of Fixed Income Investments at Dominion Trust Company from 1988 until
its acquisition by First Union. Bruce Besecker, a Vice President of FUNB, has
been the portfolio manager of EVERGREEN INTERMEDIATE-TERM BOND FUND since its
inception in 1991. Prior to joining FUNB, Mr. Besecker was a Vice President in
the Fixed Income Unit of the Financial Management Department of First Fidelity
since 1991. The portfolio manager of EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND since its inception in 1991 has been Robert Cheshire. Mr.
Cheshire is a Vice President of FUNB and was formerly a Vice President in the
Institutional Asset Management Group of First Fidelity since 1990.
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,
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
18
<PAGE>
an annual rate of .75 of 1% of the aggregate average daily net assets
attributable to the Class A, Class B and Class C shares of EVERGREEN
INTERMEDIATE-TERM BOND FUND and EVERGREEN U.S. GOVERNMENT FUND, .50 of 1% of the
aggregate average daily net assets of the Class A shares of EVERGREEN
INTERMEDIATE-TERM BOND FUND and EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND and 1% of the aggregate average daily net assets of the Class B
and Class C shares of EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND. Payments under the Plans adopted
with respect to Class A shares are currently voluntarily limited to, (as a
percentage of aggregate average daily net assets attributable to Class A
shares), .10 of 1% for EVERGREEN SHORT-INTERMEDIATE BOND FUND and .25 of 1% for
EVERGREEN U.S. GOVERNMENT FUND, EVERGREEN INTERMEDIATE-TERM BOND FUND and
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND. 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 SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT
FUND have also adopted a shareholder service plan ("Service Plans") with respect
to their Class B and Class C shares, which permits 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,
whether pursuant to a Plan or Service Plans, will not exceed .25 of 1% 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 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 Funds' 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 FUNB or its affiliates.
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.
PURCHASE AND REDEMPTION OF SHARES
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 Furman Selz LLC, other broker-dealers or other financial
institutions that are registered. See the 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").
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<PAGE>
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge on purchases under
$1,000,000. On purchases of $1,000,000 or more, a contingent deferred sales
charge ("CDSC") equal to the lesser of 1% of the purchase price or the
redemption value will be imposed on shares redeemed during the first year after
purchase. The schedule of charges for Class A shares is as follows:
Initial Sales Charge
EVERGREEN U.S. GOVERNMENT FUND
<TABLE>
<CAPTION>
as a % of the Net as a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 4.99% 4.75% 4.25%
$ 50,000 - $ 99,000 4.71% 4.50% 4.25%
$ 100,000 - $ 249,999 3.90% 3.75% 3.25%
$ 250,000 - $ 499,999 2.56% 2.50% 2.00%
$ 500,000 - $ 999,999 2.04% 2.00% 1.75%
$ 1,000,000 - $2,999,999 None None 1.00%
$ 3,000,000 - $4,999,999 None None .50%
Over $5,000,000 None None .25%
</TABLE>
EVERGREEN SHORT-INTERMEDIATE BOND FUND
EVERGREEN INTERMEDIATE-TERM BOND FUND
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
as a % of the Net as a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 3.36% 3.25% 2.75%
$ 50,000 - $ 99,000 3.09% 3.00% 2.75%
$ 100,000 - $ 249,999 2.56% 2.50% 2.25%
$ 250,000 - $ 499,999 2.04% 2.00% 1.75%
$ 500,000 - $ 999,999 1.52% 1.50% 1.25%
$ 1,000,000 - $2,999,999 None None 1.00%
$ 3,000,000 - $4,999,999 None None .50%
Over $5,000,000 None None .25%
</TABLE>
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 preceding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transactions in shares of the Funds.
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
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<PAGE>
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 preceding 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 twelve
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 customers of
FUNB 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
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 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 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.
<TABLE>
<CAPTION>
Year Since Purchase Contingent Deferred Sales Charge
<S> <C> <C>
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH 1%
</TABLE>
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% 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. The maximum amount of Class C shares that may be purchased
is $500,000.
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 the
Funds' shares is calculated by dividing the value of the amount each Fund's net
assets attributable to that Class by the number of outstanding
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<PAGE>
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 each 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 of each Trust under
which each Fund operates believe would accurately reflect fair value. Non-dollar
denominated securities will be valued as of the close of the Exchange at the
closing price of such securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares because 100% of your purchase is
invested immediately and because such shares will convert to Class A shares,
which incur lower ongoing distribution and/or shareholder service fees, after
seven years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to dealers, 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. EFD may also limit the availability of such incentives to
certain specified dealers. EFD from time to time sponsors promotions involving
First Union Brokerage Services, Inc. ("FUBS"), an affiliate of each Fund's
investment adviser, and select broker-dealers, pursuant to which incentives are
paid, including gift certificates and payments in amounts up to 1% of the dollar
amount of shares of a Fund sold. Awards may also be made based on the opening of
a minimum number of accounts. Such promotions are not being made available to
all dealers. Certain broker-dealers may also receive payments from EFD or a
Fund's investment adviser over and above the usual trail commissions or
shareholder servicing payments applicable to a given Class of shares.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
HOW TO REDEEM SHARES
You may "redeem", i.e. sell, your shares in a Fund to that 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 ten 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. (Eastern time).
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
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<PAGE>
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 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. The Funds 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 redemption of shares is a taxable transaction for Federal income
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 thirty 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.
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. Once an exchange
request has been telephoned or mailed, it is irrevocable and may not be modified
or canceled. Exchanges will be made on the basis of the relative net asset
values of the shares exchanged next determined after an exchange request is
received. An exchange, which represents an initial investment in another
Evergreen mutual fund, is subject to the minimum investment and suitability
requirements of each Fund.
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
23
<PAGE>
a maximum of three per calendar quarter. This exchange privilege may be modified
or discontinued at any time by the Funds 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 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 Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the Systematic Investment Plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within 24 months of the
initial investment. You can open a Systematic Investment Plan in the EVERGREEN
U.S. GOVERNMENT FUND and EVERGREEN SHORT-INTERMEDIATE BOND FUND for a minimum of
only $50 per month with no initial investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
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 Funds
Systematic Cash Withdrawal Plan by filling out the appropriate part of the
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 $75. 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.
24
<PAGE>
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Funds 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.
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), under the following prototype retirement plans: (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 its 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 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 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
For EVERGREEN U.S. GOVERNMENT FUND net income dividends, if any, are
declared daily and paid monthly. For EVERGREEN SHORT-INTERMEDIATE BOND FUND,
EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND net income dividends are declared and paid monthly.
Distributions of any net realized capital gains of the Funds will be made
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
25
<PAGE>
corporate dividends-received deduction of 70%. 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.
A Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions, if any, and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the 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 ninety days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
GENERAL INFORMATION
Portfolio 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 BOND FUND and EVERGREEN U.S.
GOVERNMENT FUND are each separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND are separate investment series of
The Evergreen Lexicon Fund, formerly The FFB Lexicon Fund, which is a
Massachusetts business trust organized in 1991. 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 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.
Custodian, 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 custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by a fee based
upon the
26
<PAGE>
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, an affiliate of Furman Selz LLC, located at 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Funds.
Furman Selz LLC 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 served 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 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 Funds' financial statements. To
calculate yield, a Fund takes the interest income it earned from its portfolio
of investments (as defined by the SEC formula) for a 30-day period (net of
expenses), divides it by the average number of shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on a
Fund's share price at the end of the 30-day period. This yield does not reflect
gains or losses from selling securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all the
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in 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.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The materials may also reprint, and use as advertising
and sales literature, articles from EVERGREEN EVENTS, a quarterly magazine
provided free of charge to Evergreen mutual fund shareholders.
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 provides 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
27
<PAGE>
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 SEC under the Securities Act of 1933, as amended. Copies of the
Registration Statements may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the offices of the SEC in Washington, D.C.
28
<PAGE>
INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 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., 230 Park Avenue, New York, New York 10169
536117 Rev. 03 8/96
********************************************************************************
<PAGE>
PROSPECTUS August 30, 1996
EVERGREEN(Service Mark) INCOME FUNDS (Evergreen Logo)
EVERGREEN U.S. GOVERNMENT FUND
EVERGREEN SHORT-INTERMEDIATE BOND FUND
EVERGREEN INTERMEDIATE-TERM BOND FUND
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES 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 August
30, 1996 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
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY 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(Service 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 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 15
Portfolio Managers 16
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 20
OTHER INFORMATION
Dividends, Distributions and Taxes 20
General Information 21
</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 of North
Carolina serves as investment adviser to the Evergreen Income Funds which
include: EVERGREEN SHORT-INTERMEDIATE BOND FUND, EVERGREEN U.S. GOVERNMENT FUND,
EVERGREEN INTERMEDIATE-TERM BOND FUND AND EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND. First Union National Bank of North Carolina is a subsidiary of
First Union Corporation, the sixth largest bank holding company in the United
States.
EVERGREEN SHORT-INTERMEDIATE BOND FUND (formerly Evergreen Fixed Income
Fund and previously known as 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.
EVERGREEN INTERMEDIATE-TERM BOND FUND (formerly The FFB Lexicon
Fund -- Fixed Income Fund) seeks, as its investment objective, to maximize
current yield consistent with the preservation of capital.
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND (formerly The FFB
Lexicon Fund -- Intermediate-Term Government Securities Fund) seeks to preserve
principal value and maintain a high degree of liquidity while providing current
income.
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
12b-1 Fees --
After 3 Years $24
Other Expenses .24%
After 5 Years $41
After 10 Years $92
Total .74%
</TABLE>
EVERGREEN SHORT-INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 7
12b-1 Fees --
After 3 Years $22
Other Expenses .19%
After 5 Years $38
After 10 Years $86
Total .69%
</TABLE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Management Fees .60%
After 1 Year $ 9
12b-1 Fees --
After 3 Years $ 28
Other Expenses .28%
After 5 Years $ 49
After 10 Years $ 108
Total .88%
</TABLE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES* EXAMPLE
<S> <C> <C> <C>
Management Fees .60%
After 1 Year $ 9
12b-1 Fees --
After 3 Years $ 29
Other Expenses .31%
After 5 Years $ 50
After 10 Years $ 112
Total .91%
</TABLE>
*The estimated annual operating expenses and examples do not reflect fee waivers
and expense reimbursements. Actual expenses for Class Y Shares net of fee
waivers and expense reimbursements for the most recent fiscal period were as
follows:
<TABLE>
<S> <C>
Evergreen Intermediate-Term Bond Fund.............................................. .80%
Evergreen Intermediate-Term Government Securities Fund............................. .80%
</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 the Y Class
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 June 30, 1996 except Evergreen Intermediate-Term
Bond Fund and Evergreen Intermediate-Term Government Securities Fund, which is
based on the ten month period ended June 30, 1996. 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 periods or the life of
the Fund if shorter for EVERGREEN SHORT-INTERMEDIATE BOND FUND, and EVERGREEN
U.S. GOVERNMENT FUND has been audited by KPMG Peat Marwick LLP, each Fund's
independent auditors. For EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND, the information in the tables for
the ten month period ended June 30, 1996, has been audited by KPMG Peat Marwick
LLP. Information presented four fiscal periods prior to June 30, 1996 or the
life of the Fund if shorter have been audited by Arthur Andersen LLP, the Fund's
predecessor 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 -- CLASS Y SHARES
<TABLE>
<CAPTION>
SEPTEMBER 2,
YEAR SIX MONTHS 1993*
ENDED ENDED YEAR ENDED THROUGH
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1996 1995# 1994 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................. $9.65 $9.07 $10.05 $10.25
Income (loss) from investment operations:
Net investment income.............................................. .66 .34 .69 .25
Net realized and unrealized gain (loss) on investments............. (.23) .58 (.98) (.20)
Total from investment operations................................. .43 .92 (.29) .05
Less distributions to shareholders from net investment income........ (.66) (.34) (.69) (.25)
Net asset value, end of period....................................... $9.42 $9.65 $9.07 $10.05
TOTAL RETURN+........................................................ 4.5% 10.3% (2.9%) .5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............................ $121,569 $16,934 $15,595 $14,486
Ratios to average net assets:
Expenses........................................................... .74% .79%++** .71%** .48%++**
Net investment income.............................................. 6.86% 7.31%++** 7.27%** 7.20%++**
Portfolio turnover rate.............................................. 23% 0% 19% 39%
</TABLE>
# The Fund changed its fiscal year end from December 31 to June 30.
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** 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 would have been the following:
<TABLE>
<CAPTION>
SEPTEMBER 2,
SIX MONTHS 1993*
ENDED YEAR ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1995# 1994 1993
<S> <C> <C> <C>
Expenses.................................................................... .80% .75% .79%
Net investment income....................................................... 7.30% 7.23% 6.89%
</TABLE>
5
<PAGE>
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
CLASS Y SHARES
NOVEMBER 1,
TEN MONTHS 1991*
ENDED THROUGH
JUNE 30, YEAR ENDED AUGUST 31, AUGUST 31,
1996# 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................ $10.15 $9.92 $10.61 $10.41 $10.00
Income (loss) from investment operations:
Net investment income..................................... .46 .55 .54 .57 .48
Net realized and unrealized gain (loss) on investments.... (.16) .23 (.64) .24 .40
Total from investment operations.......................... .30 .78 (.10) .81 .88
Less distributions to shareholders from:
Net investment income..................................... (.46) (.55) (.54) (.58) (.47)
Net realized gains........................................ -- -- (.05) (.03) --
Total distributions..................................... (.46) (.55) (.59) (.61) (.47)
Net asset value, end of period.............................. $9.99 $10.15 $9.92 $10.61 $10.41
TOTAL RETURN+............................................... 3.0% 8.2% (1.0%) 8.0% 9.1%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................... $87,004 $106,066 $106,448 $119,172 $87,648
Ratios to average net assets:
Expenses**................................................ .80%++ .70% .55% .55% .55%++
Net investment income**................................... 5.47%++ 5.54% 5.22% 5.48% 5.68%++
Portfolio turnover rate..................................... 28% 45% 45% 31% 47%
</TABLE>
* Commencement of class operations.
# The Fund changed its fiscal year end from August 31 to June 30.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** 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 would have been the following:
<TABLE>
<CAPTION>
CLASS Y SHARES
NOVEMBER 1,
TEN MONTHS 1991*
ENDED THROUGH
JUNE 30, YEAR ENDED AUGUST 31, AUGUST 31,
1996# 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Expenses............................................................. .87% .84% .82% .83% .86%
Net investment income................................................ 5.40% 5.40% 4.95% 5.20% 5.37%
</TABLE>
6
<PAGE>
EVERGREEN INTERMEDIATE-TERM BOND FUND
<TABLE>
<CAPTION>
CLASS Y SHARES
TEN NOVEMBER 1,
MONTHS 1991*
ENDED THROUGH
JUNE 30, YEAR ENDED AUGUST 31, AUGUST 31,
1996# 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................... $10.29 $9.93 $10.99 $10.56 $10.00
Income (loss) from investment operations:
Net investment income............................................ .48 .56 .55 .63 .55
Net realized and unrealized gain (loss) on investments........... (.19) .40 (.86) .66 .55
Total from investment operations................................. .29 .96 (.31) 1.29 1.10
Less distributions to shareholders from:
Net investment income............................................ (.48) (.56) (.55) (.64) (.54)
Net realized gains............................................... -- (.04) (.20) (.22) --
Total distributions............................................ (.48) (.60) (.75) (.86) (.54)
Net asset value, end of period..................................... $10.10 $10.29 $9.93 $10.99 $10.56
TOTAL RETURN+...................................................... 2.8% 10.1% (2.9%) 12.9% 11.3%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).......................... $157,814 $95,961 $91,724 $86,892 $66,695
Ratios to average net assets:
Expenses**....................................................... .80%++ .69% .55% .55% .55%++
Net investment income**.......................................... 5.75%++ 5.63% 5.32% 5.93% 6.49%++
Portfolio turnover rate............................................ 52% 73% 69% 49% 65%
</TABLE>
* Commencement of class operations.
# The fund changed its fiscal year end from August 31 to June 30.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
** 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 would have been the following:
<TABLE>
<CAPTION>
CLASS Y SHARES
NOVEMBER 1,
TEN MONTHS 1991*
ENDED THROUGH
JUNE 30, YEAR ENDED AUGUST 31, AUGUST 31,
1996# 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Expenses...................................................... .87% .83% .83% .83% .86%
Net investment income......................................... 5.68% 5.49% 5.04% 5.65% 6.18%
</TABLE>
7
<PAGE>
EVERGREEN SHORT-INTERMEDIATE BOND FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR SIX MONTHS
ENDED ENDED YEAR ENDED
JUNE 30, JUNE 30, DECEMBER 31,
1996 1995# 1994 1993 1992
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................................ $10.02 $9.52 $10.43 $10.41 $10.54
Income (loss) from investment operations:
Net investment income..................................................... .64 .33 .65 .69 .70
Net realized and unrealized gain (loss) on investments.................... (.19) .49 (.91) .19 (.02)
Total from investment operations........................................ .45 .82 (.26) .88 .68
Less distributions to shareholders from:
Net investment income..................................................... (.65) (.32) (.65) (.68) (.70)
Net realized gains........................................................ -- -- -- (.18) (.11)
Total distributions..................................................... (.65) (.32) (.65) (.86) (.81)
Net asset value, end of period.............................................. $9.82 $10.02 $9.52 $10.43 $10.41
TOTAL RETURN+............................................................... 4.6% 8.8% (2.6%) 8.7% 6.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)................................... $352,095 $347,050 $345,025 $376,445 $324,068
Ratios to average net assets:
Expenses.................................................................. .69% .67%++ .65% .66% .69%
Net investment income..................................................... 6.45% 6.68%++ 6.56% 6.41% 6.67%
Portfolio turnover rate..................................................... 76% 34% 48% 73% 66%
</TABLE>
# The Fund changed its fiscal year end from December 31 to June 30.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.
8
<PAGE>
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 Fund's 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 Board of Trustees of Evergreen Investment Trust, or The Evergreen
Lexicon Fund as the case may be, (the "Trustees") without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective. In addition to the investment policies detailed
below, each Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions".
EVERGREEN SHORT INTERMEDIATE BOND FUND
The objective of EVERGREEN SHORT-INTERMEDIATE BOND FUND is to attain a
high level of current income, with capital growth as a secondary objective,
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 Fund's 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 Fund's investment adviser
will consider such factors as the condition and growth potential of various
9
<PAGE>
economies and securities markets, currency and taxation considerations and other
pertinent financial, social, national and political factors. (See "Investment
Practices and Restrictions" -- "Foreign Investments".)
EVERGREEN U.S. GOVERNMENT FUND
The investment objective of EVERGREEN U.S. GOVERNMENT FUND is to achieve
a high level of current income consistent with stability of principal. The Fund
will invest in debt instruments issued or guaranteed by the U.S. government, its
agencies, or instrumentalities ("U.S. government securities"), and is suitable
for conservative investors seeking high current yields plus relative safety. It
permits an investor to participate in a portfolio that benefits from active
management of a blend of securities and maturities to maximize the opportunities
and minimize the risks created by changing interest rates.
In addition to U.S. government securities, the Fund may invest in:
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
Fund's 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 and commercial
paper which matures in 270 days or less so long as at least two of its ratings
are high quality ratings by nationally recognized statistical rating
organizations. 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, Inc. 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 of 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 weaken such bonds' prospects for principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered to be investment grade. (See the description of the rating categories
contained in the Statement of Additional Information.)
EVERGREEN INTERMEDIATE-TERM BOND FUND
The investment objective of the EVERGREEN INTERMEDIATE-TERM BOND FUND is
to maximize current yield consistent with the preservation of capital.
10
<PAGE>
The Fund will invest its assets in U.S. Treasury obligations; obligations
issued or guaranteed as to principal and interest by agencies and
instrumentalities of the U.S. government; receipts evidencing separately traded
principal and interest components of U.S. government obligations; corporate
bonds and debentures rated, at the time of purchase, A or better by S&P or
Moody's or, if unrated determined to be of comparable quality by the investment
adviser; mortgage-backed securities and asset-backed securities rated, at the
time of purchase, at least AA by S&P or Aa by Moody's, commercial paper rated
A-1 or better by Moody's or P-1 or better by S&P or, if unrated, determined to
be of comparable quality at the time of investment as determined by the
investment adviser; short-term bank obligations including certificates of
deposit; time deposits and bankers' acceptances of U.S. commercial banks or
savings and loan institutions with assets of at least $1 billion as of the end
of their most recent fiscal year; U.S. dollar denominated securities of the
government of Canada and its provincial and local governments; U.S. dollar
denominated securities issued or guaranteed by foreign governments, their
political subdivisions, agencies or instrumentalities; U.S. dollar denominated
obligations of supranational entities; and repurchase agreements involving any
of the foregoing securities; and U.S. dollar denominated securities of other
foreign issuers. A description of the rating categories is contained in the
Statement of Additional Information.
The Fund will maintain an average weighted maturity of approximately five
to fifteen years, although under normal conditions the investment adviser
expects the Fund to maintain an average weighted maturity of five to ten years.
The investment adviser may vary the average maturity substantially in
anticipation of a change in the interest rate environment.
EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
The investment objective of EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND is to preserve principal value and maintain a high degree of
liquidity while providing current income.
The Fund invests exclusively in U.S. Treasury obligations, obligations
issued or guaranteed as to principal and interest by agencies and
instrumentalities of the U.S. government, receipts evidencing separately traded
principal and interest components of U.S. government obligations, obligations of
supranational entities and repurchase agreements involving any of such
obligations. No more than 35% of the Fund's assets may be invested in receipts,
obligations of supranational entities and repurchase agreements involving such
securities.
The Fund will maintain an average weighted remaining maturity of
approximately three to ten years, although under normal conditions the
investment adviser expects to maintain an average maturity of three to six
years. No remaining maturity will exceed ten years. The investment adviser may
vary the average maturity substantially in anticipation of a change in the
interest rate environment.
The U.S. government obligations that the Fund may acquire include
securities representing an interest in a pool of mortgage loans that are issued
or guaranteed by a U.S. government agency. The primary issuers of these
mortgage-backed securities are the Government National Mortgage Association, the
Federal National Mortgage Association, and the Federal Home Loan Mortgage
Corporation. The only agency which may actually guarantee principal or interest
is the Government National Mortgage Association. Mortgage-backed securities are
in most cases "pass through" instruments through which the holder receives a
share of all interest and principal payments from the mortgages underlying the
certificates. The mortgage backing these securities include conventional thirty-
year fixed rate mortgages. However, due to scheduled and unscheduled principal
payments on the underlying loans, these securities have a shorter average
maturity and, therefore, less principal volatility than comparable bonds. During
periods of declining interest rates, prepayment of mortgages underlying
mortgage-backed securities can be expected to accelerate. When the mortgage
obligations are prepaid, the Fund will reinvest the prepaid amounts in
securities, the yield of which reflects interest rates prevailing at the time.
For purposes of complying with the Fund's investment policy of acquiring
securities with remaining maturity of ten years or less, the investment adviser
will use the expected life of a mortgage-backed security.
INVESTMENT PRACTICES AND RESTRICTIONS
Risk Factors. Bond prices move inversely to interest rates, i.e. as interest
rates decline the values of the bonds increase, and vice versa. The longer the
maturity of a bond, the greater the exposure to market price fluctuations. The
same market factors are reflected in the share price or net asset value of bond
funds which will vary with interest rates. In addition, certain of the
obligations in which each Fund may invest may be variable or floating rate
instruments, which may involve a conditional or unconditional demand feature,
and may include variable amount master demand notes. While these types of
instruments may, to a certain degree, offset the risk to principal associated
with rising interest rates, they would not be expected to appreciate in a
falling interest rate environment.
11
<PAGE>
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of 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 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 Fund to sell the
security in the open market in the case of a default. In such a case, a Fund may
incur costs in disposing of the security which would increase Fund expenses. The
Funds 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 SHORT-INTERMEDIATE BOND FUND, the EVERGREEN
INTERMEDIATE-TERM BOND FUND and the EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES 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. EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S.
GOVERNMENT 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 SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT 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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
may write (i.e., sell) covered call and put options. By writing a call option, a
Fund becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, a Fund becomes obligated during the term of the option to purchase the
securities underlying the option at the exercise
12
<PAGE>
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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
may also enter into currency and other financial futures contracts and write
options on such contracts. The Funds intend to enter into such contracts and
related options for hedging purposes. The Funds will enter into futures on
securities, currencies, or index-based futures contracts in order to hedge
against changes in interest 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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
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.
EVERGREEN SHORT-INTERMEDIATE BOND FUND and EVERGREEN U.S. GOVERNMENT FUND
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
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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
investments. In these events, the Funds may lose money on the financial futures
contracts or the options on financial futures contracts. It is not certain that
a secondary market for positions in financial futures contracts or for options
on financial futures contracts will exist at all times. Although the Funds
investment 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 Funds may invest are
debt obligations which are generally issued at a discount and payable
in full at maturity, and which do not provide for current payments of interest
prior to maturity. Zero-coupon securities usually trade at a deep discount from
their face or par value and are subject to greater market value fluctuations
from changing interest rates than debt obligations of comparable maturities
which make current distributions of interest. As a result, the net asset value
of shares of the Funds may fluctuate over a greater range than shares of other
mutual funds investing in securities making current distributions of interest
and having similar maturities.
Zero-coupon securities may include U.S. Treasury bills issued directly by
the U.S. Treasury or other short-term debt obligations, and longer-term bonds or
notes and their unmatured interest coupons which have been separated by their
holder, typically a custodian bank or investment banking firm. A number of
securities firms and banks have stripped the interest coupons from the
underlying principal (the "corpus") of U.S. Treasury securities and resold them
in custodial receipt programs with a number of different names, including
Treasury Income Growth Receipts ("TIGRS") and Certificates of Accrual on
Treasuries ("CATS"). The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are owned ostensibly by the
bearer or holder thereof), in trust on behalf of the owners thereof.
In addition, the Treasury has facilitated transfers of ownership of
zero-coupon securities by accounting separately for the beneficial ownership of
particular interest coupons and corpus payments on Treasury securities through
the Federal Reserve book-entry record-keeping system. The Federal Reserve
program as established by the Treasury Department is known as "STRIPS" or
"Separate Trading of Registered Interest and Principal of Securities". Under the
STRIPS program, the Funds will be able to have their beneficial ownership of
U.S. Treasury zero-coupon securities recorded directly in the book-entry
record-keeping system in lieu of having to hold certificates or other evidence
of ownership of the underlying U.S. Treasury securities.
When debt obligations have been stripped of their unmatured interest
coupons by the holder, the stripped coupons are sold separately. The principal
or corpus is sold at a deep discount because the buyer receives only the right
to receive a future fixed payment on the security and does not receive any
rights to periodic cash interest payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the coupons are sold
separately or grouped with other coupons with like maturity dates and sold in
such bundled form. Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the zero-coupon
securities issued directly by the obligor.
Foreign Investments. EVERGREEN SHORT-INTERMEDIATE BOND FUND may invest in
foreign securities or securities denominated in or indexed to foreign currencies
and EVERGREEN INTERMEDIATE-TERM BOND FUND may invest in U.S. dollar denominated
securities of foreign issuers. In addition, EVERGREEN SHORT-INTERMEDIATE BOND
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.
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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 the Funds receive from the reinvestment of
such prepayments, or any scheduled principal payments, may be lower than the
yield on the original mortgage security. As a consequence, mortgage securities
may be a less effective means of "locking in" interest rates than other types of
debt securities having the same stated maturity and may also have less potential
for capital appreciation. For certain types of asset pools, such as CMOs,
prepayments may be allocated to one tranche of securities ahead of other
tranches, in order to reduce the risk of prepayment for the other tranches.
Prepayments may result in a capital loss to the Funds to the extent that
the prepaid mortgage securities were purchased at a market premium over their
stated amount. Conversely, the prepayment of mortgage securities purchased at a
market discount from their stated principal amount will accelerate the
recognition of interest income by the Funds which would be taxed as ordinary
income when distributed to the shareholders. The credit characteristics of
asset-backed securities also differ in a number of respects from those of
traditional debt securities. The credit quality of most asset-backed securities
depends primarily upon the credit quality of the assets underlying such
securities, how well the entity issuing the securities is insulated from the
credit risk of the originator or any other affiliated entities, and the amount
and quality of any credit enhancement to such securities.
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 SHORT-INTERMEDIATE BOND 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. This restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933. The
EVERGREEN SHORT-INTERMEDIATE BOND FUND, the EVERGREEN INTERMEDIATE-TERM BOND
FUND and the EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES 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. 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.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund is organized. 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"), the sixth largest bank holding company
in the United States. First Union is
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headquartered in Charlotte, North Carolina, and had $139.9 billion in
consolidated assets as of June 30, 1996. First Union and its subsidiaries
provide a broad range of financial services to individuals and businesses
throughout the United States. CMG manages or otherwise oversees the investment
of over $42.1 billion in assets belonging to a wide range of clients, including
all the series of Evergreen Investment Trust (formerly known as First Union
Funds) the two series of The Evergreen Lexicon Fund (formerly The FFB Lexicon
Fund) and the two series of Evergreen Tax-Free Trust (formerly FFB Funds Trust).
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. Prior to January 1, 1996, First Fidelity Bank, N.A.
("First Fidelity") served as investment adviser to EVERGREEN INTERMEDIATE-TERM
BOND FUND and EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND. CMG
succeeded to the mutual funds advisory business of First Fidelity in connection
with the acquisition of First Fidelity Bancorporation by a subsidiary of First
Union.
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 the average daily net assets of EVERGREEN SHORT-INTERMEDIATE
BOND FUND and EVERGREEN U.S. GOVERNMENT FUND and .60 of 1% of the average daily
net assets of EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND. The total annualized operating
expenses of each Fund for the fiscal period ended June 30, 1996, expressed as a
percentage of average net assets on an annual basis, 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 LLC, an affiliate 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 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
were approximately $15.2 billion as of June 30, 1996.
PORTFOLIO MANAGERS
Thomas L. Ellis, a Vice President of FUNB, has been the portfolio manager
of EVERGREEN SHORT-INTERMEDIATE BOND FUND since its inception in 1988. Prior to
joining FUNB in 1985, Mr. Ellis had seventeen years investment management and
sales experience, including eleven years marketing short and medium-term
obligations to institutional investors, and three years as head trader of First
Boston Corporation. Rollin C. Williams, a Vice President of FUNB, has been the
portfolio manager of EVERGREEN U.S. GOVERNMENT FUND since its inception in 1992.
Mr. Williams, who has over twenty-four years investment management experience,
was Head of Fixed Income Investments at Dominion Trust Company from 1988 until
its acquisition by First Union. Bruce Besecker, a Vice President of FUNB, has
been the portfolio manager of EVERGREEN INTERMEDIATE-TERM BOND FUND since its
inception in 1991. Prior to joining FUNB, Mr. Besecker was a Vice President in
the Fixed Income Unit of the Financial Management Department of First Fidelity
since 1991. The portfolio manager of EVERGREEN INTERMEDIATE-TERM GOVERNMENT
SECURITIES FUND since its inception in 1991 has been Robert Cheshire. Mr.
Cheshire is a Vice President of FUNB and was formerly a Vice President in the
Institutional Asset Management Group of First Fidelity since 1990.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Eligible investors may purchase shares of the Funds 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
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Prospectus and are only available to (i) all shareholders of record in one or
more of the mutual funds advised by Evergreen Asset prior to December 30, 1994,
(ii) certain institutional investors, and (iii) investment advisory clients of
CMG, Evergreen Asset or their 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 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 Funds Value Their Shares. The net asset value of each Class of the
Funds' shares is calculated by dividing the value of the amount of each 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 each 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 of each Trust under
which each Fund operates 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.
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 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 the Fund's investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen mutual funds.
The Funds will not accept third party checks other than those payable directly
to a shareholder whose account has been in existence at least thirty days.
The 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 Fund at the number on the front
page of this Prospectus. The Funds cannot accept investments specifying a
certain price or date and reserve the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
mutual funds. Although not currently anticipated, the Funds reserve the right to
suspend the offer of shares for a period of time.
Shares of the Funds 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 any Fund's 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 a Fund to that 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
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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 ten 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 Funds. 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 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 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 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. The Funds 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 redemption of shares is a taxable transaction for Federal income
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 thirty 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.
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 by telephone or mail as
described below. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. An
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exchange, which represents an initial investment in another Evergreen mutual
fund, is subject to the minimum investment and suitability requirements of each
Fund.
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. 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 Funds 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 Funds 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' shares,
or the toll-free number on the front page of this Prospectus. Some services are
described in more detail in the Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25 per month or
$75 per quarter. Each Fund reserves the right to close an account that through
liquidation or termination of the Systematic Investment Plan has not reached a
minimum balance of $1,000 ($250 for retirement accounts) within 24 months of the
initial investment. You can open a Systematic Investment Plan in the EVERGREEN
U.S. GOVERNMENT FUND and EVERGREEN SHORT INTERMEDIATE BOND FUND for a minimum of
only $50 per month with no initial investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Funds Systematic Investment Plan or Telephone
Investment Plan may not be redeemed for ten days from the date of investment.
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 Funds
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 $75. 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
Funds 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.
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) under the following prototype retirement plans: (i)
Individual Retirement Accounts ("IRAs") and Rollover IRAs; (ii) Simplified
Employee Pension (SEP) for
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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 its 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 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 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
For EVERGREEN U.S. GOVERNMENT FUND net income dividends, if any, are
declared daily and paid monthly. For EVERGREEN INTERMEDIATE-TERM BOND FUND,
EVERGREEN SHORT-INTERMEDIATE BOND FUND, and EVERGREEN INTERMEDIATE-TERM
GOVERNMENT SECURITIES FUND net income dividends are declared and paid monthly.
Distributions of any net realized capital gains of the Funds will be made
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 Funds 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
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subject to special tax rules. These rules can affect the amount, timing and
characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions, if any, and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the 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.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
GENERAL INFORMATION
Portfolio 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 BOND FUND and EVERGREEN U.S.
GOVERNMENT FUND are each separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. EVERGREEN INTERMEDIATE-TERM BOND FUND and EVERGREEN
INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND are separate series of The
Evergreen Lexicon Fund (formerly, The FFB Lexicon Fund), which is a
Massachusetts business trust organized in 1991. 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
contingent deferred sales charge. 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 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.
Custodian, 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 custodian, registrar, transfer agent and dividend-disbursing agent.
State Street is compensated for its services as transfer agent by 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 or Class C Shares.
Principal Underwriter. EFD, an affiliate of Furman Selz LLC, located 230 Park
Avenue, New York, New York 10169, is the principal underwriter of the Funds.
Furman Selz LLC 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 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 served 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
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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 Funds' financial statements. To
calculate yield, a Fund takes the interest income it earned from its portfolio
of investments (as defined by the SEC formula) for a 30-day period (net of
expenses), divides it by the average number of shares entitled to receive
dividends, and expresses the result as an annualized percentage rate based on a
Fund's share price at the end of the 30-day period. This yield does not reflect
gains or losses from selling securities.
Total returns are based on the overall dollar or percentage change in the
value of a hypothetical investment in a Fund. A Fund's total return shows its
overall change in value including changes in share prices and assumes all the
Fund's distributions are reinvested. A cumulative total return reflects a Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical annually compounded return that would have produced
the same cumulative total return if a Fund's performance had been constant over
the entire period. Because average annual total returns tend to smooth out
variations in 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.
In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen mutual funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The materials may also reprint, and use as advertising
and sales literature, articles from EVERGREEN EVENTS, a quarterly magazine
provided free of charge to Evergreen mutual fund shareholders.
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 Trusts
with the SEC under the Securities Act of 1933, as amended. Copies of the
Registration Statements may be obtained at a reasonable charge from the SEC or
may be examined, without charge, at the offices of the SEC in Washington, D.C.
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INVESTMENT ADVISER
Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 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., 230 Park Avenue, New York, New York 10169
536343REV03
