1933 Act File No. 2-94560
1940 Act File No. 811-4154
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 50 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 50 X
EVERGREEN INVESTMENT TRUST
(formerly First Union Funds)
(Exact Name of Registrant as Specified in Charter)
2500 Westchester Avenue
Purchase, NY 10577
(Address of Principal Executive Offices)
(914) 694-2020
(Registrant's Telephone Number)
James P. Wallin, Esq.
Evergreen Asset Management Corp.
2500 Westchester Avenue, Purchase, NY 10577
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
/x/ Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/ / 60 days after filing pursuant to paragraph (a)(i) or
/ / on (date) pursuant to paragraph (a)(i) or
/ / 75 days after filing pursuant to paragraph (a)(ii) or
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)
The Registrant has filed a Declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for its year
ended March 31, 1997 was filed on or about May 29, 1997.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Offering Registration
Registered Registered Per Unit* Price** Fee
- -------------------------------------------------------------------------------
Shares of
Beneficial
Interest,
$0.0001 Par 1,054,226 $13.86 $15,338,988 $-
Value
- -------------------------------------------------------------------------------
*Computed under Rule 457(d) on the basis of the offering price per share at the
close of business on June 9, 1997.
** The calculation of the maximum aggregate offering price is made pursuant to
Rule 24e-2 under the Investment Company Act of 1940. 5,049,153 shares of the
Fund were redeemed during its fiscal year ended March 31, 1997. Of such
shares, 3,994,927 were used for a reduction pursuant to Rule 24f-2(c). The
remaining 1,054,226 shares are being registered herewith.
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of EVERGREEN INVESTMENT TRUST,
formerly known as FIRST UNION FUNDS, is comprised of three of the Trust's
portfolios: (1) Evergreen Utility Fund (2) Evergreen Balanced Fund and (3)
Evergreen Value Fund. Each of the portfolios consist of four separate classes of
shares: (a) Class Y Shares, (b) Class A Shares, (c) Class B Shares, and (d)
Class C Shares.
CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No. Location in Prospectus(es)
Part A
Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Overview of the Fund(s);
Expense Information
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Cover Page; Description of
the Funds; Other
Information
Item 5. Management of the Fund Management of the Fund(s);
Other Information
Item 6. Capital Stock and Other Securities Dividends, Distributions and
Taxes; Other Information
Item 7. Purchase of Securities Being Offered Purchase and Redemption of
Shares
Item 8. Redemption or Repurchase Purchase and Redemption of
Shares
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and
Policies;Investment
Restrictions; Non-
Fundamental Operating
Policies; and Certain
Risk Considerations
Item 14. Management of the Fund Management; Trustees
Item 15. Control Persons and Principal Management
Holders of Securities
Item 16. Investment Advisory and Other Services Investment Advisers;
Purchase of Shares
Item 17. Brokerage Allocation Allocation of Brokerage
Item 18. Capital Stock and Other Securities Purchase of Shares;
General Information About
the Funds
Item 19. Purchase, Redemption and Pricing of Distribution Plans and
Securities Being Offered Agreements; Purchase
of Shares; Net Asset Value
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Distribution Plans and
Agreements; Purchase of
Shares
Item 22. Calculation of Performance Data Performance Information
Item 23. Financial Statements Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
*******************************************************************************
<PAGE>
EVERGREEN BALANCED FUND
PART A
PROSPECTUS
<PAGE>
PROSPECTUS July 1, 1997
EVERGREEN(SM) BALANCED FUNDS (Evergreen logo appears here)
EVERGREEN FOUNDATION FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN BALANCED FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Balanced Funds (the "Funds") are designed to provide
investors with a selection of investment alternatives which seek to provide
current income, capital appreciation or after-tax "total return." This
Prospectus provides information regarding the Class A, Class B and Class C
shares offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A Statement of Additional Information for the Funds and certain
other funds in the Evergreen Keystone group of mutual funds dated April 1,
1997, as amended July 1, 1997 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 telephoning the Evergreen
Keystone Funds at 1-800-343-2898. There can be no assurance that the
investment objective of any Fund will be achieved. Investors are advised to
read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS.................................. 2
EXPENSE INFORMATION.................................... 3
FINANCIAL HIGHLIGHTS................................... 5
DESCRIPTION OF THE FUNDS............................... 10
Investment Objectives and Policies............ 10
Investment Practices and Restrictions......... 13
Special Risk Considerations................... 18
MANAGEMENT OF THE FUNDS................................ 19
Investment Advisers........................... 19
Portfolio Managers............................ 20
Sub-Adviser................................... 20
Administrator................................. 21
Sub-Administrator............................. 21
Distribution Plans and Agreements............. 21
PURCHASE AND REDEMPTION OF SHARES...................... 22
How to Buy Shares............................. 22
How to Redeem Shares.......................... 25
Exchange Privilege............................ 26
Shareholder Services.......................... 27
Effect of Banking Laws........................ 28
OTHER INFORMATION...................................... 29
Dividends, Distributions and Taxes............ 29
General Information........................... 30
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds."
The investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN TAX STRATEGIC FOUNDATION FUND is Evergreen Asset
Management Corp. which, with its predecessors, has served as an investment
adviser to the Evergreen mutual funds since 1971. Evergreen Asset Management
Corp. is a wholly-owned subsidiary of First Union National Bank, which in turn
is a subsidiary of First Union Corporation, the sixth largest bank holding
company in the United States. The Capital Management Group of First Union
National Bank serves as investment adviser to EVERGREEN BALANCED FUND.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed-income securities.
EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN BALANCED FUND seeks to produce long-term total return through
capital appreciation, dividends and interest income.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE(S) OF ANY FUND WILL
BE ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in Class A, Class B and Class C shares of each
Fund. For further information see "Purchase and Redemption of Shares" and
"General Information -- Other Classes of Shares."
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None None
(as a % of offering price)
Contingent Deferred Sales Charge (as a % of None 5% in the first year, declining to 1% in the 1% in the first
original purchase price or redemption sixth year and 0% thereafter year and 0%
proceeds, whichever is lower) thereafter
</TABLE>
The following tables show for each Fund the annualized operating expenses
(as a percentage of average net assets) attributable to each Class of shares for
the three month period ended March 31, 1997, 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 Class C
shares, no redemption at the end of each period.
In the following examples (i) the expenses for Class A shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B shares 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 seven years after purchase (years eight
through ten, therefore, reflect Class A expenses).
EVERGREEN FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES 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 .79% .79% .79%
After 1 Year $ 60 $ 70 $ 30 $ 20 $ 20
12b-1 Fees* .25% .75% .75%
After 3 Years $ 85 $ 93 $ 63 $ 63 $ 63
Shareholder Service
Fees -- .25% .25% After 5 Years $ 113 $ 128 $ 108 $ 108 $ 108
After 10 Years $ 191 $ 204 $ 233 $ 204 $ 233
Other Expenses .21% .21% .21%
Total 1.25% 2.00% 2.00%
</TABLE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES 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 .875% .875% .875%
After 1 Year $ 61 $ 72 $ 32 $ 22 $ 22
12b-1 Fees* .250% .750% .750%
After 3 Years $ 89 $ 97 $ 67 $ 67 $ 67
Shareholder Service
Fees -- .250% .250% After 5 Years $ 119 $ 135 $ 114 $ 115 $ 114
After 10 Years $ 205 $ 219 $ 246 $ 219 $ 246
Other Expenses .255% .265% .255%
Total 1.380% 2.140% 2.130%
</TABLE>
EVERGREEN AMERICAN RETIREMENT FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES** 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 .75% .75% .75%
After 1 Year $ 61 $ 71 $ 32 $ 21 $ 22
12b-1 Fees* .25% .75% .75%
After 3 Years $ 89 $ 96 $ 66 $ 66 $ 66
Shareholder Service
Fees -- .25% .25% After 5 Years $ 119 $ 133 $ 114 $ 113 $ 114
After 10 Years $ 204 $ 216 $ 245 $ 216 $ 245
Other Expenses .37% .36% .37%
Total 1.37% 2.11% 2.12%
</TABLE>
3
<PAGE>
EVERGREEN BALANCED FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES 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 $ 67 $ 27 $ 17 $ 17
12b-1 Fees* .25% .75% .75%
After 3 Years $ 76 $ 83 $ 53 $ 53 $ 53
Shareholder Service
Fees -- .25% .25% After 5 Years $ 97 $ 111 $ 91 $ 91 $ 91
After 10 Years $ 156 $ 169 $ 199 $ 169 $ 199
Other Expenses .18% .18% .18%
Total .93% 1.68% 1.68%
</TABLE>
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are based on the experience of each Fund for
the most recent fiscal period. From time to time, each Fund's investment adviser
may, at its descretion, reduce or waive its fees or reimburse the Funds for
certain of their expenses in order to reduce their expense ratios. Each Fund's
investment adviser may cease these waivers and reimbursements at any time. THE
EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR
ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN
THOSE SHOWN. For a more complete description of the various costs and expenses
borne by the Funds see "Management of the Funds." As a result of asset-based
sales charges, long-term shareholders may pay more than the economic equivalent
of the maximum front-end charges permitted under the rules of the National
Association of Securities Dealers, Inc.
*Class A shares can pay up to .75 of 1% of average net assets as a 12b-1 fee.
For the forseeable future, the Class A 12b-1 fees will be limited to .25 of 1%
of average net assets. For Class B and Class C shares, a portion of the 12b-1
fees equivalent to .25 of 1% of average net assets will be shareholder
servicing-related. Distribution-related 12b-1 fees will be limited to .75 of 1%
of average net assets as permitted under the rules of the National Association
of Securities Dealers, Inc.
**The annualized operating expenses and examples reflect fee waivers and expense
reimbursements for the three month period ended March 31, 1997. Actual expenses
for the three month period then ended excluding fee waivers and expense
reimbursements were as follows:
<TABLE>
<S> <C> <C>
Evergreen American Retirement Fund Class A 1.68%
Class B 2.43%
Class C 2.43%
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter has been audited by the respective Fund's independent
auditors as follows: EVERGREEN FOUNDATION FUND for the three-months ended March
31, 1997 and the fiscal year ended December 31, 1996 by KPMG Peat Marwick LLP
and for the fiscal year ended December 31, 1995 by other auditors; EVERGREEN TAX
STRATEGIC FOUNDATION FUND for the three-months ended March 31, 1997 and the
fiscal year ended December 31, 1996 by KPMG Peat Marwick LLP and for the fiscal
year ended December 31, 1995 by other auditors; EVERGREEN AMERICAN RETIREMENT
FUND for the three-months ended March 31, 1997 and the fiscal year ended
December 31, 1996 by KPMG Peat Marwick LLP and for the fiscal year ended
December 31, 1995 by other auditors; and EVERGREEN BALANCED FUND by KPMG Peat
Marwick LLP. A report of KPMG Peat Marwick LLP or other auditors, as the case
may be, on the audited information with respect to each Fund is incorporated by
reference into the Funds' Statement of Additional Information. The following
information for each Fund should be read in conjunction with the financial
statements and related notes which are incorporated by reference into the Funds'
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 FOUNDATION FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS C
CLASS A CLASS B YEAR
THREE MONTHS THREE MONTHS THREE MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, 31,
1997** 1996 1995* 1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................. $16.13 $15.12 $12.24 $16.07 $15.07 $12.24 $16.06 $15.07
Income (loss) from investment
operations:
Net investment income.............. .12 .50 .44 .09 .40 .36 .09 .40
Net realized and unrealized gain
(loss) on investments............ (.13) 1.16 3.14 (.13) 1.15 3.09 (.13) 1.14
Total from investment
operations................... (.01) 1.66 3.58 (.04) 1.55 3.45 (.04) 1.54
Less distributions to shareholders
from:
Net investment income.............. (.12) (.50) (.47) (.09) (.40) (.39) (.08) (.40)
Net realized gain on investments... -- (.15) (.23) -- (.15) (.23) -- (.15)
Total distributions............ (.12) (.65) (.70) (.09) (.55) (.62) (.08) (.55)
Net asset value, end of period....... $16.00 $16.13 $15.12 $15.94 $16.07 $15.07 $15.94 $16.06
TOTAL RETURN+........................ (.2%) 11.3% 29.7% (.3%) 10.5% 28.7% (.3%) 10.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................ $220 $206 $107 $606 $570 $296 $28 $27
Ratios to average net assets:
Expenses........................... 1.25%++ 1.24% 1.33%++# 2.00%++ 1.99% 2.07%++ 2.00%++ 1.99%
Net investment income.............. 2.83%++ 3.39% 3.73%++# 2.07%++ 2.64% 2.99%++ 2.07%++ 2.64%
Portfolio turnover rate.............. 2% 10% 28% 2% 10% 28% 2% 10%
Average commission rate paid per
share.............................. $.0670 $.0649 N/A $.0670 $.0649 N/A $.0670 $.0649
<CAPTION>
CLASS C
YEAR ENDED
DECEMBER 31,
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period............................. $12.24
Income (loss) from investment
operations:
Net investment income.............. .34
Net realized and unrealized gain
(loss) on investments............ 3.09
Total from investment
operations................... 3.43
Less distributions to shareholders
from:
Net investment income.............. (.37)
Net realized gain on investments... (.23)
Total distributions............ (.60)
Net asset value, end of period....... $15.07
TOTAL RETURN+........................ 28.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in
millions)........................ $11
Ratios to average net assets:
Expenses........................... 2.23%++#
Net investment income.............. 2.83%++#
Portfolio turnover rate.............. 28%
Average commission rate paid per
share.............................. N/A
</TABLE>
* For the period from January 3, 1995 (commencement of operations) to December
31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 operating expenses and net investment income to average net assets would
have been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995*
CLASS A CLASS C
SHARES SHARES
<S> <C> <C>
Expenses............................................................ 1.34% 2.37%
Net investment income............................................... 3.72% 2.69%
</TABLE>
5
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS C
CLASS A CLASS B YEAR
THREE MONTHS THREE MONTHS THREE MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, 31,
1997++ 1996 1995* 1997++ 1996 1995* 1997++ 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period....................... $13.50 $12.20 $10.44 $13.49 $12.19 $10.31 $13.47 $12.19
Income from investment
operations:
Net investment income........ .07 .27 .29 .05 .19 .22 .06 .18
Net realized and unrealized
gain on investments........ .06+++ 1.59 2.24 .06+++ 1.59 2.37 .05+++ 1.58
Total from investment
operations............. .13 1.86 2.53 .11 1.78 2.59 .11 1.76
Less distributions to
shareholders from:
Net investment income........ (.06) (.28) (.31) (.04) (.20) (.25) (.05) (.20)
Net realized gain on
investments................ -- (.28) (.46) -- (.28) (.46) -- (.28)
Total distributions...... (.06) (.56) (.77) (.04) (.48) (.71) (.05) (.48)
Net asset value, end of
period....................... $13.57 $13.50 $12.20 $13.56 $13.49 $12.19 $13.53 $13.47
TOTAL RETURN**................. 1.0% 15.4% 24.8% 0.8% 14.7% 25.6% 0.8% 14.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............ $ 15,039 $11,166 $2,702 $ 38,838 $28,007 $6,559 $ 5,086 $4,108
Ratios to average net assets:
Expenses................... 1.38%+ 1.52%# 1.75%#+ 2.14%+ 2.27%# 2.50%#+ 2.13%+ 2.25%#
Net investment income...... 2.30%+ 2.39%# 2.79%#+ 1.55%+ 1.64%# 2.03%#+ 1.55%+ 1.64%#
Portfolio turnover rate...... 29% 88% 110% 29% 88% 110% 29% 88%
Average commission rate paid
per share.................. $.0656 $.0648 N/A $.0656 $.0648 N/A $.0656 $.0648
<CAPTION>
CLASS C
YEAR ENDED
DECEMBER 31,
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of
period....................... $10.69
Income from investment
operations:
Net investment income........ .22
Net realized and unrealized
gain on investments........ 1.99
Total from investment
operations............. 2.21
Less distributions to
shareholders from:
Net investment income........ (.25)
Net realized gain on
investments................ (.46)
Total distributions...... (.71)
Net asset value, end of
period....................... $12.19
TOTAL RETURN**................. 21.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............ $496
Ratios to average net assets:
Expenses................... 2.50%#+
Net investment income...... 2.07%#+
Portfolio turnover rate...... 110%
Average commission rate paid
per share.................. N/A
</TABLE>
* For the period from January 17, 1995, January 6, 1995 and March 3, 1995
(commencement of Class A, Class B and Class C operations, respectively) to
December 31, 1995.
** 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.
++ The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+++ The per share amount is not in accord with the net realized and unrealized
gain for the period due to the timing of the sales of fund shares and the
amount of per share realized and unrealized gains and losses at such time.
# Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C
SHARES
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995* 1996 1995* 1996 1995*
<S> <C> <C> <C> <C> <C> <C>
Expenses....................................... 1.76% 5.02% 2.51% 3.65% 2.48% 18.91%
Net investment income (loss)................... 2.15% (.48%) 1.40% .88% 1.41% (14.34%)
</TABLE>
6
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
THREE THREE THREE YEAR
MONTHS MONTHS MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31 MARCH 31, DECEMBER 31 MARCH 31, 31,
1997** 1996 1995* 1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period... $13.86 $12.82 $10.65 $13.80 $12.80 $10.65 $13.83 $12.81
Income (loss) from investment
operations:
Net investment income................ .11 .45 .41 .09 .36 .35 .09 .36
Net realized and unrealized gain
(loss) on investments.............. (.12) 1.12 2.22 (.13) 1.09 2.20 (.13) 1.11
Total from investment
operations..................... (.01) 1.57 2.63 (.04) 1.45 2.55 (.04) 1.47
Less distributions to shareholders
from:
Net investment income................ (.11) (.42) (.46) (.09) (.34) (.40) (.09) (.34)
Net realized gain on investments..... -- (.11) -- -- (.11) -- -- (.11)
Total distributions.............. (.11) (.53) (.46) (.09) (.45) (.40) (.09) (.45)
Net asset value, end of period......... $13.74 $13.86 $12.82 $13.67 $13.80 $12.80 $13.70 $13.83
TOTAL RETURN+.......................... (.1%) 12.5% 24.9% (.3%) 11.5% 24.1% (.3%) 11.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $14,590 $11,116 $1,335 $76,791 $57,622 $4,839 $ 1,769 $1,487
Ratios to average net assets:
Expenses #........................... 1.37%++ 1.30% 1.37%++ 2.11%++ 2.06% 2.12%++ 2.12%++ 2.05%
Net investment income #.............. 3.43%++ 3.53% 3.73%++ 2.68%++ 2.79% 2.97%++ 2.65%++ 2.80%
Portfolio turnover rate................ 9% 16% 49% 9% 16% 49% 9% 16%
Average commission rate paid per
share................................ $.0606 $.0619 N/A $.0606 $.0619 N/A $ .0606 $.0619
<CAPTION>
CLASS C
YEAR ENDED
DECEMBER 31,
1995*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period... $10.65
Income (loss) from investment
operations:
Net investment income................ .36
Net realized and unrealized gain
(loss) on investments.............. 2.19
Total from investment
operations..................... 2.55
Less distributions to shareholders
from:
Net investment income................ (.39)
Net realized gain on investments..... --
Total distributions.............. (.39)
Net asset value, end of period......... $12.81
TOTAL RETURN+.......................... 24.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................... $110
Ratios to average net assets:
Expenses #........................... 2.10%++
Net investment income #.............. 2.96%++
Portfolio turnover rate................ 49%
Average commission rate paid per
share................................ N/A
</TABLE>
* For the period from January 3, 1995 (commencement of class operations) to
December 31, 1995.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 operating expenses and net investment income (loss) to average net assets
would have been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
THREE THREE THREE YEAR
MONTHS MONTHS MONTHS ENDED
ENDED YEAR ENDED ENDED YEAR ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, 31,
1997** 1996 1995* 1997** 1996 1995* 1997** 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Expenses....................................... 1.68% 1.33% 10.96% 2.43% 2.09% 4.20% 2.43% 2.08%
Net investment income (loss)................... 3.12% 3.50% (5.86%) 2.36% 2.76% .89% 2.34% 2.77%
<CAPTION>
CLASS C
YEAR ENDED
DECEMBER 31,
1995*
<S> <C>
Expenses....................................... 103.52%
Net investment income (loss)................... (98.46%)
</TABLE>
7
<PAGE>
EVERGREEN BALANCED FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
THREE THREE
MONTHS MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1997** 1996 1995 1994 1993 1992 1991* 1997** 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of
period.............. $12.95 $13.12 $11.17 $12.07 $11.41 $11.02 $10.00 $12.96 $13.13 $11.18 $12.08
Income (loss) from
investment
operations:
Net investment
income........... .12 .54 .51 .43 .42 .42 .30 .10 .43 .42 .36
Net realized and
unrealized gain
(loss) on
investments...... (.08) .94 2.40 (.71) .75 .43 1.08 (.08 ) .95 2.40 (.71)
Total from
investment
operations..... .04 1.48 2.91 (.28) 1.17 .85 1.38 .02 1.38 2.82 (.35)
Less distributions to
shareholders from:
Net investment
income........... (.12) (.54) (.50) (.43) (.42) (.42) (.35) (.10 ) (.44) (.41) (.36)
Net realized gain
on investments... -- (1.11) (.46) (.19) (.09) (.04) (.01) -- (1.11) (.46) (.19)
In excess of net
investment income... -- -- -- -- -- -- -- -- -- -- --
Total
distributions.. (.12) (1.65) (.96) (.62) (.51) (.46) (.36) (.10 ) (1.55) (.87) (.55)
Net asset value, end
of period........... $12.87 $12.95 $13.12 $11.17 $12.07 $11.41 $11.02 $12.88 $12.96 $13.13 $11.18
TOTAL RETURN+........ .3% 11.4% 26.5% (2.4%) 10.4% 7.9% 11.8% .1% 10.6% 25.6% (3.0%)
RATIOS &
SUPPLEMENTAL DATA:
Net assets,
end of period
(000's omitted)..... $41,429 $43,169 $41,849 $41,010 $35,032 $17,408 $334 $107,347 $109,591 $108,983 $100,052
Ratios to average
net assets:
Expenses........... .93%++ .89% .88% .89% .91% .91% .92%++ 1.68% ++ 1.64% 1.62% 1.48%
Net investment
income........... 3.62%++ 3.95% 4.05% 3.69% 3.61% 3.93% 4.38%++ 2.87% ++ 3.19% 3.30% 3.12%
Portfolio turnover
rate................ 28% 34% 37% 35% 19% 12% 19% 28% 34% 37% 35%
Average commission
rate paid per
share............... $.0595 $.0593 N/A N/A N/A N/A N/A $.0595 $0.0593 N/A N/A
<CAPTION>
CLASS B SHARES
YEAR ENDED
DECEMBER 31,
1993*
<S> <C>
PER SHARE DATA:
Net asset value,
beginning of
period.............. $11.54
Income (loss) from
investment
operations:
Net investment
income........... .34
Net realized and
unrealized gain
(loss) on
investments...... .65
Total from
investment
operations..... .99
Less distributions to
shareholders from:
Net investment
income........... (.34)
Net realized gain
on investments... (.09)
In excess of net
investment income... (.02)
Total
distributions.. (.45)
Net asset value, end
of period........... $12.08
TOTAL RETURN+........ 8.7%
RATIOS &
SUPPLEMENTAL DATA:
Net assets,
end of period
(000's omitted)..... $65,475
Ratios to average
net assets:
Expenses........... 1.41%++
Net investment
income........... 3.09%++
Portfolio turnover
rate................ 19%
Average commission
rate paid per
share............... N/A
</TABLE>
* For the period from June 10, 1991 (commencement of Class A operations) to
December 31, 1991; for the period from January 26, 1993 (commencement of
Class B operations) to December 31, 1993; and for the period from September
2, 1994 (commencement of Class C operations) to December 31, 1994.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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.
8
<PAGE>
EVERGREEN BALANCED FUND -- C SHARES
<TABLE>
<CAPTION>
CLASS C SHARES
THREE
MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995 1994*
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period.............................................. $12.88 $13.11 $11.17 $12.00
Income (loss) from investment operations:
Net investment income........................................................... .10 .40 .41 .18
Net realized and unrealized gain (loss) on investments.......................... (.09) .93 2.40 (.61)
Total from investment operations.............................................. .01 1.33 2.81 (.43)
Less distributions to shareholders from:
Net investment income........................................................... (.09) (.45) (.41) (.21)
Net realized gain on investments................................................ -- (1.11) (.46) (.19)
In excess of net investment income................................................
Total distributions........................................................... (.09) (1.56) (.87) (.40)
Net asset value, end of period.................................................... $12.80 $12.88 $13.11 $11.17
TOTAL RETURN+..................................................................... .1% 10.2% 25.5% (3.6%)
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)......................................... $353 $355 $300 $195
Ratios to average net assets:
Expenses........................................................................ 1.68%++ 1.65% 1.62% 1.64%++
Net investment income........................................................... 2.92%++ 3.19% 3.31% 3.23%++
Portfolio turnover rate........................................................... 28% 34% 37% 35%
Average commission rate paid per share............................................ $.0595 $.0593 N/A N/A
</TABLE>
* For the period from June 10, 1991 (commencement of Class A operations) to
December 31, 1991; for the period from January 26, 1993 (commencement of
Class B operations) to December 31, 1993; and for the period from September
2, 1994 (commencement of Class C operations) to December 31, 1994.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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.
9
<PAGE>
DESCRIPTION OF THE FUNDS
Each Fund's investment objective is fundamental and may not be changed
without shareholder approval.
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below. There can be no assurance that
any Fund's investment objective will be achieved.
INVESTMENT OBJECTIVES AND POLICIES
EVERGREEN FOUNDATION FUND
The investment objectives of EVERGREEN FOUNDATION FUND, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or not
such securities are traded on a national securities exchange. The values of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market values of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the values of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities, including issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress. Some of
these securities are supported by the full faith and credit of the U.S.
government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's Investor's
Service ("Moody's"), A-2 by Standard and Poor's Ratings Service, a division of
McGraw-Hill Companies, Inc. ("S&P").
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
10
<PAGE>
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's). For a description of such ratings see the Statement of Additional
Information.
Certain obligations may be entitled to the benefit of standby letters of
credit or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
EVERGREEN TAX STRATEGIC FOUNDATION FUND
The investment objective of EVERGREEN TAX STRATEGIC FOUNDATION FUND is to
maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
"Investment Practices and Restrictions -- Municipal Securities and Taxable
Fixed-Income Investments" below.)
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The values of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities). As of
December 31, 1994, 1995, 1996 and March 31, 1997, approximately 54%, 52%, 52%
and 55%, respectively, of the Fund's portfolio consisted of investments in
Municipal Securities.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market values of
the Municipal Securities in the Fund's portfolio can be expected to vary
inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short, medium or long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
In general, the Fund will invest in Municipal Securities only if they are
determined to be of high or upper medium quality. These include bonds rated BBB
or higher by S&P or Baa or higher by Moody's or any other nationally recognized
statistical rating organization ("SRO"). The Fund may purchase Municipal
Securities which are unrated at the time of purchase, if such securities are
determined by the Fund's investment adviser to be of comparable quality to such
rated securities. Certain Municipal Securities (primarily variable rate demand
notes) may be entitled to the benefits of standby letters of credit or similar
commitments issued by banks and, in such instances, the Fund's investment
adviser will take into account the obligations of the banks in assessing the
quality of such securities. Medium grade bonds are more susceptible to adverse
economic conditions or changing circumstances than higher grade bonds. For a
description of such ratings see the Statement of Additional Information.
Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be subject to the alternative
minimum tax on that part of the Fund's distributions derived from the bonds. As
a matter
11
<PAGE>
of fundamental policy, 80% of the Fund's investments in Municipal Securities
will be invested in Municipal Securities, the interest from which is not subject
to the federal alternative minimum tax.
EVERGREEN AMERICAN RETIREMENT FUND
The investment objectives of EVERGREEN AMERICAN RETIREMENT FUND in order
of priority are conservation of capital, reasonable income and capital growth.
The Fund offers a structured investment approach designed specifically for
retirees and persons contemplating retirement which may also be appropriate for
the qualified retirement plans of smaller companies.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock. As of December 31, 1994, 1995, 1996 and
March 31, 1997, approximately 74%, 66%, 59% and 64% respectively, of the Fund's
portfolio consisted of equity securities.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
values.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. The balance will be invested in
corporate obligations rated no lower than A by Moody's or S&P.
EVERGREEN BALANCED FUND
The investment objective of the EVERGREEN BALANCED FUND is to achieve a
long-term total return through capital appreciation, dividends and interest
income. The Fund invests in common and preferred stocks for growth and fixed
income securities to provide a stable income flow.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% in fixed income securities (including some
convertible securities) and 0-25% in cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk. As of
December 31, 1994, 1995, 1996, and March 31, 1997, approximately 55%, 60%, 54%
and 51%, respectively, of the Fund's portfolio consisted of equity securities.
12
<PAGE>
The Fund invests in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection include a company's
financial strength (such as cash flow and low debt-to-equity ratio), earnings
growth and price in relation to current earnings, dividends and book value to
identify growth opportunities. The Fund may also invest in American Depositary
Receipts ("ADRs") of foreign companies which are traded on the New York or
American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by S&P
or Moody's or any other SRO, or which, if unrated, are considered to be of
comparable quality by the Fund's investment adviser. For a description of such
ratings see the Statement of Additional Information. Bonds are selected based
upon the outlook for interest rates and their yields in relation to other bonds
of similar quality and maturity. The maturities of these bonds may be medium
(i.e., from five to ten years) to long-term (i.e., over ten years), but in no
event will they be longer than twenty years.
The Fund also invests in securities which are either issued or guaranteed
by the U.S. government, its agencies or instrumentalities. These securities
include direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government agencies
or instrumentalities, such as the Farm Credit System, including the National
Bank for Cooperatives, Farm Credit Banks and Banks for Cooperatives, Farmers
Home Administration, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Government National Mortgage
Association, Student Loan Marketing Association, Tennessee Valley Authority,
Export-Import Bank of the United States, Commodity Credit Corporation, Federal
Financing Bank and National Credit Union Administration. Some of these
securities are supported by the full faith and credit of the U.S. government,
and others are supported only by the credit of the agency or instrumentality.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. It is anticipated that the annual portfolio
turnover rate for the EVERGREEN BALANCED FUND will generally not exceed 100%,
and that the annual portfolio turnover rate for the EVERGREEN FOUNDATION FUND,
EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND
will generally not exceed 100% for the equity portions of their portfolios and
200% for the fixed income portions. A portfolio turnover rate of 100% would
occur if all of a Fund's portfolio securities were replaced in one year. The
portfolio turnover rate experienced by a Fund directly affects brokerage
commissions and other transaction costs which the Fund must pay. A high rate of
portfolio turnover will increase such costs. It is contemplated that Lieber &
Company, an affiliate of Evergreen Asset Management Corp. and a member of the
New York and American Stock Exchanges, will, to the extent practicable, effect
substantially all of the portfolio transactions for the EVERGREEN FOUNDATION
FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT
FUND on those exchanges. See the Statement of Additional Information for further
information regarding the brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy the Funds, except EVERGREEN
AMERICAN RETIREMENT FUND, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. In
addition to borrowing for temporary or emergency purposes, EVERGREEN AMERICAN
RETIREMENT FUND may borrow for purposes of leverage. The specific limits
applicable to borrowing by each Fund are set forth in the Statement of
Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the total assets of the EVERGREEN
FOUNDATION FUND and the EVERGREEN TAX STRATEGIC FOUNDATION FUND, 30% of the
value of the net assets of the EVERGREEN AMERICAN RETIREMENT FUND, and 5% of the
value of the total assets of EVERGREEN BALANCED FUND, and must be collateralized
by cash or U.S. government securities that are maintained at all times in an
amount equal to at least 100% of the current market value of the securities
loaned, including accrued interest. While such securities are on loan, the
borrower will pay a Fund any income
13
<PAGE>
accruing thereon, and the Fund may invest the cash collateral in portfolio
securities, thereby increasing its return. Any gain or loss in the market price
of the loaned securities which occurs during the term of the loan would affect a
Fund and its investors. A Fund has the right to call a loan and obtain the
securities loaned at any time on notice of not more than five business days. A
Fund may pay reasonable fees in connection with such loans.
There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities files for bankruptcy or becomes
insolvent, dispostion of the securities may be delayed pending court action.
Short Sales. EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN BALANCED FUND and
EVERGREEN FOUNDATION FUND may, as a defensive strategy, make short sales of
securities. A short sale occurs when a seller sells a security and makes
delivery to the buyer by borrowing the security. Short sales of a security are
generally made in cases where the seller expects the market value of the
security to decline. To complete a short sale, the seller must replace the
security borrowed by purchasing it at the market price at the time of
replacement, or by delivering securities from the seller's own position to the
lender. In the event the market value of a security sold short were to increase,
the seller would realize a loss to the extent that the cost of purchasing the
security for delivery to the lender were greater than the proceeds from the
short sale. In the event a short sale is completed by delivery of securities to
the lender from the seller's own position, the seller would forgo any gain that
would otherwise be realized on such securities. The EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN FOUNDATION FUND may only make short sales "against
the box" which means the Fund must own the securities sold short, or other
securities convertible into, or which carry rights to acquire, such securities.
Illiquid or Restricted Securities. EVERGREEN FOUNDATION FUND, EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND may invest up
to 15% of their net assets, and EVERGREEN BALANCED FUND may invest up to 10% of
its net assets, in illiquid securities and other securities which are not
readily marketable. EVERGREEN TAX STRATEGIC FOUNDATION FUND may only invest up
to 10% of its net assets in repurchase agreements with maturities longer than
seven days. Illiquid securities include certain restricted securities determined
by the Trustees not to be liquid, non-negotiable time deposits and repurchase
agreements providing for settlement in more than seven days after notice.
Securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10%
limits. Risks related to investment in these securities include the possibility
that a Fund may not be able to dispose of illiquid or not readily marketable
investments readily or at a reasonable price which could impair the Fund's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by each Fund's investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer liquid, a Fund's holdings will be reviewed to determine
what action, if any, is required to ensure that the retention of such security
does not result in a Fund having more than 15%, or 10%, as applicable, of its
net assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. EVERGREEN TAX STRATEGIC
FOUNDATION FUND and EVERGREEN BALANCED FUND may enter into repurchase agreements
with member banks of the Federal Reserve System, including the Funds' custodian
or primary dealers in U.S. government securities. A repurchase agreement is an
arrangement pursuant to which a buyer purchases a security and simultaneously
agrees to resell it to the vendor at a price that results in an agreed-upon
market rate of return which is effective for the period of time (which is
normally one to seven days, but may be longer) the buyer's money is invested in
the security. The arrangement results in a fixed rate of return that is not
subject to market fluctuations during the holding period. A Fund requires
continued maintenance of collateral with its custodian in an amount at least
equal to the repurchase price (including accrued interest). In the event a
vendor defaults on its repurchase obligation, a Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a
Fund might be delayed in selling the collateral. The Funds' investment advisers
will review and continually monitor the creditworthiness of each institution
with which a Fund enters into a repurchase agreement to evaluate these risks.
EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN BALANCED FUND may
borrow money by entering into "reverse repurchase agreements" by which a Fund
may agree to sell portfolio securities to financial institutions such as banks
and broker-dealers, and to repurchase them at a mutually agreed upon date and
price, for temporary or emergency purposes. At the time a Fund enters into a
reverse repurchase agreement, it will place
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in a segregated custodial account cash, U.S. government securities or liquid
high grade debt obligations having a value at least equal to the repurchase
price (including accrued interest) and will subsequently monitor the account to
ensure that such equivalent value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the repurchase price of those securities. A Fund will not enter
into reverse repurchase agreements exceeding 5% of the value of its net assets.
Options and Futures. EVERGREEN AMERICAN RETIREMENT FUND may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Fund
if afterwards securities comprising more than 15% of the market value of the
equity securities of the Fund would be subject to call options. The Fund
realizes income from the premium paid to it in exchange for writing the call
option. Once it has written a call option on a portfolio security and until the
expiration of such option, the Fund forgoes the opportunity to profit from
increases in the market price of such security in excess of the exercise price
of the call option. Should the price of the security on which a call has been
written decline, the Fund retains the risk of loss, which would be offset to the
extent the Fund has received premium income. The Fund will only write "covered"
call options traded on U.S. national securities exchanges. An option will be
deemed covered when either (i) the Fund owns the security (or securities
convertible into such security) on which the option has been written in an
amount sufficient to satisfy the obligations arising under the option, or (ii)
the Fund's custodian maintains cash or high-grade liquid debt securities
belonging to the Fund in an amount not less than the amount needed to satisfy
the Fund's obligations with respect to such options. A "closing purchase
transaction" may be entered into with respect to a call option written by the
Fund for the purpose of closing its position.
EVERGREEN BALANCED FUND may engage in options and futures transactions.
Options and futures transactions are intended to enable the Fund to manage
market, interest rate or exchange rate risk. The Fund does not use these
transactions for speculation or leverage.
EVERGREEN BALANCED FUND may attempt to hedge all or a portion of its
portfolio through the purchase of both put and call options on its portfolio
securities and listed put options on financial futures contracts for portfolio
securities. The Fund may also write covered call options on its portfolio
securities to attempt to increase its current income. The Fund will maintain its
position 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 Fund may purchase listed put options on
financial futures contracts. These options will be used only to protect
portfolio securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.
EVERGREEN BALANCED FUND may write covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
EVERGREEN BALANCED FUND may only write "covered" options. This means that
so long as the 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. The 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 Fund receives a premium from writing a
call or put option which it retains whether or not the option is exercised. By
writing a call option, the Fund might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Fund might become obligated to purchase the underlying securities for more than
their current market prices upon exercise.
EVERGREEN BALANCED FUND may also, as previously stated, purchase futures
contracts and options thereon. A futures contract is a firm commitment by two
parties: the seller, who agrees to make delivery of the specific type of
instrument called for in the contract ("going short"), and the buyer, who agrees
to take delivery of the instrument ("going long") at a certain time in the
future. Financial futures contracts call for the delivery of particular debt
instruments issued or guaranteed by the U.S. Treasury or by specific agencies or
instrumentalities of the U.S. government. If the Fund would enter into financial
futures contracts directly to hedge its holdings of fixed
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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. The 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 BALANCED FUND may also enter into currency and other financial
futures contracts and write options on such contracts. The Fund intends to enter
into such contracts and related options for hedging purposes. The Fund 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 Fund does not make
payment or deliver securities upon entering into a futures contract. Instead, it
puts down a margin deposit, which is adjusted to reflect changes in the value of
the contract and which remains in effect until the contract is terminated.
The 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 Fund sells futures contracts in order to offset a possible decline in
the profit on the securities or currencies. If a futures contract is purchased
by the Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
The 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 its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction. The Fund will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms, in
which case the Fund 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 could result in poorer performance (i.e., the Funds' returns
may be reduced). The Funds attempts 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 EVERGREEN BALANCED FUND uses 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 Fund's portfolios. This may cause the
financial futures contract and any related options to react to market changes
differently than the portfolio securities. In addition, the Funds' investment
advisers could be incorrect in their expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities price
movements and other economic factors. Even if EVERGREEN BALANCED FUND'S
investment adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its financial futures contracts. It is not
certain that a secondary market for positions in financial futures contracts or
for options on financial futures contracts will exist at all times. Although
EVERGREEN BALANCED FUND'S 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 EVERGREEN BALANCED
FUND'S ability to establish and close out financial futures contracts and
options on financial futures contracts positions depends on this secondary
market. If the 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.
Municipal Securities. As noted above, EVERGREEN TAX STRATEGIC FOUNDATION FUND
may invest in Municipal Securities, which include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the
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revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise tax or other specific source such
as from the user of the facility being financed. The term "municipal bonds" also
includes "moral obligation" issues which are normally issued by special purpose
authorities. Industrial development bonds ("IDBs") and private activity bonds
("PABs") are in most cases revenue bonds and are not payable from the
unrestricted revenues of the issuer. The credit quality of IDBs and PABs is
usually directly related to the credit standing of the corporate user of the
facilities being financed. Participation interests are interests in municipal
bonds, including IDBs and PABs, and floating and variable rate obligations that
are owned by banks. These interests carry a demand feature permitting the holder
to tender them back to the bank, which demand feature is backed by an
irrevocable letter of credit or guarantee of the bank. A put bond is a municipal
bond which gives the holder the unconditional right to sell the bond back to the
issuer at a specified price and exercise date, which is typically well in
advance of the bond's maturity date. "Short-term municipal notes" and "tax
exempt commercial paper" include tax anticipation notes, bond anticipation
notes, revenue anticipation notes and other forms of short-term loans. Such
notes are issued with a short-term maturity in anticipation of the receipt of
tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. The Municipal Securities in which
EVERGREEN TAX STRATEGIC FOUNDATION FUND may invest also include certain variable
rate and floating rate municipal obligations with or without demand features.
These variable rate securities do not have fixed interest rates; rather, the
rates fluctuate based upon changes in specified market rates, such as the prime
rate, or are adjusted at predesignated periodic intervals. Certain of these
obligations may carry a demand feature that gives the EVERGREEN TAX STRATEGIC
FOUNDATION FUND the right to demand prepayment of the principal amount of the
security prior to its maturity date. The demand obligation may or may not be
backed by letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. The
EVERGREEN TAX STRATEGIC FOUNDATION FUND will limit the value of its investments
in any floating or variable rate securities which are not readily marketable and
in all other not readily marketable securities to 15% or less of its net assets.
FOUNDATION may invest no more than 5% of its total assets in variable and
floating rate securities.
When Issued and Delayed Delivery Transactions. EVERGREEN TAX STRATEGIC
FOUNDATION FUND and EVERGREEN BALANCED FUND may purchase securities on a
when-issued or delayed delivery basis. These transactions are arrangements in
which a Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market values of the
securities on the settlement date. A Fund may dispose of a commitment prior to
settlement if the Fund's investment adviser deems it appropriate to do so. In
addition, a Fund may enter into transactions to sell its purchase commitments to
third parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. A Fund may realize
short-term profits or losses upon the sale of such commitments. Commitments to
purchase when-issued securities will not exceed 25% of the net assets of
EVERGREEN TAX STRATEGIC FOUNDATION FUND and 20% of the net assets of EVERGREEN
BALANCED FUND. The Funds will maintain cash or high quality short-term
securities in segregated accounts with their custodian in amounts equal to such
commitments. Neither Fund intends to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
Stand-By Commitments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
The EVERGREEN TAX STRATEGIC FOUNDATION FUND expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the EVERGREEN TAX STRATEGIC FOUNDATION FUND'S portfolio will not exceed 10% of
the value of the Fund's net assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality short-term
securities in a segregated account with its custodian in an amount equal to such
commitments. The Fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Fund's investment adviser, present
minimal credit risks.
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Taxable Fixed-Income Investments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may
temporarily invest up to 20% of its net assets in taxable securities under any
one or more of the following circumstances: (i) pending investment of proceeds
of sale of Fund shares or of portfolio securities, (ii) pending settlement of
purchases of portfolio securities, and (iii) to maintain liquidity for the
purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% of its net assets in taxable securities for
defensive purposes. The Fund may invest for defensive purposes during periods
when the Fund's assets available for investment exceed the available Municipal
Securities that meet the Fund's quality and other investment criteria. Taxable
securities in which the Fund may invest on a short-term basis include
obligations of the U.S. government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of U.S. banks with
assets of $1 billion or more.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities. Investments by EVERGREEN BALANCED FUND in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of the Fund denominated in such currency
will also fall. The performance of the Fund will be measured in U.S. dollars.
Securities markets of foreign countries generally are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid. Lack of liquidity may affect the Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, the Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by the Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, the Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by the Fund's investment adviser before making any of these types of
investments.
ADRs and European Depositary Receipts ("EDRs") and other securities
convertible into securities of foreign issuers may not necessarily be
denominated in the same currency as the securities into which they may be
converted but rather in the currency of the market in which they are traded.
ADRs are receipts typically issued by an American bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe by banks or depositories which evidence a
similar ownership arrangement. Generally ADRs, in registered form, are designed
for use in United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
Investments Related to Real Estate. EVERGREEN BALANCED FUND and EVERGREEN
FOUNDATION FUND may invest up to 15% of their net assets in investments related
to real estate, including real estate investment trusts ("REITS").
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Risks associated with investments in securities of companies in the real estate
industry include: declines in the value of real estate; risks related to general
and local economic conditions; overbuilding and increased competition; increases
in property taxes and operating expenses; changes in zoning laws; casualty or
condemnation losses; variations in rental income; changes in neighborhood
values; the appeal of properties to tenants; and increases in interest rates. In
addition, equity real estate investment trusts may be affected by changes in the
values of the underlying property owned by the trusts, while mortgage real
estate investment trusts may be affected by the quality of credit extended.
Equity and mortgage real estate investment trusts are dependent upon management
skills, may not be diversified and are subject to the risks of financing
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption from the Investment Company Act
of 1940, as amended (the "1940 Act"). In the event an issuer of debt securities
collateralized by real estate defaulted, it is conceivable that a Fund could end
up holding the underlying real estate.
Leverage. The utilization of leverage by the EVERGREEN AMERICAN RETIREMENT FUND
involves certain risks described below. For example, leveraging may exaggerate
changes in the net asset value of Fund shares and in the yield on the Fund's
portfolio. Although the principal of the Fund's borrowings will be fixed, the
Fund's assets may change in value during the time the borrowings are
outstanding. Borrowing will create interest expenses for the Fund which can
exceed the income from the assets retained. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were not
used. Conversely, if the income from the assets retained with borrowed funds is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if borrowing were not used, and therefore the amount available for
distribution to shareholders as dividends will be reduced.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained as investment adviser by
each of EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND. Evergreen Asset succeeded on June 30, 1994
to the advisory business of a corporation with the same name, but under
different ownership, which was organized in 1971. Evergreen Asset, with its
predecessors, has served as investment adviser to the Evergreen mutual funds
since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National
Bank ("FUNB"). The address of Evergreen Asset is 2500 Westchester Avenue,
Purchase, New York 10577. FUNB is a subsidiary of First Union Corporation
("First Union"), the sixth largest bank holding company in the United States.
Stephen A. Lieber and Nola Maddox Falcone serve as the chief investment officers
of Evergreen Asset. The Capital Management Group of FUNB ("CMG") serves as
investment adviser to EVERGREEN BALANCED FUND.
First Union is headquartered in Charlotte, North Carolina, and had $137
billion in consolidated assets as of March 31, 1997. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG and the other investment advisory
affiliates of FUNB manage or otherwise oversee the investment of over $61.9
billion in assets belonging to a wide range of clients, including all the
Evergreen Keystone mutual funds. First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND, Evergreen
Asset manages each Fund's investments, provides various administrative services
and supervises each Fund's daily business affairs, subject to the authority of
the Trustees.
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Evergreen Asset is entitled to receive from EVERGREEN AMERICAN RETIREMENT FUND a
fee equal to .75 of 1% of average daily net assets on an annual basis on the
first $750 million and .70 of 1% of average daily net assets on an annual basis
on assets over $750 million; and from each of EVERGREEN FOUNDATION FUND and
EVERGREEN TAX STRATEGIC FOUNDATION FUND a fee equal to .875 of 1% of average
daily net assets on an annual basis on the first $750 million in assets, .75 of
1% of average daily net assets on an annual basis on the next $250 million in
assets, and .70 of 1% of average daily net assets on an annual basis on assets
over $1 billion.
CMG manages the investments and supervises the daily business affairs of
EVERGREEN BALANCED FUND and, as compensation therefor, is entitled to receive an
annual fee equal to .50 of 1% of average daily net assets of the Fund.
The total expenses as a percentage of average daily net assets on an
annual basis of the Funds for the fiscal year ended December 31, 1996 and for
the three months ended March 31, 1997, are set forth in the section entitled
"Financial Highlights." Such expenses reflect all voluntary advisory fee waivers
and expense reimbursements which may be revised or terminated at any time.
PORTFOLIO MANAGERS
Stephen A. Lieber and James T. Colby, III have served as the portfolio
managers for EVERGREEN TAX STRATEGIC FOUNDATION FUND since its inception. Mr.
Lieber and Mr. Colby are assisted in the management of the Fund by Gary R.
Buesser, C.F.A. Mr. Lieber, who is Chairman and Co-Chief Executive Officer of
Evergreen Asset, makes all allocation decisions and investment decisions for the
equity portion of the portfolio, and Mr. Colby manages the fixed-income portion.
Mr. Colby has served as a fixed-income portfolio manager with Evergreen Asset
since 1992. Mr. Buesser joined Lieber & Co. as an analyst in 1996. Previously,
he was a portfolio manager/analyst with Cohen Asset Management and Shearson
Lehman Brothers. Mr. Lieber is also the portfolio manager for EVERGREEN
FOUNDATION FUND.
The portfolio manager for EVERGREEN AMERICAN RETIREMENT FUND is Irene D.
O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal manager since its
inception, and has been associated with Evergreen Asset and its predecessor
since 1981. Ms. O'Neill is assisted in the management of the Fund by Natalie
Kucharski, C.F.A. Since 1985 Ms. Kucharski has served as an analyst at Lieber &
Co. in the insurance, health care services and telecommunications industries.
R. Dean Hawes has been the portfolio manager of EVERGREEN BALANCED FUND
since its inception. Mr. Hawes, a Vice President of FUNB and the Director of
Employee Benefit Portfolio Management, joined FUNB in 1981.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND. Lieber & Company will be reimbursed by
Evergreen Asset in connection with the rendering of services on the basis of the
direct and indirect costs of performing such services. There is no additional
charge to EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND for the services provided by Lieber &
Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase,
New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of
First Union.
20
<PAGE>
ADMINISTRATOR
Evergreen Keystone Investment Services, Inc. ("EKIS") serves as
administrator to EVERGREEN BALANCED FUND, subject to the supervision and control
of the Trustees of the Evergreen Investment Trust. As administrator EKIS
provides facilities, equipment and personnel to the EVERGREEN BALANCED FUND and
is entitled to receive an administration fee from the Fund based on the
aggregate average daily net assets of all the mutual funds for which CMG,
Evergreen Asset or Keystone Investment Management Company ("Keystone") serve as
investment adviser, calculated in accordance with the following schedule:
<TABLE>
<CAPTION>
Administration Fee
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
</TABLE>
EKIS also provides facilities, equipment and personnel to EVERGREEN
FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN
RETIREMENT FUND on behalf of each Fund's investment adviser.
SUB-ADMINISTRATOR
BISYS Fund Services ("BISYS"), an affiliate of Evergreen Keystone
Distributor, Inc. ("EKD"), distributor for the Evergreen Keystone Funds, serves
as sub-administrator to the Funds and is entitled to receive a fee from EKIS
based on the aggregate average daily net assets of all the mutual funds
administered by EKIS for which CMG, Evergreen Asset or Keystone serves as
investment adviser, calculated in accordance with the following schedule:
<TABLE>
<CAPTION>
Sub-Administration Fee
<S> <C>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion
</TABLE>
The total assets of the mutual funds administered by EKIS for which FUNB
affiliates also serve as investment advisers were approximately $29 billion as
of March 31, 1997.
DISTRIBUTION PLANS AND AGREEMENTS
Distribution Plans. Each Fund's Class A, Class B and Class C shares pay for the
expenses associated with the distribution of its shares according to a
distribution plan that it has adopted pursuant to Rule 12b-1 under the 1940 Act
(each a "Plan" or collectively the "Plans"). Under the Plans, each Fund may
incur distribution-related and shareholder servicing-related expenses which are
based upon a maximum annual rate as a percent of each Fund's average daily net
assets attributable to the Class, as follows:
<TABLE>
<S> <C>
Class A shares 0.75%, currently limited to 0.25%
Class B shares 1.00%
Class C shares 1.00%
</TABLE>
Of the amount that each Class may pay under its respective Plan, up to
0.25% may constitute a service fee to be used to compensate organizations, which
may include each Fund's investment adviser or their affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts. The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above.
Distribution Agreements. Each Fund has also entered into a distribution
agreement (each a "Distribution Agreement" or collectively the "Distribution
Agreements") with EKD. Pursuant to the Distribution Agreements, each Fund will
compensate EKD for its services as distributor based upon the maximum annual
rate as a percent of each Fund's average daily net assets attributable to the
Class, as follows:
<TABLE>
<S> <C>
Class A shares 0.25%
Class B shares 1.00%
Class C shares 1.00%
</TABLE>
The Distribution Agreements provide that EKD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Fund, including interest
21
<PAGE>
and principal payments made in respect of amounts paid to broker-dealers or
other persons that have been financed (EKD 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. FUNB or its affiliates may finance the payments made by EKD to
compensate broker-dealers or other persons for distributing shares of the Fund.
Since EKD's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EKD, 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 EKD. Distribution
expenses incurred by EKD in one fiscal year that exceed the level of
compensation paid to EKD for that year may be paid from distribution fees
received from a Fund in subsequent fiscal years.
The Plans are in compliance with the Conduct Rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to an annual rate of 0.75% and 0.25%, respectively, of the average
aggregate annual net assets attributable to that class. The rules also limit the
aggregate of all front-end, deferred and asset-based sales charges imposed with
respect to a class of shares by a mutual fund that also charges a service fee to
6.25% of cumulative gross sales of shares of that class, plus interest on the
unpaid amount at the prime rate plus 1% per annum.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
You may purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EKD. In addition, you may
purchase shares of any of the Funds by mailing to that Fund, c/o Evergreen
Keystone Service Company ("EKSC"), P.O. Box 2121, Boston, Massachusetts 02106-
2121, a completed Application and a check payable to the Fund. You may also
telephone 1-800-343-2898 to obtain the number of an account to which you can
wire or electronically transfer funds and then send in a completed Application.
The minimum initial investment is $1,000, which may be waived in certain
situations. Subsequent investments in any amount may be made by check, by wiring
federal funds, by direct deposit or by an electronic funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. Share certificates are
not issued. See the Application for more information. Only Class A, Class B and
Class C shares are offered through this Prospectus (see "General
Information" -- "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You may purchase Class A
shares of each Fund at net asset value plus an initial sales charge on purchases
under $1,000,000. You may purchase $1,000,000 or more of Class A shares without
a front-end sales charge; however, a contingent deferred sales charge ("CDSC")
equal to the lesser of 1% of the purchase price or the redemption value will be
imposed on shares redeemed during the month of purchase and the 12- month period
following the month of purchase. The schedule of charges for Class A shares is
as follows:
22
<PAGE>
Initial Sales Charge
<TABLE>
<CAPTION>
As a % of the Net As a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 4.99% 4.75% 4.25%
$ 50,000 - $ 99,999 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%
1.00% of the amount invested up
to $2,999,999;
.50% of the amount invested over
$1,000,000 or more None None $2,999,999, up to $4,999,999;
and
.25% of the excess over
$4,999,999
</TABLE>
No front-end sales charges are imposed on Class A shares purchased by (a)
institutional investors, which may include bank trust departments and registered
investment advisers; (b) investment advisers, consultants or financial planners
who place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; (c) clients
of investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; (d) institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; (e) shareholders of record on October 12, 1990 in any series
of Evergreen Investment Trust in existence on that date, and the members of
their immediate families; (f) current and retired employees of FUNB and its
affiliates, EKD and any broker-dealer with whom EKD has entered into an
agreement to sell shares of the Funds, and members of the immediate families of
such employees; (g) and upon the initial purchase of an Evergreen Keystone 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 a corporation
or certain other qualified retirement plan or a non-qualified deferred
compensation plan or a Title I tax sheltered annuity or TSA plan sponsored by an
organization having 100 or more eligible employees (a "Qualifying Plan"), or a
TSA plan sponsored by a public education entity having 5,000 or more eligible
employees (an "Educational TSA Plan").
In connection with sales made to plans of the type described in the
preceding sentence EKD will pay broker-dealers and others concessions at the
rate of 0.50% of the net asset value of the shares purchased. These payments are
subject to reclaim in the event the shares are redeemed within twelve months
after purchase.
When Class A shares are sold, EKD 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. EKD may also pay fees to
banks from sales charges for services performed on behalf of the customers of
such banks in connection with the purchase of shares of the Funds. In addition
to compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to 0.25% 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 Concurrent Purchases, Rights of Accumulation, Letter of Intent,
certain Retirement Plans and Reinstatement Privilege. Consult the Application
for additional information concerning these reduced sales charges.
Class B Shares -- Deferred Sales Charge Alternative. You may purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a CDSC if you redeem shares within six years after the month of purchase. The
amount of the CDSC (expressed as a percentage of the lesser of the current net
asset value or original cost) will vary according to the number of years from
the month of purchase of Class B shares as set forth below.
23
<PAGE>
<TABLE>
<CAPTION>
CDSC
Redemption Timing Imposed
<S> <C>
Month of purchase and the first twelve-month period following the month of purchase............................... 5.00%
Second twelve-month period following the month of purchase........................................................ 4.00%
Third twelve-month period following the month of purchase......................................................... 3.00%
Fourth twelve-month period following the month of purchase........................................................ 3.00%
Fifth twelve-month period following the month of purchase......................................................... 2.00%
Sixth twelve-month period following the month of purchase......................................................... 1.00%
No CDSC is imposed on amounts redeemed thereafter.
</TABLE>
The CDSC is deducted from the amount of the redemption and is paid to EKD
or its predecessor. Class B shares are subject to higher distribution and/or
shareholder service fees than Class A shares for a period of seven years after
the month of purchase (after which it is expected that they will convert to
Class A shares without imposition of a front-end sales charge). The higher fees
mean a higher expense ratio, so Class B shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares. The Funds
will not normally accept any purchase of Class B shares in the amount of
$250,000 or more.
At the end of the period ending seven years after the end of the calendar
month in which the shareholder's purchase order was accepted, Class B shares
will automatically convert to Class A shares and will no longer be subject to a
higher distribution services fee (and, with respect to EVERGREEN BALANCED FUND,
the Shareholder Service Plan fee) imposed on Class B shares. Such conversion
will be on the basis of the relative net asset values of the two Classes,
without the imposition of any sales load, fee or other charge. The purpose of
the conversion feature is to reduce the distribution services fee paid by
holders of Class B shares that have been outstanding long enough for the
Distributor to have been compensated for the expenses associated with the sale
of such shares.
Class C Shares -- Level-Load Alternative. Class C shares are only offered
through broker-dealers who have special distribution agreements with EKD. You
may purchase Class C shares at net asset value without any initial sales charge
and, therefore, the full amount of your investment will be used to purchase Fund
shares. However, you will pay a 1.00% CDSC, if you redeem shares during the
month of purchase and the 12-month period following the month of purchase. No
CDSC is imposed on amounts redeemed thereafter. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of a Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. The
Funds will not normally accept any purchase of Class C shares in the amount of
$500,000 or more. No CDSC will be imposed on Class C shares purchased by
institutional investors, and through employee benefit and savings plans eligible
for the exemption from front-end sales charges described under "Class A
Shares-Front End Sales Charge Alternative," above. Broker-dealers and other
financial intermediaries whose clients have purchased Class C shares may receive
a trailing commission equal to 0.75% of the average daily value of such shares
on an annual basis held by their clients more than one year from the date of
purchase. The payment of trailing commissions will commence immediately with
respect to shares eligible for exemption from the CDSC normally applicable to
Class C shares.
Contingent Deferred Sales Charge. Shares obtained from dividend or distribution
reinvestment are not subject to a CDSC. Any CDSC imposed upon the redemption of
Class A, Class B or Class C shares is a percentage of the lesser of (1) the net
asset value of the shares redeemed or (2) the net asset value at the time of
purchase of such shares.
No CDSC is imposed on a redemption of shares of the Fund in the event of
(1) death or disability of the shareholder; (2) a lump-sum distribution from a
401(k) plan or other benefit plan qualified under the Employee Retirement Income
Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA plans if
the shareholder is at least 59 1/2 years old; (4) involuntary redemptions of
accounts having an aggregate net asset value of less than $1,000; (5) automatic
withdrawals under the Systematic Withdrawal Plan of up to 1.00% per month of the
shareholder's initial account balance; (6) withdrawals consisting of loan
proceeds to a retirement plan participant; (7) financial hardship withdrawals
made by a retirement plan participant; or (8) withdrawals consisting of returns
of excess contributions or excess deferral amounts made to a retirement plan
participant.
The Funds may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or a CDSC to certain Directors, Trustees,
officers and employees of the Funds, Keystone, FUNB, Evergreen Asset, EKD and
certain of their affiliates, and to members of the immediate families of such
persons, to registered representatives of firms with dealer agreements with EKD,
and to a bank or trust company acting as a trustee for a single account.
24
<PAGE>
How the Funds Value their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading markets.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to broker-dealers, EKD may
from time to time pay to broker-dealers additional cash or other incentives that
are conditioned upon the sale of a specified minimum dollar amount of shares of
a Fund and/or other Evergreen Keystone Funds. Such incentives will take the form
of payment for attendance at seminars, lunches, dinners, sporting events or
theater performances, or payment for travel, lodging and entertainment incurred
in connection with travel by persons associated with a broker-dealer and their
immediate family members to urban or resort locations within or outside the
United States. Such a dealer may elect to receive cash incentives of equivalent
amount in lieu of such payments. EKD may also limit the availability of such
incentives to certain specified dealers. EKD 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 broker-dealers. Certain broker-dealers may also receive
payments from EKD 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 its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen Keystone 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 the Fund for
cash, (at the net redemption value) on any day the Exchange is open, either
directly by writing to the Fund, c/o EKSC, or through your financial
intermediary. The amount you will receive is based on the net asset value
adjusted for fractions of a cent (less any applicable CDSC for Class B or Class
C shares) next calculated after the Fund receives your request in proper form.
Proceeds generally will be sent to you within seven days. However, for shares
recently purchased by check, a Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to 15
days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value (less any applicable CDSC). Your
financial intermediary is responsible for furnishing all necessary documentation
to a Fund and may charge you for this service. Certain financial intermediaries
may require that you give instructions earlier than 4:00 p.m. (Eastern time).
25
<PAGE>
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to the Fund, c/o EKSC, the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, EKSC, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
financial intermediaries, fiduciaries and surviving joint owners. Signature
guarantees are required for all redemption requests for shares with a value of
more than $50,000. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. Each Fund and EKSC reserve the
right to withdraw this waiver at any time. A signature guarantee must be
provided by a bank or trust company (not a Notary Public), a member firm of a
domestic stock exchange or by other financial institutions whose guarantees are
acceptable under the Securities Exchange Act of 1934 and EKSC's policies.
Shareholders may withdraw amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
Prospectus between the hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
EKSC'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 received after 4:00 p.m. (Eastern time)
will be processed using the net asset value determined on the next business day.
Such redemption requests must include the shareholder's account name, as
registered with a Fund, and the account number. During periods of drastic
economic or market changes, shareholders may experience difficulty in effecting
telephone redemptions. If you cannot reach the Fund by telephone, you should
follow the procedures for redeeming by mail or through a broker-dealer as set
forth herein. The telephone redemption service is not made available to
shareholders automatically. Shareholders wishing to use the telephone redemption
service must complete the appropriate sections on the Application and choose how
the redemption proceeds are to be paid. Redemption proceeds will either (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.
In order to insure that instructions received by EKSC are genuine when
you initiate a telephone transaction, you will be asked to verify certain
criteria specific to your account. At the conclusion of the transaction, you
will be given a transaction number confirming your request, and written
confirmation of your transaction will be mailed the next business day. Your
telephone instructions will be recorded. Redemptions by telephone are allowed
only if the address and bank account of record have been the same for a minimum
period of 30 days. Each Fund reserves the right at any time to terminate,
suspend, or change the terms of any redemption method described in this
Prospectus, except redemption by mail, and to impose fees.
Except as otherwise noted, the Funds, EKSC and EKD will not assume
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Evergreen Keystone Express Line, or by
telephone. EKSC will employ reasonable procedures to confirm that instructions
received over the Evergreen Keystone Express Line or by telephone are genuine.
The Funds, EKSC and EKD will not be liable when following instructions received
over the Evergreen Keystone Express Line or by telephone that EKSC reasonably
believes are genuine.
Evergreen Keystone Express Line. The Evergreen Keystone Express Line offers you
specific fund account information and price and yield quotations as well as the
ability to do account transactions, including investments, exchanges and
redemptions. You may access the Evergreen Keystone Express Line by dialing toll
free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a
week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists and
the Funds cannot dispose of their investments or fairly determine their value;
or (4) the Securities and Exchange Commission ("SEC") so orders. The Funds
reserve the right to close an account that through redemption has fallen below
$1,000 and has remained so for thirty days. Shareholders will receive sixty
days' written notice to increase the account value to at least $1,000 before the
account is closed. The Funds have elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which each Fund is obligated to redeem shares solely in
cash, up to the lesser of $250,000 or 1% of a Fund's total net assets, during
any 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 Keystone Funds through your financial
intermediary by calling or writing to EKSC or by using the
26
<PAGE>
Evergreen Keystone Express Line as described above. Once an exchange request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled. Exchanges will be made on the basis of the relative net asset values
of the shares exchanged next determined after an exchange request is received.
An exchange which represents an initial investment in another Evergreen Keystone
Fund is subject to the minimum investment and suitability requirements of each
Fund.
Each of the Evergreen Keystone Funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen
Keystone Funds. If you redeem shares, the CDSC applicable to the Class B or
Class C shares of the Evergreen or Keystone Fund originally purchased for cash
is applied. Also, Class B shares will continue to age following an exchange for
the purpose of conversion to Class A shares and for the purpose of determining
the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges By Telephone And Mail. Exchange requests received by a Fund after 4:00
p.m. (Eastern time) will be processed using the net asset value determined at
the close of the next business day. During periods of drastic economic or market
changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach EKSC by telephone. If you wish to use the telephone
exchange service you should indicate this on the Application. As noted above,
each Fund will employ reasonable procedures to confirm that instructions for the
redemption or exchange of shares communicated by telephone are genuine. A
telephone exchange may be refused by a Fund or EKSC 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, EKSC
or call the toll-free number on the front page of this Prospectus. Some services
are described in more detail in the Application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of a Fund with no minimum initial
investment required.
Telephone Investment Plan. You may invest not less than $100 or more than
$10,000 per investment into an existing account. Telephone investment requests
received by 4:00 p.m. (Eastern time) will be credited to a shareholder's account
the day the request is received. Shares purchased under the Systematic
Investment Plan or Telephone Investment Plan may not be redeemed for ten days
from the date of investment.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the Application. Under
this Plan, you may receive (or designate a third party to receive) payments in a
stated amount of at least $75, or a maximum of 1.0% per month or 3.0% per
quarter of the total net asset value of your account when the Plan was
established. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable CDSC will be waived with
respect to redemptions occurring under a Systematic Withdrawal Plan during a
calendar year to the extent that such redemptions do not exceed 12% of (i) the
initial value of the account plus (ii) the value, at the time of purchase, of
any subsequent investments. Excessive withdrawals may decrease or deplete the
value of your account. Moreover, because of the effect of the applicable sales
charge, a Class A
27
<PAGE>
investor should not make continuous purchases of a Fund's shares while
participating in a Systematic Withdrawal Plan.
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 Keystone Funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Evergreen Asset, Keystone or CMG may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen Keystone Funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested.
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen Keystone Fund. This
results in more shares being purchased when the selected Fund's net asset value
is relatively low and fewer shares being purchased when the Fund's net asset
value is relatively high and may result in a lower average cost per share than a
less systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen Keystone Fund. You should designate on the Application
(i) the dollar amount of each monthly or quarterly investment you wish to make
and (ii) the Fund in which the investment is to be made. Thereafter, on the
first day of the designated month, an amount equal to the specified monthly or
quarterly investment will automatically be redeemed from your initial account
and invested in shares of the designated fund.
If you are a Class A investor and paid a sales charge on your initial
purchase, the shares purchased will be eligible for Rights of Accumulation and
the sales charge applicable to the purchase will be determined accordingly. In
addition, the value of shares purchased will be included in the total amount
required to fulfill a Letter of Intent. If a sales charge was not paid on the
initial purchase, a sales charge will be imposed at the time of subsequent
purchases, and the value of shares purchased will become eligible for Rights of
Accumulation and Letters of Intent.
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any class of Evergreen Keystone Fund shares you own
automatically invested to purchase the same class of shares of any other
Evergreen Keystone Fund. You may select this service on your Application and
indicate the Evergreen Keystone Fund(s) into which distributions are to be
invested. The value of shares purchased will be ineligible for Rights of
Accumulation and Letters of Intent.
Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Pension and
Target Benefit and Money Purchase Plans. For details, including fees and
application forms, call toll free 1-800-247-4075 or write to EKSC.
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 or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
agreements or from acting as agent in connection with the purchase of shares of
a Fund by its customers. If CMG or Evergreen Asset were prevented from
continuing to provide the services called for under the investment advisory
agreements, it is expected that the Trustees would identify, and call upon each
Fund's shareholders to
28
<PAGE>
approve, new investment advisers. If this were to occur, it is not anticipated
that the shareholders of any Fund would suffer any adverse financial
consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code, and to
distribute their investment company taxable income, if any, quarterly, such
distributions of EVERGREEN TAX STRATEGIC FOUNDATION FUND to include any tax
exempt income. Dividends and distributions generally are taxable in the year in
which they are paid, except any dividends paid in January that were declared in
the previous calendar quarter may be treated as paid in 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 tax 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 tax and any state or local taxes on the dividends and distributions they
receive from a Fund whether such dividends and distributions are made in cash or
in additional shares. Questions on how any distributions will be taxed to the
investor should be directed to the investor's own tax adviser.
Under current law, the highest federal income tax rate applicable to net
long-term capital gains realized by individuals is 28%. The rate applicable to
corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States federal income tax may be entitled, subject to certain
rules and limitations, to claim a federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Application, or on a separate
form supplied by the transfer agent, that your social security or taxpayer
identification number is correct and that you are not currently subject to
backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within ninety days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
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.
29
<PAGE>
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, a Fund may consider sales of its shares as a factor in the selection
of dealers to enter into portfolio transactions with the Fund.
Organization. The EVERGREEN FOUNDATION FUND and EVERGREEN TAX STRATEGIC
FOUNDATION FUND are separate series of the Evergreen Foundation Trust, a
Massachusetts business trust organized in 1989. EVERGREEN AMERICAN RETIREMENT
FUND is a separate series of The Evergreen American Retirement Trust, a
Massachusetts business trust organized in 1987. EVERGREEN BALANCED FUND is a
separate investment series of Evergreen Investment Trust (formerly First Union
Funds), a Massachusetts business trust organized in 1984. The Funds do not
intend to hold annual shareholder meetings; shareholder meetings will be held
only when required by applicable law. Shareholders have available certain
procedures for the removal of Trustees, including the right to demand that a
meeting of shareholders be called for the purpose of voting thereon if 10% of
the shareholders so request in writing.
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, Class B, Class C and Class Y shares have
identical voting, dividend, liquidation and other rights, except that each Class
bears, to the extent applicable, its own distribution and shareholder service
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. 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. Evergreen Keystone
Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121, acts as
registrar, transfer agent and dividend-disbursing agent for each of the Funds.
Principal Underwriter. EKD, an affiliate of BISYS Fund Services, is located at
125 W. 55th Street, New York, New York 10019, and is the principal underwriter
of the Funds. BISYS Fund Services also acts as sub-administrator to the Funds
and provides personnel to serve as officers of the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) persons who at or prior to December 31, 1994, owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain institutional investors and
(iii) investment advisory clients of CMG, Evergreen Asset, Keystone 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. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B, Class C and Class Y shares. A Fund's total return for each
such period is computed by finding, through the use of a formula prescribed by
the SEC, the average annual compounded rate of return over the period that would
equate an assumed initial amount invested to the value of the investment at the
end of the period. For purposes of computing total return, dividends and capital
gains distributions paid on shares of a Fund are assumed to have been reinvested
when paid and the maximum sales charges applicable to purchases of a Fund's
shares are assumed to have been paid. Yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. The Fund's yield is calculated according to accounting methods that are
standardized by the SEC for all stock and bond funds. Because yield accounting
methods differ from the method used for other accounting purposes, the Fund's
yield may not equal its distribution
30
<PAGE>
rate, the income paid to your account or the net investment income reported in
the Fund's financial statements. To calculate yield, the Fund takes the interest
and dividend income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities.
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
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 Keystone 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 Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN KEYSTONE EVENTS, a
quarterly magazine provided to Evergreen Keystone 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 Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust shall 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. 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.
31
<PAGE>
Investment Advisers
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
Evergreen Foundation Fund, Evergreen Tax Strategic Foundation Fund,
Evergreen American Retirement Fund
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
Evergreen Balanced Fund
Custodian
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
Transfer Agent
Evergreen Keystone Service Company, P.O. Box 2121, Boston, Massachusetts
02106-2121
Legal Counsel
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
Independent Auditors
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
Distributor
Evergreen Keystone Distributor, Inc., 125 W. 55th Street, New York, New York
10019
<PAGE>
PROSPECTUS July 1, 1997
EVERGREEN(SM) BALANCED FUNDS (Evergreen logo appears here)
EVERGREEN FOUNDATION FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN BALANCED FUND
CLASS Y SHARES
The Evergreen Balanced Funds (the "Funds") are designed to provide
investors with a selection of investment alternatives which seek to provide
current income, capital appreciation or after-tax "total return". This
Prospectus provides information regarding the Class Y shares offered by the
Funds. Each Fund is, or is a series of, an open-end, diversified,
management investment company. This Prospectus sets forth concise
information about the Funds that a prospective investor should know before
investing. The address of the Funds is 2500 Westchester Avenue, Purchase,
New York 10577.
A Statement of Additional Information for the Funds and certain
other funds in the Evergreen Keystone group of mutual funds dated April 1,
1997, as amended July 1, 1997 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 telephoning the Evergreen
Keystone Funds at 1-800-343-2898. There can be no assurance that the
investment objective of any Fund will be achieved. Investors are advised to
read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS................................... 2
EXPENSE INFORMATION..................................... 3
FINANCIAL HIGHLIGHTS.................................... 5
DESCRIPTION OF THE FUNDS................................ 9
Investment Objectives and Policies............. 9
Investment Practices and Restrictions.......... 12
Special Risk Considerations.................... 17
MANAGEMENT OF THE FUNDS................................. 18
Investment Advisers............................ 18
Portfolio Managers............................. 19
Sub-Adviser.................................... 19
Administrator.................................. 20
Sub-Administrator.............................. 20
PURCHASE AND REDEMPTION OF SHARES....................... 20
How to Buy Shares.............................. 20
How to Redeem Shares........................... 21
Exchange Privilege............................. 22
Shareholder Services........................... 23
Effect of Banking Laws......................... 24
OTHER INFORMATION....................................... 24
Dividends, Distributions and Taxes............. 24
General Information............................ 25
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN TAX STRATEGIC FOUNDATION FUND is Evergreen Asset
Management Corp. which, with its predecessors, has served as an investment
adviser to the Evergreen mutual funds since 1971. Evergreen Asset Management
Corp. is a wholly-owned subsidiary of First Union National Bank, which in turn
is a subsidiary of First Union Corporation, the sixth largest bank holding
company in the United States. The Capital Management Group of First Union
National Bank serves as investment adviser to EVERGREEN BALANCED FUND.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed-income securities.
EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN BALANCED FUND seeks to produce long-term total return through
capital appreciation, dividends and interest income.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE(S) 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 each Fund. For further
information see "Purchase and Redemption of Shares."
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES None
</TABLE>
The following tables show for each Fund the annualized operating expenses
(as a percentage of average net assets) attributable to Class Y shares for the
three month period ended March 31, 1997, 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 FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
ANNUAL OPERATING ASSUMING REDEMPTION
EXPENSES AT END OF PERIOD
<S> <C> <C> <C>
Management Fees 0.79%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses 0.21%
After 5 Years $ 55
After 10 Years $ 122
Total 1.00%
</TABLE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
<S> <C> <C> <C>
Management Fees 0.875%
After 1 Year $ 12
12b-1 Fees --
After 3 Years $ 36
Other Expenses 0.255%
After 5 Years $ 62
After 10 Years $ 137
Total 1.13%
</TABLE>
EVERGREEN AMERICAN RETIREMENT FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES*
<S> <C> <C> <C>
Management Fees 0.75%
After 1 Year $ 11
12b-1 Fees --
After 3 Years $ 35
Other Expenses 0.36%
After 5 Years $ 61
After 10 Years $ 135
Total 1.11%
</TABLE>
EVERGREEN BALANCED FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES
<S> <C> <C> <C>
Management Fees 0.50%
After 1 Year $ 7
12b-1 Fees --
After 3 Years $ 22
Other Expenses 0.18%
After 5 Years $ 38
After 10 Years $ 85
Total 0.68%
</TABLE>
3
<PAGE>
* The annualized operating expenses and examples reflect fee waivers and expense
reimbursements for the three month period ended March 31, 1997. Actual
expenses for the three month period then ended excluding fee waivers and
expense reimbursements were as follows:
<TABLE>
<CAPTION>
CLASS Y
<S> <C>
Evergreen American Retirement Fund.......................................................... 1.38%
</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 tables is to assist an investor in
understanding the various costs and expenses that an investor in the Class Y
shares of each Fund will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are based on the experience of each Fund's
Class Y shares for the most recent fiscal period. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter has been audited by the respective Fund's independent
auditors as follows: for EVERGREEN FOUNDATION FUND for the three months ended
March 31, 1997 and for the year ended December 31, 1996 by KPMG Peat Marwick
LLP, and for each of the years in the four-year period ended December 31, 1995
by other auditors; for EVERGREEN TAX STRATEGIC FOUNDATION FUND for the three
months ended March 31, 1997 and for the year ended December 31, 1996 by KPMG
Peat Marwick LLP and for each of the years in the two-year period ended December
31, 1995 and the period from November 2, 1993 through December 31, 1993 by other
auditors; for EVERGREEN AMERICAN RETIREMENT FUND for the three months ended
March 31, 1997 and for the year ended December 31, 1996 by KPMG Peat Marwick
LLP, and for each of the years in the four-year period ended December 31, 1995
by other auditors; and for EVERGREEN BALANCED FUND by KPMG Peat Marwick LLP. A
report of KPMG Peat Marwick LLP on the audited information with respect to each
Fund is incorporated by reference in the Funds' 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 Funds' 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 FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995 1994 1993 1992 1991 1990*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period......... $16.14 $15.13 $12.27 $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income...................... .13 .54 .51 .42 .31 .27 .33 1.23(a)
Net realized and unrealized gain (loss) on
investments.............................. (.13) 1.16 3.07 (.57) 1.55 1.83 2.77 (.59)
Total from investment operations......... -- 1.70 3.58 (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income...................... (.12) (.54) (.49) (.42) (.31) (.24) (.33) (1.17)
Net realized gain on investments........... -- (.15) (.23) (.28) (.41) (.63) (.97) (.52)
Total distributions...................... (.12) (.69) (.72) (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period............... $16.02 $16.14 $15.13 $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+................................ 0.0% 11.5% 29.7% (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)...... $802 $809 $623 $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses................................... 1.00%++ .99% 1.07% 1.14% 1.20% 1.40%# 1.20%# 0%#++
Net investment income...................... 3.07%++ 3.64% 3.89% 3.51% 2.81% 2.93%# 2.86%# 15.07%#(a)++
Portfolio turnover rate...................... 2% 10% 28% 33% 60% 127% 178% 131%
Average commission rate paid per share....... $.0670 $.0649 N/A N/A N/A N/A N/A N/A
</TABLE>
* For the period January 2, 1990 (commencement of operations) to December 31,
1990.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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, exclusive of any
applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS Y
YEAR ENDED DECEMBER 31,
1992 1991 1990*
<S> <C> <C> <C>
Expenses............................................................... 1.43% 2.58% 3.64%
Net investment income.................................................. 2.90% 1.48% 11.43%
</TABLE>
(a) Includes receipt of a special dividend representing $.62 per share
net investment income and 7.59% of average net assets.
5
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, 1997++ 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............................ $13.54 $12.22 $10.27 $10.31 $10.00
Income from investment operations:
Net investment income......................................... .09 .34 .35 .27 .05
Net realized and unrealized gain on investments............... .05+++ 1.56 2.39 .08 .31
Total from investment operations............................ .14 1.90 2.74 .35 .36
Less distributions to shareholders from:
Net investment income......................................... (.07) (.30) (.33) (.27) (.05)
Net realized gain on investments.............................. -- (.28) (.46) (.12) --
Total distributions......................................... (.07) (.58) (.79) (.39) (.05)
Net asset value, end of period.................................. $13.61 $13.54 $12.22 $10.27 $10.31
TOTAL RETURN+*.................................................. 1.0% 15.8% 27.3% 3.4% 3.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)....................... $15,311 $15,002 $13,485 $10,575 $5,424
Ratios to average net assets:
Expenses...................................................... 1.13%+ 1.30%# 1.50%# 1.49%# .00%#+
Net investment income......................................... 2.54%+ 2.63%# 3.06%# 2.87%# 3.65%#+
Portfolio turnover rate......................................... 29% 88% 110% 245% 25%
Average commission rate paid per share.......................... $.0656 $0.0648 N/A N/A N/A
</TABLE>
* For the period November 2, 1993 (commencement of operations) to December 31,
1993.
** Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
+ Annualized.
++ The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+++ The per share amount is not in accord with the net realized and unrealized
gain for the period due to the timing of sales of fund shares and the amount
of per share realized and unrealized gains and losses at such time.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets, exclusive of any
applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS Y
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993*
<S> <C> <C> <C> <C>
Expenses..................................................................................... 1.56% 2.23% 2.41% 3.10%
Net investment income........................................................................ 2.37% 2.33% 1.95% .54%
</TABLE>
6
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period....................... $ 13.86 $12.83 $10.67 $11.60 $10.95 $10.52 $9.59 $10.41
Income (loss) from investment
operations:
Net investment income........ .14 .48 .47 .60 .56 .66 .60 .60
Net realized and unrealized
gain (loss) on
investments................ (.14) 1.10 2.16 (.93) .96 .55 1.15 (.66)
Total from investment
operations............... -- 1.58 2.63 (.33) 1.52 1.21 1.75 (.06)
Less distributions to
shareholders from:
Net investment income........ (.12) (.44) (.47) (.60) (.60) (.61) (.60) (.60)
Net realized gain on
investments................ -- (.11) -- -- (.24) (.17) (.22) (.16)
In excess of net realized
gains on investments....... -- -- -- -- (.03) -- -- --
Total distributions........ (.12) (.55) (.47) (.60) (.87) (.78) (.82) (.76)
Net asset value, end of
period....................... $13.74 $13.86 $12.83 $10.67 $11.60 $10.95 $10.52 $9.59
TOTAL RETURN+.................. .0% 12.6% 25.1% (2.9%) 14.1% 11.8% 18.8% (.5%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).............. $37,237 $41,243 $39,327 $37,176 $37,336 $23,781 $15,632 $12,351
Ratios to average net assets:
Expenses..................... 1.11%#++ 1.05%# 1.26% 1.28% 1.36% 1.51%# 1.50%# 1.50%#
Net investment income........ 3.56%#++ 3.65%# 3.96% 5.40% 5.13% 6.23%# 5.91%# 6.04%#
Portfolio turnover rate........ 9% 16% 49% 136% 92% 151% 97% 33%
Average commission rate paid
per share.................... $.0606 $.0619 N/A N/A N/A N/A N/A N/A
<CAPTION>
YEAR ENDED DECEMBER 31,
1989 1988*(A)
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period....................... $ 10.09 $10.00
Income (loss) from investment
operations:
Net investment income........ .57 .39
Net realized and unrealized
gain (loss) on
investments................ .76 .18
Total from investment
operations............... 1.33 .57
Less distributions to
shareholders from:
Net investment income........ (.59) (.36)
Net realized gain on
investments................ (.42) (.12)
In excess of net realized
gains on investments....... -- --
Total distributions........ (1.01) (.48)
Net asset value, end of
period....................... $ 10.41 $10.09
TOTAL RETURN+.................. 13.4% 5.8%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted).............. $11,610 $9,449
Ratios to average net assets:
Expenses..................... 1.88%# 2.00%++
Net investment income........ 5.49%# 5.01%++
Portfolio turnover rate........ 152% 52%
Average commission rate paid
per share.................... N/A N/A
</TABLE>
* For the period March 14, 1988 (commencement of operations) to December 31,
1988.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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 operating expenses and net investment income to average net assets would
have been the following:
(a) Investment income, expenses and net investment income are based upon average
monthly shares outstanding for the period indicated.
<TABLE>
<CAPTION>
CLASS Y
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Expenses.................................. 1.38% 1.09% 1.59% 1.82% 1.95% 2.03%
Net investment income..................... 3.29% 3.61% 6.15% 5.59% 5.59% 5.34%
</TABLE>
7
<PAGE>
EVERGREEN BALANCED FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
1997** 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $12.95 $13.12 $11.17 $12.07 $11.41 $11.02
Income (loss) from investment operations:
Net investment income.............................. .13 .57 .54 .46 .45 .46
Net realized and unrealized gain (loss) on
investments...................................... (.08) .95 2.40 (.71) .75 .42
Total from investment operations................. .05 1.52 2.94 (.25) 1.20 .88
Less distributions to shareholders from:
Net investment income.............................. (.13) (.58) (.53) (.46) (.45) (.45)
Net realized gain on investments................... -- (1.11) (.46) (.19) (.09) (.04)
Total distributions.............................. (.13) (1.69) (.99) (.65) (.54) (.49)
Net asset value, end of period....................... $12.87 $12.95 $13.12 $11.17 $12.07 $11.41
TOTAL RETURN+........................................ .3% 11.7% 26.8% (2.2%) 10.7% 8.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $767,747 $778,641 $818,137 $778,657 $760,147 $520,232
Ratios to average net assets:
Expenses........................................... .68%++ .64% .62% .64% .66% .66%
Net investment income.............................. 3.87%++ 4.19% 4.30% 3.93% 3.86% 4.20%
Portfolio turnover rate.............................. 28% 34% 37% 35% 19% 12%
Average commission rate paid per share............... $.0595 $.0593 N/A N/A N/A N/A
<CAPTION>
YEAR ENDED DECEMBER 31,
1991*
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period................. $10.00
Income (loss) from investment operations:
Net investment income.............................. .36
Net realized and unrealized gain (loss) on
investments...................................... 1.03
Total from investment operations................. 1.39
Less distributions to shareholders from:
Net investment income.............................. (.36)
Net realized gain on investments................... (.01)
Total distributions.............................. (.37)
Net asset value, end of period....................... $11.02
TOTAL RETURN+........................................ 15.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)............ $247,472
Ratios to average net assets:
Expenses........................................... .68%++
Net investment income.............................. 4.86%++
Portfolio turnover rate.............................. 19%
Average commission rate paid per share............... N/A
</TABLE>
* For the period April 1, 1991 (commencement of operations) to December 31,
1991.
** The Fund changed its fiscal year end from December 31 to March 31, effective
March 31, 1997.
+ 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
Each Fund's investment objective is fundamental and may not be changed
without shareholder approval.
In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below. There can be no assurance that
any Fund's investment objective will be achieved.
INVESTMENT OBJECTIVES AND POLICIES
EVERGREEN FOUNDATION FUND
The investment objectives of EVERGREEN FOUNDATION FUND, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or not
such securities are traded on a national securities exchange. The values of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market values of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the values of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government, its
agencies or instrumentalities, including issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an act of Congress. Some of
these securities are supported by the full faith and credit of the U.S.
government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's Investor's
Service ("Moody's"), A-2 by Standard and Poor's Ratings Service, a division of
McGraw-Hill Companies, Inc. ("S&P").
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
9
<PAGE>
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's). For a description of such ratings see the Statement of Additional
Information.
Certain obligations may be entitled to the benefit of standby letters of
credit or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
EVERGREEN TAX STRATEGIC FOUNDATION FUND
The investment objective of EVERGREEN TAX STRATEGIC FOUNDATION FUND is to
maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
"Investment Practices and Restrictions -- Municipal Securities and Taxable
Fixed-Income Investments" below.)
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The values of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities). As of
December 31, 1994, 1995, 1996 and March 31, 1997, approximately 54%, 52%, 52%
and 55%, respectively, of the Fund's portfolio consisted of investments in
Municipal Securities.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market values of
the Municipal Securities in the Fund's portfolio can be expected to vary
inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short, medium or long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
In general, the Fund will invest in Municipal Securities only if they are
determined to be of high or upper medium quality. These include bonds rated BBB
or higher by S&P or Baa or higher by Moody's or any other nationally recognized
statistical rating organization ("SRO"). The Fund may purchase Municipal
Securities which are unrated at the time of purchase if such securities are
determined by the Fund's investment adviser to be of comparable quality to such
rated securities. Certain Municipal Securities (primarily variable rate demand
notes) may be entitled to the benefits of standby letters of credit or similar
commitments issued by banks and, in such instances, the Fund's investment
adviser will take into account the obligations of the banks in assessing the
quality of such securities. Medium grade bonds are more susceptible to adverse
economic conditions or changing circumstances than higher grade bonds. For a
description of such ratings see the Statement of Additional Information.
Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be
10
<PAGE>
subject to the alternative minimum tax on that part of the Fund's distributions
derived from the bonds. As a matter of fundamental policy, 80% of the Fund's
investments in Municipal Securities will be invested in Municipal Securities,
the interest from which is not subject to the federal alternative minimum tax.
EVERGREEN AMERICAN RETIREMENT FUND
The investment objectives of EVERGREEN AMERICAN RETIREMENT FUND in order
of priority are conservation of capital, reasonable income and capital growth.
The Fund offers a structured investment approach designed specifically for
retirees and persons contemplating retirement which may also be appropriate for
the qualified retirement plans of smaller companies.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock. As of December 31, 1994, 1995, 1996 and
March 31, 1997, approximately 74%, 66%, 59% and 64%, respectively, of the Fund's
portfolio consisted of equity securities.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
values.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. The balance will be invested in
corporate obligations rated no lower than A by Moody's or S&P.
EVERGREEN BALANCED FUND
The investment objective of the EVERGREEN BALANCED FUND is to achieve a
long-term total return through capital appreciation, dividends and interest
income. The Fund invests in common and preferred stocks for growth and fixed
income securities to provide a stable income flow.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% in fixed income securities (including some
convertible securities) and 0-25% in cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk. As of
December 31, 1994, 1995, 1996 and March 31, 1997, approximately 55%, 60%, 54%
and 51%, respectively, of the Fund's portfolio consisted of equity securities.
11
<PAGE>
The Fund invests in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection include a company's
financial strength (such as cash flow and low debt-to-equity ratio), earnings
growth and price in relation to current earnings, dividends and book value to
identify growth opportunities. The Fund may also invest in American Depositary
Receipts ("ADRs") of foreign companies which are traded on the New York or
American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by S&P
or Moody's or any other SRO, or which, if unrated, are considered to be of
comparable quality by the Fund's investment adviser. For a description of such
ratings see the Statement of Additional Information. Bonds are selected based
upon the outlook for interest rates and their yields in relation to other bonds
of similar quality and maturity. The maturities of these bonds may be medium
(i.e., from five to ten years) to long-term (i.e., over ten years), but in no
event will they be longer than twenty years.
The Fund also invests in securities which are either issued or guaranteed
by the U.S. government, its agencies or instrumentalities. These securities
include direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government agencies
or instrumentalities, such as the Farm Credit System, including the National
Bank for Cooperatives, Farm Credit Banks and Banks for Cooperatives, Farmers
Home Administration, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Government National Mortgage
Association, Student Loan Marketing Association, Tennessee Valley Authority,
Export-Import Bank of the United States, Commodity Credit Corporation, Federal
Financing Bank and National Credit Union Administration. Some of these
securities are supported by the full faith and credit of the U.S. government,
and others are supported only by the credit of the agency or instrumentality.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. It is anticipated that the annual portfolio
turnover rate for the EVERGREEN BALANCED FUND will generally not exceed 100%,
and that the annual portfolio turnover rate for the EVERGREEN FOUNDATION FUND,
EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND
will generally not exceed 100% for the equity portions of their portfolios and
200% for the fixed income portions. A portfolio turnover rate of 100% would
occur if all of a Fund's portfolio securities were replaced in one year. The
portfolio turnover rate experienced by a Fund directly affects brokerage
commissions and other transaction costs which the Fund must pay. A high rate of
portfolio turnover will increase such costs. It is contemplated that Lieber &
Company, an affiliate of Evergreen Asset Management Corp. and a member of the
New York and American Stock Exchanges, will, to the extent practicable, effect
substantially all of the portfolio transactions for the EVERGREEN FOUNDATION
FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT
FUND on those exchanges. See the Statement of Additional Information for further
information regarding the brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy the Funds, except EVERGREEN
AMERICAN RETIREMENT FUND, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. In
addition to borrowing for temporary or emergency purposes, EVERGREEN AMERICAN
RETIREMENT FUND may borrow for purposes of leverage. The specific limits
applicable to borrowing by each Fund are set forth in the Statement of
Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the total assets of the EVERGREEN
FOUNDATION FUND and the EVERGREEN TAX STRATEGIC FOUNDATION FUND, 30% of the
value of the net assets of the EVERGREEN AMERICAN RETIREMENT FUND, and 5% of the
value of the total assets of EVERGREEN BALANCED FUND, and must be collateralized
by cash or U.S. government securities that are maintained at all times in an
amount equal to at least 100% of the current market value of the securities
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loaned, including accrued interest. While such securities are on loan, the
borrower will pay a Fund any income accruing thereon, and the Fund may invest
the cash collateral in portfolio securities, thereby increasing its return. Any
gain or loss in the market price of the loaned securities which occurs during
the term of the loan would affect a Fund and its investors. A Fund has the right
to call a loan and obtain the securities loaned at any time on notice of not
more than five business days. A Fund may pay reasonable fees in connection with
such loans.
There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities files for bankruptcy or becomes
insolvent, dispostion of the securities may be delayed pending court action.
Short Sales. EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN BALANCED FUND and
EVERGREEN FOUNDATION FUND may, as a defensive strategy, make short sales of
securities. A short sale occurs when a seller sells a security and makes
delivery to the buyer by borrowing the security. Short sales of a security are
generally made in cases where the seller expects the market value of the
security to decline. To complete a short sale, the seller must replace the
security borrowed by purchasing it at the market price at the time of
replacement, or by delivering securities from the seller's own position to the
lender. In the event the market value of a security sold short were to increase,
the seller would realize a loss to the extent that the cost of purchasing the
security for delivery to the lender were greater than the proceeds from the
short sale. In the event a short sale is completed by delivery of securities to
the lender from the seller's own position, the seller would forgo any gain that
would otherwise be realized on such securities. The EVERGREEN AMERICAN
RETIREMENT FUND and the EVERGREEN FOUNDATION FUND may only make short sales
"against the box" which means the Fund must own the securities sold short, or
other securities convertible into, or which carry rights to acquire, such
securities.
Illiquid or Restricted Securities. EVERGREEN FOUNDATION FUND, EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND may invest up
to 15% of their net assets, and EVERGREEN BALANCED FUND may invest up to 10% of
its net assets, in illiquid securities and other securities which are not
readily marketable. EVERGREEN TAX STRATEGIC FOUNDATION FUND may only invest up
to 10% of its net assets in repurchase agreements with maturities longer than
seven days. Illiquid securities include certain restricted securities determined
by the Trustees not to be liquid, non-negotiable time deposits and repurchase
agreements providing for settlement in more than seven days after notice.
Securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10%
limits. Risks related to investment in these securities include the possibility
that a Fund may not be able to dispose of illiquid or not readily marketable
investments readily or at a reasonable price which could impair the Fund's
ability to raise cash for redemptions or other purposes. The liquidity of
securities purchased by a Fund which are eligible for resale pursuant to Rule
144A will be monitored by each Fund's investment adviser on an ongoing basis,
subject to the oversight of the Trustees. In the event that such a security is
deemed to be no longer liquid, a Fund's holdings will be reviewed to determine
what action, if any, is required to ensure that the retention of such security
does not result in a Fund having more than 15% or 10%, as applicable, of its net
assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. EVERGREEN TAX STRATEGIC
FOUNDATION FUND and EVERGREEN BALANCED FUND may enter into repurchase agreements
with member banks of the Federal Reserve System, including the Funds' custodian
or primary dealers in U.S. government securities. A repurchase agreement is an
arrangement pursuant to which a buyer purchases a security and simultaneously
agrees to resell it to the vendor at a price that results in an agreed-upon
market rate of return which is effective for the period of time (which is
normally one to seven days, but may be longer) the buyer's money is invested in
the security. The arrangement results in a fixed rate of return that is not
subject to market fluctuations during the holding period. A Fund requires
continued maintenance of collateral with its custodian in an amount at least
equal to the repurchase price (including accrued interest). In the event a
vendor defaults on its repurchase obligation, a Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a
Fund might be delayed in selling the collateral. The Funds' investment advisers
will review and continually monitor the creditworthiness of each institution
with which a Fund enters into a repurchase agreement to evaluate these risks.
EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN BALANCED FUND may
borrow money by entering into "reverse repurchase agreements" by which a Fund
may agree to sell portfolio securities to financial
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institutions such as banks and broker-dealers, and to repurchase them at a
mutually agreed upon date and price, for temporary or emergency purposes. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, U.S. government securities or liquid high
grade debt obligations having a value at least equal to the repurchase price
(including accrued interest) and will subsequently monitor the account to ensure
that such equivalent value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. A Fund will not enter into
reverse repurchase agreements exceeding 5% of the value of its net assets.
Options and Futures. EVERGREEN AMERICAN RETIREMENT FUND may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Fund
if afterwards securities comprising more than 15% of the market value of the
equity securities of the Fund would be subject to call options. The Fund
realizes income from the premium paid to it in exchange for writing the call
option. Once it has written a call option on a portfolio security and until the
expiration of such option, the Fund forgoes the opportunity to profit from
increases in the market price of such security in excess of the exercise price
of the call option. Should the price of the security on which a call has been
written decline, the Fund retains the risk of loss, which would be offset to the
extent the Fund has received premium income. The Fund will only write "covered"
call options traded on U.S. national securities exchanges. An option will be
deemed covered when either (i) the Fund owns the security (or securities
convertible into such security) on which the option has been written in an
amount sufficient to satisfy the obligations arising under the option, or (ii)
the Fund's custodian maintains cash or high-grade liquid debt securities
belonging to the Fund in an amount not less than the amount needed to satisfy
the Fund's obligations with respect to such options. A "closing purchase
transaction" may be entered into with respect to a call option written by the
Fund for the purpose of closing its position.
EVERGREEN BALANCED FUND may engage in options and futures transactions.
Options and futures transactions are intended to enable the Fund to manage
market, interest rate or exchange rate risk. The Fund does not use these
transactions for speculation or leverage.
EVERGREEN BALANCED FUND may attempt to hedge all or a portion of its
portfolio through the purchase of both put and call options on its portfolio
securities and listed put options on financial futures contracts for portfolio
securities. The Fund may also write covered call options on its portfolio
securities to attempt to increase its current income. The Fund will maintain its
position 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 Fund may purchase listed put options on
financial futures contracts. These options will be used only to protect
portfolio securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.
EVERGREEN BALANCED FUND may write covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
EVERGREEN BALANCED FUND may only write "covered" options. This means that
so long as the 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. The 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 prices 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 Fund receives a premium from writing a
call or put option which it retains whether or not the option is exercised. By
writing a call option, the Fund might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Fund might become obligated to purchase the underlying securities for more than
their current market prices upon exercise.
EVERGREEN BALANCED FUND may also, as previously stated, purchase futures
contracts and options thereon. A futures contract is a firm commitment by two
parties: the seller, who agrees to make delivery of the specific type of
instrument called for in the contract ("going short"), and the buyer, who agrees
to take delivery of
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the instrument ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specific agencies or instrumentalities of
the U.S. government. If the 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. The 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 BALANCED FUND may also enter into currency and other financial
futures contracts and write options on such contracts. The Fund intends to enter
into such contracts and related options for hedging purposes. The Fund 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 Fund does not make
payment or deliver securities upon entering into a futures contract. Instead, it
puts down a margin deposit, which is adjusted to reflect changes in the value of
the contract and which remains in effect until the contract is terminated.
The 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 Fund sells futures contracts in order to offset a possible decline in
the profit on the securities or currencies. If a futures contract is purchased
by the Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
The 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 its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction. The Fund will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms, in
which case the Fund 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 could 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 EVERGREEN BALANCED FUND uses financial futures
contracts and options on financial futures contracts as hedging devices, there
is a risk that the prices of the securities subject to the financial futures
contracts and options on financial futures contracts may not correlate perfectly
with the prices of the securities in the Funds' portfolios. This may cause the
financial futures contract and any related options to react to market changes
differently than the portfolio securities. In addition, the Funds' investment
advisers could be incorrect in their expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities price
movements and other economic factors. Even if EVERGREEN BALANCED FUND'S
investment adviser correctly predicts interest rate movements, a hedge could be
unsuccessful if changes in the value of the Fund's futures position did not
correspond to changes in the value of its financial futures contracts. It is not
certain that a secondary market for positions in financial futures contracts or
for options on financial futures contracts will exist at all times. Although the
EVERGREEN BALANCED FUND'S 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 EVERGREEN BALANCED
FUND'S ability to establish and close out financial futures contracts and
options on financial futures contracts positions depends on this secondary
market. If the 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.
Municipal Securities. As noted above, EVERGREEN TAX STRATEGIC FOUNDATION FUND
may invest in Municipal Securities, which include municipal bonds, short-term
municipal notes and tax exempt commercial paper.
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"Municipal bonds" are debt obligations issued to obtain funds for various public
purposes that are exempt from federal income tax in the opinion of issuer's
counsel. The two principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific source such as from the user
of the facility being financed. The term "municipal bonds" also includes "moral
obligation" issues which are normally issued by special purpose authorities.
Industrial development bonds ("IDBs") and private activity bonds ("PABs") are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. The credit quality of IDBs and PABs is usually directly related to
the credit standing of the corporate user of the facilities being financed.
Participation interests are interests in municipal bonds, including IDBs and
PABs, and floating and variable rate obligations that are owned by banks. These
interests carry a demand feature permitting the holder to tender them back to
the bank, which demand feature is backed by an irrevocable letter of credit or
guarantee of the bank. A put bond is a municipal bond which gives the holder the
unconditional right to sell the bond back to the issuer at a specified price and
exercise date, which is typically well in advance of the bond's maturity date.
"Short-term municipal notes" and "tax exempt commercial paper" include tax
anticipation notes, bond anticipation notes, revenue anticipation notes and
other forms of short-term loans. Such notes are issued with a short-term
maturity in anticipation of the receipt of tax funds, the proceeds of bond
placements and other revenues.
Floating Rate and Variable Rate Obligations. The Municipal Securities in which
EVERGREEN TAX STRATEGIC FOUNDATION FUND may invest also include certain variable
rate and floating rate municipal obligations with or without demand features.
These variable rate securities do not have fixed interest rates; rather, the
rates fluctuate based upon changes in specified market rates, such as the prime
rate, or are adjusted at predesignated periodic intervals. Certain of these
obligations may carry a demand feature that gives the EVERGREEN TAX STRATEGIC
FOUNDATION FUND the right to demand prepayment of the principal amount of the
security prior to its maturity date. The demand obligation may or may not be
backed by letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. The
EVERGREEN TAX STRATEGIC FOUNDATION FUND will limit the value of its investments
in any floating or variable rate securities which are not readily marketable and
in all other not readily marketable securities to 15% or less of its net assets.
FOUNDATION may invest no more than 5% of its total assets in variable and
floating rate securities.
When Issued and Delayed Delivery Transactions. EVERGREEN TAX STRATEGIC
FOUNDATION FUND and EVERGREEN BALANCED FUND may purchase securities on a
when-issued or delayed delivery basis. These transactions are arrangements in
which a Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market values of the
securities on the settlement date. A Fund may dispose of a commitment prior to
settlement if the Fund's investment adviser deems it appropriate to do so. In
addition, a Fund may enter into transactions to sell its purchase commitments to
third parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. A Fund may realize
short-term profits or losses upon the sale of such commitments. Commitments to
purchase when-issued securities will not exceed 25% of the net assets of
EVERGREEN TAX STRATEGIC FOUNDATION FUND and 20% of the net assets of EVERGREEN
BALANCED FUND. The Funds will maintain cash or high quality short-term
securities in segregated accounts with their custodian in amounts equal to such
commitments. Neither Fund intends to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.
Stand-By Commitments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
The EVERGREEN TAX STRATEGIC FOUNDATION FUND expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the EVERGREEN TAX STRATEGIC FOUNDATION FUND'S portfolio will not exceed 10% of
the value of the Fund's net assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality
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short-term securities in a segregated account with its custodian in an amount
equal to such commitments. The Fund will enter into stand-by commitments only
with banks and broker-dealers that, in the judgment of the Fund's investment
adviser, present minimal credit risks.
Taxable Fixed-Income Investments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may
temporarily invest up to 20% of its net assets in taxable securities under any
one or more of the following circumstances: (i) pending investment of proceeds
of sale of Fund shares or of portfolio securities, (ii) pending settlement of
purchases of portfolio securities, and (iii) to maintain liquidity for the
purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% of its net assets in taxable securities for
defensive purposes. The Fund may invest for defensive purposes during periods
when the Fund's assets available for investment exceed the available Municipal
Securities that meet the Fund's quality and other investment criteria. Taxable
securities in which the Fund may invest on a short-term basis include
obligations of the U.S. government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of U.S. banks with
assets of $1 billion or more.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
SPECIAL RISK CONSIDERATIONS
Investment in Foreign Securities. Investments by EVERGREEN BALANCED FUND in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of the Fund denominated in such currency
will also fall. The performance of the Fund will be measured in U.S. dollars.
Securities markets of foreign countries generally are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid. Lack of liquidity may affect the Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, the Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by the Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, the Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by the Fund's investment adviser before making any of these types of
investments.
ADRs and European Depositary Receipts ("EDRs") and other securities
convertible into securities of foreign issuers may not necessarily be
denominated in the same currency as the securities into which they may be
converted but rather in the currency of the market in which they are traded.
ADRs are receipts typically issued by an American bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe by banks or depositories which evidence a
similar ownership
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arrangement. Generally ADRs, in registered form, are designed for use in United
States securities markets and EDRs, in bearer form, are designed for use in
European securities markets.
Investments Related to Real Estate. EVERGREEN BALANCED FUND and EVERGREEN
FOUNDATION FUND may invest up to 15% of their net assets in investments related
to real estate, including real estate investment trusts ("REITS"). Risks
associated with investments in securities of companies in the real estate
industry include: declines in the value of real estate; risks related to general
and local economic conditions; overbuilding and increased competition; increases
in property taxes and operating expenses; changes in zoning laws; casualty or
condemnation losses; variations in rental income; changes in neighborhood
values; the appeal of properties to tenants; and increases in interest rates. In
addition, equity real estate investment trusts may be affected by changes in the
values of the underlying property owned by the trusts, while mortgage real
estate investment trusts may be affected by the quality of credit extended.
Equity and mortgage real estate investment trusts are dependent upon management
skills, may not be diversified and are subject to the risks of financing
projects. Such trusts are also subject to heavy cash flow dependency, defaults
by borrowers, self liquidation and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended (the "Code") and to maintain exemption from the Investment Company Act
of 1940, as amended (the "1940 Act"). In the event an issuer of debt securities
collateralized by real estate defaulted, it is conceivable that a Fund could end
up holding the underlying real estate.
Leverage. The utilization of leverage by the EVERGREEN AMERICAN RETIREMENT FUND
involves certain risks described below. For example, leveraging may exaggerate
changes in the net asset value of Fund shares and in the yield on the Fund's
portfolio. Although the principal of the Fund's borrowings will be fixed, the
Fund's assets may change in value during the time the borrowings are
outstanding. Borrowing will create interest expenses for the Fund which can
exceed the income from the assets retained. To the extent the income derived
from securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were not
used. Conversely, if the income from the assets retained with borrowed funds is
not sufficient to cover the cost of borrowing, the net income of the Fund will
be less than if borrowing were not used, and therefore the amount available for
distribution to shareholders as dividends will be reduced.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which each Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained as investment adviser by
each of EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND. Evergreen Asset succeeded on June 30, 1994
to the advisory business of a corporation with the same name, but under
different ownership, which was organized in 1971. Evergreen Asset, with its
predecessors, has served as investment adviser to the Evergreen mutual funds
since 1971. Evergreen Asset is a wholly-owned subsidiary of First Union National
Bank ("FUNB"). The address of Evergreen Asset is 2500 Westchester Avenue,
Purchase, New York 10577. FUNB is a subsidiary of First Union Corporation
("First Union"), the sixth largest bank holding company in the United States.
Stephen A. Lieber and Nola Maddox Falcone serve as the chief investment officers
of Evergreen Asset. The Capital Management Group of FUNB ("CMG") serves as
investment adviser to EVERGREEN BALANCED FUND.
First Union is headquartered in Charlotte, North Carolina, and had $137
billion in consolidated assets as of March 31, 1997. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG and the other investment advisory
affiliates of FUNB manage or otherwise oversee the investment of over $61.9
billion in assets belonging to a wide range of clients, including all the
Evergreen Keystone mutual funds. First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a
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registered broker-dealer principally engaged in providing, consistent with its
federal banking authorizations, private placement, securities dealing, and
underwriting services.
As investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND, Evergreen
Asset manages each Fund's investments, provides various administrative services
and supervises each Fund's daily business affairs, subject to the authority of
the Trustees. Evergreen Asset is entitled to receive from EVERGREEN AMERICAN
RETIREMENT FUND a fee equal to .75 of 1% of average daily net assets on an
annual basis on the first $750 million and .70 of 1% of average daily net assets
on an annual basis on assets over $750 million; and from each of EVERGREEN
FOUNDATION FUND and EVERGREEN TAX STRATEGIC FOUNDATION FUND a fee equal to .875
of 1% of average daily net assets on an annual basis on the first $750 million
in assets, .75 of 1% of average daily net assets on an annual basis on the next
$250 million in assets, and .70 of 1% of average daily net assets on an annual
basis on assets over $1 billion.
CMG manages the investments and supervises the daily business affairs of
EVERGREEN BALANCED FUND and, as compensation therefor, is entitled to receive an
annual fee equal to .50 of 1% of average daily net assets of the Fund.
The total expenses as a percentage of average daily net assets on an
annual basis of the Funds for the fiscal year ended December 31, 1996 and for
the three months ended March 31, 1997, are set forth in the section entitled
"Financial Highlights". Such expenses reflect all voluntary advisory fee waivers
and expense reimbursements which may be revised or terminated at any time.
PORTFOLIO MANAGERS
Stephen A. Lieber and James T. Colby, III have served as the portfolio
managers for EVERGREEN TAX STRATEGIC FOUNDATION FUND since its inception. Mr.
Lieber and Mr. Colby are assisted in the management of the Fund by Gary R.
Buesser, C.F.A. Mr. Lieber, who is Chairman and Co-Chief Executive Officer, of
Evergreen Asset, makes all allocation decisions and investment decisions for the
equity portion of the portfolio, and Mr. Colby manages the fixed-income portion.
Mr. Colby has served as a fixed-income portfolio manager with Evergreen Asset
since 1992. Mr. Buesser joined Lieber & Co. as an analyst in 1996. Previously,
he was a portfolio manager/analyst with Cohen Asset Management and Shearson
Lehman Brothers. Mr. Lieber is also the portfolio manager for EVERGREEN
FOUNDATION FUND.
The portfolio manager for EVERGREEN AMERICAN RETIREMENT FUND is Irene D.
O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal manager since its
inception, and has been associated with Evergreen Asset and its predecessor
since 1981. Ms. O'Neill is assisted in the management of the Fund by Natalie
Kucharski, C.F.A. Since 1985 Ms. Kucharski has served as an analyst at Lieber &
Co. in the insurance, health care services and telecommunications industries.
R. Dean Hawes has been the portfolio manager of EVERGREEN BALANCED FUND
since its inception. Mr. Hawes, a Vice President of FUNB and the Director of
Employee Benefit Portfolio Management, joined FUNB in 1981.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND. Lieber & Company will be reimbursed by
Evergreen Asset in connection with the rendering of services on the basis of the
direct and indirect costs of performing such services. There is no additional
charge to EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND for the services provided by Lieber &
Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase,
New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of
First Union.
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<PAGE>
ADMINISTRATOR
Evergreen Keystone Investment Services, Inc. ("EKIS") serves as
administrator to EVERGREEN BALANCED FUND, subject to the supervision and control
of the Trustees of the Evergreen Investment Trust. As administrator EKIS
provides facilities, equipment and personnel to the EVERGREEN BALANCED FUND and
is entitled to receive an administration fee from the Fund based on the
aggregate average daily net assets of all the mutual funds for which CMG,
Evergreen Asset or Keystone Investment Management Company ("Keystone") serve as
investment adviser, calculated in accordance with the following schedule:
<TABLE>
<CAPTION>
Administration Fee
<S> <C>
0.050% on the first $7 billion
0.035% on the next $3 billion
0.030% on the next $5 billion
0.020% on the next $10 billion
0.015% on the next $5 billion
0.010% on assets in excess of $30 billion
</TABLE>
EKIS also provides facilities, equipment and personnel to EVERGREEN
FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN
RETIREMENT FUND on behalf of each Fund's investment adviser.
SUB-ADMINISTRATOR
BISYS Fund Services ("BISYS"), an affiliate of Evergreen Keystone
Distributor, Inc. ("EKD"), distributor for the Evergreen Keystone Funds, serves
as sub-administrator to the Funds and is entitled to receive a fee from EKIS
based on the aggregate average daily net assets of all the mutual funds
administered by EKIS for which CMG, Evergreen Asset or Keystone serve as
investment adviser, calculated in accordance with the following schedule:
<TABLE>
<CAPTION>
Sub-Administration Fee
<S> <C>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion
</TABLE>
The total assets of the mutual funds administered by EKIS for which FUNB
affiliates also serve as investment advisers were approximately $29 billion as
of March 31, 1997.
PURCHASE AND REDEMPTION OF SHARES
HOW TO BUY SHARES
Class Y shares are offered at net asset value without a front-end sales
charge or a contingent deferred sales load. Class Y shares are only offered to
(i) persons who at or prior to December 31, 1994, owned shares in a mutual fund
advised by Evergreen Asset, (ii) certain institutional investors and (iii)
investment advisory clients of CMG, Evergreen Asset, Keystone or their
affiliates.
Eligible investors may purchase Class Y shares of any of the Funds
through broker-dealers, banks or other financial intermediaries, or directly
through EKD. In addition, you may purchase Class Y shares of any of the Funds by
mailing to that Fund, c/o Evergreen Keystone Service Company ("EKSC"), P.O. Box
2121, Boston, Massachusetts 02106-2121, a completed Application and a check
payable to the Fund. You may also telephone 1-800-343-2898 to obtain the number
of an account to which you can wire or electronically transfer funds and then
send in a completed Application. The minimum initial investment is $1,000, which
may be waived in certain situations. Subsequent investments in any amount may be
made by check, by wiring federal funds, by direct deposit or by an electronic
funds transfer.
There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. Share certificates are
not issued. See the Application for more information. Only Class Y shares are
offered through this Prospectus (see "General Information" -- "Other Classes of
Shares").
20
<PAGE>
How the Funds Value their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
value. Non-dollar denominated securities will be valued as of the close of the
Exchange at the closing price of such securities in their principal trading
markets.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen Keystone 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 Class Y shares in a Fund to the Fund
for cash, (at the net redemption value) on any day the Exchange is open, either
directly by writing to the Fund, c/o EKSC, or through your financial
intermediary. The amount you will receive is the net asset value adjusted for
fractions of a cent next calculated after the Fund receives your request in
proper form. Proceeds generally will be sent to you within seven days. However,
for shares recently purchased by check, a Fund will not send proceeds until it
is reasonably satisfied that the check has been collected (which may take up to
15 days). Once a redemption request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. 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 the Fund, c/o EKSC; the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, EKSC, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
financial intermediaries, fiduciaries and surviving joint owners. Signature
guarantees are required for all redemption requests for shares with a value of
more than $50,000. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. Each Fund and EKSC reserve the
right to withdraw this waiver at any time. A signature guarantee must be
provided by a bank or trust company (not a Notary Public), a member firm of a
domestic stock exchange or by other financial institutions whose guarantees are
acceptable under the Securities Exchange Act of 1934 and EKSC's policies.
Shareholders may withdraw amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
Prospectus between the hours of 8:00 a.m. and 5:30 p.m.(Eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or EKSCs
offices are closed). The Exchange is closed on New Years Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Redemption requests received after 4:00 p.m. (Eastern time) will
be processed using the net asset value determined on the next business day. Such
redemption requests must include the shareholder's account name, as registered
with a Fund, and the account number. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
redemptions. If you cannot reach the Fund by telephone, you should follow the
procedures for redeeming by mail or through a broker-dealer as set forth herein.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
complete the appropriate sections on the Application and choose how the
redemption proceeds are to be paid. Redemption proceeds will either (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.
21
<PAGE>
In order to insure that instructions received by EKSC are genuine when
you initiate a telephone transaction, you will be asked to verify certain
criteria specific to your account. At the conclusion of the transaction, you
will be given a transaction number confirming your request, and written
confirmation of your transaction will be mailed the next business day. Your
telephone instructions will be recorded. Redemptions by telephone are allowed
only if the address and bank account of record have been the same for a minimum
period of 30 days. Each Fund reserves the right at any time to terminate,
suspend, or change the terms of any redemption method described in this
Prospectus, except redemption by mail, and to impose fees.
Except as otherwise noted, the Funds, EKSC, and EKD will not assume
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Evergreen Keystone Express Line, or by
telephone. EKSC will employ reasonable procedures to confirm that instructions
received over the Evergreen Keystone Express Line or by telephone are genuine.
The Funds, EKSC, and EKD will not be liable when following instructions received
over the Evergreen Keystone Express Line or by telephone that EKSC reasonably
believes are genuine.
Evergreen Keystone Express Line. The Evergreen Keystone Express Line offers you
specific fund account information and price and yield quotations as well as the
ability to do account transactions, including investments, exchanges and
redemptions. You may access the Evergreen Keystone Express Line by dialing toll
free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a
week.
General. The sale of shares is a taxable transaction for federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists and
the Funds cannot dispose of their investments or fairly determine their value;
or (4) the Securities and Exchange Commission ("SEC") so orders. The Funds
reserve the right to close an account that through redemption has fallen below
$1,000 and has remained so for thirty days. Shareholders will receive sixty
days' written notice to increase the account value to at least $1,000 before the
account is closed. The Funds have elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which each Fund is obligated to redeem shares solely in
cash, up to the lesser of $250,000 or 1% of a Fund's total net assets, during
any ninety day period for any one shareholder.
EXCHANGE PRIVILEGE
How to Exchange Shares. You may exchange some or all of your Class Y shares for
shares of the same Class in the other Evergreen Keystone Funds through your
financial intermediary, by calling or writing to EKSC or by using the Evergreen
Keystone Express Line as described above. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received. An
exchange which represents an initial investment in another Evergreen Keystone
Fund is subject to the minimum investment and suitability requirements of each
Fund.
Each of the Evergreen Keystone Funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. (Eastern time)
for you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges By Telephone And Mail. Exchange requests received by a Fund after 4:00
p.m. (Eastern time) will be processed using the net asset value determined at
the close of the next business day. During periods of drastic economic or market
changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach EKSC by telephone. If you wish to use the telephone
exchange service you should indicate this on the Application. As noted above,
each
22
<PAGE>
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 EKSC 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, EKSC
or call the toll-free number on the front page of this Prospectus. Some services
are described in more detail in the Application.
Systematic Investment Plan. Under a Systematic Investment Plan, you may invest
as little as $25 per month to purchase shares of a Fund with no minimum initial
investment required.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Systematic Investment Plan or Telephone Investment
Plan may not be redeemed for ten days from the date of investment.
Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the Application. Under
this Plan, you may receive (or designate a third party to receive) a monthly or
quarterly fixed-withdrawal payment in a stated amount of at least $75 and may be
as much as 1.0% per month or 3.0% per quarter of the total net asset value of
the Fund shares in your account when the Plan was opened. Fund shares will be
redeemed as necessary to meet withdrawal payments. All participants must elect
to have their dividends and capital gain distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested.
Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen Keystone Fund. This
results in more shares being purchased when the selected Fund's net asset value
is relatively low and fewer shares being purchased when the Fund's net asset
value is relatively high and may result in a lower average cost per share than a
less systematic investment approach.
Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen Keystone Fund. You should designate on the Application
(i) the dollar amount of each monthly or quarterly investment you wish to make,
and (ii) the Fund in which the investment is to be made. Thereafter, on the
first day of the designated month, an amount equal to the specified monthly or
quarterly investment will automatically be redeemed from your initial account
and invested in shares of the designated fund.
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any Class Y Evergreen Keystone Fund shares you own
automatically invested to purchase the same class of shares of any other
Evergreen Keystone Fund. You may select this service on your Application and
indicate the Evergreen Keystone Fund(s) into which distributions are to be
invested.
Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Incentive Match Plan for Employees (SIMPLEs); Tax Sheltered Annuity Plans;
403(b)(7) Plans; 401(k) Plans; Keogh Plans; Profit-Sharing Plans; Pension and
Target Benefit and Money Purchase Plans. For details, including fees and
application forms, call toll free 1-800-247-4075 or write to EKSC.
23
<PAGE>
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 or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
agreements or from acting as agent in connection with the purchase of shares of
a Fund by its customers. If CMG or Evergreen Asset were prevented from
continuing to provide the services called for under the investment advisory
agreements, it is expected that the Trustees would identify, and call upon each
Fund's shareholders to approve, new investment advisers. If this were to occur,
it is not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
OTHER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders any net
realized capital gains annually or more frequently, and to distribute their
investment company taxable income, if any, quarterly, such distributions of
EVERGREEN TAX STRATEGIC FOUNDATION FUND to include any tax exempt income.
Dividends and distributions generally are taxable in the year in which they are
paid, except any dividends paid in January that were declared in the previous
calendar quarter will 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 tax 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 tax and any state or local taxes on the dividends and distributions they
receive from a Fund whether such dividends and distributions are made in cash or
in additional shares. Questions on how any distributions will be taxed to the
investor should be directed to the investor's own tax adviser.
Under current law, the highest federal income tax rate applicable to net
long-term capital gains realized by individuals is 28%. The rate applicable to
corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce the
yield on its investments. Tax treaties between certain countries and the United
States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States federal income tax may be entitled, subject to certain
rules and limitations, to claim a federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
24
<PAGE>
Each Fund is required by federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Application, or on a separate
form supplied by the transfer agent, that your social security or taxpayer
identification number is correct and that you are not currently subject to
backup withholding or are exempt from backup withholding.
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 Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, a Fund may consider sales of its shares as a factor in the selection
of dealers to enter into portfolio transactions with the Fund.
Organization. The EVERGREEN FOUNDATION FUND and EVERGREEN TAX STRATEGIC
FOUNDATION FUND are separate series of the Evergreen Foundation Trust, a
Massachusetts business trust organized in 1989. EVERGREEN AMERICAN RETIREMENT
FUND is a separate series of The Evergreen American Retirement Trust, a
Massachusetts business trust organized in 1987. EVERGREEN BALANCED FUND is a
separate investment series of Evergreen Investment Trust (formerly First Union
Funds), a Massachusetts business trust organized in 1984. The Funds do not
intend to hold annual shareholder meetings; shareholder meetings will be held
only when required by applicable law. Shareholders have available certain
procedures for the removal of Trustees, including the right to demand that a
meeting of shareholders be called for the purpose of voting thereon if 10% of
the shareholders so request in writing.
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, Class B, Class C and Class Y shares have
identical voting, dividend, liquidation and other rights, except that each Class
bears, to the extent applicable, its own distribution and shareholder service
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. 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. Evergreen Keystone
Service Company, P.O. Box 2121, Boston, Massachusetts 02106-2121, acts as
registrar, transfer agent and dividend-disbursing agent for each of the Funds.
Principal Underwriter. EKD, an affiliate of BISYS Fund Services, is located at
125 W. 55th Street, New York, New York 10019, and is the principal underwriter
of the Funds. BISYS Fund Services also acts as sub-administrator to the Funds
and provides personnel to serve as officers of the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) persons who at or prior to December 31, 1994,
owned shares in a mutual fund advised by Evergreen Asset, (ii) certain
institutional investors and (iii) investment advisory clients of CMG,
25
<PAGE>
Evergreen Asset, Keystone 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. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B, Class C and Class Y shares. A Fund's total return for each
such period is computed by finding, through the use of a formula prescribed by
the SEC, the average annual compounded rate of return over the period that would
equate an assumed initial amount invested to the value of the investment at the
end of the period. For purposes of computing total return, dividends and capital
gains distributions paid on shares of a Fund are assumed to have been reinvested
when paid and the maximum sales charges applicable to purchases of a Fund's
shares are assumed to have been paid. Yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. The Fund's yield is calculated according to accounting methods that are
standardized by the SEC for all stock and bond funds. Because yield accounting
methods differ from the method used for other accounting purposes, the Fund's
yield may not equal its distribution rate, the income paid to your account or
the net investment income reported in the Fund's financial statements. To
calculate yield, the Fund takes the interest and dividend income it earned from
its portfolio of investments (as defined by the SEC formula) for a 30-day period
(net of expenses), divides it by the average number of shares entitled to
receive dividends, and expresses the result as an annualized percentage rate
based on the Fund's share price at the end of the 30-day period. This yield does
not reflect gains or losses from selling securities.
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
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 Keystone 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 Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN KEYSTONE EVENTS, a
quarterly magazine provided to Evergreen Keystone 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 Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust shall 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. 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.
26
<PAGE>
INVESTMENT ADVISERS
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND,
EVERGREEN AMERICAN RETIREMENT FUND
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN BALANCED FUND
CUSTODIAN
State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827
TRANSFER AGENT
Evergreen Keystone Service Company, P.O. Box 2121, Boston, Massachusetts
02106-2121
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110
DISTRIBUTOR
Evergreen Keystone Distributor, Inc., 125 W. 55th Street, New York, New York
10019
<PAGE>
EVERGREEN BALANCED FUND
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
EVERGREEN KEYSTONE GROWTH AND INCOME AND BALANCED FUNDS
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1997
AS AMENDED JULY 1, 1997
Growth and Income Funds
Evergreen Growth and Income Fund ("Growth and Income")
Evergreen Income and Growth Fund (formerly Evergreen Total Return Fund)
("Income and Growth")
Evergreen Small Cap Equity Income Fund ("Small Cap")
Evergreen Utility Fund ("Utility")
Evergreen Value Fund ("Value")
Keystone Fund for Total Return ("Total Return")
Balanced Funds
Evergreen Foundation Fund ("Foundation")
Evergreen Tax Strategic Foundation Fund ("Tax Strategic")
Evergreen American Retirement Fund ("American Retirement")
Evergreen Balanced Fund ("Balanced")
This Statement of Additional Information pertains to all classes of
shares of the Funds listed above. It is not a prospectus and should be read in
conjunction with the Prospectus dated April 1, 1997 for the Growth and Income
Funds and July 1, 1997 for the Balanced Funds, for the specific Fund in which
you are making orcontemplating an investment. The Evergreen Keystone Growth and
Income and Balanced Funds are offered through four separate prospectuses: one
offering Class A, Class B and Class C shares and a separate prospectus offering
Class Y shares of Growth and Income, Income and Growth, Small Cap, Utility,
Value and Total Return; and one offering Class A, Class B and Class C shares and
a separate prospectus offering Class Y shares of Foundation, Tax Strategic,
American Retirement and Balanced.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Investment Objectives and Policies.......................................3
Investment Restrictions..................................................7
Non-Fundamental Operating Policies......................................15
Certain Risk Considerations.............................................15
Management..............................................................16
Trustees ...............................................................16
Investment Advisers.....................................................28
Distribution Plans......................................................33
Allocation of Brokerage.................................................37
Additional Tax Information..............................................40
Net Asset Value.........................................................43
Purchase of Shares......................................................44
General Information about the Funds.....................................55
Performance Information.................................................56
General ...............................................................62
Financial Statements....................................................62
Appendix "A"............................................................64
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
(SEE ALSO "DESCRIPTION OF THE FUNDS - INVESTMENT OBJECTIVES
AND POLICIES" IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
The investment objective(s) of each Fund and a description of the
securities in which each Fund may invest is set forth under "Description of the
Funds-Investment Objectives and Policies" in the relevant Prospectus. The
investment objectives are fundamental and cannot be changed without the approval
of shareholders. The following expands upon the discussion in the Prospectus
regarding certain investments of each Fund.
U.S. Government Securities (All Funds)
The types of U.S. government securities in which the Funds may invest
generally include direct obligations of the U.S. Treasury such as U. S. Treasury
bills, notes and bonds and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
(i) the full faith and credit of the U.S. Treasury;
(ii) the issuer's right to borrow from the U.S. Treasury;
(iii) the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
(iv) the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities that may not always receive
financial support from the U.S. government are:
(i) Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association; and
(vi) Student Loan Marketing Association.
Restricted and Illiquid Securities (All Funds)
Each Fund may invest in restricted and illiquid securities. The ability of
the Board of Trustees ("Trustees") to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange Commission
("SEC") Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for sale under the
Rule. The Funds which invest in Rule 144A securities believe that the Staff of
the SEC has left the question of determining the liquidity of all restricted
securities (eligible for resale under the Rule) for determination by the
Trustees. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
(i) the frequency of trades and quotes for the security;
(ii) the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
(iii) dealer undertakings to make a market in the security; and
(iv) the nature of the security and the nature of the marketplace trades.
Restricted securities would generally be acquired either from institutional
investors who originally acquired the securities in private placements or
directly from the issuers of the securities in private placements. Restricted
securities and securities that are not readily marketable may sell at a discount
from the price they would bring if freely marketable.
When-Issued and Delayed Delivery Securities (Balanced, Tax Strategic,
Utility, Value and Total Return)
Securities purchased on a when-issued or delayed delivery basis are made to
secure what is considered to be an advantageous price or yield for a Fund. No
fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of a Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the transaction has
been settled. Balanced, Utility and Value do not intend to engage in when-
issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of their assets and Tax
Strategic's commitment to purchase when-issued securities will not exceed 25% of
the Fund's total assets. Total Return does not intend to invest more than 5% of
its net assets in when-issued or delayed delivery transactions.
Lending of Portfolio Securities (All Funds)
Each Fund may lend its portfolio securities to generate income and to
offset expenses. The collateral received when a Fund lends portfolio securities
must be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the lending Fund.
During the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
at the option of the Fund or the borrower. A Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to the borrower or placing broker. A Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote if
that were considered important with respect to the investment.
Reverse Repurchase Agreements (Small Cap, Utility, Value, Tax Strategic,
Balanced and Total Return)
Reverse repurchase agreements are similar to borrowing cash. In a
reverse repurchase agreement, a Fund transfers possession of a portfolio
instrument to another person, such as a financial institution, broker, or
dealer, in return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest at an
agreed upon rate.
The use of reverse repurchase agreements may enable a Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
Options and Futures Transactions (All Funds except Balanced, American
Retirement and Tax Strategic)
Options which Balanced, Utility and Value trade must be listed on
national securities exchanges.
Purchasing Put and Call Options on Financial Futures Contracts
Balanced, Utility, Value and Total Return may purchase put and call
options on financial futures contracts (in the case of Utility and Value limited
to options on financial futures contracts for U.S. government securities).
Unlike entering directly into a futures contract, which requires the purchaser
to buy a financial instrument on a set date at an undetermined price, the
purchase of a put option on a futures contract entitles (but does not obligate)
its purchaser to decide on or before a future date whether to assume a short
position at the specified price.
A Fund may purchase put and call options on futures to protect
portfolio securities against decreases in value resulting from an anticipated
increase in market interest rates. Generally, if the hedged portfolio securities
decrease in value during the term of an option, the related futures contracts
will also decrease in value and the put option will increase in value. In such
an event, a Fund will normally close out its option by selling an identical put
option. If the hedge is successful, the proceeds received by the Fund upon the
sale of the put option plus the realized gain offsets the decrease in value of
the hedged securities.
Alternately, a Fund may exercise its put option to close out the
position. To do so, it would enter into a futures contract of the type
underlying the option. If the Fund neither closes out nor exercises an option,
the option will expire on the date provided in the option contract, and only the
premium paid for the contract will be lost.
Purchasing Options
Balanced, Utility, Value and Total Return may purchase both put and
call options on their portfolio securities. These options will be used as a
hedge to attempt to protect securities which a Fund holds or will be purchasing
against decreases or increases in value. A Fund may purchase put and call
options for the purpose of offsetting previously written put and call options of
the same series. If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not be able to
sell the underlying securities or dispose of assets held in a segregated account
until the options expire or are exercised.
Balanced, Utility, Value and Total Return intend to purchase put and
call options on currency and other financial futures contracts for hedging
purposes. A put option purchased by a Fund would give it the right to assume a
position as the seller of a futures contract. A call option purchased by the
Fund would give it the right to assume a position as the purchaser of a futures
contract. The purchase of an option on a futures contract requires the Fund to
pay a premium. In exchange for the premium, the Fund becomes entitled to
exercise the benefits, if any, provided by the futures contract, but is not
required to take any action under the contract. If the option cannot be
exercised profitably before it expires, the Fund's loss will be limited to the
amount of the premium and any transaction costs.
Utility and Value currently do not intend to invest more than 5% of
their net assets in options transactions. Total Return will not purchase a put
option if, as a result of such purchase, more than 10% of its total assets would
be invested in premiums for such option.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, a Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is instead
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. In computing its daily net asset value, a Fund
will mark-to-market its open futures positions. The Fund is also required to
deposit and maintain margin when it writes call options on futures contracts.
Balanced will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, the Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
Income and Growth and Growth and Income may write covered call options
to a limited extent on their portfolio securities ("covered options") in an
attempt to earn additional income. A Fund will write only covered call option
contracts and will receive premium income from the writing of such contracts.
Income and Growth and Growth and Income may purchase call options to close out a
previously written call option. In order to do so, the Fund will make a "closing
purchase transaction" -- the purchase of a call option on the same security with
the same exercise price and expiration date as the call option which it has
previously written. A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. If an option is exercised, a Fund
realizes a long-term or short-term gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
Junk Bonds (Growth and Income and Total Return)
Consistent with its strategy of investing in "undervalued" securities,
Growth and Income and Total Return may invest in lower medium and low-quality
bonds also known as "junk bonds" and may also purchase bonds in default if, in
the opinion of the Fund's investment adviser, there is significant potential for
capital appreciation. Total Return may invest without limit in debt securities
which are rated below investment grade. Growth and Income, however, will not
invest more than 5% of its total assets in debt securities which are rated below
investment grade. These bonds are regarded as speculative with respect to the
issuer's continuing ability to meet principal and interest payments. High yield
bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than investment grade bonds. A projection of an
economic downturn, or higher interest rates, for example, could cause a decline
in high yield bond prices because such events could lessen the ability of highly
leveraged companies to make principal and interest payments on their debt
securities. In addition, the secondary trading market for high yield bonds may
be less liquid than the market for higher grade bonds, which can adversely
affect the ability to dispose of such securities.
Variable and Floating Rate Securities (Foundation and Tax Strategic)
The terms of variable and floating rate instruments provide for the
interest rate to be adjusted according to a formula on certain predetermined
dates. Variable and floating rate instruments that are repayable on demand at a
future date are deemed to have a maturity equal to the time remaining until the
principal will be received on the assumption that the demand feature is
exercised on the earliest possible date. For the purposes of evaluating the
interest-rate sensitivity of a Fund, variable and floating rate instruments are
deemed to have a maturity equal to the period remaining until the next
interest-rate readjustment. For the purposes of evaluating the credit risks of
variable and floating rate instruments, these instruments are deemed to have a
maturity equal to the time remaining until the earliest date the Fund is
entitled to demand repayment of principal. Foundation may invest no more than 5%
of its total assets, at the time of the investment in question, in variable and
floating rate securities. Tax Strategic will limit the value of its investments
in any floating or variable rate securities which are not readily marketable and
in all other not readily marketable securities to 5% or less of its net assets.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
FUNDAMENTAL INVESTMENT RESTRICTIONS
Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.
1. CONCENTRATION OF ASSETS IN ANY ONE ISSUER
Neither Growth and Income nor Income and Growth may invest more than 5% of
their net assets, at the time of the investment in question, in the securities
of any one issuer other than the U.S. government and its agencies or
instrumentalities.
American Retirement may not invest more than 5% of its total assets, at the
time of the investment in question, in the securities of any one issuer other
than the U.S. government and its agencies or instrumentalities.
None of Balanced, Foundation, Small Cap, Utility, Value or Total Return may
invest more than 5% of its total assets, at the time of the investment in
question, in the securities of any one issuer other than the U.S. government and
its agencies or instrumentalities, except that up to 25% of the value of a
Fund's total assets may be invested without regard to such 5% limitation.
Tax Strategic may not invest more than 5% of its total assets, at the
time of the investment in question, in the securities of any one issuer other
than the U.S. government and its agencies or instrumentalities, except that up
to 25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of the Fund's portfolio.
2. TEN PERCENT LIMITATION ON SECURITIES OF ANY ONE ISSUER
None of American Retirement, Foundation, Small Cap, Growth and Income
or Income and Growth may purchase more than 10% of any class of securities of
any one issuer other than the U.S.
government and its agencies or instrumentalities.
Neither Value nor Utility may purchase more than 10% of the outstanding
voting securities of any one issuer.
Neither Tax Strategic nor Total Return may purchase more than 10% of
the voting securities of any one issuer other than the U.S. government and its
agencies or instrumentalities.
3. INVESTMENT FOR PURPOSES OF CONTROL OR MANAGEMENT
None of American Retirement, Foundation, Growth and Income, Small Cap*,
Tax Strategic*, Income and Growth, Utility*, Value or Total Return may invest in
companies for the purpose of exercising control or management.
4. PURCHASE OF SECURITIES ON MARGIN
None of American Retirement, Balanced, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Income and Growth, Utility, Value or Total Return
may purchase securities on margin, except that each Fund may obtain such
short-term credits as may be necessary for the clearance of transactions. A
deposit or payment by a Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not considered
the purchase of a security on margin.
5. UNSEASONED ISSUERS
Neither American Retirement nor Foundation may invest in the securities
of unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of their predecessors.
None of Income and Growth, Value*, Utility* or Total Return may invest
more than 5% of its total assets in securities of unseasoned issuers that have
been in continuous operation for less than three years, including operating
periods of their predecessors.
None of Growth and Income, Small Cap* and Tax Strategic* may invest
more than 15% of its total assets (10% of total net assets in the case of Growth
and Income) in securities of unseasoned issuers that have been in continuous
operation for less than three years, including operating periods of their
predecessors.
6. UNDERWRITING
American Retirement, Foundation, Growth and Income, Small Cap, Tax
Strategic, Income and Growth, Balanced, Utility, Value and Total Return will not
underwrite any issue of securities except as they may be deemed an underwriter
under the Securities Act of 1933 in connection with the sale of securities in
accordance with their investment objectives, policies and limitations.
7. INTERESTS IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT
PROGRAMS.
None of American Retirement, Foundation, Growth and Income, Small Cap, Tax
Strategic or Income and Growth may purchase, sell or invest in interests in oil,
gas or other mineral exploration or development programs.
Neither Balanced* nor Utility* will purchase interests in oil, gas or
other mineral exploration or development programs or leases, although each Fund
may purchase the securities of other issuers which invest in or sponsor such
programs.
Value will not purchase interests in oil, gas or other mineral
exploration or development programs or leases, although it may purchase the
publicly traded securities of companies engaged in such activities.
8. CONCENTRATION IN ANY ONE INDUSTRY
Neither Growth and Income nor Income and Growth may concentrate its
investments in any one industry, except that each Fund may invest up to 25% of
its total net assets in any one industry.
None of American Retirement, Foundation, Small Cap and Tax Strategic
may invest 25% or more of its total assets in the securities of issuers
conducting their principal business activities in any one industry; provided,
that this limitation shall not apply (i) with respect to each Fund, to
obligations issued or guaranteed by the U.S. government or its agencies or
instrumentalities, or (ii) with respect to Tax Strategic, to municipal
securities. For purposes of this restriction, utility companies, gas, electric,
water and telephone companies will be considered separate industries.
Balanced and Value will not invest 25% or more of the value of their
total assets in any one industry except Balanced may invest more than 25% and
Value may invest 25% or more of its total assets in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
Utility will not invest more than 25% of its total assets (valued at
the time of investment) in securities of companies engaged principally in any
one industry other than the utilities industry, except that this restriction
does not apply to cash or cash items and securities issued or guaranteed by the
U.S.
government, its agencies or instrumentalities.
Total Return will not purchase any security (other than U.S. government
securities) of any issuer if as a result more than 25% of its total assets would
be invested in a single industry; except that (i) there is no restriction with
respect to obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities; (ii) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily related
to financing the activities of the parents; (iii) the industry classification of
utilities will be determined according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (iv) the industry classification of medically related industries
will be determined according to their services (for example, management,
hospital supply, medical equipment and pharmaceuticals will each be considered a
separate industry).
9. WARRANTS
None of American Retirement, Growth and Income, Income and Growth, Small
Cap*, Foundation or Tax Strategic* may invest more than 5% of its net assets in
warrants and, of this amount, no more than 2% of each Fund's net assets may be
invested in warrants that are listed on neither the New York nor the American
Stock Exchange.
Utility* and Value* will not invest more than 5% of their net assets in
warrants, including those acquired in units or attached to other securities. For
purposes of this restriction, warrants acquired by the Funds in units or
attached to securities may be deemed to be without value.
10. OWNERSHIP BY TRUSTEES/OFFICERS
None of American Retirement, Balanced*, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Income and Growth, Utility* or Value* may purchase
or retain the securities of any issuer if (i) one or more officers or Trustees
of a Fund or its investment adviser individually owns or would own, directly or
beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in
the aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.
Portfolio securities of any Fund may not be purchased from or sold or
loaned to its adviser or any affiliate thereof, or any of their directors,
officers or employees.
11. SHORT SALES
Neither American Retirement nor Foundation may make short sales of
securities unless, at the time of each such sale and thereafter while a short
position exists, each Fund owns the securities sold or securities convertible
into or carrying rights to acquire such securities.
None of Growth and Income, Tax Strategic* and Income and Growth may
make short sales of securities unless, at the time of each such sale and
thereafter while a short position exists, each Fund owns an equal amount of
securities of the same issue or owns securities which, without payment by the
Fund of any consideration, are convertible into, or are exchangeable for, an
equal amount of securities of the same issue.
Small Cap,* may not make short sales of securities unless, at the time
of each such sale and thereafter while a short position exists, each Fund owns
an equal amount of securities of the same issue or owns securities which,
without payment by the Fund of any consideration, are convertible into, or are
exchangeable for, an equal amount of securities of the same issue (and provided
that transactions in futures contracts and options are not deemed to constitute
selling securities short).
Neither Balanced nor Total Return will make short sales of securities
or maintain a short position, unless at all times when a short position is open
it owns an equal amount of such securities or of securities which, without
payment of any further consideration are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the securities sold
short. With respect to Balanced, the use of short sales will allow the Fund to
retain certain bonds in its portfolio longer than it would without such sales.
To the extent that the Fund receives the current income produced by such bonds
for a longer period than it might otherwise, the Fund's investment objective is
furthered.
Utility and Value will not sell any securities short.
12. LENDING OF FUNDS AND SECURITIES
Neither Small Cap nor Tax Strategic may lend its funds to other
persons, except through the purchase of a portion of an issue of debt securities
publicly distributed or the entering into of repurchase agreements.
None of American Retirement, Foundation, Growth and Income and Income and
Growth may lend its funds to other persons, except through the purchase of a
portion of an issue of debt securities publicly distributed.
None of Foundation, Small Cap or Tax Strategic, may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the current market value of the loaned securities,
including accrued interest, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's total assets.
Neither American Retirement or Growth and Income may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the value of the loaned securities (100% of the
current market value for American Retirement), provided that the aggregate
amount of such loans shall not exceed 30% of the Fund's net assets.
Income and Growth may not lend its portfolio securities, unless the
borrower is a broker, dealer or financial institution that pledges and maintains
collateral with the Fund consisting of cash, letters of credit or securities
issued or guaranteed by the U.S. government having a value at all times not less
than 100% of the current market value of the loaned securities (100% of the
value of the loaned securities for Income and Growth), including accrued
interest, provided that the aggregate amount of such loans shall not exceed 30%
of the Fund's net assets.
Balanced will not lend any of its assets except portfolio securities
in accordance with its investment objective, policies and limitations.
Utility will not lend any of its assets, except portfolio securities up
to 15% of the value of its total assets. This does not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's investment
objectives and policies or the Declaration of Trust governing the Fund.
Value will not lend any of its assets except that it may purchase or
hold corporate or government bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, repurchase agreements or
other transactions which are permitted by the Fund's investment objectives and
policies or the Declaration of Trust by which the Fund is governed or lend
portfolio securities valued at not more than 5% of its total assets to
broker-dealers.
Total Return will not make loans, except that the Fund may purchase or
hold debt securities consistent with its investment objective, lend portfolio
securities valued at not more than 15% of its total assets to broker-dealers and
enter into repurchase agreements.
13. COMMODITIES
Tax Strategic may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.
Small Cap may not purchase, sell or invest in physical commodities unless
acquired as a result of ownership of securities or other instruments (but this
shall not prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities).
None of American Retirement, Foundation, Growth and Income, Income and
Growth may purchase, sell or invest in commodities or commodity contracts.
None of Balanced, Utility, Value or Total Return will purchase or sell
commodities or commodity contracts; however, each Fund may enter into futures
contracts on financial instruments or currency and sell or buy options on such
contracts.
14. REAL ESTATE
Small Cap may not purchase or invest in real estate or interests in
real estate (but this shall not prevent the Fund from investing in marketable
securities issued by companies such as real estate investment trusts which deal
in real estate or interests therein).
None of American Retirement, Foundation, Growth and Income, Tax
Strategic or Income and Growth may purchase, sell or invest in real estate or
interests in real estate, except that (i) each Fund may purchase, sell or invest
in marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts, and (ii) Tax Strategic may
purchase, sell or invest in municipal securities or other debt securities
secured by real estate or interests therein.
None of Balanced, Utility or Value will buy or sell real estate
although each Fund may invest in securities of companies whose business involves
the purchase or sale of real estate or in securities which are secured by real
estate or interests in real estate. Neither Utility nor Value will invest in
limited partnership interests in real estate.
Total Return will not purchase or sell real estate, except that it may
purchase and sell securities secured by real estate and securities of companies
which invest in real estate.
15. BORROWING, SENIOR SECURITIES, REPURCHASE AGREEMENTS AND REVERSE
REPURCHASE AGREEMENTS
None of American Retirement, Foundation or Income and Growth may borrow
money except from banks as a temporary measure to facilitate redemption requests
which might otherwise require the untimely disposition of portfolio investments
and for extraordinary or emergency purposes (and, with respect to American
Retirement only, for leverage), provided that the aggregate amount of such
borrowings shall not exceed 5% of the value of the Fund's total net assets (5%
of total assets for American Retirement and Foundation) at the time of any such
borrowing, or mortgage, pledge or hypothecate its assets, except in an amount
sufficient to secure any such borrowing. Neither American Retirement nor
Foundation may issue senior securities, except as permitted by the Investment
Company Act of 1940. Neither Foundation nor American Retirement may enter into
repurchase agreements or reverse repurchase agreements.
Neither Small Cap nor Tax Strategic may borrow money, issue senior
securities or enter into reverse repurchase agreements, except for temporary or
emergency purposes, and not for leveraging, and then in amounts not in excess of
10% of the value of each Fund's total assets at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of each Fund's total assets at the time of such
borrowing, provided that each of Small Cap, Tax Strategic will not purchase any
securities at any time when borrowings, including reverse repurchase agreements,
exceed 5% of the value of its total assets. Neither Fund will enter into reverse
repurchase agreements exceeding 5% of the value of its total assets.
Growth and Income may not borrow money except from banks as a temporary
measure for extraordinary or emergency purposes, provided that the aggregate
amount of such borrowings shall not exceed 5% of the value of the Fund's total
assets at the time of such borrowing; or mortgage, pledge or hypothecate its
assets, except in an amount not exceeding 15% of its assets taken at cost to
secure such borrowing. Growth and Income may not issue senior securities, as
defined in the Investment Company Act of 1940, except that this restriction
shall not be deemed to prohibit the Fund from (i) making any permitted
borrowings, mortgages or pledges, (ii) lending its portfolio securities, or
(iii) entering into permitted repurchase transactions.
Balanced and Utility will not issue senior securities except that each
Fund may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts borrowed
and except to the extent a Fund may enter into futures contracts. The Funds will
not borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary or emergency measure to
facilitate management of their portfolios by enabling them to, for example, meet
redemption requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. Balanced will not purchase any securities while
any borrowings are outstanding. Utility will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. Neither Balanced
nor Utility will mortgage, pledge or hypothecate any assets except to secure
permitted borrowings. In these cases, Balanced and Utility may pledge assets
having a market value not exceeding the lesser of the dollar amounts borrowed or
15% of the value of total assets at the time of borrowing. Margin deposits for
the purchase and sale of financial futures contracts and related options and
segregation or collateral arrangements made in connection with options
activities are not deemed to be a pledge.
Value will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary measure
for extraordinary or emergency purposes and then only in amounts not in excess
of 10% of the value of its total assets; provided that while borrowings exceed
5% of the Fund's total assets, any such borrowings will be repaid before
additional investments are made. The Fund will not purchase any securities while
borrowings in excess of 5% of the value of its total assets are outstanding. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes. The Fund will not mortgage, pledge or hypothecate
any assets except to secure permitted borrowings. In these cases, the Fund may
pledge assets having a market value not exceeding the lesser of the dollar
amounts borrowed or 10% of the value of total assets at the time of borrowing.
Margin deposits for the purchase and sale of financial futures contracts and
related options and segregation or collateral arrangements made in connection
with options activities are not deemed to be a pledge.
Total Return will not borrow money or enter into reverse repurchase
agreements, except that the Fund may enter into reverse repurchase agreements or
borrow money from banks for temporary or emergency purposes in aggregate amounts
up to one-third of the value of the Fund's net assets; provided that while
borrowings from banks (not including reverse repurchase agreements) exceed 5% of
the Fund's net assets, any such borrowings will be repaid before additional
investments are made. The Fund will not pledge more than 15% of its net assets
to secure indebtedness; the purchase or sale of securities on a "when issued"
basis or collateral arrangement with respect to the writing of options on
securities are not deemed to be a pledge of assets. The Fund will not issue
senior securities; the purchase or sale of securities on a "when issued" basis
or collateral arrangement with respect to the writing of options on securities
are not deemed to be the issuance of a senior security.
16. JOINT TRADING
None of American Retirement, Foundation, Growth and Income, Small Cap,*
Tax Strategic,* or Income and Growth may participate on a joint or joint and
several basis in any trading account in any securities. (The "bunching of orders
or the purchase or sale of portfolio securities with its investment adviser or
accounts under its management to reduce brokerage commissions, to average prices
among them or to facilitate such transactions is not considered a trading
account in securities for purposes of this restriction).
17. OPTIONS
Foundation and Tax Strategic* may not write, purchase or sell put or
call options, or combinations thereof.
Neither Growth and Income nor Income and Growth may write, purchase or
sell put or call options, or combinations thereof, except that each Fund is
authorized to write covered call options on portfolio securities and to purchase
call options in closing purchase transactions, provided that (i) such options
are listed on a national securities exchange, (ii) the aggregate market value of
the underlying securities does not exceed 25% of the Fund's net assets, taken at
current market value on the date of any such writing, and (iii) the Fund retains
the underlying securities for so long as call options written against them make
the shares subject to transfer upon the exercise of any options.
American Retirement may not write, purchase or sell put or call
options, or combinations thereof, except that the Fund is authorized (i) to
write call options traded on a national securities exchange against no more than
15% of the value of the equity securities (including securities convertible into
equity securities) held in its portfolio, provided that the Fund owns the
optioned securities or securities convertible into or carrying rights to acquire
the optioned securities and (ii) to purchase call options in closing purchase
transactions.
Utility* will not purchase put options on securities unless the
securities are held in the Fund's portfolio and not more than 5% of the Fund's
total assets would be invested in premiums on open put options. Utility* will
not write call options on securities unless securities are held in the Fund's
portfolio or unless the Fund is entitled to them in deliverable form without
further payment or after segregating cash in the amount of any further payment.
18. INVESTMENT IN EQUITY SECURITIES
American Retirement may not invest more than 75% of the value of its
total assets in equity securities (including securities convertible into equity
securities).
19. INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Balanced*, Utility and Value will purchase securities of investment
companies only in open-market transactions involving customary broker's
commissions. However, these limitations are not applicable if the securities are
acquired in a merger, consolidation or acquisition of assets. It should be noted
that investment companies incur certain expenses such as management fees, and,
therefore, any investment by a Fund in shares of another investment company
would be subject to such duplicate expenses.
Total Return may not purchase securities of other investment companies,
except as part of a merger, consolidation, purchase or assets or similar
transaction.
Each other Fund may purchase the securities of other investment
companies, except to the extent such purchases are not permitted by applicable
law.
20. RESTRICTED SECURITIES
Balanced and Value will not invest more than 10% of their net assets in
securities subject to restrictions on resale under the Securities Act of 1933
(except for, in the case of Balanced, certain restricted securities which meet
criteria for liquidity established by the Trustees).
Utility* will not invest more than 10% of the value of its net assets
in securities subject to restrictions on resale under the Securities Act of
1933, except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees.
- --------------------------------------------------------------------------------
NON-FUNDAMENTAL OPERATING POLICIES
- --------------------------------------------------------------------------------
Certain Funds have adopted additional non-fundamental operating
policies. Operating policies may be changed by the Board of Trustees without a
shareholder vote.
1. FUTURES AND OPTIONS TRANSACTIONS
Small Cap will not: (i) sell futures contracts, purchase put options or
write call options if, as a result, more than 30% of the Fund's total assets
would be hedged with futures and options under normal conditions; (ii) purchase
futures contracts or write put options if, as a result, the Fund's total
obligations upon settlement or exercise of purchased futures contracts and
written put options would exceed 30% of its total assets; or (iii) purchase call
options if, as a result, the current value of option premiums for options
purchased by the Fund would exceed 5% of the Fund's total assets. These
limitations do not apply to options attached to, or acquired or traded together
with their underlying securities, and do not apply to securities that
incorporate features similar to options.
2. ILLIQUID SECURITIES
None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Income and Growth may invest more than 15% of its net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements which have a maturity of longer than seven days,
but excluding securities eligible for resale under Rule 144A of the Securities
Act of 1933, as amended, which the Trustees have determined to be liquid.
Balanced and Utility will not invest more than 10% (in the case of
Balanced) or 15% (in the case of Utility) of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain securities determined by the Trustees
not to be liquid and, in the case of Utility, in non-negotiable time deposits.
Except with respect to borrowing money (and with respect to Total
Return, including borrowing money), if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
- --------------------------------------------------------------------------------
CERTAIN RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
There can be no assurance that a Fund will achieve its investment
objective(s) and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objectives and Policies"
in each Fund's Prospectus.
In addition, the ability of Tax Strategic to achieve its investment
objective is dependent on the continuing ability of the issuers of Municipal
Securities in which the Fund invests -- and of banks issuing letters of credit
backing such securities -- to meet their obligations with respect to the payment
of interest and principal when due. The ratings of Moody's Investors Service,
Standard & Poor's Ratings Service, a division of McGraw Hill Companies, Inc.,
and other nationally recognized rating organizations represent their opinions as
to the quality of Municipal Securities which they undertake to rate. Ratings are
not absolute standards of quality; consequently, Municipal Securities with the
same maturity, coupon, and rating may have different yields. There are
variations in Municipal Securities, both within a particular classification and
between classifications, resulting from numerous factors.
Unlike other types of investments, Municipal Securities have
traditionally not been subject to regulation by, or registration with, the SEC,
although there have been proposals which would provide for regulation in the
future.
The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in the rights of
holders of their obligations. In addition, there have been lawsuits challenging
the issuance of pollution control revenue bonds or the validity of their
issuance under state or federal law which could ultimately affect the validity
of those Municipal Securities or the tax-free nature of the interest thereon.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Evergreen Keystone Funds consist of seventy-three mutual funds. Each
mutual fund is, or is a series of, a registered, open-end management company.
The Trustees and executive officers of each mutual fund, their ages,
addresses and principal occupations during the past five years are set forth
below:
- --------------------------------------------------------------------------------
TRUSTEES
- --------------------------------------------------------------------------------
JAMES S. HOWELL (72), 4124 Crossgate Road, Charlotte, NC-Chairman of the
Evergreen Keystone group of mutual funds and Trustee. Retired Vice President of
Lance Inc. (food manufacturing); Chairman of the Distribution Comm. Foundation
for the Carolinas from 1989 to 1993.
RUSSELL A. SALTON, III, M.D. (49), 205 Regency Executive Park, Charlotte,
NC -Trustee. Medical Director, U.S. Healthcare of Charlotte, North Carolina
since 1996; President, Primary Physician Care from 1990 to 1996.
MICHAEL S. SCOFIELD (53), 212 S. Tryon Street Suite 980, Charlotte,
NC-Trustee. Attorney, Law Offices of Michael S. Scofield since 1969.
Messrs. Howell, Salton and Scofield are Trustees of all seventy-three
investment companies.
GERALD M. MCDONNELL (57), 821 Regency Drive, Charlotte, NC -Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
THOMAS L. McVERRY (58), 4419 Parkview Drive, Charlotte, NC-Trustee.
Director of Carolina Cooperative Federal Credit Union since 1990 and Rexham
Corporation from 1988 to 1990; Vice President of Rexham Industries, Inc.
(diversified manufacturer) from 1989 to 1990; Vice President-Finance and
Resources, Rexham Corporation from 1979 to 1990.
WILLIAM WALT PETTIT (41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NCTrustee. Partner in the law firm Holcomb and Pettit, P.A.
since
1990.
Messrs. McDonnell, McVerry and Pettit are Trustees of forty-three of the
investment companies (excluded are those established within the Evergreen
Variable Trust).
LAURENCE B. ASHKIN (68), 180 East Pearson Street, Chicago, IL- Trustee.
Real estate developer and construction consultant since 1980; President of
Centrum Equities since 1987 and Centrum Properties, Inc. since 1980.
FOSTER BAM (70), Greenwich Plaza, Greenwich, CT- Trustee. Partner in the
law firm of Cummings and Lockwood since 1968.
Messrs. Ashkin and Bam are Trustees of forty-two of the investment
companies (excluded are those established within the Evergreen Variable Trust
and Evergreen Investment Trust).
FREDERICK AMLING (69) Trustee. Professor, Finance Department, George
Washington University; President, Amling & Company (investment advice); Member,
Board of Advisers, Credito Emilano (banking); and former Economics and Financial
Consultant, Riggs National Bank.
CHARLES A. AUSTIN III (61) Trustee. Investment Counselor to Appleton
Partners, Inc.; former Managing Director, Seaward Management Corporation
(investment advice); and former Director, Executive Vice President and
Treasurer, State Street Research & Management Company (investment advice).
GEORGE S. BISSELL* (67) Chairman of the Keystone group of mutual funds, and
Trustee. Chairman of the Board and Trustee of Anatolia College; Trustee of
University Hospital (and Chairman of its Investment Committee); former Director
and Chairman of the Board of Hartwell Keystone; and former Chairman of the Board
and Chief Executive Officer of Keystone Investments, Inc..
EDWIN D. CAMPBELL (69) Trustee. Director and former Executive Vice President,
National Alliance of Business; former Vice President, Educational Testing
Services; former Dean, School of Business, Adelphi University; and former
Executive Director, Coalition of Essential Schools, Brown University.
CHARLES F. CHAPIN (67) Trustee. Former Group Vice President, Textron Corp.;
and former Director, Peoples Bank (Charlotte, NC).
K. DUN GIFFORD (57) Trustee. Chairman of the Board, Director, and Executive
Vice President, The London Harness Company; Managing Partner, Roscommon Capital
Corp.; Trustee, Cambridge College; Chairman Emeritus and Director, American
Institute of Food and Wine; Chief Executive Officer, Gifford Gifts of Fine
Foods; Chairman, Gifford, Drescher & Associates (environmental consulting);
President, Oldways Preservation and Exchange Trust (education); and former
Director, Keystone Investments, Inc. and Keystone Investment Management Company.
LEROY KEITH, JR. (57) Trustee. Director of Phoenix Total Return Fund and
Equifax, Inc.; Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio Fund, and
The Phoenix Big Edge Series Fund; and former President, Morehouse College.
F. RAY KEYSER, JR. (69) Trustee and Advisor to the Boards of Trustees of
the Evergreen group of mutual funds. Counsel, Keyser, Crowley & Meub, P.C.;
Member, Governor's (VT) Council of Economic Advisers; Chairman of the Board and
Director, Central Vermont Public Service Corporation and Hitchcock Clinic;
Director, Vermont Yankee Nuclear Power Corporation, Vermont Electric Power
Company, Inc., Grand Trunk Corporation, Central Vermont Railway, Inc., S.K.I.
Ltd., Sherburne Corporation, Union Mutual Fire Insurance Company, New England
Guaranty Insurance Company, Inc., and the Investment Company Institute; former
Governor of Vermont.
DAVID M. RICHARDSON (55) Trustee. Executive Vice President, DHR
International, Inc. (executive recruitment); former Senior Vice President,
Boyden International Inc. (executive recruitment); and Director, Commerce and
Industry Association of New Jersey, 411 International, Inc., and J&M Cumming
Paper Co.
RICHARD J. SHIMA (57) Trustee and Advisor to the Boards of Trustees of the
Evergreen group of mutual funds. Chairman, Environmental Warranty, Inc., and
Consultant, Drake Beam Morin, Inc. (executive outplacement); Director of
Connecticut Natural Gas Corporation, Trust Company of Connecticut, Hartford
Hospital, Old State House Association, and Enhance Financial Services, Inc.;
Chairman, Board of Trustees, Hartford Graduate Center; Trustee, Kingswood-
Oxford School and Greater Hartford YMCA; former Director, Executive Vice
President, and Vice Chairman of The Travelers Corporation.
ANDREW J. SIMONS (57) Trustee. Partner, Farrell, Fritz, Caemmerer, Cleary,
Barnosky & Armentano, P.C.; former President, Nassau County Bar Association;
former Associate Dean and Professor of Law, St. John's University School of Law.
Messrs. Amling, Austin, Bissell, Campbell, Chapin, Gifford, Keith, Keyser,
Richardson, Shima and Simons are Trustees or Directors of the thirty-one funds
in the Keystone group of mutual funds. Their addresses are 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
ROBERT J. JEFFRIES (74), 2118 New Bedford Drive, Sun City Center, Fl
Trustee Emeritus. Corporate consultant since 1967.
Mr. Jeffries has been serving as a Trustee Emeritus of eleven of the investment
companies since January 1, 1996 (excluded are Evergreen Variable Trust,
Evergreen Investment Trust, as well as the Keystone group of mutual funds).
EXECUTIVE OFFICERS
JOHN J. PILEGGI (37), 230 Park Avenue, Suite 910, New York, NY- President
and Treasurer. Consultant to BISYS Fund Services since 1996. Senior Managing
Director, Furman Selz LLC since 1992, Managing Director from 1984 to 1992.
GEORGE O. MARTINEZ (37), 3435 Stelzer Road, Columbus, OH-Secretary. Senior Vice
President/Director of Administration and Regulatory Services, BISYS Fund
Services since April 1995. Vice President/Assistant General Counsel, Alliance
Capital Management from 1988 to 1995.
- --------
* Messrs. Pettit and Bissell may each be deemed to be an "interested person"
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act").
The officers of the Trusts are all officers and/or employees of The BISYS Group,
Inc. ("BISYS"), except for Mr. Pileggi, who is a consultant to BISYS. BISYS is
an affiliate of Evergreen Keystone Distributor, Inc., the distributor of each
Class of shares of each Fund.
The Funds do not pay any direct remuneration to any officer or Trustee who
is an "affiliated person" of either First Union National Bank, Evergreen Asset
Management Corp., Keystone Investment Management Company or their affiliates.
See "Investment Advisers". Currently, none of the Trustees is an "affiliated
person" as defined in the 1940 Act. The Trusts pay each Trustee who is not an
"affiliated person" an annual retainer and a fee per meeting attended, plus
expenses, as follows:
NAME OF TRUST/FUND ANNUAL RETAINER MEETING FEE
Income and Growth $ 5,500 $ 300
Growth and Income 500 100
The Evergreen American
Retirement Trust 1,000 100
American Retirement
Small Cap
Evergreen Foundation Trust
Foundation 500 100
Tax Strategic 100
Evergreen Investment Trust* 15,500 2,000
Balanced
Utility
Value
Keystone Total Return**
* The annual retainer and meeting fee paid by Evergreen Investment Trust to each
Trustee are allocated among its fourteen series based on assets.
** See Item No. 7 below.
In addition:
(1) The Chairman of the Board of the Evergreen group of mutual funds is paid an
annual retainer of $5,000, and the Chairman of the Audit Committee is paid an
annual retainer of $2,000. These retainers are allocated among all the funds in
the Evergreen group of mutual funds, based upon assets.
(2) Each member of the Audit Committee of the Evergreen group of mutual funds is
paid an annual retainer of $500.
(3) Each non-affiliated Trustee of the Evergreen group of mutual funds is paid a
fee of $500 for each special telephonic meeting in which he participates,
regardless of the number of Funds for which the meeting is called.
(4) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $300 for each special telephonic meeting in which he participates,
regardless of the number of Funds for which the meeting is called.
(5) Each non-affiliated Trustee of the Evergreen group of mutual funds is paid a
fee of $250 for each special Committee of the Board telephone conference call
meeting of one or more Funds in which he participates.
(6) The members of the Advisory Committee to the Boards of Trustees of the
Evergreen group of mutual funds are paid an annual retainer of $17,500 and a fee
of $2,200 for each meeting of the Boards of Directors or Trustees of the
Evergreen group of mutual funds attended.
(7) Each non-affiliated Trustee of the Keystone group of mutual funds is paid an
annual retainer of $30,000, and a fee of $1,200 for each meeting attended, which
fees are charged to the Funds as follows:
Annual Meeting
Retainer Fee
Keystone Global Opportunities Fund $ 500 $ 20
Keystone Global Resources and Development Fund $ 2,000 $ 80
Keystone Omega Fund $ 2,000 $ 80
Keystone Small Company Growth Fund II $ 500 $ 20
Keystone Strategic Income Fund $ 2,000 $ 80
Keystone Tax Free Income Fund $ 500 $ 20
Keystone Quality Bond Fund (B-1) $ 2,000 $ 80
Keystone Diversified Bond Fund (B-2) $ 2,500 $ 100
Keystone High Income Bond Fund (B-4) $ 2,500 $ 100
Keystone Balanced Fund (K-1) $ 3,000 $ 120
Keystone Strategic Growth Fund (K-2) $ 2,000 $ 80
Keystone Growth and Income Fund (S-1) $ 500 $ 20
Keystone Mid-Cap Growth Fund (S-3) $ 500 $ 20
Keystone Small Company Growth Fund (S-4) $ 3,000 $ 120
Keystone International Fund Inc. $ 500 $ 20
Keystone Precious Metals Holdings, Inc. $ 500 $ 20
Keystone Tax Free Fund $ 5,500 $ 220
(8) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $600 for attendance at each Committee meeting held on the same day as a
regular meeting.
(9) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $1,200 for attendance at each Committee meeting held on a non-meeting
day.
(10) Any individual who has been appointed as a Trustee Emeritus of one or more
funds in the Evergreen group of mutual funds is paid one-half of the annual
retainer fees that are payable to regular Trustees, and one-half of the meeting
fees for each meeting attended.
Set forth below for each of the Trustees is the aggregate compensation
(and expenses) paid to such Trustees by each Trust for the fiscal year ended
March 31, 1997 (fiscal year ended November 30, 1996 for Total Return and January
31, 1997 for Income and Growth).
Aggregate Compensation From Each Trust
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name of Evergreen Evergreen Evergreen Evergreen Evergreen Keystone
Trustee Income Growth American Foundation Investment Fund for
and and Retirement Trust Trust Total
Growth Income Trust Return
Fund Fund
L.B.Ashkin $7,249 $1,108 $2,016 $1,764 $ 0 $0
F. Bam 6,949 1,021 1,816 1,564 0 0
R.J. Jeffries 3,239 409 800 550 0 0
J.S. Howell 7,410 1,187 2,032 2,034 26,007 0
Name of Evergreen Evergreen Evergreen Evergreen Evergreen Keystone
Trustee Income Growth American Foundation Investment Fund for
and and Retirement Trust Trust Total
Growth Income Trust Return
Fund Fund
G.M. 6,834 966 1,809 1,446 22,355 0
McDonnell
T.L. McVerry 7,238 1,111 2,017 1,790 24,902 0
W.W. Pettit 7,071 1,029 2,003 1,548 23,504 0
R.A. Salton 7,071 1,029 2,003 1,548 23,504 0
M.S. Scofield 7,071 1,029 2,003 1,548 23,504 0
F. Amling 0 0 0 0 0 0
C.A. Austin 0 0 0 0 0 0
G.S. Bissell 0 0 0 0 0 0
E.D. Campbell 0 0 0 0 0 0
C.F. Chapin 0 0 0 0 0 0
K.D. Gifford 0 0 0 0 0 0
L. Keith 0 0 0 0 0 0
F.R. Keyser 0 0 47 0 0 0
D.M. 0 0 0 0 0 0
Richardson
R.J. Shima 0 0 47 0 0 0
A.J. Simons 0 0 0 0 0 0
-------------------------------------
</TABLE>
Total Compensation From Trusts
and Fund Complex Paid To Trustees
J.S. Howell $77,400
R.A. Salton 71,200
M.S. Scofield 71,200
As of the date of this Statement of Additional Information, the officers
and Trustees of the Trusts owned as a group less than 1% of the outstanding
Class A, Class B, Class C or Class Y shares of any of the Funds.
Set forth below is information with respect to each person, who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of
each Fund's total outstanding shares and their aggregate ownership of the Fund's
total outstanding shares as of June 1, 1997.
<TABLE>
<CAPTION>
Name of % of
Name and Address Fund/Class No. of Shares Class
- ---------------- ---------- ------------- ------------
<S> <C> <C> <C>
MLPF&S for the sole benefit Balanced/C 7,441 24.29%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
A.G. Edwards & Sons Inc C/F Balanced/C 3,982 13.00%
Lottie Helen O'Leary
IRA Account
1139 Via Doble
Concord, CA 94521-4713
Fubs & Co. Febo Balanced/C 3,273 10.68%
FUNB NC F B O Goldston S. Bldg.
Supply Loan Acct.
Attn: Frank Pierce Loan Ofcr
PO Box 3008, 6th Floor
Raleigh, NC 27602-3008
Fubs & Co. Febo Balanced/C 2,194 7.16%
First Union National Bank-FL F/B/O
Leroy Selby, Jr. Loan Account
Attn: Carol Moening
Hwy 50 Orrice
Titusville, FL 32780
First Union National Bank Balanced/Y 30,977,338 54.21%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank Balanced/Y 26,083,390 45.64%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
2
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union Natl. Bank-FL C/F Income and 2,381 6.12%
Fred W. Cookson IRA Growth/C
6704 Willow Lane Braden Woods
Bradenton, FL 34202-9632
Fubs & Co. Febo Income and 2,570 6.61%
Last Stop Inc. Growth/C
8661 Colesville Rd #D149
Silver Spring, MD 20910-3933
MLPF&S for the sole benefit Growth and 172,906 22.97%
of its customers Income/C
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
First Union National Bank/EB/INT Growth and 4,296,089 19.69%
Cash Account Income/Y
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 29202-1911
First Union National Bank/EB/INT Growth and 11,712,074 53.69%
Reinvest Account Income/Y
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 29202-1911
First Union Natl Bank-VA C/F American Retirement/C 7,467 6.11%
Vincent A. Megna IRA
7017 Capitol View Dr.
McLean, VA 22101-2616
Charles Schwab & Co. Inc. American Retirement/Y 487,073 18.44%
Special Custody Account for the
Exclusive Benefit of Customers
Reinvest Account Mut Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
First Union National Bank/EB/INT American Retirement/Y 224,830 8.51%
Reinvest Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 29202-1911
MLPF&S for the sole benefit Small Cap/A 10,025 9.06%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Small Cap/A 6,037 5.46%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Small Cap/B 17,778 7.95%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Small Cap/C 11,918 5.33%
of its customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484
Nola Maddox Falcone Small Cap/Y 133,937 5.68%
70 Drake Road
Scarsdale, NY 10583-6447
Stephen A. Lieber Small Cap/Y 123,357 5.23%
1210 Greacen Point Rd.
Mamaroneck, NY 10543-4693
First Union National Bank/EB/INT Small Cap/Y 990,500 42.00%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 28202-1911
First Union National Bank/EB/INT Small Cap/Y 406,529 17.24%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 28202-1911
Citibank NA Small Cap/Y 375,596 15.93%
Delta Airlines Master Trust
308235
Joe Villella Citicorp Services
1410 N. Westshore Blvd. F15
Tampa, FL 33607-4519
Charles Schwab & Co. Inc. Foundation/A 1,065,330 7.71%
Special Custody Account For the
Exclusive Benefit of Customers
Reinvest Account Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
MLPF&S for the sole benefit Foundation/C 389,470 22.97%
of its customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484
Charles Schwab & Co. Inc. Foundation/Y 3,409,898 6.86%
Special Custody Account for
the Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104-4122
First Union National Bank/EB/INT Foundation/Y 4,589,976 9.23%
Cash Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 29202-1911
First Union National Bank/EB/INT Foundation/Y 16,323,890 32.84%
Reinvest Account
Attn: Trust Operations Fund Group
401 S. Tryon Street
3rd Floor CMG 1151
Charlotte, NC 29202-1911
Mac & Co. Foundation/Y 6,561,937 13.20%
Aetna Retirement Services
Central Valuation Unit
Attn: Mutual Funds Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
Fubs & Co. Febo Tax Strategic /A 78,331 5.35%
Ray D. Russenberger
PO Box 12063
Pensacola, FL 32590-2063
MLPF&S for the sole benefit Tax Strategic /C 150,045 40.70%
of its customers
Attn: Fund Administration
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484
Fubs & Co. Febo Tax Strategic /C 21,749 5.90%
Hossein Golabachi and
Margot R. Golabachi
4848 Old Belair Lane
Grovetown, GA 30813-9729
Fubs & Co. Febo Tax Strategic /C 46,040 12.49%
Brenda Dykgraaf
9710 Wildoak Drive
Windermere, FL 34786-8335
Nola Maddox Falcone Tax Strategic /Y 102,130 9.01%
70 Drake Rd.
Scarsdale, NY 10583-6447
Constance E. Lieber Tax Strategic /Y 59,814 5.28%
1210 Greacen Point Rd
Mamaroneck, NY 10543-4613
Stephen A. Lieber Tax Strategic/Y 518,329 45.72%
1210 Greacen Point Rd
Mamaroneck, NY 10543-4613
Fubs & Co. Febo Utility/C 6,315 19.31%
Elsie B. Strom
Lewis F. Strom
906 Wells Street
Bennettsville, SC 29512-3240
Fubs & Co. Febo Utility/C 3,816 11.67%
Laura Alyce Hulbert
Ronald F. Hulbert
7900 Latchington Court
Charlotte, NC 28227-3190
Fubs & Co. Febo Utility/C 1,772 5.42%
Evelyn L. Smith
Creg Smith
3294 Myrtle Street
Hapeville, GA 30354-1418
Fubs & Co. Febo Utility/C 2,056 6.29%
Max Ray and
Jeralyne Ray
Route 2 Box 111
Greenmountain, NC 28740-9618
Fubs & Co. Febo Utility/C 2,156 6.59%
Thomas McKinney and
Lottie McKinney
170 Scott Blvd.
Tyrone, GA 30290-9767
Khalid Iqbal C/F Utility/Y 7,156 5.31%
Fatima Khalid Iqbal
Unif Gift Min Act KY
401 Bogle St.
Somerset, KY 42503-2870
First Union National Bank Utility/Y 47,610 35.33%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank Utility/Y 72,869% 54.08%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank-FL C/F Value/C 16,393 16.87%
Irving Decter IRA
418 Mariner Dr.
Jupiter, FL 33447
FUBS & Co. FEBO Value/C 6,253 6.44%
Clara Caudill
812 N. Ocean Blvd. #402
Pompano Beach, FL 33062-4014
First Union National Bank Value/Y 786,882 33.24%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
First Union National Bank Value/Y 112,241 65.51%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0002
MLPF&S for the sole benefit Key Tot Return/A 136,080 5.91%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Key Tot Return/B 438,214 10.14%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
SSN/TIN: 866168037 Key Tot Return/C 134,649 12.89%
Lavedna Ellingson
Douglas Ellingson TTEES
Lavedna Ellingson Marital Trust
U/A DTD 5-1-86
8510 McClintock
Tempe, AZ 85284-2527
MLPF&S for the sole benefit Key Tot Return/C 129,186 12.36%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
MLPF&S for the sole benefit Key Tot Return/C 132,989 5.31%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
- - ---------------------------------
</TABLE>
First Union National Bank ("FUNB") and its affiliates act in various
capacities for numerous accounts. As a result of its ownership on June 1, 1997
of 50.11% the shares of Small Cap, 35.17% of Growth and Income, 83.15% of
Balanced and 63.10% of Value, FUNB may be deemed to "control" these Funds as
that term is defined in the 1940 Act.
- --------------------------------------------------------------------------------
INVESTMENT ADVISERS
(SEE ALSO "MANAGEMENT OF THE FUND" IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
The investment adviser of Income and Growth, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York ("Evergreen Asset" or the "Adviser"). Evergreen Asset
is owned by FUNB (the"Adviser") which, in turn, is a subsidiary of First Union
Corporation ("First Union"), a bank holding company headquartered in Charlotte,
North Carolina.
The investment adviser of Balanced, Utility and Value is FUNB which
provides investment advisory services through its Capital Management Group.
The investment adviser of Total Return is Keystone Investment Management
Company ("Keystone" or the "Adviser"), a Delaware corporation, with offices at
200 Berkeley Street, Boston, Massachusetts. Keystone is an indirectly owned
subsidiary of FUNB.
The Directors of Evergreen Asset are Richard K. Wagoner and Barbara I.
Colvin. The executive officers of Evergreen Asset are Stephen A. Lieber,
Chairman and Co-Chief Executive Officer, Nola Maddox Falcone, President and
Co-Chief Executive Officer, and Theodore J. Israel, Jr., Executive Vice
President. The Directors of Keystone are Donald McMullen, William M. Ennis, II
and Barbara I. Colvin. The executive officers of Keystone are Edward F. Godfrey,
Senior Vice President, Chief Financial Officer and Treasurer, and Rosemary D.
Van Antwerp, Senior Vice President, General
Counsel and Secretary.
On June 30, 1994, Evergreen Asset and Lieber & Company ("Lieber"), were
acquired by First Union through certain of its subsidiaries. Contemporaneously
with the acquisition, Income and Growth, Growth and Income, American Retirement,
Small Cap, Foundation and Tax Strategic entered into new investment advisory
agreements with Evergreen Asset and into distribution agreements with Evergreen
Keystone Distributor, Inc. (formerly known as Evergreen Funds Distributor, Inc.
(the "Distributor")), an affiliate of BISYS Fund Services. At that time,
Evergreen Asset also entered into new sub-advisory agreements with Lieber
pursuant to which Lieber provides certain services to Evergreen Asset in
connection with its duties as investment adviser. The new advisory and
sub-advisory agreements were approved by the shareholders of Income and Growth,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
at their meetings held on June 23, 1994, and became effective on June 30, 1994.
On September 6, 1996, First Union and FUNB entered into an Agreement
and Plan of Acquisition and Merger (the "Merger") with Keystone Investments,
Inc. ("Keystone Investments"), the corporate parent of Keystone, which provided,
among other things, for the merger of Keystone Investments with and into a
wholly-owned subsidiary of FUNB. The Merger was consummated on December 11,
1996. Keystone continues to provide investment advisory services to the Keystone
Family of Funds. Contemporaneously with the Merger, Total Return entered into a
new investment advisory agreement with Keystone and into a principal
underwriting agreement with the Distributor.
Under the Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registrations under the Securities Act of
1933, as amended, and the 1940 Act, printing prospectuses (for existing
shareholders) as they are updated, state qualifications, mailings, brokerage,
custodian and stock transfer charges, printing, legal and auditing expenses,
expenses of shareholder meetings and reports to shareholders. Notwithstanding
the foregoing, each Adviser will pay the costs of printing and distributing
prospectuses used for prospective shareholders.
The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:
<TABLE>
<CAPTION>
BALANCED Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
Advisory Fee $1,170,691 $4,765,912 $4,870,748 $4,621,512
========== ========== ============ =========
INCOME Year Ended Year Ended Year Ended
AND GROWTH 1/31/97 1/31/96 1/31/95
Advisory Fee $8,823,541 $9,343,195 $8,542,289
=========== ========== ==========
INCOME Year Ended Year Ended Year Ended
AND GROWTH 1/31/97 1/31/96 1/31/95
Expense $ 0 $ 53,576
Reimbursement
FOUNDATION Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/94
Advisory Fee $3,246,270 $11,140,780 $5,387,186 $2,551,768
========= ========= ========= =========
Expense
Reimbursement $ 0 $ 0 $ 11,064
========= ========= =========
SMALL CAP Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $ 63,333 $ 45,397 $29,075
Waiver ($ 63,333) ($ 45,397) ($29,075)
------------ ------------- ------------
Net Advisory Fee $ 0 $ 0 $ 0
========= ======== ========
Expense
Reimbursement $133,406 $164,584 $63,704
-------------- --------------- ------------
UTILITY Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $725,733 $456,021 $153,458
Waiver ($396,483) ($299,028) ($152,038)
-------------- -------------- --------------
Net Advisory Fee $329,300 $156,993 $ 1,420
======== ======== ========
Expense
Reimbursement $ 0 $ 51,894 $106,957
---------------- --------------- ---------------
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $5,287,338 $1,332,685 $684,891
========= ========= =======
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Expense
Reimbursement $ 5,000 $ 38,106
----------------- ----------------
AMERICAN Three Months Year ended Year Ended Year Ended
RETIREMENT Ended 3/31/97 12/31/96 12/31/95 12/31/94
Advisory Fee $255,438 $549,949 $297,242 $292,628
Waiver $ 0 ($ 24,841)
------------- --------------
Net Advisory Fee $225,438 $525,108
========
Expense
Reimbursement $ 90,000 $ 3,400 $ 76,464
------------- --------------- -------------
TAX STRATEGIC Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/94
Advisory Fee $143,945 $354,958 $140,386 $65,915
Waiver $ 0 ($ 90,551) ($96,975) ($65,915)
------------- ------------- ------------ -------------
Net Advisory Fee $143,945 $264,407 $43,411 $ 0
======= ======== ======= ========
Expense
Reimbursement $ 0 $ 11,339 $85,543 $ 3,777
------------ ----------- ------------
VALUE Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $6,950,730 $5,120,579 $3,850,673
TOTAL RETURN Year Ended Year Ended Year Ended
11/30/96 11/30/95 11/30/94
Advisory Fee $448,266 $300,290 $242,315
</TABLE>
Utility commenced operations on January 4, 1994 and, therefore, the
first year's figures set forth in the table above reflect for Utility investment
advisory fees paid for the period from commencement of operations through
December 31, 1994.
Expense Limitations
Evergreen Asset has voluntarily agreed to reimburse Small Cap to the
extent that any of the Fund's aggregate operating expenses (including the
Adviser's fee but excluding interest, taxes, brokerage commissions, Rule 12b-1
distribution fees and shareholder servicing fees and extraordinary expenses)
exceed 1.50% of its average net assets until such time as said Fund's net assets
reach $15 million.
Keystone has voluntarily agreed to limit Total Return's Class A expenses to
1.50% of the average daily net assets of Class A shares, such expense limitation
to be reevaluated on a calendar month basis and to be modified or eliminated in
the future at the discretion of Keystone.
The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignments. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder.
The Investment Advisory Agreements with respect to Income and Growth,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
were approved by each Fund's shareholders on June 23, 1994, became effective on
June 30, 1994, and were last approved by the Trustees of each Trust on June 17,
1997.
The Investment Advisory Agreement with respect to Balanced, Utility and
Value dated February 28, 1985, and amended from time to time thereafter, was
last approved by the Trustees of Evergreen Investment Trust on June 17, 1997.
The Investment Advisory Agreement with respect to Total Return was
approved by the Fund's shareholders on December 9, 1996, and became effective on
December 11, 1996.
Each Investment Advisory Agreement will continue in effect from year to
year provided that its continuance is approved annually by a vote of a majority
of the Trustees of each Trust including a majority of those Trustees who are not
parties thereto or "interested persons" (as defined in the 1940 Act) of any such
party (the "Independent Trustees"), cast in person at a meeting duly called for
the purpose of voting on such approval or a majority of the outstanding voting
shares of each Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.
Although the investment objectives of the Funds are not the same, and their
investmentdecisions are made independently of each other, they rely upon the
same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, each
Adviser attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.
Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sales transactions to be effected between each Fund and the
other registered investment companies for which Evergreen Asset, FUNB or
Keystone act as investment adviser or between the Fund and any advisory clients
of Evergreen Asset, FUNB, Keystone or Lieber. Each Fund may from time to time
engage in such transactions but only in accordance with these procedures and if
they are equitable to each participant and consistent with each participant's
investment objectives.
Prior to July 7, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the period ended July 7, 1995, and the fiscal years ended
December 31, 1994 and 1993 Balanced incurred $392,991, $779,584 and $597,752,
respectively, in administrative service costs. For the period ended July 7,
1995, and the period from January 4, 1994 (commencement of operations) to
December 31, 1994, Utility incurred $10,384 and $16,382, respectively, in
administrative service costs, all of which were voluntarily waived. For the
period ended July 7, 1995, and for the fiscal years ended December 31, 1994 and
1993, Value incurred $374,216, $649,487, and $526,836, respectively, in
administrative service costs.
Since July 8, 1995, Evergreen Asset provided administrative services to
each of the portfolios of Evergreen Investment Trust for a fee based on the
average daily net assets of each fund administered by Evergreen Asset for which
Evergreen Asset or FUNB also served as investment adviser, calculated daily and
payable monthly at the following annual rates: .050% on the first $7 billion;
.035% on the next $3 billion; .030% on the next $5 billion; .020% on the next
$10 billion; .015% on the next $5 billion; and .010% on assets in excess of $30
billion. For the period from July 8, 1995 through December 31, 1995, and the
fiscal year ended December 31, 1996 (and for the three month period ended March
31, 1997 for Balanced), Balanced, Utility and Value incurred the following
administration costs: Balanced $283,139, $459,486, and $91,488, respectively;
Utility $39,330 and $70,215, respectively; and Value $323,050 and $670,060,
respectively.
BISYS Fund Services, an affiliate of the Distributor, serves as
sub-administrator to each Fund and is entitled to receive a fee from each Fund
calculated daily and payable monthly at an annual rate based on the aggregate
average daily net assets of the mutual funds administered by EKIS for which
FUNB, Evergreen Asset, or any affiliate of First Union National Bank also serves
as investment adviser, calculated in accordance with the following schedule:
.0100% on 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 EKIS for which Evergreen Asset, FUNB
or Keystone serve as investment adviser were approximately $29 billion as of
March 31, 1997. Effective March 11, 1997, Evergreen Keystone Investment
Services, Inc. ("EKIS") began providing administrative services to each of the
portfolios of Evergreen Investment Trust at the same rates as described above.
- --------------------------------------------------------------------------------
DISTRIBUTION PLANS AND AGREEMENTS
- --------------------------------------------------------------------------------
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, Class B Class and Class C shares and are charged as
class expenses, as accrued. The distribution fees attributable to the Class B
shares and Class C shares are designed to permit an investor to purchase such
shares through broker-dealers without the assessment of a front-end sales
charge, and, in the case of Class C shares, without the assessment of a
contingent deferred sales charge after the first year following the month of
purchase, while at the same time permitting the Distributor to compensate
broker-dealers in connection with the sale of such shares. In this regard, the
purpose and function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and the Class C shares are the
same as those of the front-end sales charge and distribution fee with respect to
the Class A shares in that in each case the sales charge and/or distribution fee
provide for the financing of the distribution of the Fund's shares.
Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plans and the purposes for which such expenditures
were made to the Trustees of each Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of the disinterested
Trustees are committed to the discretion of such disinterested Trustees then in
office.
Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the SEC make payments for distribution
services to the Distributor; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.
Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of each Trust or by vote
of the holders of a majority of the outstanding voting securities of that Class
and, in either case, by a majority of the Independent Trustees of the Trust who
have no direct or indirect financial interest in the operation of the Plan or
any agreement related thereto.
The Plans permit the payment of fees to brokers and others for distribution
and shareholder-related administrative services and to broker-dealers,
depository institutions, financial intermediaries and administrators for
administrative services as to Class A, Class B and Class C shares. The Plans are
designed to (i) stimulate brokers to provide distribution and administrative
support services to each Fund and holders of Class A, Class B and Class C shares
and (ii) stimulate administrators to render administrative support services to
the Fund and holders of Class A, Class B and Class C shares. The administrative
services are provided by a representative who has knowledge of the shareholder's
particular circumstances and goals, and include, but are not limited to
providing office space, equipment, telephone facilities, and various personnel
including clerical, supervisory, and computer, as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding Class A, Class B and
Class C shares; assisting clients in changing dividend options, account
designations, and addresses; and providing such other services as the Fund
reasonably requests for its Class A, Class B and Class C shares.
In addition to the Plans, Balanced, Utility and Value have each adopted
a Shareholder Services Plan whereby shareholder servicing agents may receive
fees from the Fund for providing services which include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance, and communicating or facilitating purchases and redemptions of Class
B and Class C shares of the Fund.
In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.
All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. With respect to Balanced,
Utility, and Value, amendments to the Shareholder Services Plan require a
majority vote of the disinterested Trustees but do not require a shareholders
vote. Any Plan, Shareholder Services Plan or Distribution Agreement may be
terminated (i) by a Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
Class or by a majority vote of the disinterested Trustees, or (ii) by the
Distributor. To terminate any Distribution Agreement, any party must give the
other parties 60 days' written notice; to terminate a Plan only, the Fund need
give no notice to the Distributor. Any Distribution Agreement will terminate
automatically in the event of its assignment.
Income and Growth, Growth and Income, American Retirement, Small Cap,
Foundation, Tax Strategic and Total Return incurred the following Distribution
Plans and Shareholder Services Plan fees:
Distribution Fees:
INCOME AND GROWTH. For the fiscal period from January 3, 1995 (commencement
of class operations) through January 31, 1995, the fiscal years ended January
31, 1996 and 1997, $7, $4,915 and $18,106 on behalf of its Class A shares, $126,
$46,636 and $189,323, respectively on behalf of its Class B shares, and $7,
$1,516 and $6,382, respectively on behalf of its Class C shares.
GROWTH AND INCOME. For the fiscal period from January 3, 1995 (commencement
of class operations) through December 31, 1995 and the fiscal year ended
December 31, 1996, $22,055 and $122,222, respectively, on behalf of its Class A
shares, $159,114 and $934,314, respectively, on behalf of its Class B shares,
and $6,902 and $36,055, respectively, on behalf of its Class C shares.
AMERICAN RETIREMENT. For the fiscal period from January 3, 1995
(commencement of class operations) through December 31, 1995, the fiscal year
ended December 31, 1996 and the three month period ended March 31, 1997, $659,
$14,426 and $7,950, respectively, on behalf of its Class A shares; $9,137,
$199,829 and $124,370, respectively, on behalf of its Class B shares; and $187,
$5,713 and $2,995, respectively, on behalf of its Class C shares.
SMALL CAP. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, $340 and $618, respectively, on behalf of its Class A shares, $1,298
and $3,199, respectively, on behalf of its Class B shares, and $111 and $267,
respectively, on behalf of its Class C shares.
FOUNDATION. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997, $116,677, $414,289 and
$135,502, respectively on behalf of its Class A shares; $972,541, $3,487,899 and
$1,113,659, respectively, on behalf of its Class B shares; and $37,823, $152,488
and $51,839, respectively, on behalf of its Class C shares.
TAX STRATEGIC. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997, $2,582, $16,426 and
$8,004, respectively, on behalf of its Class A shares; $21,725, $131,282 and
$62,195, respectively, on behalf of its Class B shares; and $1,292, $16,493 and
$8,824, respectively, on behalf of its Class C shares.
TOTAL RETURN. For the fiscal years ended November 30, 1994, 1995 and 1996,
$44,889, $101,222 and $195,178, respectively, on behalf of its Class B shares,
and $36,580, $60,201 and $84,812, respectively, on behalf of its Class C shares.
Shareholder Services Fees:
INCOME AND GROWTH. For the fiscal period from January 3, 1995 (commencement
of class operations) through January 31, 1995, the fiscal years ended January
31, 1996 and 1997, shareholder services fees on behalf of $42, $15,546 and
$63,108, respectively, on behalf of its Class B shares, and $3, $505 and $2,127,
respectively, on behalf of its Class C shares.
GROWTH AND INCOME. For the fiscal period from January 3, 1995 (commencement
of class operations) through December 31, 1995 and the fiscal year ended
December 31, 1996, shareholder services fees of $53,139 and $311,235 on behalf
of its Class B shares, and $2,301 and $12,018, respectively, on behalf of its
Class C shares.
AMERICAN RETIREMENT. For the fiscal period from January 3, 1995
(commencement of class operations) through December 31, 1995, the fiscal year
ended December 31, 1996 and the three month period ended March 31, 1997, $3,045,
$66,610 and $41,457, respectively, on behalf of its Class B shares; and $62,
$1,904 and $998, respectively, on behalf of its Class C shares.
SMALL CAP. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, $433 and $1,066, respectively, on behalf of its Class B shares, and
$37 and $89, respectively, on behalf of its Class C shares.
FOUNDATION. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997, $324,180, $1,162,633 and
$371,220, respectively, on behalf of its Class B shares; and $12,608, $50,829
and $17,280, respectively, on behalf of its Class C shares.
TAX STRATEGIC. For the fiscal period from January 3, 1995 (commencement of
class operations)through December 31, 1995, the fiscal year ended December 31,
1996 and the three month period ended March 31, 1997 , $7,242, $43,761 and
$20,732, respectively, on behalf of its Class B shares, and $431, $5,498 and
$2,941, respectively, on behalf of its Class C shares.
TOTAL RETURN. For the fiscal years ended November 30, 1994, 1995 and 1996,
$61,955, $61,454 and $75,270, respectively, on behalf of its Class A shares,
$14,587, $33,741, and $65,059, respectively, on behalf of Class B shares; and
$20,893, $20,066, and $28,183, respectively, on behalf of its Class C shares.
Balanced, Value and Utility incurred the following Distribution Services
Plans and Shareholder Services Plans fees:
Distribution Fees:
BALANCED. For the fiscal years ended December 31, 1994, 1995 and 1996 and
the three month period ended March 31, 1997, $102,621, $102,400, $107,023 and
$26,750, respectively, on behalf of Class A shares; and $670,202, $784,084,
$810,803 and $205,485, respectively, on behalf of Class B shares; for the period
from September 2, 1994 (commencement of operations) to December 31, 1994, and
the fiscal years ended December 31, 1995 and 1996 and the three month period
ended March 31, 1997, $310, $1,811, $1,883 and $710, respectively, on behalf of
Class C shares.
VALUE. For the fiscal years ended December 31, 1994, 1995 and 1996, $473,347,
$603,896 and $767,254, respectively, on behalf of Class A shares, and $621,330,
$916,221 and $1,255,600, respectively, on behalf of Class B shares; for the
period from September 2, 1994 (commencement of operations) to December 31, 1994,
and the fiscal years ended December 31, 1995 and 1996, $716, $4,798 and $8,706,
respectively, on behalf of Class C shares.
UTILITY. For the fiscal years ended December 31, 1994, 1995 and 1996, $9,658,
$133,582 and $252,753, respectively, on behalf of Class A shares, and $169,007,
$234,357 and $283,875, respectively, on behalf of Class B shares; for the period
from September 2, 1994 (commencement of operations) to December 31, 1994, and
the fiscal years ended December 31, 1995 and 1996, $232, $1,271 and $2,843,
respectively, on behalf of Class C shares.
Shareholder Services Plans fees:
BALANCED. For the fiscal years ended December 31, 1994, 1995 and 1996 and the
three month period ended March 31, 1997, $83,641, $261,361, $270,267 and
$68,495, respectively, on behalf of Class B shares, and $103, $604, $628 and
$237, respectively, on behalf of Class C shares.
VALUE. For the fiscal years ended December 31, 1994, 1995 and 1996, $83,225,
$305,407 and $418,533, respectively, on behalf of Class B shares; and $239,
$1,599 and $2,902, respectively, on behalf of Class C shares.
UTILITY. For the fiscal years ended December 31, 1994, 1995 and 1996, $24,141,
$78,119 and $94,625, respectively, on behalf of Class B shares; and $77, $424
and $948, respectively, on behalf of Class C shares.
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ALLOCATION OF BROKERAGE
- --------------------------------------------------------------------------------
Decisions regarding each Fund's portfolio are made by its Adviser, subject
to the supervision and control of the Trustees. Orders for the purchase and sale
of securities and other investments are placed by employees of each Fund's
Adviser. In general, the same individuals perform the same functions for the
other funds managed by each Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
A substantial portion of the transactions in equity securities for each
Fund will occur on domestic stock exchanges. Transactions on stock exchanges
involve the payment of brokerage commissions. In transactions on stock exchanges
in the United States, these commissions are negotiated, whereas on many foreign
stock exchanges these commissions are fixed. In the case of securities traded in
the foreign and domestic over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup.
Over-the-counter transactions will generally be placed directly with a principal
market maker, although the Fund may place an over-the-counter order with a
broker-dealer if a better price (including commission) and execution are
available.
It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.
In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. Each Adviser will also consider such factors as the price of the
securities and the size and difficulty of execution of the order. If these
objectives may be met with more than one firm, the Adviser will also consider
the availability of statistical and investment data and economic facts and
opinions helpful to the Fund. To the extent that receipt of these services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the SEC, Lieber may be compensated for
effecting transactions in portfolio securities for a Fund on a national
securities exchange provided the conditions of the rules are met. Each Fund
advised by Evergreen Asset has entered into an agreement with Lieber authorizing
Lieber to retain compensation for brokerage services. In accordance with such
agreement, it is contemplated that Lieber, a member of the New York and American
Stock Exchanges, will, to the extent practicable, provide brokerage services to
Growth and Income, Income and Growth, American Retirement, Small Cap, Foundation
and Tax Strategic with respect to substantially all securities transactions
effected on the New York and American Stock Exchanges. In such transactions, the
Adviser will seek the best execution at the most favorable price while paying a
commission rate no higher than that offered to other clients of Lieber or that
which can be reasonably expected to be offered by an unaffiliated broker-dealer
having comparable execution capability in a similar transaction. However, no
Fund will engage in transactions in which Lieber would be a principal. While no
Fund advised by Evergreen Asset contemplates any ongoing arrangements with other
brokerage firms, brokerage business may be given from time to time to other
firms. In addition, the Trustees have adopted procedures pursuant to Rule 17e-1
under the 1940 Act to ensure that all brokerage transactions with Lieber, as an
affiliated broker-dealer, are fair and reasonable.
The Fund's Board of Trustees has determined that the Fund may consider
sales of Fund shares as a factor in the selection of brokers to execute
portfolio transactions, subject to the requirements of best execution described
above. The Fund expects that purchases and sales of securities will usually be
effected through brokerage transactions for which commissions are payable.
Purchases from underwriters will include the underwriting commission or
concession, and purchases from dealers serving as market makers will include a
dealer's mark-up or reflect a dealer's mark-down. Where transactions are made in
the over-the-counter market, the Fund will deal with primary market makers
unless more favorable prices are otherwise obtainable. Under its Investment
Advisory Agreement, Keystone is permitted to pay higher brokerage commissions
for brokerage and research services in accordance with Section 28(e) of the
Securities Exchange Act of 1934. In the event Keystone follows such a practice,
it will do so on a basis that is fair and equitable to the Total Return Fund.
Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for Growth and Income, Income and Growth, American
Retirement, Small Cap, Foundation and Tax Strategic will accrue to FUNB and to
its ultimate parent, First Union. The Investment Advisory Agreements do not
provide for a reduction of the Adviser's fee with respect to any Fund by the
amount of any profits earned by Lieber from brokerage commissions generated by
portfolio transactions of the Fund.
The following chart shows: (i) the brokerage commissions paid by each
Fund advised by Evergreen Asset during their last three fiscal years; (ii) the
amount and percentage thereof paid to Lieber; and (iii) the percentage of the
total dollar amount of all portfolio transactions with respect to which
commissions have been paid which were effected by Lieber:
<TABLE>
<CAPTION>
INCOME AND GROWTH Year Ended Year Ended Year Ended
1/31/97 1/31/96 1/31/95
<S> <C> <C> <C>
Total Brokerage $3,529,313 $3,255,068 $3,755,606
Commissions
Dollar Amount and % $2,835,293 $2,982,640 $3,465,900
paid to Lieber 80% 92% 92%
% of Transactions
Effected by Lieber 47% 90% 97%
FOUNDATION Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/97
Total Brokerage $83,153 $689,724 $393,121 $282,250
Commissions
Dollar Amount and % $81,365 $680,252 $380,226 $ 276,985
paid to Lieber 98% 99% 98% 98%
% of Transactions
Effected by Lieber 97% 96% 97% 98%
SMALL CAP Year Ended Year Ended Period Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $14,647 $5,968 $ 3,998
Commissions
Dollar Amount and % $13,246 $4,863 $ 3,618
paid to Lieber 90% 81% 90%
% of Transactions
Effected by Lieber 87% 77% 90%
GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $519,064 $210,923 $80,871
Commissions
Dollar Amount and % $429,888 $160,659 $71,721
paid to Lieber 83% 76% 89%
% of Transactions 78% 74% 88%
AMERICAN RETIREMENT Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 12/31/96 12/31/95 12/31/94
Total Brokerage $14,54 $55,581 $57,216 $203,922
Commissions
Dollar Amount and % $11,925 $51,579 $53,276 $202,838
paid to Lieber 82% 93% 93% 99%
% of Transactions
Effected by Lieber 68% 89% 82% 99%
TAX STRATEGIC Three Months Year Ended Year Ended Period Ended
Ended 3/31/97 12/31/96 12/31/9 12/31/94
Total Brokerage $11,34 $51,273 $37,374 $24,872
Commissions
Dollar Amount and % $10,75 $50,033 $35,954 $24,072
paid to Lieber 95% 98% 96% 97%
% of Transactions
Effected by Lieber 97% 97% 94% 98%
</TABLE>
Income and Growth changed its fiscal year end from March 31 to January
31 during the first period covered by the foregoing table. Accordingly, the
commissions reported in the foregoing table reflect for Income and Growth the
period from April 1, 1994 to January 31, 1995.
American Retirement, Balanced, Foundation and Tax Strategic have
changed their fiscal year ends to March 31 from December 31, effective March 31,
1997.
Balanced, Value, Utility and Total Return did not pay any commissions
to Lieber. For the three month period ended March 31, 1997 and the fiscal years
ended December 31, 1996, 1995 and 1994, Balanced paid $256,092, $522,227,
$615,041 and $450,569, respectively, in commissions on brokerage transactions.
For the fiscal year ended December 31, 1996 and 1995, and for the period from
January 4, 1994 (commencement of operations) to December 31, 1994, Utility paid
$323,978, $272,806 and $66,294, respectively, in commissions on brokerage
transactions. For the fiscal years ended December 31, 1996, 1995 and 1994, Value
paid $3,164,292, $1,644,077 and $1,437,338, respectively, in commissions on
brokerage transactions. For the fiscal years ended November 30, 1996, 1995 and
1994, Total Return paid $227,013, $92,665 and $65,514, respectively, in
commissions on brokerage transactions.
- --------------------------------------------------------------------------------
ADDITIONAL TAX INFORMATION
(SEE ALSO "OTHER INFORMATION - DIVIDENDS,
DISTRIBUTIONS AND TAXES" IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (i)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; (ii) derive less than 30% of its gross
income from the sale or other disposition of securities, options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(iii) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.
Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.
Distributions will be taxable as described above to shareholders (who
are not exempt from tax), whether made in shares or in cash. Shareholders
electing to receive distributions in the form of additional shares will have a
cost basis for federal income tax purposes in each share so received equal to
the net asset value of a share of a Fund on the reinvestment date.
Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution nevertheless would be taxable as ordinary income or
capital gain as described above to shareholders (who are not exempt from tax),
even though, from an investment standpoint, it may constitute a return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution. The price of shares
purchased at that time includes the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will then receive what is in
effect a return of capital upon the distribution which will nevertheless be
taxable to shareholders subject to taxes.
Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.
Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these shareholders, whether taken in cash or
reinvested in additional shares, and any redemption proceeds will be reduced by
the amounts required to be withheld. Investors may wish to consult their own tax
advisers about the applicability of the backup withholding provisions.
If more than 50% of the value of a Fund's total assets at the end of a
fiscal year is represented by securities of foreign corporations and a Fund
elects to make foreign tax credits available to its shareholders, a shareholder
will be required to include in his gross income both cash dividends and the
amount a Fund advises him is his pro rata portion of income taxes withheld by
foreign governments from interest and dividends paid on a Fund's investments.
The shareholder will be entitled, however, to take the amount of such foreign
taxes withheld as a credit against his U.S. income tax, or to treat the foreign
tax withheld as an itemized deduction from his gross income, if that should be
to his advantage. In substance, this policy enables the shareholder to benefit
from the same foreign tax credit or deduction that he would have received if he
had been the individual owner of foreign securities and had paid foreign income
tax on the income therefrom. As in the case of individuals receiving income
directly from foreign sources, the above-described tax credit and deductions are
subject to certain limitations.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates). It does not reflect the special
tax consequences to certain taxpayers (e.g., banks, insurance companies, tax
exempt organizations and foreign persons). Shareholders are encouraged to
consult their own tax advisers regarding specific questions relating to federal,
state and local tax consequences of investing in shares of a Fund. Each
shareholder who is not a U.S. person should consult his or her tax adviser
regarding the U.S. and foreign tax consequences of ownership of shares of a
Fund, including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.
Special Tax Considerations for Tax Strategic
With respect to Tax Strategic, to the extent that the Fund distributes
exempt interest dividends to a shareholder, interest on indebtedness incurred or
continued by such shareholder to purchase or carry shares of the Fund is not
deductible. Furthermore, entities or persons who are "substantial users" (or
related persons) of facilities financed by "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds) should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is defined generally as including a "non-exempt person" who regularly uses
in its trade or business a part of a facility financed from the proceeds of
industrial development bonds.
The percentage of the total dividends paid by the Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.
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NET ASSET VALUE
- --------------------------------------------------------------------------------
The following information supplements that set forth in each Fund's
Prospectus under the subheading "How to Buy Shares - How the Funds Value Their
Shares" in the Section entitled "Purchase and Redemption of Shares."
The public offering price of shares of a Fund is its net asset value
plus, in the case of Class A shares, a sales charge which will vary depending
upon the purchase alternative chosen by the investor, as more fully described in
the Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales
Charge Alternative." On each Fund business day on which a purchase or redemption
order is received by a Fund and trading in the types of securities in which a
Fund invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any weekday,
exclusive of national holidays on which the Exchange is closed and Good Friday.
For each Fund, securities for which the primary market is on a domestic
or foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked prices and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
The respective per share net asset values of the Class A, Class B, Class C
and Class Y shares are expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the Class B and Class
C shares may be lower than the per share net asset value of the Class A shares
(and, in turn, that of Class A shares may be lower than Class Y shares) as a
result of the greater daily expense accruals, relative to Class A and Class Y
shares, of Class B and Class C shares relating to distribution services fees
(and, with respect to Balanced, Utility and Value, Shareholder Service Plan fee)
and, to the extent applicable, transfer agency fees and the fact that Class Y
shares bear no additional distribution, shareholder service or transfer agency
related fees. While it is expected that, in the event each Class of shares of a
Fund realizes net investment income or does not realize a net operating loss for
a period, the per share net asset values of the four Classes will tend to
converge immediately after the payment of dividends, which dividends will differ
by approximately the amount of the expense accrual differential among the
Classes, there is no assurance that this will be the case. In the event one or
more Classes of a Fund experiences a net operating loss for any fiscal period,
the net asset value per share of such Class or Classes will remain lower than
that of Classes that incurred lower expenses for the period.
To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York.
Furthermore, trading takes place in various foreign markets on days
which are not business days in New York and on which the Fund's net asset value
is not calculated. Such calculation does not take place contemporaneously with
the determination of the prices of the majority of the portfolio securities used
in such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the Exchange
will not be reflected in a Fund's calculation of net asset value unless the
Trustees deem that the particular event would materially affect net asset value,
in which case an adjustment will be made. Securities transactions are accounted
for on the trade date, the date the order to buy or sell is executed. Dividend
income and other distributions are recorded on the ex-dividend date, except
certain dividends and distributions from foreign securities which are recorded
as soon as the Fund is informed after the ex-dividend date.
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
The following information supplements that set forth in each Fund's
Prospectus under the heading "Purchase and Redemption of Shares - How To Buy
Shares."
General
Shares of each Fund will be offered on a continuous basis at a price equal
to their net asset value plus an initial sales charge at the time of purchase
(the "front-end sales charge alternative"), with a contingent deferred sales
charge (the deferred sales charge alternative"), or without any front-end sales
charge, but with a contingent deferred sales charge imposed only during the
first year after the month of purchase (the "level-load alternative"), as
described below. Class Y shares which, as described below, are not offered to
the general public, are offered without any front-end or contingent sales
charges. Shares of each Fund are offered on a continuous basis through (i)
investment dealers that are members of the National Association of Securities
Dealers, Inc. and have entered into selected dealer agreements with the
Distributor ("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered into selected
agent agreements with the Distributor ("selected agents"), or (iii) the
Distributor. The minimum for initial investment is $1,000; there is no minimum
for subsequent investments. The subscriber may use the Application available
from the Distributor for his or her initial investment. Sales personnel of
selected dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A, Class B or Class C shares.
Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.
Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.
Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Application. Payment for shares
purchased by telephone can be made only by Electronic Funds Transfer from a bank
account maintained by the shareholder at a bank that is a member of the National
Automated Clearing House Association ("ACH"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a Fund business
day, the order to purchase shares is automatically placed the same Fund business
day for non-money market funds, and two days following the day the order is
received for money market funds, and the applicable public offering price will
be the public offering price determined as of the close of business on such
business day. Full and fractional shares are credited to a subscriber's account
in the amount of his or her subscription. As a convenience to the subscriber,
and to avoid unnecessary expense to a Fund, stock certificates representing
shares of a Fund are not issued. This facilitates later redemption and relieves
the shareholder of the responsibility for and inconvenience of lost or stolen
certificates.
Alternative Purchase Arrangements
Each Fund issues four classes of shares: (i) Class A shares, which are sold
to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; (iii) Class C shares, which are sold to investors choosing the
level-load sales charge alternative; and (iv) Class Y shares, which are offered
only to (a) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (b) certain investment advisory clients
of the Advisers and their affiliates, and (c) institutional investors. The four
Classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (i) only Class A, Class B and Class C shares are subject to a Rule
12b-1 distribution fee, (ii) Class B and Class C shares of Balanced, Utility and
Value are subject to a Shareholder Service Plan fee, (iii) Class A shares bear
the expense of the front-end sales charge and Class B and Class C shares bear
the expense of the deferred sales charge, (iv) Class B shares and Class C shares
each bear the expense of a higher Rule 12b-1 distribution services fee and
shareholder service fee than Class A shares and, in the case of Class B shares,
higher transfer agency costs, (v) with the exception of Class Y shares, each
Class of each Fund has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services (and, to the extent
applicable, Shareholder Service Plan fee) is paid which relates to a specific
Class and other matters for which separate Class voting is appropriate under
applicable law, provided that, if the Fund submits to a simultaneous vote of
Class A, Class B and Class C shareholders an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder with respect to
the Class A shares, the Class A shareholders and the Class B and Class C
shareholders will vote separately by Class, and (vi) only the Class B shares are
subject to a conversion feature. Each Class has different exchange privileges
and certain different shareholder service options available.
The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, Shareholder Service Plan) fee and contingent deferred sales
charges on Class B shares prior to conversion, or the accumulated distribution
services (and, to the extent applicable, shareholder service) fee on Class C
shares, would be less than the front-end sales charge and accumulated
distribution services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher return of Class A
shares. Class B and Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at the lowest applicable sales
charge. For this reason, the Distributor will reject any order (except orders
for Class B shares from certain retirement plans) for more than $250,000 for
Class B shares or $500,000 for Class C shares.
Class A shares are subject to a lower distribution services fee and no
Shareholder Service Plan fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares. However, because
front-end sales charges are deducted at the time of purchase, investors
purchasing Class A shares would not have all their funds invested initially and,
therefore, would initially own fewer shares. Investors not qualifying for
reduced front-end sales charges who expect to maintain their investment for an
extended period of time might consider purchasing Class A shares because the
accumulated continuing distribution (and, to the extent applicable, Shareholder
Service Plan) charges on Class B shares or Class C shares may exceed the
front-end sales charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration against the fact
that, because of such front-end sales charges, not all their funds will be
invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution services (and, to the extent applicable, Shareholder Service Plan)
fees and, in the case of Class B shares, being subject to a contingent deferred
sales charge for a six-year period. For example, based on current fees and
expenses, an investor subject to the 4.75% front-end sales charge imposed on
Class A shares of the Funds would have to hold his or her investment
approximately seven years for the Class B and Class C distribution services
(and, to the extent applicable, Shareholders Service Plan) fees, to exceed the
front-end sales charge plus the accumulated distribution services fee of Class A
shares. In this example, an investor intending to maintain his or her investment
for a longer period might consider purchasing Class A shares. This example does
not take into account the time value of money, which further reduces the impact
of the Class B and Class C distribution services (and, to the extent applicable,
shareholder service) fees on the investment, fluctuations in net asset value or
the effect of different performance assumptions.
Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the six year period during
which Class B shares are subject to a contingent deferred sales charge may find
it more advantageous to purchase Class C shares.
With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B, Class C
and Class Y shares. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.
Front-End Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers choosing
the front-end sales charge alternative is the net asset value plus a sales
charge as set forth in the Prospectus for each Fund.
Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.
Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date Net Asset Per Share Offering Price
Value Sales Charge Per Share
Balanced 3/31/97 $12.87 $0.64 $13.51
Growth and Income 12/31/96 $22.53 $1.12 $23.65
Income and Growth 1/31/97 $21.79 $1.09 $22.88
American Retirement 3/31/97 $13.74 $0.69 $14.43
Small Cap 12/31/96 $13.10 $0.65 $13.75
Date Net Asset Per Share Offering Price
Value Sales Charge Per Share
Foundation 3/31/97 $16.00 $0.80 $16.80
Tax Strategic 3/31/97 $13.57 $0.68 $14.25
Utility 12/31/96 $10.57 $0.53 $11.10
Value 12/31/96 $20.57 $1.03 $21.60
Total Return 11/30/96 $17.33 $1.06 $18.39
</TABLE>
Prior to January 3, 1995, shares of Growth and Income, Income and
Growth, American Retirement, Small Cap, Foundation and Tax Strategic were
offered exclusively on a no-load basis and, accordingly, no underwriting
commissions were paid in respect of sales of shares of these Funds or retained
by the Distributor. In addition, since Class B and Class C shares were not
offered by Growth and Income, Income and Growth, American Retirement, Small Cap,
Foundation or Tax Strategic prior to January 3, 1995, contingent deferred sales
charges have been paid to the Distributor with respect to Class B or Class C
shares only since January 3, 1995.
With respect to Balanced, Utility and Value, the following commissions
were paid to and amounts were retained by Federated Securities Corp. through
July 7, 1995, which until such date was the principal underwriter of portfolios
of Evergreen Investment Trust. For the period from July 8 through December 31,
1995, commissions were paid to and amounts were retained by the current
Distributor as noted below:
<TABLE>
<CAPTION>
Three Months Year Ended Period From Period From
Ended 3/31/97 12/31/96 7/8/95 1/1/95
to 12/31/95 to 7/7/95
<S> <C> <C> <C> <C>
BALANCED
Commissions $25,829 $77,026 $15,844 $11,841
Received
Commissions $3,100 $9,150 $1,731 $1,303
Retained
VALUE
Commissions $522,573 $58,797 $56,058
Received
Commissions $ 56,609 $ 6,615 $ 6,001
Retained
UTILITY
Three Months Year Ended Period From Period From
Ended 3/31/97 12/31/96 7/8/95 1/1/95
to 12/31/95 to 7/7/95
Commissions $ 74,988 $ 15,692 $ 20,958
Received
Commissions $ 7,857 $ 1,727 $ 2,228
Retained
With respect to Income and Growth, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic, the following commissions
were paid to and amounts were retained by the Distributor for the periods
indicated:
Three Months Year Ended Year Ended Period from 1/3/95
Ended 3/31/97 1/31/97 1/31/96 to 1/31/95
INCOME AND GROWTH
Commissions Received $ 187,403 $ 98,890 $ 4,585
Commissions Retained $ 20,208 $ 10,733 ---
Year Ended Year Ended
12/31/96 12/31/95
GROWTH AND INCOME
Commissions Received $ 1,473,258 $ 326,249
Commissions Retained $ 158,858 $ 37,300
AMERICAN RETIREMENT
Commissions Received $121,810 $ 317,718 $ 42,447
Commissions Retained $12,910 $ 20,024
$ 7,397
SMALL CAP
Commissions Received $ 3,568 $ 778
Commissions Retained $ 340 $ 284
FOUNDATION
Three Months Year Ended Year Ended Period from 1/3/95
Ended 3/31/97 1/31/97 1/31/96 to 1/31/95
Commissions Received $ 495,558 $ 2,418,388 $1,604,275
Commissions Retained $ 53,267 $ 57,736 $ 178,885
TAX STRATEGIC
Commissions Received $ 141,912 $ 199,131 $ 28,976
Commissions Retained $ 16,111 $ 25,078 $ 3,266
With respect to Total Return, the following commissions were paid to and
amounts were retained by Keystone Investment Distributors Company, which prior
to December 1, 1996, was the distributor for Total Return.
Three Months Year Ended Year Ended Year Ended
Ended 3/31/97 11/30/96 11/30/95 11/30/94
TOTAL RETURN
Commissions Received $355,043 $190,327 $106,144
Commissions Retained ($595,877) ($243,621) ($ 90,031)
</TABLE>
Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.
Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
Keystone Funds (other than the money market funds) into a single "purchase," if
the resulting "purchase" totals at least $100,000. The term "purchase" refers
to: (i) a single purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an individual,
his or her spouse and their children under the age of 21 years purchasing shares
for his, her or their own account(s); (ii) a single purchase by a trustee or
other fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase by an organization exempt from federal income tax under Section 501
(c)(3) or (13) of the Code; a pension, profit-sharing or other employee benefit
plan whether or not qualified under Section 401 of the Code. The term "purchase"
also includes purchases by any "company," as the term is defined in the 1940
Act, but does not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen Keystone Fund.
Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on the previous day) of
(a) all Class A shares of the Fund held by the investor and (b) all such shares
of any other Evergreen Keystone Fund held by the investor; and
(iii) the net asset value of all shares described in paragraph; and
(iv) owned by another shareholder eligible to combine his or her purchase
with that of the investor into a single "purchase" (see above).
For example, if an investor owned Class A, B or C shares of an
Evergreen Keystone Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of a Fund worth an additional
$100,000, the sales charge for the $100,000 purchase, in the case of the Funds,
would be at the 2.50% rate applicable to a single $300,000 purchase of shares of
the Fund, rather than the 3.75% rate.
To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.
Letter of Intent. Class A investors may also obtain the reduced sales
charges shown in the Prospectus by means of a written Letter of Intent, which
expresses the investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares of the Fund or any other Evergreen
Keystone Fund. Each purchase of shares under a Letter of Intent will be made at
the public offering price or prices applicable at the time of such purchase to a
single transaction of the dollar amount indicated in the Letter of Intent. At
the investor's option, a Statement of Intention may include purchases of Class A
shares of the Fund or any other Evergreen Keystone Fund made not more than 90
days prior to the date that the investor signs a Statement of Intention;
however, the 13-month period during which the Letter of Intent is in effect will
begin on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen Keystone Funds under a single Letter
of Intent. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in Class A shares of the Fund or any
other Evergreen Keystone Fund, to qualify for the 3.75% sales charge applicable
to purchases in any Evergreen Keystone Equity or Long-Term Bond Fund on the
total amount being invested (the sales charge applicable to an investment of
$100,000).
The Statement of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released. To the extent
that an investor purchases more than the dollar amount indicated on the Letter
of Intent and qualifies for a further reduced sales charge, the sales charge
will be adjusted for the entire amount purchased at the end of the 13-month
period. The difference in sales charge will be used to purchase additional
shares of the Fund subject to the rate of sales charge applicable to the actual
amount of the aggregate purchases.
Investors wishing to enter into a Letter of Intent in conjunction with
their initial investment in Class A shares of a Fund should complete the
appropriate portion of the Application while current Class A shareholders
desiring to do so can obtain a form of Letter of Intent by contacting a Fund at
the address or telephone number shown on the cover of this Statement of
Additional Information.
Investments Through Employee Benefit and Savings Plans. Certain qualified
and non-qualified benefit and savings plans may make shares of the Evergreen
Keystone Funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative." The Advisers may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen Keystone Funds available to
their participants.
Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes except that no
loss will be recognized to the extent that the proceeds are reinvested in shares
of the Fund. The reinstatement privilege may be used by the shareholder only
once, irrespective of the number of shares redeemed or repurchased, except that
the privilege may be used without limit in connection with transactions whose
sole purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of Additional
Information.
Sales at Net Asset Value. In addition to the categories of investors set
forth in the Prospectus, each Fund may sell its Class A shares at net asset
value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trusts; present or former trustees of other investment companies
managed by the Advisers; officers, directors and present or retired full-time
employees of the Advisers, the Distributor, and their affiliates; officers,
directors and present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant (collectively
"relatives") of any such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or relative; or the
estate of any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the Fund); (iii)
certain employee benefit plans for employees of the Advisers, the Distributor
and their affiliates; (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer and approved by the
Distributor, pursuant to which such persons pay an asset-based fee to such
broker-dealer, or its affiliate or agent, for service in the nature of
investment advisory or administrative services. These provisions are intended to
provide additional job-related incentives to persons who serve the Funds or work
for companies associated with the Funds and selected dealers and agents of the
Funds. Since these persons are in a position to have a basic understanding of
the nature of an investment company as well as a general familiarity with the
Fund, sales to these persons, as compared to sales in the normal channels of
distribution, require substantially less sales effort. Similarly, these
provisions extend the privilege of purchasing shares at net asset value to
certain classes of institutional investors who, because of their investment
sophistication, can be expected to require significantly less than normal sales
effort on the part of the Funds and the Distributor.
Deferred Sales Charge Alternatives--Class B and Class C Shares
Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.
Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
services fee (and, with respect to Balanced, Utility and Value, the Shareholder
Service Plan fee) enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher distribution services
fee (and, with respect to Balanced, Utility and Value, the Shareholder Service
Plan fee) incurred by Class B shares will cause such shares to have a higher
expense ratio and to pay lower dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which are redeemed
within six years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.
In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed that the redemption is first of any Class A
shares or Class C shares in the shareholder's Fund account, second of Class B
shares held for over six years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B shares held
longest during the six-year period.
To illustrate, assume that an investor purchased 100 Class B shares at $10
per share (at a cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor has acquired 10
additional Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares, 10 Class B
shares will not be subject to charge because of dividend reinvestment. With
respect to the remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net asset value of $2
per share. Therefore, of the $600 of the shares redeemed $400 of the redemption
proceeds (40 shares x $10 original purchase price) will be charged at a rate of
4.0% (the applicable rate in the second year after purchase for a contingent
deferred sales charge of $16).
The contingent deferred sales charge is waived on redemptions of shares
(I) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.
Conversion Feature. At the end of the period ending seven years after the
end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee (and, with respect to
Balanced, Utility and Value, the Shareholder Service Plan fee) imposed on Class
B shares. Such conversion will be on the basis of the relative net asset values
of the two classes, without the imposition of any sales load, fee or other
charge. The purpose of the conversion feature is to reduce the distribution
services fee paid by holders of Class B shares that have been outstanding long
enough for the Distributor to have been compensated for the expenses associated
with the sale of such shares.
For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (I) the
assessment of the higher distribution services fee (and, with respect to
Balanced, Utility and Value, Shareholder Service Plan fee) and transfer agency
costs with respect to Class B shares does not result in the dividends or
distributions payable with respect to other Classes of a Fund's shares being
deemed "preferential dividends" under the Code, and (ii) the conversion of Class
B shares to Class A shares does not constitute a taxable event under Federal
income tax law. The conversion of Class B shares to Class A shares may be
suspended if such an opinion is no longer available at the time such conversion
is to occur. In that event, no further conversions of Class B shares would
occur, and shares might continue to be subject to the higher distribution
services fee (and, with respect to Balanced, Utility and Value, the Shareholder
Service Plan fee) for an indefinite period which may extend beyond the period
ending seven years after the end of the calendar month in which the
shareholder's purchase order was accepted.
Level-Load Alternative--Class C Shares
Investors choosing the level load sales charge alternative purchase Class C
shares at the public offering price equal to the net asset value per share of
the Class C shares on the date of purchase without the imposition of a front-end
sales charge. However, you will pay a 1.0% contingent deferred sales charge if
you redeem shares during the first year after the month of purchase. No charge
is imposed in connection with redemptions made more than one year after the
month of purchase. Class C shares are sold without a front-end sales charge so
that the Fund will receive the full amount of the investor's purchase payment
and after the first year without a contingent deferred sales charge so that the
investor will receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee (and, with
respect to Balanced, Utility and Value, Shareholder Service Plan fee) enables
the Fund to sell Class C of shares without either a front-end or contingent
deferred sales charge. However, unlike Class B shares, Class C shares do not
convert to any other Class shares of the Fund. Class C shares incur higher
distribution services fees (and, with respect to Balanced, Utility and Value,
Shareholder Service Plan fee) than Class A shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than Class A shares.
Class Y Shares
Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUNDS
(SEE ALSO "OTHER INFORMATION - GENERAL INFORMATION"
IN EACH FUND'S PROSPECTUS)
- --------------------------------------------------------------------------------
Capitalization and Organization
Each of the Evergreen Growth and Income Fund and Evergreen Income and
Growth Fund is a Massachusetts business trust. Evergreen American Retirement
Fund and Evergreen Small Cap Equity Income Fund are each separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust. The
Evergreen Foundation Fund and Evergreen Tax Strategic Foundation Fund are each
separate series of the Evergreen Foundation Trust, a Massachusetts business
trust. The Evergreen Balanced Fund, Evergreen Utility Fund and Evergreen Value
Fund, which prior to July 7, 1995 were known as the First Union Balanced
Portfolio, First Union Utility Portfolio and First Union Value Portfolio,
respectively, are each separate series of Evergreen Investment Trust, a
Massachusetts business trust. Keystone Fund for Total Return (formerly Keystone
America Fund for Total Return) is a Massachusetts business trust. On July 7,
1995, First Union Funds changed its name to Evergreen Investment Trust. The
above-named Trusts are individually referred to in this Statement of Additional
Information as the "Trust" and collectively as the "Trusts." Each Trust is
governed by a Board of Trustees. Unless otherwise stated, references to the
"Board of Trustees" or "Trustees" in this Statement of Additional Information
refer to the Trustees of all the Trusts.
Income and Growth and Growth and Income may issue an unlimited number
of shares of beneficial interest with a $0.001 par value. American Retirement,
Small Cap, Foundation, Tax Strategic, Balanced, Value and Utility may issue an
unlimited number of shares of beneficial interest with a $0.0001 par value.
Total Return may issue an unlimited number of shares of beneficial interest with
a no par value. All shares of these Funds have equal rights and privileges. Each
share is entitled to one vote, to participate equally in dividends and
distributions declared by the Funds and on liquidation to their proportionate
share of the assets remaining after satisfaction of outstanding liabilities.
Shares of these Funds are fully paid, nonassessable and fully transferable when
issued and have no pre-emptive, conversion or exchange rights.
Fractional shares have proportionally the same rights, including voting rights,
as are provided for a full share.
Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Trust or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.
Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.
The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more of the Trusts. Any issuance of shares of another series or class would be
governed by the 1940 Act and the law of the Commonwealth of Massachusetts. If
shares of another series of a Trust were issued in connection with the creation
of additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.
In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related and other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act, will be available to shareholders of each Fund. The rights of the holders
of shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
Distributor
Evergreen Keystone Distributor, Inc. (formerly known as Evergreen Funds
Distributor, Inc. (the "Distributor")), 125 W. 55th Street, New York, New York
10019, serves as each Fund's principal underwriter, and as such may solicit
orders from the public to purchase shares of any Fund. The Distributor is not
obligated to sell any specific amount of shares and will purchase shares for
resale only against orders for shares. Under the Distribution Agreement between
each Fund and the Distributor, the Fund has agreed to indemnify the Distributor,
in the absence of its willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
Counsel
Sullivan & Worcester LLP, Washington, D.C. serves as counsel to the Funds.
Independent Auditors
Price Waterhouse LLP has been selected to be the independent auditors
of Income and Growth.
KPMG Peat Marwick LLP has been selected to be the independent auditors of
Growth and Income, American Retirement, Small Cap, Balanced, Utility, Value,
Total Return, Foundation and Tax Strategic.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
Total Return
From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for the most recent one, five, and ten-year periods (or
the period since the Fund's inception). The Fund's total return for such a
period is computed by finding, through the use of a formula prescribed by the
SEC, the average annual compounded rate of return over the period that would
equate an assumed initial amount invested to the value of such investment at the
end of the period. For purposes of computing total return, income dividends and
capital gains distributions paid on shares of the Fund are assumed to have been
reinvested when paid, and the maximum sales charge applicable to purchases of
Fund shares is assumed to have been paid. The Fund will include performance data
for Class A, Class B, Class C and Class Y shares in any advertisement or
information including performance data of the Fund.
With respect to Income and Growth, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic, the shares of each Fund
outstanding prior to January 3, 1995 have been reclassified as Class Y shares.
The average annual compounded total return for each Class of shares offered by
the Funds for the most recently completed one, five and ten year fiscal periods
(if applicable) and for the three months ended March 31, 1997 for American
Retirement, Foundation, Tax Strategic, and Balanced is set forth in the table
below.
<TABLE>
<CAPTION>
INCOME AND 1 Year Ended 5 Years 10 Years Ended
GROWTH 1/31/97 Ended 1/31/97 1/31/97
<S> <C> <C> <C>
Class A 8.4% 9.5% 7.7%
Class B 8.0% 10.0% 8.1%
Class C 11.9% 10.3% 8.1%
Class Y 14.1% 10.7% 8.3
GROWTH AND 1 Year Ended 5 Y ears Ended 10 Years
INCOME 12/31/96 12/31/96 Ended 12/31/96
Class A 17.6% 15.6% 14.0%
Class B 17.6% 16.2% 14.4%
Class C 21.6% 16.5% 14.4%
Class Y 23.8% 16.9% 14.6%
AMERICAN 3 Months Ended 1 Year Ended 5 Years Ended From inception*****
RETIREMENT 3/31/97 3/31/97 3/31/97 to 3/31/97
Class A (4.8%) 3.8% --- 13.89%
Class B (5.3%) 3.0% --- 14.37%
Class C (1.3%) 7.0% --- 15.52%
Class Y 0.0% 9.1% --- 10.53%
SMALL CAP 1 Year Ended From 10/1/93
12/31/96 (inception) to
12/31/96
Class A 16.2% 13.8%
Class B 16.1% 14.3%
Class C 20.1% 15.0%
Class Y 22.4% 15.7%
FOUNDATION 3 Months Ended 1 Year Ended 5 Years From inception
3/31/97 3/31/97 Ended ****** to
3/31/97 3/31/97
Class A (4.9%) 7.5% - 15.2%
Class B (5.3%) 7.0% - 15.7%
Class C (1.3%) 11.0% - 16.7%
Class Y 0.0% 13.2% 13.6% 15.7%
TAX STRATEGIC 3 Months Ended 1 Year Ended From inception
3/31/97 3/31/97 To 3/31/97
Class A (3.8%) 10.3% 15.9%
Class B (4.2%) 10.0% 17.1%
TAX STRATEGIC 3 Months Ended 1 Year Ended From inception
3/31/97 3/31/97 To 3/31/97
Class C (0.2%) 13.8% 17.5%
Class Y (1.0%) 16.1% 14.7%
BALANCED 3 Months 1 Year 5 Years From inception*
Ended Ended Ended to 3/31/97
3/31/97 3/31/97 3/31/97
Class A (4.5%) 4.4% 9.9% 10.5%
Class B (4.9%) 4.0% - 9.2%
Class C (0.9%) 7.4% - 11.8%
Class Y 0.3% 9.9% 11.2% 11.3%
UTILITY 1 Year Ended From inception***to
12/31/96 12/31/96
Class A -.6% 7.1%
Class B -1.3% 7.2%
Class C 2.5% 12.4%
Class Y 4.5% 11.2%
VALUE 1 Year Ended 5 Years Ended From inception***to
12/31/96 12/31/96 12/31/96
Class A 13.3% 12.4% 13.4%
Class B 13.1% -- 14.1%
Class C 17.1% -- 18.8%
Class Y 19.2% 13.8% 15.7%
TOTAL RETURN 1 Year Ended 5 Years Ended From inception****
11/30/96 11/30/96 to 11/30/96
Class A 22.4% 13.8% 11.4%
Class B 24.7% __ 13.7%
Class C 28.7% __ 14.3%
</TABLE>
Total Return commenced offering Class Y shares effective December 15, 1996.
* Inception date: Class A - June 6, 1991; Class B - January 26, 1993; Class C -
September 2, 1994; Class Y - April 1, 1991.
** Inception date: Class A - January 4, 1994; Class B - January 4, 1994; Class C
- - September 2, 1994; Class Y - February 28, 1994.
*** Inception date: Class A - April 12, 1985; Class B - January 25, 1993; Class
C - September 2, 1994; Class Y - December 31, 1990.
****Inception date: Class A - February 13, 1987; Class B and Class C- February
1, 1993.
***** Inception date: Class A, B and C - January 3, 1995; Class Y - March
14, 1988.
****** Inception date: Class A, B and C - January 3, 1995; Class Y- January 2,
1990.
******* Inception date: Class A - January 17, 1995; Class B - January 6, 1995;
Class C - March 3, 1995; Class Y - November 2, 1993
The performance numbers for Income and Growth, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic for the Class A,
Class B and Class C shares are hypothetical numbers based on the performance for
Class Y shares as adjusted for any applicable front-end sales charge or
contingent deferred sales charge through January 3, 1995 (commencement of class
operations) and the actual performance of each class subsequent to January 3,
1995. The performance data calculated prior to January 3, 1995, does not reflect
any Rule 12b-1 fees. If such fees were reflected the returns would be lower.
A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is
useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal investment in a Fund
is not fixed and will fluctuate in response to prevailing market conditions.
YIELD CALCULATIONS
From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:
YIELD = [2[(a-b/cd)+ 1]6-1]
Where a = Interest earned during the period
b = Expenses accrued for the period (net of reimbursements)
c = The average daily number of shares outstanding during the
period that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period
Income is calculated for purposes of yield quotations in accordance with
standardized methods applicable to all stock and bond funds. Gains and losses
generally are excluded from the calculation. Income calculated for purposes of
determining a Fund's yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rates of distributions a Fund paid over the same
period, or the net investment income reported in a Fund's financial statements.
Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.
It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
The yield of American Retirement, Foundation, Tax Strategic and
Balanced, except Total Return, for the thirty-day period ended March 31, 1997
(January 31, 1997 with respect to Income and Growth and December 31, 1996 with
respect to Growth and Income, Small Cap, Utility and Value) for each Class of
shares offered by the Funds is set forth in the table below:
Income and Growth Tax Strategic
Class A 3.32% 2.49%
Class B 2.76% 1.89%
Class C 2.76% 1.82%
Class Y 3.73% 2.88%
Growth and Income Balanced
Class A .54% 3.49%
Class B -.17% 2.89%
Class C -.17% 2.92%
Class Y .81% 3.93%
American Retirement Utility
Class A 3.10% 3.70%
Class B 2.49% 3.13%
Class C 2.49% 3.13%
Class Y 3.52% 4.14%
Small Cap Value
Class A 2.13% 1.43%
Class B 1.50% .66%
Class C 1.51% .66%
Class Y 2.48% 1.78%
Foundation
Class A 3.79%
Class B 3.19%
Class C 3.19%
Class Y 4.24%
Non-Standardized Performance
In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.
- --------------------------------------------------------------------------------
GENERAL
- --------------------------------------------------------------------------------
From time to time, a Fund may quote its performance in advertising and
other types of literature as compared to the performance of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average,
Russell 2000 Index, or any other commonly quoted index of common stock prices.
The Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average and the Russell 2000 Index are unmanaged indices of selected common
stock prices. A Fund's performance may also be compared to those of other mutual
funds having similar objectives. This comparative performance would be expressed
as a ranking prepared by Lipper Analytical Services, Inc. or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may be
useful to investors who wish to compare a Fund's past performance with that of
its competitors. Of course, past performance cannot be a guarantee of future
results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statements filed by the Trusts with the SEC under the Securities Act of 1933.
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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely Price Waterhouse LLP (in the case of Income
and Growth) or KPMG Peat Marwick LLP (in the case of Growth and Income, American
Retirement, Small Cap, Balanced, Utility, Foundation, Tax Strategic, Value, and
Total Return) are incorporated by reference into this Statement of Additional
Information. The Annual Reports to Shareholders for each Fund, which contain the
referenced statements, are available upon request and without charge.
<PAGE>
APPENDIX "A"
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Service. A Standard & Poor's corporate or
municipal bond rating is a current assessment of the credit worthiness of an
obligor with respect to a specific obligation. This assessment of credit
worthiness may take into consideration obligors such as guarantors, insurers or
lessees. The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit in connection
with the ratings and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation.
2. Nature of and provisions of the obligation.
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or their arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest and
repay any principal.
AA - Debt rated AA also qualifies as high quality debt obligations.
Capacity to pay interest and repay principal is very strong and in the majority
of instances they differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.
B - Debt rated B has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC - Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 - The rating C1 is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace periods; it will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-) - To provide more detailed indications of credit
quality, the ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.
Moody's Investors Service. A brief description of the applicable Moody's
rating symbols and their meanings follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. NOTE:
Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol "1" following the rating.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and
issue so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible risk
factors; AA -- high credit quality, with strong protection factors and modest
risk, which may vary very slightly from time to time because of economic
conditions; A--average credit quality with adequate protection factors, but with
greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.
Fitch Investors Service L.P.: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
A Standard & Poor's note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in three years or less will
likely receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment.
o Amortization schedule (the larger the final maturity relative to
other maturities the more likely it will be treated as a note).
o Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note.) Note rating
symbols are as follows:
o SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
o SP-2 Satisfactory capacity to pay principal and interest.
o SP-3 Speculative capacity to pay principal and interest.
Moody's Short-Term Loan Ratings - Moody's ratings for state and
municipal short-term obligations will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
are uppermost in importance in short-term borrowing, while various factors of
major importance in bond risk are of lesser importance over the short run.
Rating symbols and their meanings follow:
o MIG 1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
o MIG 2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
o MIG 3 - This designation denotes favorable quality. All security
elements are accounted for but this is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
o MIG 4 - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
COMMERCIAL PAPER RATINGS
Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries the
smallest degree of investment risk. The modifiers 1, 2, and 3 are used to denote
relative strength within this highest classification.
Standard & Poor's Ratings Service: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating
category utilized by Duff & Phelps which uses + or - to denote relative strength
within this classification. Duff 2 represents good certainty of timely payment,
with minimal risk factors. Duff 3 represents satisfactory protection factors,
with risk factors larger and subject to more variation.
Fitch Investors Service L.P.: F-1+ -- denotes exceptionally strong
credit quality given to issues regarded as having strongest degree of assurance
for timely payment; F-1 -- very strong, with only slightly less degree of
assurance for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.
EVERGREEN INVESTMENT TRUST
PART C. OTHER INFORMATION
Item 24.
Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement:
Financial Highlights for the Class Y shares of Evergreen Balanced
Fund for the fiscal period from April 1, 1991 (commencement of
operations) to December 31, 1991, the fiscal years ended
December 31, 1992 through December 31, 1996 and the three months
ended March 31, 1997
Financial Highlights for the Class A shares of Evergreen Balanced
Fund for the fiscal period from June 10, 1991 (commencement of
class operations) to December 31, 1991, for the fiscal
years ended December 31, 1992 through December 31, 1996 and the
three months ended March 31, 1997
Financial Highlights for the Class B shares of Evergreen Balanced
Fund for the fiscal period from January 26, 1993 (commencement of
class operations) to December 31, 1993, for the fiscal
years ended December 31, 1994 through December 31, 1996 and the
three months ended March 31, 1997
Financial Highlights for the Class C shares of Evergreen Balanced
Fund for the fiscal period from September 2, 1994 (commencement of
class operations) to December 31, 1994, for the fiscal
years ended December 31, 1995 and December 31, 1996 and the three
months ended March 31, 1997
<PAGE>
Included in Part B of this Registration Statement:*
Statements of Investments for Evergreen Balanced Fund
as of March 31, 1997 (audited)
Statements of Assets and Liabilities for Evergreen Balanced
Fund as of March 31, 1997 (audited)
Statements of Operations for Evergreen Balanced Fund for the
three months ended March 31, 1997 and the fiscal year ended
December 31, 1996 (audited)
Statement of Changes in Net Assets of Evergreen Balanced Fund
for the three months ended March 31, 1997 and the fiscao years
ended December 31, 1995 and 1996 (audited)
Financial Highlights of Evergreen Balanced Fund
Notes to Financial Statements of Evergreen Balanced Fund.
Report of Independent Auditors of Evergreen Balanced Fund.
-----------------------------------------------------------
* Incorporated by reference to the Annual Report to
Shareholders for the three months ended March 31, 1997 and
by reference to the Annual Report of Registrant on
Form N-SAR for the aforementioned period.
(b) Exhibits:
(1) Declaration of Trust (1); (i) Amendment to
Declaration of Trust (14); Amendment
to Declaration of Trust(22)
(2) By-Laws(1)(i) Amendment to the By-Laws (3)
(3) Not applicable
(4) Specimen Certificate for Shares of Beneficial
Interest (19)
(5) Investment Advisory Contract (21)
(6) Distributor's Contract(22)
(i) Previous Distributors
Contract(21)
(7) Administrative Services Agreement+
(7a) Sub-Administrator Agreement+
(7b) Form of Deferred Compensation Plan
(8) Custodian Contract (21)
(9) Fund Accounting and Shareholder
Recordkeeping Agreement (20)
(i) Previous Transfer Agency and Service Agreement(21)
(ii) Shareholder Services Plan (21)
(iii) Shareholder Services Agreement (21)
(9a) Form of Dealer Agreement+
(10) Opinion and Consent of Counsel (24)
(11) Consent of KPMG Peat Marwick LLP, Independent
accountants+
(12) Not applicable
(13) Copy of Initial Capital Understanding (1)
(14) Forms of model plans used in the establishment of
retirement
plans in connection with which Registrant offers its
securities (25)
(15) (i) Distribution Plan
First Union Utility
Portfolio - Class B Investment Shares (21)
First Union Funds - Class C
Investment Shares (17)
(i) Exhibit to Class C Investment Shares (21)
(ii) Rule 12b-1 Agreement (14)
(iii)Amendment Number 5 to 12b-1 Agreement(21)
(16) None
(17) Financial Data Schedules+
(18) Multiple Class Plan+
(19) Powers of Attorney+
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A. (File Nos. 2-94560 and 811-4154).
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A (File Nos. 2-94560 and 811-4154).
(5) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 filed on July 30, 1990 on Form N-1A (File Nos. 2-94560
and 811-4154).
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 filed on August 26, 1992 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(14) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 filed on April 15, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(15) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 filed on April 30, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(16) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 filed on June 14, 1993 on Form N-1A (File Nos. 2-94560
and 811-4154).
(17) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 filed on November 2, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(18) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 filed on December 29, 1993 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(19) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 filed on February 25, 1994 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(20) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 36 filed on June 28, 1994 on Form N-1A (File Nos. 2-94560
and 811-4154).
(21) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 38 filed on December 30, 1994 on Form N-1A (File Nos. 2-
94560 and 811-4154).
(22) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 40 filed on July 6, 1995 on Form N-1A (File Nos. 2-94560
and 811-4154).
(23) Response is incoporated by refernce to Registrant's Post-Effective
Amendment No. 44 filed on April 1, 1996 on Form N-1A (File Nos. 2-94560
and 811-4154)
(24) Incorporated herein by reference to Rule 24f-2 Notice filed May 29, 1997
to the Registration Statement.
(25) Incorporated herein by reference to Post-Effective Amendment No. 66 to
Registration Statement No. 2-10527/811-96.
Item 25. Persons Controlled by or Under Common Control with Registrant:
As a result of their beneficial ownership of 83.15% of the shares of
Evergreen Balanced Fund on June 1, 1997, First Union National Bank may be
deemed to "control" the Fund, as that term is defined in the 1940 Act.
As a result of their beneficial ownership of 63.10% of the shares of
Evergreen Value Fund on June 1, 1997, First Union National Bank may be
deemed to "control" the Fund, as that term is defined in the 1940 Act.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of June 1, 1997
Shares of beneficial interest
(no par value)
Evergreen Utility Fund
a) Class Y Shares 12
b) Class A Investment Shares 4,926
c) Class B Investment Shares 2,912
d) Class C Investment Shares 31
Evergreen Balanced Fund
a) Class Y Shares 44
b) Class A Investment Shares 2,613
c) Class B Investment Shares 7,293
d) Class C Investment Shares 48
Evergreen Value Fund
a) Class Y Shares 377
b) Class A Shares 19,890
c) Class B Shares 19,849
d) Class C Shares 195
Item 27. Indemnification: (1.)
- --------------------------------------
(1.) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 35 filed on February 25, 1994 on Form N-1A
(File Nos. 2-94560 and 811-4154).
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Management of the
Funds-Investment Adviser" in Part A.
The Trustees and principal executive officers of the Fund's
Investment Adviser, and the Directors of the Fund's Manager, are
set forth in the following tables:
FIRST UNION NATIONAL BANK
BOARD OF DIRECTORS
Edward E. Crutchfield
Anthony P. Terracciano
John R. Georgius
Marion A. Cowell, Jr.
Robert T. Atwood
All of the Directors are located at the following address:
First Union National Bank, 301 South College Street,
Charlotte, NC 28288
FIRST UNION NATIONAL BANK
EXECUTIVE OFFICERS
Edward E. Crutchfield, Chairman & CEO, First Union Corporation
John R. Georgius, Vice Chairman, First Union Corporation
Marion A. Cowell, Jr., Secretary and EVP, First Union Corporation
Robert T. Atwood, EVP & CFO, First Union Corporation
Anthony P. Terracciano, President, First Union Corporation
All of the Executive Officers are located at the following
address: First Union National Bank, 301 South College Street,
Charlotte, NC 28288
Item 29. Principal Underwriters
Evergreen Keystone Distributor, Inc.(formerly known as Evergreen Funds
Distributor, Inc.) The Director and principal executive officers are:
Director Michael C. Petrycki
Officers Lynn J. Mangum Chairman/CEO
Robert J. McMullan Executive Vice President/Treasurer
J. David Huber President
Kevin J. Dell Vice President/General Counsel/Secretary
Mark J. Rybarczyk Senior Vice President
Dennis Sheehan Senior Vice President
Mark Dillon Senior Vice President
George Martinez Senior Vice President
D'Ray Moore Vice President
Dale Smith Vice President
Michael Burns Vice President
Bruce Treff Assistant Secretary
Annamaria Porcaro Assistant Secretary
Evergreen Keystone Distributor, Inc. acts as Distributor for the
following registered investment companies or separate series thereof:
Evergreen Trust:
Evergreen Fund
Evergreen Aggressive Growth Fund
Evergreen Income and Growth Fund (formerly Evergreen Total Return Fund)
Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Money Market Trust:
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen American Retirement Trust:
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
Evergreen Municipal Trust:
Evergreen Tax Exempt Money Market Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-California
Evergreen Florida High Income Municipal Bond Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Investment Trust:
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short-Intermediate Bond Fund
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund
Evergreen Lexicon Trust:
Evergreen Intermediate Term Government Securities Fund
Evergreen Intermediate Term Bond Fund
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Evergreem VA Global Leaders Fund
Evergreen VA Strategic Income Fund
Evergreen VA Aggressive Growth Fund
<PAGE>
Keystone America Hartwell Emerging Growth Fund
Keystone Balanced Fund II
Keystone Capital Preservation and Income Fund
Keystone Fund for Total Return
Keystone Fund of the Americas
Keystone Global Opportunities Fund
Keystone Global Resources and Development Fund
Keystone Government Securities Fund
Keystone Intermediate Term Bond Fund
Keystone Liquid Trust
Keystone Omega Fund
Keystone Small Company Growth Fund II
Keystone State Tax Free Fund:
Florida Tax Free Fund
Massachusetts Tax Free Fund
Pennsylvania Tax Free Fund
New York Insured Tax Free Fund
Keystone State Tax Free Fund- Series II:
California Insured Tax Free Fund
Missouri Tax Free Fund
Keystone Strategic Income Fund
Keystone Tax Free Income Fund
Keystone World Bond Fund
Keystone Quality Bond Fund (B-1)
Keystone Diversified Bond Fund (B-2)
Keystone High Income Bond Fund (B-4)
Keystone Balanced Fund (K-1)
Keystone Strategic Growth Fund (K-2)
Keystone Growth and Income Fund (S-1)
Keystone Mid-Cap Growth Fund (S-3)
Keystone Small Company Growth Fund (S-4)
Keystone Institutional Adjustable Rate Fund
Keystone Institutional Trust
Keystone International Fund Inc.
Keystone Precious Metals Holdings, Inc.
Keystone Tax Free Fund
<PAGE>
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are maintained at the offices of the Registrant's Custodian, State Street Bank
and Trust Company, 2 Heritage Drive, North Quincy, Massachusetts 02171, the
offices of Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577, the office of First Union National Bank, 301 South College
Street, Charlotte, North Carolina 28288, or the offices of Keystone Investment
Management Company and Evergreen Keystone Service Company, 200 Berkeley Street,
Boston, Massachusetts 02116-5034.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 50 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in The City of New
York, State of New York, on the 1st day of July, 1997.
EVERGREEN INVESTMENT TRUST
/s/ John J. Pileggi
by-----------------------------
John J. Pileggi, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 50 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
- ----------- ----- ----
/s/John J. Pileggi
- ----------------------- President and July 1, 1997
John J. Pileggi Treasurer
/s/James S. Howell
- ----------------------- Trustee July 1, 1997
James S. Howell
by James P. Wallin
Attorney - In - Fact
/s/Gerald M. McDonnell
- ----------------------- Trustee July 1, 1997
Gerald M. McDonnell
by James P. Wallin
Attorney - In - Fact
/s/Thomas L. McVerry
- ----------------------- Trustee July 1, 1997
Thomas L. McVerry
by James P. Wallin
Attorney - In - Fact
/s/William Walt Pettit
- ----------------------- Trustee July 1, 1997
William Walt Pettit
by James P. Wallin
Attorney - In - Fact
/s/Russell A. Salton, III, M.D
- ------------------------------ Trustee July 1, 1997
Russell A. Salton, III, M.D
by James P. Wallin
Attorney - In - Fact
/s/Michael S. Scofield
- ----------------------- Trustee July 1, 1997
Michael S. Scofield
by James P. Wallin
Attorney - In - Fact
<PAGE>
JAMES WALLIN, ESQ.
2500 WESTCHESTER AVENUE
PURCHASE, NY 10577
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re Post-Effective Amendment of
EVERGREEN INVESTMENT TRUST
Registration No. 2-94560; Investment Company File No.811-4154
Commissioners:
I have acted as counsel to the above-referenced registrant which proposes
to file, pursuant to paragraph (b) of Rule 485 (the "Rule"), Post-Effective
Amendment No. 50 the "Amendment") to its registration statement under the
Securities Act of 1933, as amended.
Pursuant to paragraph (b)(4) of the Rule, I represent that the Amendment
does not contain disclosures which would render it ineligible to become
effective pursuant to paragraph (b) of the Rule.
Very truly yours,
/s/ James P. Wallin
---------------------
James P. Wallin
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
7 Administrative Services Agreement
7(a) Sub-Administrator Agreement
7(b) Form of Deferred Compensation Plan
9(a) Form of Dealer Agreement
11 Consent of Independent
Auditors
17 Financial Data Schedules
18 Multiple Class Plan
19 Powers of Attorney
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this 1st day of April,
1997 between Evergreen Investment Trust, a Massachusetts business trust (herein
called the "Trust"), and Evergreen Keystone Investment Services, Inc. (herein
called "EKIS").
WHEREAS, the Trust is a Massachusetts business trust consisting of one or
more portfolios which operates as an open-end management investment company and
is so registered under the Investment Company Act of 1940; and
WHEREAS, the Trust desires to retain EKIS as its Administrator to provide
it with administrative services, and EKIS is willing to render such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Trust hereby appoints EKIS as
Administrator of the Trust and each of its portfolios on the terms and
conditions set forth in this Agreement; and EKIS hereby accepts such appointment
and agrees to perform the services and duties set forth in Section 2 of this
Agreement in consideration of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the supervision
and control of the Trustees of the Trust, EKIS will hereafter provide
facilities, equipment and personnel to carry out the following administrative
services for operation of the business and affairs of the Trust and each of its
portfolios:
(a) prepare, file and maintain the Trust's governing documents, including
the Declaration of Trust (which has previously been prepared and filed), the By-
laws, minutes of meetings of Trustees and shareholders, and proxy statements for
meetings of shareholders;
(b) prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements for the
Trust and the Trust's shares and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements, and such other
documents as may be necessary or convenient to enable the Trust to make a
continuous offering of its shares;
(c) prepare, negotiate and administer contracts on behalf of the Trust
with, among others, the Trust's distributor, custodian and transfer agent;
(d) supervise the Trust's fund accounting agent in the maintenance of the
Trust's general ledger and in the preparation of the Trust's financial
statements, including oversight of expense accruals and payments and the
determination of the net asset value of the Trust's assets and of the Trust's
shares, and of the declaration and payment of dividends and other distributions
to shareholders;
(e) calculate performance data of the Trust for dissemination to
information services covering the investment company industry;
(f) prepare and file the Trust's tax returns;
(g) examine and review the operations of the Trust's custodian and transfer
agent;
(h) coordinate the layout and printing of publicly disseminated
prospectuses and reports;
(i) prepare various shareholder reports;
(j) assist with the design, development and operation of new portfolios of
the Trust;
(k) coordinate shareholder meetings;
(l) provide general compliance services; and
(m) advise the Trust and its Trustees on matters concerning the Trust and
its affairs.
The foregoing, along with any additional services that EKIS shall agree in
writing to perform for the Trust hereunder, shall hereafter be referred to as
"Administrative Services." Administrative Services shall not include any duties,
functions, or services to be performed for the Trust by the Trust's investment
adviser, distributor, custodian or transfer agent pursuant to their agreements
with the Trust.
3. Expenses. EKIS shall be responsible for expenses incurred in providing
office space, equipment and personnel as may be necessary or convenient to
provide the Administrative Services to the Trust. The Trust shall be responsible
for all other expenses incurred by EKIS on behalf of the Trust, including
without limitation postage and courier expenses, printing expenses, registration
fees, filing fees, fees of outside counsel and independent auditors, insurance
premiums, fees payable to Trustees who are not EKIS employees, and trade
association dues.
4. Compensation. For the Administrative Services provided, the Trust hereby
agrees to pay and EKIS hereby agrees to accept as full compensation for its
services rendered hereunder an administrative fee, calculated daily and payable
monthly, at an annual rate determined in accordance with the table below.
Aggregate Daily Net Assets of
Funds Administered by EKIS
For Which any Affiliate of First Union
Administrative National Bank of North Carolina
Fee Serves as Investment Adviser
.050% on the first $7 billion
.035% on the next $3 billion
.030% on the next $5 billion
.020% on the next $10 billion
.015% on the next $5 billion
.010% on assets in excess of $30 billion
Each portfolio of the Trust shall pay a portion of the administrative fee
equal to the rate determined above times that portfolios average annual daily
net assets.
5. Responsibility of Administrator. EKIS shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. EKIS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the Trust) on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Any person, even though also an officer,
director, partner, employee or agent of EKIS, who may be or become an officer,
trustee, employee or agent of the Trust, shall be deemed, when rendering
services to the Trust or acting on any business of the Trust (other than
services or business in connection with the duties of EKIS hereunder) to be
rendering such services to or acting solely for the Trust and not as an officer,
director, partner, employee or agent or one under the control or direction of
EKIS even though paid by EKIS.
6. Duration and Termination.
(a) This Agreement shall be in effect until June 30, 1998, and shall
continue in effect from year to year thereafter, provided it is approved, at
least annually, by a vote of a majority of Trustees of the Trust including a
majority of the disinterested Trustees.
(b) This Agreement may be terminated at any time, without payment of any
penalty, on sixty (60) day's prior written notice by a vote of a majority of the
Trust's Trustees or by EKIS.
7. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. Notices. Notices of any kind to be given to the Trust hereunder by EKIS
shall be in writing and shall be duly given if delivered to the Trust and to its
investment adviser at the following address: First Union National Bank of North
Carolina, One First Union Center, Charlotte, NC 28288. Notices of any kind to be
given to EKIS hereunder by the Trust shall be in writing and shall be duly given
if delivered to EKIS at 200 Berkeley Street, Boston MA, Attention: Chief
Administrative Officer.
9. Limitation of Liability. EKIS is hereby expressly put on notice of the
limitation of liability as set forth in Article IX of the Declaration of Trust
and agrees that the obligations pursuant to this Agreement of a particular
portfolio and of the Trust with respect to that particular portfolio be limited
solely to the assets of that particular portfolio, and EKIS shall not seek
satisfaction of any such obligation from the assets of any other portfolio, the
shareholders of any portfolio, the Trustees, officers, employees or agents of
the Trust, or any of them.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section 5
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by New
York law; provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
EVERGREEN INVESTMENT TRUST
By_____________________ Its: President
Attest:____________________
Its:_______________________
EVERGREEN KEYSTONE INVESTMENT SERVICES, INC.
By_____________________ Its:__________________
Attest:____________________
Its:_______________________
<PAGE>
SCHEDULE A
Evergreen Investment Trust
-Evergreen Emerging Markets Growth Fund
-Evergreen International Equity Fund
-Evergreen Balanced Fund
-Evergreen Value Fund
-Evergreen Utility Fund
-Evergreen Short-Intermediate Bond Fund
-Evergreen U.S. Government Fund
-Evergreen Florida Municipal Bond Fund
-Evergreen Georgia Municipal Bond Fund
-Evergreen North Carolina Municipal Bond Fund
-Evergreen South Carolina Municipal Bond Fund
-Evergreen Virginia Municipal Bond Fund
-Evergreen High Grade Tax Free Fund
-Evergreen Treasury Money Market Fund
SUB-ADMINISTRATOR AGREEMENT
This Sub-Administrator Agreement is made as of this 1st day of January,
1997 between Evergreen Keystone Investment Services, a Delaware Corporation
(herein called "EKIS"), and BISYS Fund Services Limited Partnership DBA as BISYS
Fund Services, an Ohio Limited Partnership (herein called "BISYS").
WHEREAS, EKIS has been appointed as investment adviser or administrator to
certain open-end management investment companies, or to one or more separate
investment series thereof, listed on Schedule A, as the same may be amended from
time to time to reflect additions or deletions of such companies or series,
which are registered under the Investment Company Act of 1940 (the "Funds");
WHEREAS, in its capacity as investment adviser or administrator to the
Funds, EKIS has the obligation to provide, or engage others to provide, certain
administrative services to the Funds; and
WHEREAS, EKIS desires to retain BISYS as Sub-Administrator to the Funds for
the purpose of providing the Funds with personnel to act as officers of the
Funds and to provide certain administrative services in addition to those
provided by EKIS ("Sub-Administrative Services"), and BISYS is willing to render
such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. Appointment of Sub-Administrator. EKIS hereby appoints BISYS as
Sub-Administrator for the Funds on the terms and conditions set forth in this
Agreement and BISYS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in consideration of
the compensation provided for in Section 4 hereof.
2. Services and Duties. As Sub-Administrator, and subject to the
supervision and control of EKIS and the Trustees or Directors of the Funds,
BISYS will hereafter provide facilities, equipment and personnel to carry out
the following Sub-Administrative services to assist in the operation of the
business and affairs of the Funds:
(a) provide individuals reasonably acceptable to the Funds for nomination,
appointment or election as officers of the Funds and who will be responsible for
the management of certain of each Fund's affairs as determined from time to time
by the Trustees or Directors of the Funds;
(b) review filings with the Securities and Exchange Commission and state
securities authorities that have been prepared on behalf of the Funds by the
administrator and take such actions as may be reasonably requested by the
administrator to effect such filings;
(c) verify, authorize and transmit to the custodian, transfer agent and
dividend disbursing agent of each Fund all necessary instructions for the
disbursement of cash, issuance of shares, tender and receipt of portfolio
securities, payment of expenses and payment of dividends; and
(d) advise the Trustees or Directors of the Funds on matters concerning the
Funds and their affairs.
BISYS may, in addition, agree in writing to perform additional
Sub-Administrative Services for the Funds. Sub-Administrative Services shall not
include investment advisory services or any duties, functions, or services to be
performed for the Funds by their distributor, custodian or transfer agent
pursuant to their agreements with the Funds.
3. Expenses. BISYS shall be responsible for expenses incurred in providing
office space, equipment and personnel as may be necessary or convenient to
provide the Sub-Administrative Services to the Funds. EKIS and/or the Funds
shall be responsible for all other expenses incurred by BISYS on behalf of the
Funds pursuant to this Agreement at the direction of EKIS, including without
limitation postage and courier expenses, printing expenses, registration fees,
filing fees, fees of outside counsel and independent auditors, insurance
premiums, fees payable to Trustees or Directors who are not BISYS employees, and
trade association dues.
4. Compensation. For the Sub-Administrative Services provided, EKIS hereby
agrees to pay and BISYS hereby agrees to accept as full compensation for its
services rendered hereunder a sub- administrative fee, calculated daily and
payable monthly at an annual rate based on the aggregate average daily net
assets of the Funds, or separate series thereof, set forth on Schedule A and
determined in accordance with the table below.
Aggregate Daily Net Assets of Funds For
Which KIMCO, Evergreen Asset Management
Sub-Administrative Corp., First Union National Bank of North
Fee as a % of Carolina or any Affiliates Thereof Serve as
Average Annual Investment Adviser or Administrator And For
Daily Net Assets Which BISYS Serves as Sub-Administrator
.0100% on the first $7 billion
.0075% on the next $3 billion
.0050% on the next $15 billion
.0040% on assets in excess of $25 billion
5. Indemnification and Limitation of Liability of BISYS. The duties of
BISYS shall be limited to those expressly set forth herein or later agreed to in
writing by BISYS, and no implied duties are assumed by or may be asserted
against BISYS hereunder. BISYS shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. (As used in this Section, the term "BISYS" shall include partners,
officers, employees and other agents of BISYS as well as BISYS itself).
So long as BISYS acts in good faith and with due diligence and without
negligence, EKIS shall indemnify BISYS and hold it harmless from any and all
actions, suits and claims, and from any and all losses, damages, costs, charges,
reasonable counsel fees and disbursements, payments, expenses and liabilities
(including reasonable investigation expenses) arising directly or indirectly out
of BISYS' actions taken or nonactions with respect to the performance of
services hereunder. The indemnity and defense provisions set forth herein shall
survive the termination of this Agreement for a period of three years.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case EKIS maybe asked to indemnify or hold BISYS
harmless, EKIS shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood that BISYS
will use all reasonable care to identify and notify EKIS promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against EKIS.
EKIS shall be entitled to participate at its own expense or, if it so
elects, to assume the defense of any suit brought to enforce any claims subject
to this indemnity provision. If EKIS elects to assume the defense of any such
claim, the defense shall be conducted by counsel chosen by EKIS and satisfactory
to BISYS, whose approval shall not be unreasonably withheld. In the event that
EKIS elects to assume the defense of any suit and retain counsel, BISYS shall
bear the fees and expenses of any additional counsel retained by it. If EKIS
does not elect to assume the defense of a suit, it will reimburse BISYS for the
reasonable fees and expenses of any counsel retained by BISYS.
BISYS may apply to EKIS at any time for instructions and may consult
counsel for EKIS or its own counsel and with accountants and other experts with
respect to any matter arising in connection with BISYS' duties, and BISYS shall
not be liable or accountable for any action taken or omitted by it in good faith
in accordance with such instruction or with the opinion of such counsel,
accountants or other experts.
Any person, even though also an officer, director, partner, employee or
agent of BISYS, who may be or become an officer, trustee, employee or agent of
the Funds, shall be deemed, when rendering services to a Fund or acting on any
business of a Fund (other than services or business in connection with the
duties of BISYS hereunder) to be rendering such services to or acting solely for
the Fund and not as an officer, director, partner, employee or agent or one
under the control or direction of BISYS even though paid by BISYS.
6. Duration and Termination.
(a) The initial term of this Agreement (the "Initial Term") shall commence
on the date this Agreement is executed by both parties, shall continue until
April 30, 1998, and shall continue in effect for a Fund from year to year
thereafter, provided it is approved, at least annually, by a vote of a majority
of Directors/Trustees of the Funds, including a majority of the disinterested
Directors/Trustees. In the event of' any breach of this Agreement by either
party, the non-breaching party shall notify the breaching party in writing of
such breach and upon receipt of such notice, the breaching party shall have 45
days to remedy the breach except in the case of a breach resulting from fraud or
other acts which materially and adversely affects the operations or financial
position of the Funds. In the event any material breach is not remedied within
such time period, the nonbreaching party may immediately terminate this
Agreement.
Notwithstanding the foregoing, after such termination for so long as BISYS,
with the written consent of EKIS, in fact continues to perform any one or more
of the services contemplated by this Agreement or any schedule or exhibit
hereto, the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force and
effect. Compensation due BISYS and unpaid by EKIS upon such termination shall be
immediately due and payable upon and notwithstanding such termination. BISYS
shall be entitled to collect from EKIS, in addition to the compensation
described herein, all costs reasonably incurred in connection with BISYS's
activities in effecting such termination, including without limitation, the
delivery to the Funds and/or their designees of each Fund's property, records,
instruments and documents, or any copies thereof. To the extent that BISYS may
retain in its possession copies of any Fund documents or records subsequent to
such termination which copies had not been requested by or on behalf of a Fund
in connection with the termination process described above, BISYS will provide
such Fund with reasonable access to such copies; provided, however, that, in
exchange therefor, EKIS shall reimburse BISYS for all costs reasonably incurred
in connection therewith.
(b) Subject to (c) below, this Agreement may be terminated at any time,
without payment of any penalty, on sixty (60) day's prior written notice by
KIMCO, or by BISYS and, with respect to one or more of the Funds a vote of a
majority of such Fund's or Funds' Directors/Trustees.
(c) If, during the first six months this Agreement is in effect it is
terminated for a Fund or Funds in accordance with (b) above, for any reason
other than a material breach of this Agreement, the merger of a Fund or Funds
for which KIMCO, Evergreen Asset Management Corp., First Union National Bank of
North Carolina or any affiliates thereof act as investment adviser, or any other
event that leads to the termination of the existence of a Fund or Funds, and
BISYS is replaced as sub-administrator, then EKIS shall make a one-time cash
payment to BISYS equal to the unpaid balance due BISYS for the first six-months
this Agreement in effect, assuming for purposes of calculation of the payment
that the asset level of each Fund on the date BISYS is replaced will remain
constant for the balance of such term. Once this Agreement has been in effect
for more than six months from the commencement date, this paragraph (c) shall be
null, void and of no further effect.
7. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. Notices. Notices of any kind to be given to EKIS hereunder by BISYS
shall be in writing and shall be duly given if delivered to EKIS at the
following address: Evergreen Asset Management Corp., 2500 Westchester Avenue,
Purchase, New York 10577, ATT: Legal Department. Notices of any kind to be given
to BISYS hereunder by EKIS or the Funds shall be in writing and shall be duly
given if delivered to BISYS at 3435 Stelzer Road, Columbus, Ohio 43219
Attention: George O. Martinez, Senior Vice President.
9. Limitation of Liability. BISYS is hereby expressly put on notice of the
limitations of liability as set forth in the Declarations of Trust of the Funds
that are Massachusetts business trusts or series thereof and agrees that the
obligations pursuant to this Agreement of a particular Fund be limited solely to
the assets of that particular Fund, and BISYS shall not seek satisfaction of any
such obligation from the assets of any other Fund, the shareholders of any Fund,
the Trustees, officers, employees or agents of any Fund, or any of them.
10. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. Subject to the provisions of Section 5
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and shall be governed by New
York law; provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
EVERGREEN KEYSTONE INVESTMENT SERVICES
By__________________________________________
Its:________________________________________
Attest:_________________
BISYS FUND SERVICES LIMITED PARTNERSHIP
By___________________________________________
BISYS FUND SERVICES, INC., its General Partner
Attest:________________________
<PAGE>
SCHEDULE A
Evergreen Trust on behalf of:
Evergreen Fund
The Evergreen Aggressive Growth Fund
The Evergreen Total Return Fund
The Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Money Market Trust on behalf of:
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
The Evergreen American Retirement Trust on behalf of:
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
The Evergreen Municipal Trust on behalf of:
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Tax Exempt Money Market Fund
Evergreen Florida High Income Municipal Bond Fund
Evergreen Institutional Tax-Exempt Money Market Fund
Evergreen Equity Trust on behalf of:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
Evergreen Foundation Trust on behalf of:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Investment Trust on behalf of:
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short-Intermediate Bond Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund
Evergreen U.S. Government Fund
Evergreen Variable Trust on behalf of:
Evergreen VA Foundation Fund
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Global Leaders Fund
Evergreen VA Strategic Income Fund
Evergreen VA Aggressive Growth Fund
Evergreen Tax Free Trust on behalf of:
Evergreen New Jersey Tax-Free Income Fund
Evergreen Pennsylvania Tax-Exempt Money Market Fund
Evergreen Lexicon Fund on behalf of:
Evergreen Fixed Income Fund
Evergreen Short-Intermediate U.S. Government Securities Fund
Keystone America Hartwell Emerging Growth Fund ("Emerging Growth")
Keystone Balanced Fund II ("Balanced Fund")
Keystone Capital Preservation and Income Fund ("Capital Preservation and
Income")
Keystone Emerging Markets Fund ("Emerging Markets")
Keystone Fund For Total Return ("Total Return")
Keystone Fund of the Americas ("Fund of the Americas")
Keystone Global Opportunities Fund ("Global Opportunities")
Keystone Global Resources and Development Fund ("Global Resources")
Keystone Government Securities Fund ("Government Securities")
Keystone Intermediate Term Bond Fund ("Intermediate Term")
Keystone Liquid Trust ("Liquid Trust")
Keystone Omega Fund ("Omega")
Keystone Small Company Growth Fund II ("Small Company Growth")
Keystone State Tax Free Fund ("State Tax Free")
- Florida Tax Free Fund ("Florida Tax Free")
- Massachusetts Tax Free Fund ("Massachusetts Tax Free")
- Pennsylvania Tax Free Fund ("Pennsylvania Tax Free")
- New York Insured Tax Free Fund ("New York Insured")
Keystone State Tax Free Fund-Series II ("State Tax Free II")
- California Insured Tax Free Fund ("California Insured")
- Missouri Tax Free Fund ("Missouri Tax Free")
Keystone Strategic Income Fund ("Strategic Income")
Keystone Tax Free Income Fund ("Tax Free Income")
Keystone Quality Bond Fund (B-1) ("B-1")
Keystone Diversified Bond Fund (B-2) ("B-2")
Keystone High Income Bond Fund (B-4) ("B-4")
Keystone Balanced Fund (K-1) ("K-1")
Keystone Strategic Growth Fund (K-2) ("K-2")
Keystone Growth and Income Fund (S-1) ("S-1")
Keystone Mid-Cap Growth Fund (S-3) ("S-3")
Keystone Small Company Growth Fund (S-4) ("S-4")
Keystone Institutional Adjustable Rate Fund ("Adjustable Rate")
Keystone Institutional Trust ("Institutional")
Keystone International Fund Inc. ("International")
Keystone Precious Metals Holdings, Inc. ("Precious Metals")
Keystone Tax Free Fund ("Tax Free")
THE EVERGREEN FUNDS
DEFERRED COMPENSATION PLAN
AGREEMENT, made on this ___ day of ___________, 1995, by and
between the registered open-end investment companies listed in
Attachment A hereto (each a "Fund" and together, the "Funds"), and
___________ (the "Trustee").
WHEREAS, the Trustee is serving as a director/trustee of the
Funds for which he is entitled to receive trustees' fees; and
WHEREAS, the Funds and the Trustee desire to permit the
Trustee to defer receipt of trustees' fees payable by the Funds;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations set forth in this Agreement, the Funds and the Trustee
hereby agree as follows:
1. DEFINITION OF TERMS AND CONDITIONS
1.1 Definitions. Unless a different meaning is plainly implied
by the context, the following terms as used in this Agreement shall
have the meanings specified below:
(a) "Beneficiary" shall mean such person or persons
designated pursuant to Section 4.3 hereof to receive benefits after
the death of the Trustee.
(b) "Board of Trustees" shall mean the Board of
Trustees or the Board of Directors of a Fund.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time, or any successor statute.
(d) "Compensation" shall mean the amount of trustees'
fees paid by a Fund to the Trustee during a Deferral Year prior to
reduction for Compensation Deferrals made under this Agreement.
(e) "Compensation Deferral" shall mean the amount or
amounts of the Trustee's Compensation deferred under the provisions
of Section 3 of this Agreement.
(f) "Deferral Account" shall mean the account
maintained to reflect the Trustee's Compensation Deferrals made
pursuant to Section 3 hereof and any other credits or debits thereto.
(g) "Deferral-Year" shall mean each calendar year
during which the Trustee makes, or is entitled to make, Compensation
Deferrals under Section 3 hereof.
(h) "Valuation Date" shall mean the last business day
of each calendar year and any other day upon which a Fund makes a
valuation of the Deferred Account.
1.2 Plurals and Gender. Where appearing in this Agreement the
singular shall include the plural and the masculine shall include the
feminine, and vice versa, unless the context clearly indicates a
different meaning.
1.3 Trustees and Directors. Where appearing in this Agreement,
"Trustee" shall also refer to "Director" and trustee emeritus and
director emeritus and "Board of Trustees" shall also refer to "Board of
Directors."
1.4 Headings. The headings and subheadings in this Agreement are
inserted for the convenience of reference only and are to be ignored in
any construction of the provisions hereof.
1.5 Separate Agreement for Each Fund. This Agreement is
drafted, and shall be construed, as a separate agreement between the
Trustee and each of the Funds.
2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED
2.1 Commencement of Compensation Deferrals. The Trustee may elect,
on a form provided by, and submitted to, the Secretary of a Fund, to
commence Compensation Deferrals under Section 3 hereof for the period
beginning on the later of (i) the date this Agreement is executed or
(ii) the date such form is submitted to the Secretary of the Fund.
2.2 Termination of Deferrals. The Trustee shall not be eligible to
make Compensation Deferrals after the earlier of the following dates:
(a) The date on which he ceases to serve as a Trustee of
the Fund; or
(b) The effective date of the termination of this
Agreement.
3. COMPENSATION DEFERRALS
3. Compensation Deferral Elections.
(a) Except as provided below, a deferral election on the form
described in Section 2.1 hereof, must be filed with the Secretary of a
Fund prior to the first day of the Deferral Year to which it applies.
The form shall set forth the amount of such Compensation Deferral (in
whole percentage amounts) . Such election shall continue in effect for
all subsequent Deferral Years unless it is canceled or modified as
provided below. Notwithstanding the foregoing, (i) any person who is
elected to the Board during a fiscal year of a Fund may elect before
becoming a Trustee or within 30 days after becoming a Trustee to defer
any unpaid portion of the retainer of such fiscal year and the fees for
any future meetings during such fiscal year by filing an election form
with the Secretary of the Fund, and (ii) Trustees may elect to defer any
unpaid portion of the retainer for the fiscal year in which Deferred
Compensation Agreements are first authorized by the Board and any unpaid
fees for any future meetings during such fiscal year by submitting an
election form to the Secretary of a Fund within 30 days of such
authorization.
(b) Compensation Deferrals shall be withheld from each
payment of Compensation by a Fund to the Trustee based upon the
percentage amount elected by the Trustee under Section 3.1 (a) hereof.
(c) The Trustee may cancel or modify the amount of his
Compensation Deferrals on a prospective basis by submitting to the
Secretary of a Fund a revised compensation Deferral election form.
Subject to the provisions of Section 4.2 hereof, such change will be
effective as of the first day of the Deferral Year following the date
such revision is submitted to the Secretary of the Fund.
3.2 Valuation of Deferral Account.
(a) A Fund shall establish a bookkeeping Deferral Account to
which will be credited an amount equal to the Trustee's Compensation
Deferrals under this Agreement. Compensation Deferrals shall be
allocated to the Deferral Account on the day such Compensation
Deferrals are withheld from the Trustee's Compensation and shall be
deemed invested pursuant to Section 3.3, below, as of the same day. The
Deferral Account shall be debited to reflect any distributions from
such Account. Such debits shall be allocated to the Deferral Account as
of the date such distributions are made.
(b) As of each Valuation Date, income, gain and loss
equivalents (determined as if the Deferral Account is invested in the
manner set forth under Section 3.3, below) attributable to the period
following the next preceding Valuation Date shall be credited to and/or
deducted from the Trustees Deferral Account.
3.3 Investment of Deferral Account Balance
(a) (1) The Trustee may select from various options made
available by the Funds the investment media in which all or part of his
Deferral Account shall be deemed to be invested. The investment media
available to the Trustee as of the date of this Agreement are listed in
Attachment B hereto.
(2) The Trustee shall make an investment designation on
a form provided by the Secretary of the Funds (Attachment C) which
shall remain effective until another valid designation has been made by
the Trustee as herein provided. The Trustee may amend his investment
designation daily by giving instructions to the Secretary of the Funds.
(3) Any changes to the investment media to be made
available to the Trustee, and any limitation on the maximum or minimum
percentages of the Trustee's Deferral Account that may be invested in
any particular medium, shall be communicated from time-to-time to the
Trustee by the Secretary of the Funds.
(b) Except as provided below, the Trustee's Deferral
Account shall be deemed to be invested in accordance with his
investment designations, provided such designations conform to the
provisions of this Section. If:
(1) the Trustee does not furnish the secretary of the
Funds with complete, written investment instructions, or
(2) the written investment instructions from the
Trustee are unclear,
then the Trustee's election to make Compensation Deferrals hereunder
shall be held in abeyance and have no force and effect, and he shall be
deemed to have selected the Evergreen Money Market Fund until such time
as the Trustee shall provide the Secretary of the Funds with complete
investment instructions. In the event that any fund under which any
portion of the Trustee's Deferral Account is deemed to be invested
ceases to exist, such portion of the Deferral Account thereafter shall
be held in the successor to such Fund, subject to subsequent deemed
investment elections.
The use of the returns on the investment media to determine
the amount of the earnings credited to a Trustee's Deferral Account is
subject to regulatory approval. Until such approval is received, the
Compensation Deferrals of a Trustee Under this Agreement shall be
continuously credited with earnings in an amount determined by
multiplying the balance credited to the Deferral Account by an interest
rate equal to the yield on 90-day U.S. Treasury Bills.
The Secretary of the Funds shall provide an annual statement
to the Trustee showing such information as is appropriate, including the
aggregate amount in the Deferral Account, as of a reasonably current
date.
4. DISTRIBUTION FROM DEFERRAL ACCOUNT
4.1 In General. Distributions from the Trustee's Deferral Account
may be paid in a lump sum or in installments as elected by the Trustee
commencing on or as soon as practicable after a date specified by the
Trustee, which may not be sooner than the earlier of the first business
day of January following (a) a date five years following the deferral
election, or (b) the year in which the Trustee ceases to be a member of
the Board of Trustees of the Funds. Notwithstanding the foregoing, in
the event of the liquidation, dissolution or winding up of a Fund or the
distribution of all or substantially all of a Fund's assets and property
relating to one or more series of its shares to the shareholders of such
series (for this purpose a sale, conveyance or transfer of a Fund's
assets to a trust, partnership, association or corporation in exchange
for cash shares or other securities with the transfer being made subject
to, or with the assumption by the transferee of, the liabilities of the
Fund shall not be deemed a termination of the Fund or such a
distribution), all unpaid amounts in the Deferral Account as of the
effective date thereof shall be paid in a lump sum on such effective
date. In addition, upon application by a Trustee and determination by
the Chairman of the Board of Trustees of the Funds that the Trustee has
suffered a severe and unanticipated financial hardship, the Secretary
shall distribute to the Trustee, in a single lump sum, an amount equal
to the lesser of the amount needed by the Trustee to meet the hardship
plus applicable income taxes payable upon such distribution, or the
balance of the Trustee's Deferral Account.
4.2 Death Prior to Complete Distribution of Deferral Account. Upon
the death of the Trustee (whether prior to or after the commencement of
the distribution of the amounts credited to his Deferral Account), the
balance of such Account shall be distributed to his Beneficiary in a
lump sum as soon as practicable after the Trustee's death.
4.3 Designation of Beneficiary. For purposes of Section 4.3 hereof,
the Trustee's Beneficiary shall be the person or persons so designated
by the Trustee in a written instrument submitted to the Secretary of the
Funds. In the event the Trustee fails to properly designate a
Beneficiary, his Beneficiary shall be the person or persons in the first
of the following classes of successive preference Beneficiaries
Surviving at the death of the Trustee: the Trustees (1) surviving
spouse, or (2) estate.
5. AMENDMENT AND TERMINATION
5.1 The Board of Trustees may at any time in its sole discretion
amend or terminate this Plan; provided however, that no Such amendment
or termination shall adversely affect the right of Trustees to receive
amounts previously credited to their Deferral Accounts.
6. MISCELLANEOUS
6.1 Rights of Creditors.
(a) This Agreement is an unfunded and non-qualified deferred
compensation arrangement. Neither the Trustee nor other persons shall
have any interest in any specific asset or assets of a Fund by reason of
any Deferral Account hereunder, nor any rights to receive distribution
of his Deferral Account except as and to the extent expressly provided
hereunder. A Fund shall not be required to purchase, hold or dispose of
any investments pursuant to this Agreement; however, if in order to
cover its obligations hereunder the Fund elects to purchase any
investments the same shall continue for all purposes to be a part of the
general assets and property of the Fund, subject to the claims of its
general creditors and no person other than the Fund shall by virtue of
the provisions of this Agreement have any interest in such assets other
than an interest as a general creditor.
(b) The rights of the Trustee and the Beneficiaries to the amounts
held in the Deferral Account are unsecured and shall be subject to the
creditors of the Funds. With respect to the payment of amounts held
under the Deferral Account, the Trustee and his Beneficiaries have the
status of unsecured creditors of the Funds. This Agreement is executed
on behalf of the Fund by an officer of a Fund as such and not
individually. Any obligation of a Fund hereunder shall be an unsecured
obligation of the Fund and not of any other person.
6.2 Agents. The Funds may employ agents and provide for such
clerical, legal, actuarial, accounting, advisory or other services as
they deem necessary to perform their duties under this Agreement. The
Funds shall bear the cost of such services and all other expenses they
incur in connection with the administration of this Agreement.
6.3 Incapacity. If a Fund shall receive evidence satisfactory to
it that the Trustee or any Beneficiary entitled to receive any benefit
under this Agreement is, at the time when such benefit becomes payable,
a Minor, or is physically or mentally incompetent to give a valid
release therefor, and that another person or an institution is then
maintaining or has custody of the Trustee or Beneficiary and that no
guardian, committee or other representative of the estate of the Trustee
or Beneficiary shall have been duly appointed, the Fund may make payment
of such benefit otherwise payable to the Trustee or Beneficiary to such
other person or institution, including a custodian under a Uniform Gifts
to Minors Act, or corresponding legislation (who shall be a guardian of
the minor or a trust company), and the release of such other person or
institution shall be a valid and complete discharge for the payment of
such benefit.
6.4 Cooperation of Parties. All parties to this Agreement and any
person claiming any interest hereunder agree to perform any and all acts
and execute any and all documents and papers which are necessary or
desirable for carrying out this Agreement or any of its provisions.
6.5 Governing Law. This Agreement is made and entered into in the
State of North Carolina and all matters concerning its validity,
construction and administration shall be governed by the laws of the
State of North Carolina.
6.6 No Guarantee of Trusteeship. Nothing contained in this
Agreement shall be construed as a guaranty or right of any Trustee to be
continued as a Trustee of one or more of the Evergreen Funds (or of a
right of a Trustee to any specific level of Compensation) or as a
limitation of the right of any of the Evergreen Funds, by shareholder
action or otherwise, to remove any of its trustees.
6.7 Counsel. The Funds may consult with legal counsel with respect
to the meaning or construction of this Agreement, their obligations or
duties hereunder or with respect to any action or proceeding or any
question of law, and they shall be fully protected with respect to any
action taken or omitted by them in good faith pursuant to the advice of
legal counsel.
6.8 Spendthrift Provision. The Trustees' and Beneficiaries'
interests in the Deferral Account shall not be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charges
and any attempt so to anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void; nor shall any portion
of any such right hereunder be in any manner payable to any assignee,
receiver or trustee, or be liable for such person's debts, contracts,
liabilities, engagements or torts, Or be subject to any legal process to
levy upon or attach.
6.9 Notices. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or by nationally recognized overnight
delivery service, addressed to the Trustee at the home address set forth
in the Funds' records and to a Fund at its principal place of business,
provided that all notices to a Fund shall be directed to the attention
of the Secretary of the Fund or to such other address as either party
may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon
receipt.
6.10 Entire Agreement. This Agreement contains the entire
understanding between the Funds and the Trustee with respect to the
payment of non-qualified elective deferred compensation by the Funds to
the Trustee.
6.11 Interpretation of Agreement. Interpretation of, and
determinations related to, this Agreement made by the Funds in good
faith, including any determinations of the amounts of the Deferral
Account, shall be conclusive and binding upon all parties; and a Fund
shall not incur any liability to the Trustee for any such interpretation
or determination so made or for any other action taken by it in
connection with this Agreement in good faith.
6.12 Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the Funds and their successors and
assigns and to the Trustees and his heirs, executors, administrators and
personal representatives.
6.13 Severability. In the event any one or more provisions of this
Agreement are held to be invalid or unenforceable, such illegality or
unenforceability shall not affect the validity or enforceability of the
other provisions hereof and such other provisions shall remain in full
force and effect unaffected by such invalidity or unenforceability.
6.14 Execution of Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
EVERGREEN TRUST
EVERGREEN EQUITY TRUST
EVERGREEN INVESTMENT TRUST
EVERGREEN TOTAL RETURN FUND
EVERGREEN GROWTH AND INCOME FUND
THE EVERGREEN AMERICAN RETIREMENT
TRUST
EVERGREEN FOUNDATION TRUST
EVERGREEN MUNICIPAL TRUST
EVERGREEN MONEY MARKET FUND
EVERGREEN LIMITED MARKET FUND, INC.
By:
________________ ____________________
Witness John J. Pileggi
President
________________ ____________________
Witness Trustee
<PAGE>
ATTACHMENT A
EVERGREEN TRUSTS & FUNDS
1. EVERGREEN TRUST
a. Evergreen Fund
b. Evergreen Aggressive Growth Fund
2. EVERGREEN EQUITY TRUST
a. Evergreen Global Real Estate Equity Fund
b. Evergreen U.S. Real Estate Equity Fund
C. Evergreen Global Leaders Fund
3. EVERGREEN INVESTMENT TRUST
a. Evergreen International Equity Fund
b. Evergreen Emerging Markets Growth Fund
C. Evergreen Balanced Fund
d. Evergreen Value Fund
e. Evergreen Utility Fund
f. Evergreen U.S. Government Fund
g. Evergreen Fixed Income Fund
h. Evergreen Managed Bond Fund (Y Shares only)
i. Evergreen High Grade Tax Free Fund
J. Evergreen Florida Municipal Bond Fund
k. Evergreen Georgia Municipal Bond Fund
1. Evergreen North Carolina Municipal Bond Fund
M. Evergreen South Carolina Municipal Bond Fund
n. Evergreen Virginia Municipal Bond Fund
0. Evergreen Treasury Money Market
4. EVERGREEN TOTAL RETURN FUND
5. EVERGREEN GROWTH AND INCOME FUND
6. THE EVERGREEN AMERICAN RETIREMENT TRUST
a. Evergreen American Retirement Fund
b. Evergreen Small Cap Equity Income Fund
7. EVERGREEN FOUNDATION TRUST
a. Evergreen Foundation Fund
b. Evergreen Tax Strategic Foundation Fund
8. EVERGREEN MUNICIPAL TRUST
a. Evergreen Short-intermediate municipal Fund
b. Evergreen Short-intermediate Municipal Fund-California
C. Evergreen Florida High Income Municipal Fund
d. Evergreen Tax Exempt Money Market Fund
9. EVERGREEN MONEY MARKET FUND
10. EVERGREEN LIMITED MARKET FUND, INC.
ATTACHMENT B
EVERGREEN TRUSTS & FUNDS
Available Fund Options
Evergreen International Equity Fund
Evergreen Aggressive Growth Fund
Evergreen Fund
Evergreen Foundation Fund
Evergreen Growth & Income
Evergreen Value
Evergreen Fixed Income
Evergreen Money Market Fund
<PAGE>
ATTACHMENT C
DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION FORM
TO: The Secretary of The Evergreen Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
"Agreement") dated as of November __, 1995 by and between the
undersigned and The Evergreen Funds, I hereby make the following
elections:
Deferral of Compensation
Starting with Compensation to be paid to me with respect to
services provided by me to The Evergreen Funds after the date this
election form is provided to The Evergreen Funds, and for all periods
thereafter (unless subsequently amended by way of a new election form),
I hereby elect that ___ percent (__%) of my Compensation (as defined
under the Agreement) be deferred and that the Funds establish a
bookkeeping account credited with amounts equal to the amount so
deferred (the "Deferral Account"), The Deferral Account shall be
further credited with income equivalents as provided under the
Agreement. Each Compensation Deferral (as defined in the Agreement)
shall be deemed invested pursuant to Section 3.3 of the Agreement as of
the same day it would have been paid to me.
I wish the Compensation Deferral to be invested in the Funds
and percentages noted in Annex A to this Form.
I understand that the amounts held in the Deferral Account
shall remain the general assets of The Evergreen Funds and that, with
respect to the payment of such amounts, I am merely a general creditor
of The Evergreen Funds. I may not sell, encumber, pledge, assign or
otherwise alienate the amounts held under the Deferral Account.
<PAGE>
Distribution from Deferral Account
I hereby elect that distributions from my Deferral Account be
paid:
______ in a lump sum or
______ in quarterly installments for ___ years (specify a
number of years not to exceed ten); commencing on the first business
day of January following:
______ the year in which I cease to be a member of the
Board of Trustees of the Funds, or
______ a calendar year but not a year earlier than 2000.
I hereby agree that the terms of the Agreement are incorporated
herein and are made a part hereof. Dated as of the day and year first
above written.
WITNESS: TRUSTEE:
__________________ __________________
RECEIVED:
THE EVERGREEN FUNDS
By:____________________
Name:__________________
Title:_________________
Date:__________________
<PAGE>
ANNEX A
I desire that my deferred Compensation be invested as follows:
Evergreen International Equity Fund %_____
Evergreen Aggressive Growth Fund %_____
Evergreen Fund %_____
Evergreen Foundation Fund %_____
Evergreen Growth & Income Fund %_____
Evergreen Value %_____
Evergreen Fixed Income %_____
Evergreen Money Market Fund %_____
______________________
100% of Deferred
Compensation Amount
<PAGE>
ATTACHMENT D
THE EVERGREEN FUNDS
DEFERRED COMPENSATION PLAN
DESIGNATION OF BENEFICIARY
You may designate one or more beneficiaries to receive any
amount remaining in your Deferral Account at your death. If your
Designated Beneficiary survives you, but dies before receiving the full
amount of the Deferral Account to which he or she is entitled, the
remainder will be paid to the Designated Beneficiary's estate, unless
you specifically elect otherwise in your Designation of Beneficiary
form.
You may indicate the names not only of one or more primary
Designated Beneficiaries but also the names of secondary beneficiaries
who would receive amounts in your Deferral Account in the event the
primary beneficiary or beneficiaries are not alive at your death. In
the case of each Designated Beneficiary, give his or her name, address,
relationship to you, and the percentage of your Deferral Account he or
she is to receive. You may change your Designated Beneficiaries at any
time, without their consent, by filing a new Designation of Beneficiary
form with the Secretary of the Funds.
******************************************
As a participant in the Evergreen Funds' Deferred Compensation
Plan (the "Plan"), I hereby designate the person or persons listed
below to receive any amount remaining in my Deferral Account in the
event of my death. This designation of beneficiary shall become
effective upon its delivery to the Secretary of the Funds prior to my
death, and revokes any designation(s) of beneficiary previously made by
me. I reserve the right to revoke this designation of beneficiary at
any time without notice to any beneficiary.
I hereby name the following as primary Designated Beneficiaries
under the Plan:
_____________________________________________________________________
Name Relationship Percentage Address
_____________________________________________________________________
Name Relationship Percentage Address
_____________________________________________________________________
Name Relationship Percentage Address
_____________________________________________________________________
Name Relationship Percentage Address
In the event that one or more of my primary Designated
Beneficiaries predeceases mer his or her share shall be allocated among
the Surviving primary Designated Beneficiaries. I name the following as
secondary Designated Beneficiaries under the Plan, in the event that no
primary Designated Beneficiary survives me:
______________________________________________________________________
Name Relationship Percentage Address
______________________________________________________________________
Name Relationship Percentage Address
______________________________________________________________________
Name Relationship Percentage Address
______________________________________________________________________
Name Relationship Percentage Address
In the event that no primary Designated Beneficiary
survives me and one or more of the secondary Designated Beneficiaries
predeceases me, his or her share shall be allocated among the
surviving secondary Designated Beneficiaries.
___________________ _____________________
(witness) (Signature of Trustee)
Date: Date:
- ---------------------
EVERGREEN KEYSTONE
- ---------------------
[logo] FUNDS [logo]
- ---------------------
EVERGREEN KEYSTONE DISTRIBUTOR, INC.
230 PARK AVENUE
NEW YORK, NEW YORK 10169
December 12, 1996
Effective January 1, 1997
To Whom It May Concern:
You currently have a dealer agreement ("Agreement") with Evergreen
Keystone Distributor, Inc. ("Company"). Effective January 1, 1997 the
Agreement is amended and restated in its entirety as set forth below.
The Company, principal underwriter, invites you to participate in the
distribution of shares, including separate classes of shares, ("Shares") of
the Keystone Fund Family, the Keystone America Fund Family, the Evergreen Fund
Family and to the extent applicable their separate investment series
(collectively "Funds" and each individually a "Fund") designated by us which
are currently or hereafter underwritten by the Company, subject to the
following terms:
1. You will offer and sell Shares of the Funds at the public offering price
with respect to the applicable class described in the then current prospectus
and/or statement of additional information ("Prospectus") of the Fund whose
Shares you offer. You will offer Shares only on a forward pricing basis, i.e.
orders for the purchase, repurchase or exchange of Shares accepted by you
prior to the close of the New York Stock Exchange and placed with us the same
day prior to the close of our business day, 5:00 p.m. Eastern Time, shall be
confirmed at the closing price for that business day. You agree to place
orders for Shares only with us and at such closing price. In the event of a
difference between verbal and written price confirmation, the written
confirmations shall be considered final. Prices of a Fund's Shares are
computed by and are subject to withdrawal by each Fund in accordance with its
Prospectus. You agree to place orders with us only through your central order
department unless we accept your written Power of Attorney authorizing others
to place orders on your behalf. This Agreement on your part runs to us and the
respective Fund and is for the benefit and enforceable by each.
2. In the distribution and sale of Shares, you shall not have authority to act
as agent for the Fund, the Company or any other dealer in any respect in such
transactions. All orders are subject to acceptance by us and become effective
only upon confirmation by us. The Company reserves the unqualified right not
to accept any specific order for the purchase or exchange of Shares.
3. In addition to the distribution services provided by you with respect to a
Fund you may be asked to render administrative, account maintenance and other
services as necessary or desirable for shareholders of such Fund ("Shareholder
Services").
4. Notwithstanding anything else contained in this Agreement or in any other
agreement between us, the Company hereby acknowledges and agrees that any
information received from you concerning your customer in the course of this
arrangement is confidential. Except as requested by the customer or as
required by law and except for the respective Fund, its officers, directors,
employees, agents or service providers, the Company will not provide nor
permit access to such information by any person or entity, including any First
Union Corporation bank or First Union Brokerage Services, Inc.
5. So long as this Agreement remains in effect, we will pay you commissions on
sales of Shares of the Funds and service fees for Shareholder Services, in
accordance with the Schedule of Commissions and Service Fees ("Schedule")
attached hereto and made a part hereof, which Schedule may be modified from
time to time or rescinded by us, in either case without prior notice. You have
no vested right to receive any continuing service fees, other fees, or other
commissions which we may elect to pay to you from time to time on Shares
previously sold by you or by any person who is not a broker or dealer actually
engaged in the investment banking or securities business. You will receive
commissions in accordance with the attached Schedule on all purchase
transactions in shareholder accounts (excluding reinvestment of income
dividends and capital gains distributions) for which you are designated as
Dealer of Record except where we determine that any such purchase was made
with the proceeds of a redemption or repurchase of Shares of the same Fund or
another Fund, whether or not the transaction constitutes the exercise of the
exchange privilege. Commissions will be paid to you twice a month. You will
receive service fees for shareholder accounts for which you are designated
Dealer of Record as provided in the Schedule. You hereby represent that
receipt of such service fees by you will be disclosed to your customers.
You hereby authorize us to act as your agent in connection with all
transactions in shareholder accounts in which you are designated as Dealer of
Record. All designations of Dealer of Record and all authorizations of the
Company to act as your agent shall cease upon the termination of this
Agreement or upon the shareholder's instruction to transfer his or her account
to another Dealer of Record.
6. Payment for all Shares purchased from us shall be made to the Company and
shall be received by the Company within three business days after the
acceptance of your order or such shorter time as may be required by law. If
such payment is not received by us, we reserve the right, without prior
notice, forthwith to cancel the sale, or, at our option, to sell such Shares
back to the respective Fund in which case we may hold you responsible for any
loss, including loss of profit, suffered by us or by such Fund resulting from
your failure to make payment as aforesaid.
7. You agree to purchase Shares of the Funds only from us or from your
customers. If you purchase Shares from us, you agree that all such purchases
shall be made only to cover orders already received by you from your
customers, or for your own bonafide investment without a view to resale. If
you purchase Shares from your customers, you agree to pay such customers the
applicable net asset value per Share less any contingent deferred sales charge
("CDSC") that would be applicable under the Prospectus ("repurchase price").
8. You will sell Shares only (a) to your customers at the prices described in
paragraph 2 above; or (b) to us as agent for a Fund at the repurchase
price. In such a sale to us, you may act either as principal for your own
account or as agent for your customer. If you act as principal for your own
account in purchasing Shares for resale to us, you agree to pay your
customer not less nor more than the repurchase price which you receive from
us. If you act as agent for your customer in selling Shares to us, you
agree not to charge your customer more than a fair commission for handling
the transaction. You shall not withhold placing with us orders received
from your customers so as to profit yourself as a result of such
withholding.
10. We will not accept from you any conditional orders for Shares.
11. If any Shares sold to you under the terms of this Agreement are
repurchased by a Fund, or are tendered for redemption, within seven business
days after the date of our confirmation of the original purchase by you, it is
agreed that you shall forfeit your right to any commissions on such sales even
though the shareholder may be charged a CDSC by the Fund.
We will notify you of any such repurchase or redemption within the next
ten business days after the date on which the certificate or written request
for redemption is delivered to us or to the Fund, and you shall forthwith
refund to us the full amount of any commission you received on such sale. We
agree, in the event of any such repurchase or redemption, to refund to the
Fund any commission we retained on such sale and, upon receipt from you of the
commissions paid to you, to pay such commissions forthwith to the Fund.
12. Shares sold to you hereunder shall not be issued until payment has been
received by the Fund concerned. If transfer instructions are not received from
you within 15 days after our acceptance of your order, the Company reserves
the right to instruct the transfer agent for the Fund concerned to register
Shares sold to you in your name and notify you of such. You agree to hold
harmless and indemnify the Company, the Fund and its transfer agent for any
loss or expense resulting from such registration.
13. You agree to comply with any compliance standards that may be furnished to
you by us regarding when each class of Shares of a Fund may appropriately be
sold to particular customers.
14. No person is authorized to make any representations concerning Shares of a
Fund except those contained in the Prospectus and in sales literature issued
by us supplemental to such Prospectus. In purchasing Shares from us you shall
rely solely on the representations contained in the appropriate Prospectus and
in such sales literature. We will furnish additional copies of such
Prospectuses and sales literature and other releases and information issued by
us in reasonable quantities upon request. You agree that you will in all
respects duly conform with all laws and regulations applicable to the sales of
Shares of the Funds and will indemnify and hold harmless the Funds, their
directors and trustees and the Company from any damage or expenses on account
of any wrongful act by you, your representatives, agents or sub-agents in
connection with any orders or solicitation or orders of Shares of the Funds by
you, your representatives, agents or sub-agents.
15. Each party hereto represents that it is (1) a member of the National
Association of Securities Dealers, Inc., and agrees to notify the other should
it cease to be a member of such Association and agrees to the automatic
termination of this Agreement at that time or (2) excluded from the definition
of broker-dealer under the Securities Exchange Act of 1934. It is further
agreed that all rules or regulations of the Association now in effect or
hereafter adopted, including its Business Conduct Rule 2830(d), which are
binding upon underwriters and dealers in the distribution of the securities of
open-end investment companies, shall be deemed to be a part of this Agreement
to the same extent as if set forth in full herein.
16. You will not offer the Funds for sale in any State where they are not
qualified for sale under the blue sky laws and regulations of such State or
where you are not qualified to act as a dealer except for States in which they
are exempt from qualification.
17. This Agreement supersedes and cancels any prior agreement with respect to
the sales of Shares of any of the Funds underwritten by the Company. The
Agreement may be amended by us at any time upon written notice to you.
18. This amendment to the Agreement shall be effective on January 1, 1997 and
all sales hereunder are to be made, and title to Shares of the Funds shall
pass in The Commonwealth of Massachusetts. This Agreement shall be interpreted
in accordance with the laws of The Commonwealth of Massachusetts.
19. All communications to the Company should be sent to the above address. Any
notice to you shall be duly given if mailed or telegraphed to you at the
addressed specified by you.
20. Either part may terminate this Agreement at any time by written notice to
the other party.
- --------------------------- EVERGREEN KEYSTONE DISTRIBUTOR, INC.
Dealer or Broker Name
- --------------------------- /s/ Robert A. Hering
Address
ROBERT A. HERING, President
<PAGE>
- ---------------------
EVERGREEN KEYSTONE
- ---------------------
[logo] FUNDS [logo]
- ---------------------
EVERGREEN KEYSTONE DISTRIBUTOR, INC. ROBERT A. HERING
230 PARK AVENUE President
NEW YORK, NEW YORK 10169
December 12, 1996
Effective January 1, 1997
Dear Financial Professional:
This Schedule of Commissions and Service Fees ("Schedule") supersedes any
previous Schedules, is hereby made part of our dealer agreement ("Agreement")
with you effective January 1, 1997 and will remain in effect until modified or
rescinded by us. Capitalized terms used in this Schedule and not defined
herein have the same meaning as such terms have in the Agreement. All
commission rates and service fee rates set forth in this Schedule may be
modified by us from time to time without prior notice.
I. KEYSTONE FUNDS
KEYSTONE QUALITY BOND FUND (B-1) KEYSTONE MID-CAP GROWTH FUND (S-3)
KEYSTONE DIVERSIFIED BOND FUND (B-2) KEYSTONE SMALL COMPANY GROWTH FUND (S-4)
KEYSTONE HIGH INCOME BOND FUND (B-4) KEYSTONE INTERNATIONAL FUND INC.
KEYSTONE BALANCED FUND (K-1) KEYSTONE PRECIOUS METALS HOLDINGS, INC.
KEYSTONE STRATEGIC GROWTH FUND (K-2) KEYSTONE TAX FREE FUND
KEYSTONE GROWTH AND INCOME FUND (S-1) (COLLECTIVELY "KEYSTONE FUNDS")
1. COMMISSIONS FOR THE KEYSTONE FUNDS (OTHER THAN KEYSTONE PRECIOUS METALS
HOLDINGS, INC.)
Except as otherwise provided in our Agreement, we will pay you commissions
on your sales of Shares of such Keystone Funds rtds d such er tv amrr
rdKeystone Fundat the rate of 4.0% of the aggregate public offering price of
such Shares as described in the Fund's Prospectus ("Offering Price") when sold
in an eligible sale.
2. COMMISSIONS FOR KEYSTONE PRECIOUS METALS HOLDINGS, INC.
Except as otherwise provided for in our Agreement, we will pay you
commissions on your sale of Shares of Keystone Precious Metals Holdings, Inc.
as the rate of the Offering Price when sold in an eligible sale as follows:
AMOUNT OF PURCHASE COMMISSION AMOUNT OF PURCHASE COMMISSION
Less than $100,000 4% $250,000-$499,999 1%
$100,000-$249,999 2% $500,000 and above 0.5%
3. SERVICE FEES
We will pay you service fees based on the aggregate net asset value of
Shares of the Keystone Funds (other than Keystone Precious Metals Holdings,
Inc.) you have sold on or after June 1, 1983 and of Keystone Precious Metals
Holdings, Inc. you have sold on or after November 19, 1984, which remain
issued and outstanding on the books of such Funds on the fifteenth day of the
third month of each calendar quarter (March 15, June 15, September 15 and
December 15, each hereinafter a "Service Fee Record Date") and which are
registered in the names of customers for whom you are dealer of record
("Eligible Shares"). Such service fees will be calculated quarterly at the
rate of 0.0625% per quarter of the aggregate net asset value of all such
Eligible Shares (approximately 0.25% annually) on the Service Fee Record Date;
provided, however, that in any calendar quarter in which service fees earned
by you on Eligible Shares of all Funds (except Keystone Liquid Trust Class A
Shares) are less than $50.00 in the aggregate, no service fees will be paid to
you nor will such amounts be carried over for payment in a future quarter.
Service fees will be payable within five business days after the Service Fee
Record Date. Service fees will only be paid by us to the extent that such
amounts have been paid to us by the Funds.
4. PROMOTIONAL INCENTIVES
We may, from time to time, provide promotional incentives, including
reallowance and/or payment of additional commissions to certain dealers. Such
incentives may, at our discretion, be limited to dealers who allow their
individual selling representatives to participate in such additional
commissions.
<TABLE>
<CAPTION>
II. KEYSTONE AMERICA FUNDS AND EVERGREEN FUNDS
KEYSTONE AMERICA FUNDS
<S> <C>
KEYSTONE GOVERNMENT SECURITIES FUND KEYSTONE OMEGA FUND
KEYSTONE STATE TAX FREE FUND KEYSTONE SMALL COMPANY GROWTH FUND - II
KEYSTONE STATE TAX FREE FUND - SERIES II KEYSTONE FUND FOR TOTAL RETURN
KEYSTONE STRATEGIC INCOME FUND KEYSTONE BALANCED FUND - II
KEYSTONE TAX FREE INCOME FUND (COLLECTIVELY "KEYSTONE EQUITY AND LONG TERM INCOME FUNDS")
KEYSTONE WORLD BOND FUND KEYSTONE CAPITAL PRESERVATION AND INCOME FUND
KEYSTONE FUND OF THE AMERICAS KEYSTONE INTERMEDIATE TERM BOND FUND
KEYSTONE GLOBAL OPPORTUNITIES FUND (COLLECTIVELY "KEYSTONE INTERMEDIATE INCOME FUNDS")
KEYSTONE AMERICA HARTWELL EMERGING GROWTH FUND, INC. KEYSTONE LIQUID TRUST
KEYSTONE GLOBAL RESOURCES AND DEVELOPMENT FUND
EVERGREEN FUNDS
EVERGREEN U.S. GOVERNMENT FUND EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN HIGH GRADE TAX FREE FUND EVERGREEN FOUNDATION FUND
EVERGREEN FLORIDA MUNICIPAL BOND FUND EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN GEORGIA MUNICIPAL BOND FUND EVERGREEN UTILITY FUND
EVERGREEN NEW JERSEY MUNICIPAL BOND FUND EVERGREEN TOTAL RETURN FUND
EVERGREEN NORTH CAROLINA MUNICIPAL BOND FUND EVERGREEN SMALL CAP EQUITY INCOME FUND
EVERGREEN SOUTH CAROLINA MUNICIPAL BOND FUND (COLLECTIVELY "EVERGREEN EQUITY AND LONG TERM INCOME FUNDS")
EVERGREEN VIRGINIA MUNICIPAL BOND FUND
EVERGREEN FLORIDA HIGH INCOME MUNICIPAL BOND FUND EVERGREEN MONEY MARKET FUND
EVERGREEN FUND EVERGREEN TAX EXEMPT MONEY MARKET FUND
EVERGREEN U.S. REAL ESTATE EQUITY FUND EVERGREEN TREASURY MONEY MARKET FUND
EVERGREEN LIMITED MARKET FUND EVERGREEN PENNSYLVANIA TAX FREE MONEY MARKET FUND
EVERGREEN AGGRESSIVE GROWTH FUND (COLLECTIVELY "EVERGREEN MONEY MARKET FUNDS")
EVERGREEN INTERNATIONAL EQUITY FUND EVERGREEN SHORT-INTERMEDIATE BOND FUND
EVERGREEN GLOBAL LEADERS FUND EVERGREEN INTERMEDIATE-TERM BOND FUND
EVERGREEN EMERGING MARKETS FUND EVERGREEN INTERMEDIATE-TERM GOVERNMENT SECURITIES FUND
EVERGREEN GLOBAL REAL ESTATE EQUITY FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND
EVERGREEN BALANCED FUND EVERGREEN SHORT-INTERMEDIATE MUNICIPAL FUND -- CALIFORNIA
EVERGREEN GROWTH & INCOME FUND (COLLECTIVELY "EVERGREEN INTERMEDIATE INCOME AND
EVERGREEN VALUE FUND MONEY MARKET FUNDS")
</TABLE>
A. CLASS A SHARES
1. COMMISSIONS
Except as otherwise provided in our Agreement, in paragraph 2 below or in
connection with certain types of purchases at net asset value which are
described in the Prospectuses for the Keystone America Funds and the Evergreen
Funds, we will pay you commissions on your sales of Shares of such Funds in
accordance with the following sales charge schedules* on sales where we
receive a commission from the shareholder:
KEYSTONE AMERICA AND EVERGREEN EQUITY AND LONG TERM INCOME FUNDS
SALES CHARGE AS COMMISSION AS
AMOUNT OF A PERCENTAGE OF A PERCENTAGE OF
PURCHASE OFFERING PRICE OFFERING PRICE
Less than $50,000 4.75% 4.25%
$50,000-$99,999 4.50% 4.25%
$100,000-$249,999 3.75% 3.25%
$250,000-$499,999 2.50% 2.00%
$500,000-$999,999 2.00% 1.75%
Over $1,000,000 None See paragraph 2
KEYSTONE AMERICA AND EVERGREEN INTERMEDIATE INCOME FUNDS
SALES CHARGE AS COMMISSION AS
AMOUNT OF A PERCENTAGE OF A PERCENTAGE OF
PURCHASE OFFERING PRICE OFFERING PRICE
Less than $50,000 3.25% 2.75%
$50,000-$99,999 3.00% 2.75%
$100,000-$249,999 2.50% 2.25%
$250,000-$499,999 2.00% 1.75%
$500,000-$999,999 1.50% 1.25%
Over $1,000,000 None See paragraph 2
KEYSTONE LIQUID TRUST AND EVERGREEN MONEY MARKET FUNDS
No sales charge for any amount of purchase.
2. COMMISSIONS FOR CERTAIN TYPES OF PURCHASES
With respect to (a) purchases of Class A Shares in the amount of $1 million
or more and/or (b) purchases of Class A Shares made by a corporate or certain
other qualified retirement plan or a non-qualified deferred compensation plan
or a Title I tax sheltered annuity or TSA Plan sponsored by an organization
having 100 or more eligible employees (a "Qualifying Plan"), (each such
purchase a "NAV Purchase"), we will pay you commissions as follows:
<TABLE>
<CAPTION>
a. Purchases described in 2(a) above
AMOUNT OF COMMISSION AS A PERCENTAGE
PURCHASE OF OFFERING PRICE
<S> <C>
$1,000,000-$2,999,999 1.00% of the first $2,999,999, plus
$3,000,000-$4,999,999 0.50% of the next $2,000,000, plus
$5,000,000 0.25% of amounts equal to or over $5,000,000
b. Purchases described in 2(b) above .50% of amount of purchase (subject to recapture
upon early redemption)
</TABLE>
* These sales charge schedules apply to purchases made at one time or pursuant
to Rights of Accumulation or Letters of Intent. Any purchase which is made
pursuant to Rights of Accumulation or Letter of Intent is subject to the
terms described in the Prospectus(es) for the Fund(s) whose Shares are being
purchased.
3. PROMOTIONAL INCENTIVES
We may, from time to time, provide promotional incentives, including
reallowance and/or payment of up to the entire sales charge to certain
dealers. Such incentives may, at our discretion, be limited to dealers who
allow their individual selling representatives to participate in such
additional commissions.
4. SERVICE FEES FOR EVERGREEN FUNDS (OTHER THAN EVERGREEN MONEY MARKET FUNDS)
AND KEYSTONE AMERICA FUNDS (OTHER THAN KEYSTONE STATE TAX FREE FUND,
KEYSTONE STATE TAX FREE FUND - SERIES II, KEYSTONE CAPITAL PRESERVATION AND
INCOME FUND AND KEYSTONE LIQUID TRUST)
a. Keystone America Funds Only. Until March 31, 1997, we will pay you
service fees based on the aggregate net asset value of Shares of such Funds
you have sold which remain issued and outstanding on the books of such Funds
on the fifteenth day of the third month of each calendar quarter (March 15,
June 15, September 15 and December 15, each hereinafter a "Service Fee Record
Date") and which are registered in the names of customers for whom you are
dealer of record ("Eligible Shares"). Such service fees will be calculated
quarterly at the rate of 0.0625% per quarter of the aggregate net asset value
of all such Eligible Shares (approximately 0.25% annually) on the Service Fee
Record Date; provided, however, that in any calendar quarter in which total
service fees earned by you on Eligible Shares of all Keystone Funds (except
Keystone Liquid Trust Class A Shares) are less than $50.00 in the aggregate,
no service fees will be paid to you nor will such amounts be carried over for
payment in a future quarter. Service fees will be paid within five days after
the Service Fee Record Date. Service fees will only be paid by us to the
extent that such amounts have been paid to us by the Funds.
b. Evergreen Funds and Keystone America Funds (after March 31, 1997). We
will pay you service fees based on the average daily net asset value of Shares
of such Funds you have sold which are issued and outstanding on the books of
such Funds during each calendar quarter and which are registered in the names
of customers for whom you are dealer of record ("Eligible Shares"). Such
service fees will be calculated quarterly at the rate of 0.0625% per quarter
of the daily average net asset value of all such Eligible Shares
(approximately 0.25% annually) during such quarter; provided, however, that in
any calendar quarter in which total service fees earned by you on Eligible
Shares of all Funds (except Keystone Liquid Trust Class A Shares) are less
than $50.00 in the aggregate, no service fees will be paid to you nor will
such amounts be carried over for payment in a future quarter. Service fees
will be paid by the twentieth day of the month before the end of the
respective quarter. Service fees will only be paid by us to the extent that
such amounts have been paid to us by the Funds.
5. SERVICE FEES FOR KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE
FUND - SERIES II
a. Until March 31, 1997, we will pay you service fees based on the aggregate
net asset value of Shares of such Funds you have sold which remain issued and
outstanding on the books of the Funds on the fifteenth day of the third month
of each calendar quarter (March 15, June 15, September 15 and December 15,
each hereinafter a "Service Fee Record Date") and which are registered in the
names of customers for whom you are dealer of record ("Eligible Shares"). Such
service fees will be calculated quarterly at the rate of 0.0375% per quarter
of the aggregate net asset value of all such Eligible Shares (approximately
0.15% annually) on the Service Fee Record Date; provided, however, that in any
calendar quarter in which total service fees earned by you on Eligible Shares
of all Funds (except Keystone Liquid Trust Class A Shares) are less than
$50.00 in the aggregate, no service fees will be paid to you nor will such
amounts be carried over for payment in a future quarter. Service fees will be
paid within five days after the Service Fee Record Date. Service fees will
only be paid by us to the extent that such amounts have been paid to us by the
Funds.
b. After March 31, 1997 we will pay you service fees calculated as provided
in section II (A)(4)(b) except that the quarterly rate will be 0.0375%
(approximately 0.15% annually).
c. After June 30, 1997, we will pay you service fees calculated as provided
in section II (A)(4)(b) above on Shares sold on or after July 1, 1997.
6. SERVICE FEES FOR KEYSTONE CAPITAL PRESERVATION AND INCOME FUND
a. Until March 31, 1997, we will pay you service fees calculated as provided
in section II (A)(4)(a) except that for Eligible Shares sold after January 1,
1997 the quarterly rate will be 0.025% (approximately 0.10% annually).
b. After March 31, 1997 we will pay you service fees calculated as provided
in section II (A)(4)(b) except that for Eligible Shares sold after January 1,
1997 the quarterly rate will be 0.025% (approximately 0.10% annually).
7. SERVICE FEES FOR KEYSTONE LIQUID TRUST
We will pay you service fees based on the aggregate net asset value of all
Shares of such Fund you have sold which remain issued and outstanding on the
books on the Fund on the fifteenth day of the third month of each calendar
quarter (March 15, June 15, September 15 and December 15, each hereinafter a
"Service Fee Record Date") and which are registered in the names of customers
for whom you are dealer of record ("Eligible Shares"). Such service fees will
be calculated at the rates set forth below and based on the aggregate net
asset value of all such Eligible Shares on the Service Fee Record Date;
provided, however, that no such service fees will be paid to you for any
quarter if the aggregate net asset value of such Eligible Shares on the last
business day of the quarter is less than $2 million; and provided further,
however, that service fees will only be paid to us to the extent that such
amounts have been paid to us by the Fund. Service fees will be paid within 5
days after the Service Fee Record Date. The quarterly rates at which such
service fees are payable and the net asset value to which such rates will be
applied are set forth below:
ANNUAL QUARTERLY AGGREGATE NET ASSET
RATE PAYMENT RATE VALUE OF SHARES
0.00000% 0.00000% of the first $1,999,999, plus
0.15000% 0.03750% of the next $8,000,000, plus
0.20000% 0.05000% of the next $15,000,000, plus
0.25000% 0.06250% of the next $25,000,000, plus
0.30000% 0.07500% of amounts over $50,000,000
8. SERVICE FEES FOR EVERGREEN MONEY MARKET FUNDS
We will pay you service fees calculated as provided in section II (A)(4)(b)
except that the quarterly rate will be 0.075% (approximately 0.30% annually.)
<PAGE>
B. CLASS B SHARES
ALL KEYSTONE AMERICA AND EVERGREEN FUNDS
1. COMMISSIONS
Except as otherwise provided in our Agreement, we will pay you commissions
on your sales of Class B Shares of the Keystone America Funds and the
Evergreen Funds at the rate of 4.00% of the aggregate Offering Price of such
Shares, when sold in an eligible sale.
2. PROMOTIONAL INCENTIVES
We may, from time to time, provide promotional incentives, including
reallowance and/or payment of additional commissions, to certain dealers. Such
incentives may, at our discretion, be limited to dealers who allow their
individual selling representatives to participate in such additional
commissions.
3. SERVICE FEES FOR EVERGREEN FUNDS AND KEYSTONE AMERICA FUNDS (OTHER THAN
KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE FUND - SERIES II)
a. Keystone America Funds - Until March 31, 1997, we will pay you service
fees calculated as provided in section II (A)(4)(a) above.
b. Evergreen Funds and Keystone America Funds (after March 31. 1997). We
will pay you service fees calculated as provided in section II (A)(4)(b)
above.
4. SERVICE FEES FOR KEYSTONE STATE TAX FREE FUND AND KEYSTONE STATE TAX FREE
FUND - SERIES II
a. Until March 31, 1997, we will pay you service fees calculated as provided
in section II (A)(5)(a) above.
b. After March 31, 1997, we will pay you service fees calculated as provided
in section II (A)(5)(b) above.
c. After June 30, 1997, we will pay you service fees calculated as provided
in section II (A)(5)(c) above.
C. CLASS C SHARES
ALL KEYSTONE AMERICA AND EVERGREEN FUNDS
1. COMMISSIONS
Except as provided in our Agreement, we will pay you initial commissions on
your sales of Class C Shares of the Keystone America and the Evergreen Funds
at the rate of 0.75% of the aggregate Offering Price of such Shares sold in
each eligible sale.
We will also pay you commissions based on the average daily net asset value
of Shares of such Funds you have sold which have been on the books of the
Funds for a minimum of 14 months from the date of purchase (plus any
reinvested distributions attributable to such Shares), which have been issued
and outstanding on the books of such Funds during the calendar quarter and
which are registered in the names of customers for whom you are dealer of
record ("Eligible Shares"). Such commissions will be calculated quarterly at
the rate of 0.1875% per quarter of the average daily net asset value of all
such Eligible Shares (approximately 0.75% annually) during such quarter. Such
commissions will be paid by the twentieth day of the month before the end of
the respective quarter. Such commissions will continue to be paid to you
quarterly so long as aggregate payments do not exceed applicable NASD
limitations and other governing regulations.
2. SERVICE FEES
We will pay you a full year's service fee in advance on your sales of Class
C Shares of such Funds at the rate of 0.25% of the aggregate net asset value
of such Shares.
We will pay you service fees based on the average daily net asset value of
Shares of such Funds you have sold which have been on the books of the Funds
for a minimum of 14 months from the date of purchase (plus any reinvested
distributions attributable to such Shares), which have been issued and
outstanding during the respective quarter and which are registered in the
names of customers for whom you are the dealer of record ("Eligible Shares").
Such service fees will be calculated quarterly at the rate of 0.0625% per
quarter of the average daily net asset value of all such Eligible Shares
(approximately 0.25% annually); provided, however, that in any calendar
quarter in which total service fees earned by you on Eligible Shares of Funds
(except Keystone Liquid Trust Class A Shares) are less than $50.00 in the
aggregate, no service fees will be paid to you nor will such amounts be
carried over for payment in a future quarter. Service fees will be paid by the
twentieth day of the month before the end of the respective quarter. Service
fees other than those paid in advance will only be paid by us to the extent
that such amounts have been paid to us by the Funds.
CONSENT OF INDEPENDENT AUDITORS
The Trustees and Shareholders
Evergreen Utility Fund
Evergreen Growth and Income Fund
Evergreen Value Fund
Evergreen Small Cap Equity Income Fund
Keystone Fund for Total Return
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen American Retirement Fund
Evergreen Balanced Fund
We consent to:
1) the use of our report dated February 19, 1997 for Evergreen Utility Fund,
Evergreen Growth and Income Fund, Evergreen Value Fund and Evergreen Small
Cap Equity Income Fund incorporated by reference herein;
2) the use of our report dated December 27, 1996 for Keystone Fund for Total
Return incorporated by reference herein;
3) the use of our report dated May 2, 1997 for Evergreen Foundation Fund,
Evergreen Tax Strategic Foundation Fund, Evergreen American Retirement
Fund and Evergreen Balanced Fund incorporated by reference herein; and
4) the reference to our firm under the captions "FINANCIAL HIGHLIGHTS" in the
prospectuses for the Evergreen Balanced Funds.
KPMG Peat Marwick LLP
Boston, Massachusetts
June 30, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Balanced Fund Class A
<SERIES>
<NUMBER> 71
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<INVESTMENTS-AT-COST> 803,831,536
<INVESTMENTS-AT-VALUE> 905,659,177
<RECEIVABLES> 16,356,436
<ASSETS-OTHER> 47,547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 922,063,160
<PAYABLE-FOR-SECURITIES> 2,659,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,527,057
<TOTAL-LIABILITIES> 5,186,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 757,904,605
<SHARES-COMMON-STOCK> 3,218,879
<SHARES-COMMON-PRIOR> 3,333,437
<ACCUMULATED-NII-CURRENT> 246,535
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,897,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 101,827,641
<NET-ASSETS> 41,429,056
<DIVIDEND-INCOME> 3,035,556
<INTEREST-INCOME> 7,615,522
<OTHER-INCOME> 0
<EXPENSES-NET> 1,899,974
<NET-INVESTMENT-INCOME> 8,751,104
<REALIZED-GAINS-CURRENT> 56,839,210
<APPREC-INCREASE-CURRENT> (62,291,441)
<NET-CHANGE-FROM-OPS> 3,298,873
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (369,566)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 82,428
<NUMBER-OF-SHARES-REDEEMED> (223,885)
<SHARES-REINVESTED> 26,899
<NET-CHANGE-IN-ASSETS> (14,880,064)
<ACCUMULATED-NII-PRIOR> 115,118
<ACCUMULATED-GAINS-PRIOR> 7,713
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,170,691
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,899,974
<AVERAGE-NET-ASSETS> 43,267,866
<PER-SHARE-NAV-BEGIN> 12.95
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> (0.08)
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.87
<EXPENSE-RATIO> 0.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Balanced Fund Class B
<SERIES>
<NUMBER> 72
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<INVESTMENTS-AT-COST> 803,831,536
<INVESTMENTS-AT-VALUE> 905,659,177
<RECEIVABLES> 16,356,436
<ASSETS-OTHER> 47,547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 922,063,160
<PAYABLE-FOR-SECURITIES> 2,659,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,527,057
<TOTAL-LIABILITIES> 5,186,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 757,904,605
<SHARES-COMMON-STOCK> 8,334,838
<SHARES-COMMON-PRIOR> 8,453,724
<ACCUMULATED-NII-CURRENT> 246,535
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,897,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 101,827,641
<NET-ASSETS> 107,347,482
<DIVIDEND-INCOME> 3,035,556
<INTEREST-INCOME> 7,615,522
<OTHER-INCOME> 0
<EXPENSES-NET> 1,899,974
<NET-INVESTMENT-INCOME> 8,751,104
<REALIZED-GAINS-CURRENT> 56,839,210
<APPREC-INCREASE-CURRENT> (62,291,441)
<NET-CHANGE-FROM-OPS> 3,298,873
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (786,903)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 165,348
<NUMBER-OF-SHARES-REDEEMED> (341,159)
<SHARES-REINVESTED> 56,925
<NET-CHANGE-IN-ASSETS> (14,880,064)
<ACCUMULATED-NII-PRIOR> 115,118
<ACCUMULATED-GAINS-PRIOR> 7,713
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,170,691
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,899,974
<AVERAGE-NET-ASSETS> 110,841,516
<PER-SHARE-NAV-BEGIN> 12.96
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> (0.07)
<PER-SHARE-DIVIDEND> (0.10)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.88
<EXPENSE-RATIO> 1.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Balanced Fund Class C
<SERIES>
<NUMBER> 73
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<INVESTMENTS-AT-COST> 803,831,536
<INVESTMENTS-AT-VALUE> 905,659,177
<RECEIVABLES> 16,356,436
<ASSETS-OTHER> 47,547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 922,063,160
<PAYABLE-FOR-SECURITIES> 2,659,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,527,057
<TOTAL-LIABILITIES> 5,186,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 757,904,605
<SHARES-COMMON-STOCK> 27,591
<SHARES-COMMON-PRIOR> 27,541
<ACCUMULATED-NII-CURRENT> 246,535
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,897,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 101,827,641
<NET-ASSETS> 353,161
<DIVIDEND-INCOME> 3,035,556
<INTEREST-INCOME> 7,615,522
<OTHER-INCOME> 0
<EXPENSES-NET> 1,899,974
<NET-INVESTMENT-INCOME> 8,751,104
<REALIZED-GAINS-CURRENT> 56,839,210
<APPREC-INCREASE-CURRENT> (62,291,441)
<NET-CHANGE-FROM-OPS> 3,298,873
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,467)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,813
<NUMBER-OF-SHARES-REDEEMED> (3,891)
<SHARES-REINVESTED> 128
<NET-CHANGE-IN-ASSETS> (14,880,064)
<ACCUMULATED-NII-PRIOR> 115,118
<ACCUMULATED-GAINS-PRIOR> 7,713
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,170,691
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,899,974
<AVERAGE-NET-ASSETS> 385,131
<PER-SHARE-NAV-BEGIN> 12.88
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> (0.09)
<PER-SHARE-DIVIDEND> (0.09)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.80
<EXPENSE-RATIO> 1.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<NAME> Evergreen Balanced Fund Class Y
<SERIES>
<NUMBER> 74
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Mar-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<INVESTMENTS-AT-COST> 803,831,536
<INVESTMENTS-AT-VALUE> 905,659,177
<RECEIVABLES> 16,356,436
<ASSETS-OTHER> 47,547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 922,063,160
<PAYABLE-FOR-SECURITIES> 2,659,900
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,527,057
<TOTAL-LIABILITIES> 5,186,957
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 757,904,605
<SHARES-COMMON-STOCK> 59,654,900
<SHARES-COMMON-PRIOR> 60,120,604
<ACCUMULATED-NII-CURRENT> 246,535
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 56,897,422
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 101,827,641
<NET-ASSETS> 767,746,504
<DIVIDEND-INCOME> 3,035,556
<INTEREST-INCOME> 7,615,522
<OTHER-INCOME> 0
<EXPENSES-NET> 1,899,974
<NET-INVESTMENT-INCOME> 8,751,104
<REALIZED-GAINS-CURRENT> 56,839,210
<APPREC-INCREASE-CURRENT> (62,291,441)
<NET-CHANGE-FROM-OPS> 3,298,873
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,410,252)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,764,660
<NUMBER-OF-SHARES-REDEEMED> (4,480,218)
<SHARES-REINVESTED> 249,854
<NET-CHANGE-IN-ASSETS> (14,880,064)
<ACCUMULATED-NII-PRIOR> 115,118
<ACCUMULATED-GAINS-PRIOR> 7,713
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,170,691
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,899,974
<AVERAGE-NET-ASSETS> 792,350,862
<PER-SHARE-NAV-BEGIN> 12.95
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> (0.08)
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.87
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
MULTIPLE CLASS PLAN FOR THE EVERGREEN/KEYSTONE FUND GROUP
Each Fund in the Evergreen/Keystone group of mutual funds currently
offers up to four classes of shares with the following class provisions and
current offering and exchange characteristics. Additional classes of shares
(such classes being shares having characteristics referred to in Rule 18f-3
under the Investment Company Act of 1940, as amended (the "1940 Act")), when
created, may have characteristics that differ from those described.
I. CLASSES
A. Class A Shares
1. Class A Shares have a distribution plan adopted pursuant to Rule
12b-1 under the 1940 Act (a "12b-1 Distribution Plan") and/or a
shareholder services plan. The plans provide for annual payments of
distribution and/or shareholder services fees that are based on a
percentage of average daily net assets of Class A shares, as described
in the Fund's current prospectus.
2. Class A Shares are offered with a front-end sales load, except that
purchases of Class A Shares made under certain circumstances are not
subject to the front-end load or may be subject to a contingent
deferred sales charge ("CDSC"), as described in the Fund's current
prospectus.
3. Shareholders may exchange Class A Shares of the Fund for Class A
Shares of any other fund named in the Fund's prospectus.
B. Class B Shares
1. Class B Shares have adopted a 12b-1 Distribution Plan and/or a
shareholder services plan. The plans provide for annual payments of
distribution and/or shareholder services fees that are based on a
percentage of average daily net assets of Class B shares, as described
in the Fund's current prospectus.
2. Class B Shares are offered at net asset value without a front-end
sales load, but may be subject to a CDSC as described in the Fund's
current prospectus.
3. Class B Shares automatically convert to Class A Shares without a
sales load or exchange fee after designated periods.
4. Shareholders may exchange Class B Shares of the Fund for Class B
Shares of any other fund described in the Fund's prospectus.
C. Class C Shares
1. Class C Shares have adopted a 12b-1 Distribution Plan and/or a
shareholder services plan. The plans provide for annual payments of
distribution and/or shareholder services fees that are based on a
percentage of average daily net assets of Class C shares, as described
in the Fund's current prospectus.
2. Class C Shares are offered at net asset value without a front-end
sales load, but may be subject to a CDSC as described in the Fund's
current prospectus.
3. Shareholders may exchange Class C Shares of the Fund for Class C
Shares of any other fund named in the Fund's prospectus.
D. Class Y Shares
1. Class Y Shares have no distribution or shareholder services plans.
2. Class Y Shares are offered at net asset value without a front-end
sales load or CDSC.
3. Shareholders may exchange Class Y Shares of the Fund for Class Y
Shares of any other fund described in the Fund's prospectus.
II. CLASS EXPENSES
Each class bears the expenses of its 12b-1 Distribution Plan and/or
shareholder services plan. There currently are no other class specific expenses.
III. EXPENSE ALLOCATION METHOD
All income, realized and unrealized capital gains and losses and
expenses not assigned to a class will be allocated to each class based on the
relative net asset value of each class.
IV. VOTING RIGHTS
A. Each class will have exclusive voting rights on any matter submitted to
its shareholders that relates solely to its class arrangement.
B. Each class will have separate voting rights on any matter submitted to
shareholders where the interests of one class differ from the interests of any
other class.
C. In all other respects, each class has the same rights and obligations as
each other class.
V. EXPENSE WAIVERS OR REIMBURSEMENTS
Any expense waivers or reimbursements will be in compliance with Rule 18f-3
issued under the 1940 Act.
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Laurence B. Ashkin
Laurence B. Ashkin
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Frederick Amling
Frederick Amling
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Charles A. Austin, III
Charles A. Austin, III
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ George S. Bissell
George S. Bissell
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Edwin D. Campbell
Edwin D. Campbell
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Charles F. Chapin
Charles F. Chapin
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ K. Dun Gifford
K. Dun Gifford
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ James S. Howell
James S. Howell
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Leroy Keith, Jr.
Leroy Keith, Jr.
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ F. Ray Keyser, Jr.
F. Ray Keyser, Jr.
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Gerald M. McDonnell
Gerald M. McDonnell
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Thomas L. McVerry
Thomas L. McVerry
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ William Walt Petit
William Walt Petit
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ David M. Richardson
David M. Richardson
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Russell A. Salton, III MD
Russell A. Salton, III MD
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Michael S. Scofield
Michael S. Scofield
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Richard J. Shima
Richard J. Shima
Director/Trustee
<PAGE>
POWER OF ATTORNEY
I, the undersigned, hereby constitute Dorothy E. Bourassa, Terrence J.
Cullen, Rosemary D. Van Antwerp, James P. Wallin, Martin J. Wolin and John J.
Pileggi, each of them singly, my true and lawful attorneys, with full power to
them and each of them to sign for me and in my name in the capacity indicated
below any and all registration statements, including, but not limited to, Forms
N-8A, N-8B-1, S-5, N-14 and N-1A, as amended from time to time, and any and all
amendments thereto to be filed with the Securities and Exchange Commission for
the purpose of registering from time to time all investment companies of which I
am now or hereafter a Director or Trustee and for which Keystone Investment
Management Company, Evergreen Asset Management Corp. or First Union National
Bank of North Carolina serves as Adviser or Manager and registering from time to
time the shares of such companies, and generally to do all such things in my
name and on my behalf to enable such investment companies to comply with the
provisions of the Securities Act of 1933, as amended, the Investment Company Act
of 1940, as amended, and all requirements and regulations of the Securities and
Exchange Commission thereunder, hereby ratifying and confirming my signature as
it may be signed by my said attorneys to any and all registration statements and
amendments thereto.
In Witness Whereof, I have executed this Power of Attorney as of June 18,
1997.
/s/ Andrew J. Simons
Andrew J. Simons
Director/Trustee
