STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 25, 1995
Acquisition of the Assets of
CAPITAL APPRECIATION EQUITY FUND
OF
THE FFB LEXICON FUND
2 Oliver Street
Boston, Massachusetts 02109
1-800-833-8974
By and in Exchange for Shares of
EVERGREEN GROWTH AND INCOME FUND
2500 Westchester Avenue
Purchase, NY 10577
1-800-807-2940
This Statement of Additional Information, relating specifically to the
proposed transfer of the assets of the Capital Appreciation Equity Fund, a
series of The FFB Lexicon Fund, in exchange for Class Y shares of Evergreen
Growth and Income Fund and the assumption by Evergreen Growth and Income Fund of
certain identified liabilities of the Capital Appreciation Equity Fund, is not a
prospectus. A Prospectus/Proxy Statement dated September 25, 1995 relating to
the above-referenced matter may be obtained from Evergreen Growth and Income
Fund, 2500 Westchester Avenue, Purchase, New York 10577 or by calling toll-free
1-800-807-2940. This Statement of Additional Information relates to and should
be read in conjunction with such Prospectus/Proxy Statement.
This Statement of Additional Information incorporates by reference the
following documents, a copy of each of which accompanies this Statement of
Additional Information:
1. The Prospectus of the Evergreen Growth and Income Fund
dated July 7, 1995.
2. The Statement of Additional Information of the
Evergreen Growth and Income Fund dated July 7, 1995.
3. The Annual Report of the Evergreen Growth and Income
Fund dated December 31, 1994.
4. The Semi-Annual Report of the Evergreen Growth and
Income Fund dated June 30, 1995.
5. The Prospectus of the Capital Appreciation Equity Fund
<PAGE>
dated December 30, 1994.
6. The Statement of Additional Information of the Capital
Appreciation Equity Fund dated December 30, 1994.
7. The Annual Report of the Capital Appreciation Equity
Fund dated August 31, 1994.
8. The Semi-Annual Report of the Capital Appreciation
Equity Fund dated February 28, 1995.
The following pro forma financial information relates to the Capital
Appreciation Equity Fund and the Evergreen Growth and
Income Fund:
<PAGE>
-2-
EVERGREEN GROWTH AND INCOME FUND
Pro Forma Combining Financial Statements - June 30, 1995
<TABLE>
<CAPTION>
EVERGREEN GROWTH AND INCOME FUND FFB LEXICON FUNDS EVERGREEN GROWTH AND INCOME
JUNE 30, 1995 JUNE 30, 1995 ADJUSTMENTS PROFORMA COMBINED
Principal Amount/ Principal Amount/ Principal Amount/
SECURITY DESCRIPTION Shares Value Shares Value Shares Value
<S> <C> <C> <C> <C> <C> <C> <C>
Short-Term Investments 4.1%
Commercial Paper
American Home Products Corp.
5.96% Due 7/7/95 1,000,000 $999,006 1,000,000 $999,006
Bell Atlantic Financial Services, Inc.
5.93% Due 7/10/95 300,000 299,555 300,000 299,555
Xerox Corp.
5.85% Due 7/6/95 900,000 899,269 900,000 899,269
2,197,830
2,200,000 2,197,830
Repurchase Agreements
Agency Repurchase Agreement
6.20% 7/3/95 (J.P. Morgan) 100 3,470,979 100 3,470,979
American Depository Receipts
Reuters Holdings Public Limited Company
American Depository Receipt Cl. B 43,000 2,155,375 43,000 2,155,375
Teva Pharmaceutical
American Depository Receipt 60,000 2,250,000 60,000 2,250,000
103,000 4,405,375 103,000 4,405,375
U.S. Government & Agency Obligations
Federal Home Loan Mortgage Corp.
5.9% Due 7/7/95 1,000,000 999,017 1,000,000 999,017
Total Short-Term Investments 3,200,000 3,196,847 103,100 7,876,354 3,303,100 11,073,201
Corporate Obligations 0.7%
Columbia Gas System, Inc.
9.00% Due 8/1/93 215,000 302,613 215,000 302,613
9.00% Due 10/1/94 188,000 261,320 188,000 261,320
8.75% Due 4/1/95 225,000 312,188 225,000 312,188
9.125% Due 10/1/95 30,000 41,925 30,000 41,925
10.125% Due 11/1/95 55,000 77,069 55,000 77,069
8.375% Due 3/1/96 22,000 30,195 22,000 30,195
7.5% Due 6/1/97 20,000 26,450 20,000 26,450
7.5% Due 10/1/97 25,000 33,375 25,000 33,375
1,085,135
780,000 1,085,135
Time Warner Inc. Redeemable Reset Notes
Due 8/15/02 825,000 812,625 825,000 812,625
Viacom, Inc.
8% Due 7/7/06 92,000 89,240 92,000 89,240
Total Corporate Obligations 1,987,000 1,987,000
Common Stocks 94.5%
Banks & Thrifts 5.0%
Central Fidelity Banks, Inc. 50,000 1,525,000 50,000 1,525,000
Cullen/Frost Bankers, Inc. 22,500 911,250 22,500 911,250
First Security Corp. 70,000 1,960,000 70,000 1,960,000
Hibernia Corp. Cl. A 145,000 1,286,875 145,000 1,286,875
Liberty Bancorp, Inc. 20,000 645,000 20,000 645,000
Michigan National Corp. 7,000 744,625 7,000 744,625
ONBANCorp, Inc. 20,000 567,500 20,000 567,500
State Street Boston Corp. 40,000 1,475,000 40,000 1,475,000
Summit Bankcorporation 50,000 1,062,500 50,000 1,062,500
Washington Mutual Savings Bank 54,600 1,279,688 54,600 1,279,688
Wells Fargo and Company 12,800 2,307,200 12,800 2,307,200
11,457,438 12,800 2,307,200 13,764,638
Business Equipment & Services 6.0%
Airtouch Communications, Inc. 66,500 1,895,250 66,500 1,895,250
Associated Group, Inc. Cl. A 11,950 206,138 11,950 206,138
Associated Group, Inc. Cl. B 11,950 221,075 11,950 221,075
Compuware Corp. 62,500 1,921,875 62,500 1,921,875
Cray Research, Inc. 7,200 175,500 7,200 175,500
First Financial Management Corp. 20,000 1,710,000 20,000 1,710,000
Harper Group, Inc. 117,500 1,968,125 117,500 1,968,125
Landmark Graphics Corp. 25,000 637,500 25,000 637,500
Lin Broadcasting Corp. 16,000 2,024,000 16,000 2,024,000
Pittston Services Group 40,000 960,000 40,000 960,000
Policy Management Systems Corp. 30,000 1,380,000 30,000 1,380,000
Reynolds & Reynolds Co. Cl. A 116,000 3,422,000 116,000 3,422,000
16,521,463 16,521,463
Chemicals, Healthcare & Agricultural Products 16.1%
Abbott Laboratories 56,000 2,268,000 56,000 2,268,000
Air Products & Chemicals, Inc. 22,500 1,254,375 22,500 1,254,375
Amgen, Inc. 31,000 2,493,562 31,000 2,493,562
Bush Boake Allen, Inc. 5,400 164,025 5,400 164,025
Caremark International, Inc. 35,000 700,000 35,000 700,000
Dupont (EI) De Nemours and Company 33,500 2,303,125 33,500 2,303,125
Fuller (H.B.) Co. 47,300 1,750,100 47,300 1,750,100
Gillette Company 49,000 2,186,625 49,000 2,186,625
Great Lakes Chemical Corp. 15,000 903,750 15,000 903,750
Health Management Associates, Inc. Cl. A 70,000 2,047,500 70,000 2,047,500
Healthsouth Rehabilitation Corp. 103,000 1,789,625 103,000 1,789,625
Health Systems International, Inc. 15,000 435,000 15,000 435,000
Johnson & Johnson 12,000 811,500 12,000 811,500
Laboratory Corporation of America Holding 105,000 1,391,250 105,000 1,391,250
Lincare Holdings, Inc. 82,000 2,178,125 70,000 1,859,375 152,000 4,037,500
Mallinckrodt Group, Inc. 25,000 887,500 25,000 887,500
McKesson Corp. 14,500 677,875 14,500 677,875
Pfizer, Inc. 22,300 2,059,963 22,300 2,059,963
Praxair, Inc. 100,000 2,500,000 100,000 2,500,000
Schering Plough Corp. 56,000 2,471,000 45,000 1,985,625 101,000 4,456,625
Shared Medical Systems Corp. 12,500 501,562 12,500 501,562
Spacelabs Medical, Inc. 25,000 634,375 25,000 634,375
Target Therapeutics, Inc. 43,000 1,892,000 43,000 1,892,000
Tenet Healthcare Corp. 70,000 1,006,250 70,000 1,006,250
Warner-Lambert Co. 11,000 950,125 11,000 950,125
Wellpoint Health Networks, Inc. 41,000 1,158,250 41,000 1,158,250
West Co., Inc. 40,000 1,120,000 40,000 1,120,000
Vencor, Inc. 56,000 1,764,000 56,000 1,764,000
21,495,062 22,649,400 44,144,462
Consumer Products 8.5%
Campbell Soup Company 40,000 1,960,000 40,000 1,960,000
Circus Enterprises, Inc. 58,500 2,062,125 58,500 2,062,125
Coca Cola Company 37,000 2,358,750 37,000 2,358,750
Colgate Palmolive Company 30,000 2,193,750 30,000 2,193,750
CPC International, Inc. 25,000 1,543,750 25,000 1,543,750
Crown Cork and Seal, Inc. 50,500 2,531,312 50,500 2,531,312
Kellogg Company 34,000 2,426,750 34,000 2,426,750
Mattel, Inc. 82,000 2,132,000 82,000 2,132,000
Philip Morris Companies, Inc. 31,000 2,305,625 31,000 2,305,625
UST Incorporated 64,000 1,904,000 64,000 1,904,000
Walt Disney Company 35,000 1,946,875 35,000 1,946,875
1,543,750 21,821,187 23,364,937
Diversified Companies 1.4%
Grace (W.R.) & Co. 22,500 1,380,937 22,500 1,380,937
ITT Corp. 7,500 881,250 7,500 881,250
Morton International, Inc. 52,500 1,535,625 52,500 1,535,625
3,797,812 3,797,812
Durable Goods 21.0%
Adaptec, Inc. 62,000 2,294,000 62,000 2,294,000
Applied Materials, Inc. 38,000 3,291,750 38,000 3,291,750
Aspect Telecommunications 52,000 2,327,000 52,000 2,327,000
Belden, Inc. 92,000 2,484,000 92,000 2,484,000
Cisco Systems, Inc. 48,000 2,427,000 48,000 2,427,000
Danaher Corp. 67,500 2,041,875 67,500 2,041,875
Dell Computer Corporation 44,000 2,645,500 44,000 2,645,500
DSC Communications Corp. 72,000 3,348,000 72,000 3,348,000
EMC Corp. 121,000 2,934,250 121,000 2,934,250
Equitable of Iowa 59,500 1,956,062 59,500 1,956,062
General Electric Company 35,100 1,978,763 35,100 1,978,763
General Instrument Corp. 58,000 2,225,750 58,000 2,225,750
Harley-Davidson, Inc. 79,000 1,925,625 79,000 1,925,625
Intel Corp. 46,000 2,912,375 46,000 2,912,375
Lam Research Corp. 46,300 2,963,200 46,300 2,963,200
LSI Logic Corporation 72,000 2,817,000 72,000 2,817,000
Magna International Inc., Cl. A 50,500 2,228,313 50,500 2,228,313
Micro Warehouse, Inc. 59,000 2,714,000 59,000 2,714,000
Oracle Corp. 66,000 2,549,250 66,000 2,549,250
Pioneer Hi-Bred International, Inc. 52,000 2,184,000 52,000 2,184,000
Price T. Rowe and Associates, Inc. 55,000 2,117,500 55,000 2,117,500
Thermo Electron Corp. 69,300 2,789,325 69,300 2,789,325
3 Com Corp. 35,000 2,345,000 35,000 2,345,000
57,499,538 57,499,538
Energy & Oil 3.4%
Anadarko Petroleum Corp. 20,000 862,500 20,000 862,500
Coastal Corp. 45,000 1,366,875 45,000 1,366,875
Input/Output Inc. 78,000 2,808,000 78,000 2,808,000
Kerr McGee Corp. 25,000 1,340,625 25,000 1,340,625
Southwestern Energy Co. 54,000 749,250 54,000 749,250
Williams Companies, Inc. 50,000 1,743,750 50,000 1,743,750
YPF Sociedad Anonima-ADR 20,000 377,500 20,000 377,500
6,440,500 2,808,000 9,248,500
Finance & Insurance 4.4%
Equifax, Inc. 59,500 1,985,812 59,500 1,985,812
Federal Home Loan Mortgage Corp. 50,000 3,437,500 50,000 3,437,500
Federal National Mortgage Association 14,000 1,321,250 24,500 2,312,188 38,500 3,633,438
Guaranty National Corp. 10,000 185,000 10,000 185,000
Hartford Steam Boiler Inspection &
Insurance Co. 7,000 310,625 7,000 310,625
National RE Corp. 10,000 335,000 10,000 335,000
Norwest Corp. 79,700 2,291,375 79,700 2,291,375
5,589,375 6,589,375 12,178,750
Metals, Mining, Construction & Industrial
Products 5.8%
Clayton Homes, Inc. 117,500 1,924,062 117,500 1,924,062
Eaton Corp. 7,500 435,938 7,500 435,938
J&L Specialty Steel, Inc. 27,000 519,750 27,000 519,750
Lone Star Industries, Inc. 71,000 1,526,500 71,000 1,526,500
Medusa Corp. 32,500 808,437 82,500 2,052,188 115,000 2,860,625
National Gypsum Co. 19,000 992,750 19,000 992,750
Nucor Corp. 34,000 1,819,000 34,000 1,819,000
Santa Fe Pacific Gold Corp. 55,000 666,875 55,000 666,875
Strattec Security Corp. 57,900 709,275 57,900 709,275
Sundstrand Corp. 12,000 717,000 12,000 717,000
Tecumseh Products Co. Cl. A 27,500 1,210,000 27,500 1,210,000
Vulcan Materials Co. 25,000 1,362,500 25,000 1,362,500
York International Corp. 22,500 1,012,500 22,500 1,012,500
9,961,525 5,795,250 15,756,775
Miscellaneous 2.6%
Carnival Corp. Cl. A 108,000 2,524,500 108,000 2,524,500
Dover Corp. 33,000 2,400,750 33,000 2,400,750
Illinois Central Corp. 60,000 2,070,000 60,000 2,070,000
6,995,250 6,995,250
Paper 0.8%
Westvaco Corp. 50,000 2,212,500 50,000 2,212,500
Publishing, Broadcasting & Entertainment 9.7%
Citicasters 107,900 2,967,250 107,900 2,967,250
Evergreen Media Corp. Cl. A 10,000 260,000 10,000 260,000
Scripps (E.W.) Co. Cl A 35,000 1,128,750 35,000 1,128,750
EZ Communications, Inc. Cl. A 140,000 2,590,000 140,000 2,590,000
Gaylord Entertainment Co. Cl. A 39,375 994,219 39,375 994,219
HBO & Company 50,000 2,725,000 50,000 2,725,000
Jacor Communications, Inc. 40,000 640,000 40,000 640,000
Katz Media Group, Inc. 92,000 1,460,500 92,000 1,460,500
Lin Television Corp. 4,500 151,312 4,500 151,312
McGraw-Hill Companies, Inc. 7,500 569,062 7,500 569,062
Multimedia, Inc. 37,500 1,453,125 37,500 1,453,125
New York Times Co. Cl. A 21,000 493,500 21,000 493,500
Outlet Communications, Inc. 30,500 1,220,000 30,500 1,220,000
Pulitzer Publishing Co. 1,000 42,625 1,000 42,625
TCA Cable TV, Inc. 100,000 2,700,000 100,000 2,700,000
TeleWest Communications - PLC ADS 2,500 64,375 2,500 64,375
Time Warner, Inc. 65,000 2,673,125 65,000 2,673,125
Viacom, Inc. Cl. A 17,000 790,500 17,000 790,500
Viacom, Inc. Cl B 6,940 321,842 6,940 321,842
Viacom, Inc. Cl. C Warrants expiring 6/6/ 2,654 9,787 2,654 9,787
Viacom, Inc. Cl. E Warrants expiring 6/6/ 1,592 9,154 1,592 9,154
Washington Post Co. 1,800 469,800 1,800 469,800
Young Broadcasting, Inc. Cl. A 101,000 2,802,750 101,000 2,802,750
23,811,676 2,725,000 26,536,676
Retail 2.9%
Caldor Corp. 30,000 536,250 30,000 536,250
Carson Pirie Scott & Co. 5,000 81,875 5,000 81,875
Gymboree Corp. 77,000 2,237,812 77,000 2,237,812
Kellwood Co. 15,000 255,000 15,000 255,000
Lowes Companies, Inc. 57,700 1,723,788 57,700 1,723,788
Mercantile Stores Co., Inc. 12,500 581,250 12,500 581,250
Michaels Stores, Inc. 60,000 1,275,000 60,000 1,275,000
Sears, Roebuck & Co. 20,000 1,197,500 20,000 1,197,500
2,651,875 5,236,600 7,888,475
Transportation 2.1%
Kansas City Southern Industries, Inc. 40,000 1,490,000 40,000 1,490,000
Santa Fe Pacific Corp. 75,000 1,912,500 75,000 1,912,500
Union Pacific Corp. 40,000 2,215,000 40,000 2,215,000
5,617,500 5,617,500
Utilities 4.8%
AT&T Corp. 15,000 796,875 35,000 1,859,375 50,000 2,656,250
Century Telephone Enterprises, Inc. 50,000 1,418,750 50,000 1,418,750
Commonwealth Energy System 25,000 943,750 25,000 943,750
Eastern Utilities Associates 5,000 113,125 5,000 113,125
Houston Industries, Inc. 15,000 631,875 15,000 631,875
Illinova Corp. 50,000 1,268,750 50,000 1,268,750
MCI Communications Corp. 109,000 2,398,000 109,000 2,398,000
Pacific Telesis Group 26,500 708,875 26,500 708,875
SBC Communications, Inc. 17,208 819,531 17,208 819,531
TNP Enterprises, Inc. 61,000 983,625 61,000 983,625
Unicom Corp. 45,000 1,198,125 45,000 1,198,125
8,883,281 4,257,375 13,140,656
Total Common Stock 94.5% 119,983,757 138,684,175 258,667,932
Total Investments (Cost $219,222,242) 99.3% 125,167,604 146,560,529 271,728,133
Other Assets and Liabilities,net 0.7% 1,924,675 41,176 1,965,851
Net Assets $127,092,279 146,601,705 273,693,984
</TABLE>
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<TABLE>
<CAPTION>
Evergreen Lexicon
Growth & Income Capital Appreciation Pro Forma
Fund Fund Adjustments Combined
<S> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
(Cost $ 219,222,242 ) $125,167,604 $146,560,529 $271,728,133
Cash 75,045 24,774 99,819
Interest and Dividend receivable 188,193 139,789 327,982
Receivable for investment securities sold 90,330 0 90,330
Receivable for fund shares sold 2,073,381 0 2,073,381
Prepaid expenses 50,907 0 50,907
TOTAL ASSETS 127,645,460 146,725,092 0 274,370,552
LIABILITIES:
Payable for investment securities purchased 316,250 0 316,250
Payable for fund shares repurchased 86,601 0 86,601
Accrued advisory fee 333 0 333
Accrued expenses 149,997 123,387 273,384
TOTAL LIABILITIES 553,181 123,387 676,568
NET ASSETS 127,092,279 146,601,705 0 273,693,984
NET ASSETS CONSIST OF:
Paid in capital 96,722,780 114,930,830 211,653,610
Undistributed net investment income (9,930) 1,875 (8,055)
Accumulated realized gain on investments 2,449,180 7,093,358 9,542,538
Net unrealized appreciation of investments 27,930,249 24,575,642 52,505,891
NET ASSETS 127,092,279 146,601,705 0 273,693,984
Net asset value and offering price per share:
Class A $17.12 - $17.12
Maximum offering price (4.75% sales charge) $17.97 - $17.97
Class B $17.10 - $17.10
Class C $17.10 - $17.10
Class Y $17.13 $12.75 $17.13
Net Assets:
Class A 8,553,096 - 8,553,096
Class B 20,103,557 - 20,103,557
Class C 1,123,568 - 1,123,568
Class Y 97,312,058 146,601,705 243,913,763
Shares outstanding:
Class A 499,461 - 499,461
Class B 1,175,426 - 1,175,426
Class C 65,716 - 65,716
Class Y 5,680,306 11,499,060 (2,940,875)(1) 14,238,491
</TABLE>
(See Notes which are an integral part of the Pro Forma Financial Statements)
(1) Reflects shares issued as a result of the merger.
<TABLE>
<CAPTION>
Evergreen Lexicon
Growth & Income Capital Appreciation Pro Forma
Fund Fund Adjustments Combined
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income 1,868,074 2,525,738 0 4,393,812
EXPENSES:
Investment advisory fee 835,210 1,017,767 277,381 (1) 2,130,358
Trustees' fees 17,298 5,530 (5,530)(2) 17,298
Administrative personnel and service fees 0 230,694 (230,694)(1) -0-
Custodian and portfolio accounting fees 66,152 0 17,049 (3) 83,201
12B-1 Distribution & Servicing Fees:
Class "A" 4,459 0 0 4,459
Class "B" 42,311 0 0 42,311
Class "C" 1,536 0 0 1,536
Transfer and dividend disbursing agent fees 60,148 365 (280)(2) 60,233
Fund share registration costs 53,040 (1,872) 7,044 (6) 58,212
Professional fees 43,018 37,159 (15,650)(2) 64,527
Printing & Postage 21,738 23,477 (22,918)(5) 22,297
Insurance premiums 7,014 2,233 767 (6) 10,014
Miscellaneous 4,972 8,686 (6,200)(5) 7,458
TOTAL EXPENSES 1,156,896 1,324,039 20,969 2,501,904
Less fee waiver and expense reimbursements (13,589) (345,465) 359,054 (4) ----
NET EXPENSES 1,143,307 978,574 380,023 2,501,904
NET INVESTMENT INCOME 724,767 1,547,164 (380,023) 1,891,908
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain on investments 3,788,534 10,391,163 0 14,179,697
Net increase in unrealized
appreciation of investments 14,047,880 15,042,289 0 29,090,169
Net gain on investments 17,836,414 25,433,452 0 43,269,866
Net (decrease) increase in net assets
resulting from operations $18,561,181 26,980,616 ($380,023) 45,161,774
</TABLE>
(See Notes which are an integral part of the Pro Forma Financial Statements)
(1) Reflects an increase in investment advisory fee and a decrease in
administrative personnel and service fees based on the surviving
Fund's fee schedule
(2) Reflects elimination of duplicate service fees.
(3) Based on surviving Fund's contract in effect for custodian and portfolio
accounting services
(4) Reflects a change in waiver of investment advisory fee based on the
surviving Fund's voluntary advisory fee waiver in effect
for the year ended June 30,1995
(5) Adjustment reflects the expected cost savings when the Funds combine.
(6) Reflects anticipated expenses of the combined fund.
Evergreen Growth & Income Fund
Notes to Pro Forma Combining Financial Statements (Unaudited)
June 30, 1995
1. Basis of Combination - The Pro forma Statement of Assets and
Liabilities, including the Pro forma Portfolio of Investments, and the related
Pro forma related Statement of Operations ("Pro forma Statements") reflects
the accounts of Evergreen Growth & Income Fund ("Evergreen") and Lexicon
Capital Appreciation Fund ("Lexicon") at June 30, 1995 and for the year then
ended.
The Pro forma Statements give effect to the proposed transfer of all
assets and liabilities of Lexicon in exchange for shares of Evergreen.
The Pro forma Statements do not reflect the expense of each Fund in
carrying out its obligations under the Agreement and Plan of
Reorganization. The actual fiscal year end of the combined Fund will
be December 31, the fiscal year end of Evergreen.
The Reorganization will be accomplished through the acquisition of
substantially all of the assets of Lexicon by Evergreen, and the assumption by
Evergreen of certain identified liabilities of Lexicon. Thereafter there will be
a distribution of such shares of Evergreen to shareholders of Lexicon in
liquidation of and subsequent termination of Lexicon. The information contained
herein is based on the experience of each fund for the year ended June 30, 1995
and is designed to permit shareholders of Lexicon to evaluate the financial
effect of the proposed Reorganization. The expenses of Evergreen and Lexicon in
connection with the Reorganization (including the cost of any proxy soliciting
agents), will be borne by First Union National Bank of North Carolina.
The Pro forma Statements should be read in conjunction with the
historical financial statements of each Fund
incorporated by reference in the Statement of Additional Information.
2. Shares of Beneficial Interest - The pro forma net asset value per
share assumes the issuance of additional shares of Evergreen Class Y
shares which would have been issued at June 30, 1995 in connection with
the proposed reorganization. The amount of additional shares assumed
to be issued was calculated based on the June 30, 1995 net assets of
Lexicon totaling $146,601,705 and the net asset value per share of
Evergreen Class Y of $17.13.
The pro forma shares outstanding of 499,461 Class A, 1,175,426 Class B,
65,716 Class C, and 14,238,491 Class Y consists of 8,558,185 additional shares
of Class Y to be issued in the proposed reorganization, as calculated above,
in addition to shares of Evergreen outstanding as of June 30, 1995.
3. Pro Forma Operations - The Pro Forma Statement of Operations
assumes similar rates of gross investment income for the investments
of each Fund. Accordingly, the combined gross
<PAGE>
investment income is equal to the sum of each Fund's gross investment
income. Pro forma operating expenses include the actual expenses of
the Funds and the combined Fund, with certain expenses adjusted to
reflect the expected expenses of the combined entity. The investment
advisory and administrative service have been charged to the combined
Fund based on the fee schedule in effect for Evergreen at the combined
level of average net assets for the year ended June 30, 1995. The Adviser
may, at its discretion, waive its fee or reimburse the Fund for certain of
its expenses in order to reduce the Fund for certain of its expense in
order to reduce th Fund's expense ratio. An adjustment has been made to the
combined Fund's expenses to adjust the waiver of investment advisory
fee based on the voluntary advisory fee waiver in effect for Evergreen
for the year ended June 30, 1995. The Adviser may, at its discretion,
revise or cease this voluntary fee waiver at any time.
<PAGE>
<PAGE>
