PROSPECTUS July 7, 1995
EVERGREEN(SM) GROWTH AND INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN BALANCED FUND
EVERGREEN GROWTH AND INCOME FUND
EVERGREEN VALUE FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN FOUNDATION FUND
EVERGREEN TOTAL RETURN FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Growth and Income Funds (the "Funds") are designed
to provide investors with a selection of investment alternatives which seek
to provide capital growth, income and diversification. This Prospectus
provides information regarding the Class A, Class B and Class C shares
offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 807-2940. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 14
Investment Practices and Restrictions 18
MANAGEMENT OF THE FUNDS
Investment Advisers 23
Sub-Adviser 24
Distribution Plans and Agreements 25
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 26
How to Redeem Shares 28
Exchange Privilege 29
Shareholder Services 30
Effect of Banking Laws 30
OTHER INFORMATION
Dividends, Distributions and Taxes 31
Management's Discussion of Fund Performance 32
General Information 35
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND, and EVERGREEN TOTAL RETURN
FUND is Evergreen Asset Management Corp. ("Evergreen Asset") which, with its
predecessors, has served as an investment adviser to the Evergreen Funds since
1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank
of North Carolina ("FUNB"), which in turn is a subsidiary of First Union
Corporation, one of the ten largest bank holding companies in the United States.
The Capital Management Group of FUNB ("CMG") serves as investment adviser to
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND.
EVERGREEN BALANCED FUND (formerly First Union Balanced Portfolio) seeks
to produce long-term total return through capital appreciation, dividends, and
interest income.
EVERGREEN GROWTH AND INCOME FUND seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
EVERGREEN VALUE FUND (formerly First Union Value Portfolio) seeks
long-term capital growth, with current income as a secondary objective.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities.
EVERGREEN TOTAL RETURN FUND attempts to maximize the "total return" on
its portfolio of investments. It invests primarily in common and preferred
stocks, securities convertible into or exchangeable for common stocks and fixed
income securities.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C Shares of the
Fund. For further information see "Purchase and Redemption of Fund Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the 1% during the
original purchase price or redemption second year, 3% during the third and fourth first year and
proceeds, whichever is lower) years, 2% during the fifth year, 1% during 0% thereafter
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B and C, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares and Class C Shares assume deduction at the time of
redemption (if applicable) of the maximum contingent deferred sales charge
applicable for that time period, and (iii) the expenses for Class B Shares
reflects the conversion to Class A Shares eight years after purchase (years
eight through ten, therefore, reflect Class A expenses).
EVERGREEN BALANCED FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50% After 1 Year $ 56 $ 66 $ 26 $ 16
Administrative Fees .06% .06% .06% After 3 Years $ 74 $ 81 $ 51 $ 81
12b-1 Fees* .25% .75% .75% After 5 Years $ 93 $ 108 $ 88 $ 88
Shareholder Service Fees -- .25% .25% After 10 Years $ 150 $ 163 $ 192 $ 163
Other Expenses .06% .06% .06%
Total .87% 1.62% 1.62%
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 16
Administrative Fees $ 51
12b-1 Fees* $ 88
Shareholder Service Fees $ 192
Other Expenses
Total
</TABLE>
EVERGREEN GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00% After 1 Year $ 63 $ 74 $ 34 $ 24
12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 95 $ 103 $ 73 $ 73
Other Expenses .33% .33% .33% After 5 Years $ 129 $ 145 $ 125 $ 125
Total 1.58% 2.33% 2.33% After 10 Years $ 226 $ 239 $ 267 $ 239
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 24
12b-1 Fees* $ 73
Other Expenses $ 125
Total $ 267
</TABLE>
EVERGREEN VALUE FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50% After 1 Year $ 56 $ 67 $ 27 $ 17
Administrative Fees .06% .06% .06% After 3 Years $ 75 $ 82 $ 52 $ 52
12b-1 Fees* .25% .75% .75% After 5 Years $ 95 $ 110 $ 90 $ 90
Shareholder Service Fees -- .25% .25% After 10 Years $ 154 $ 167 $ 197 $ 167
Other Expenses .10% .10% .10%
Total .91% 1.66% 1.66%
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 17
Administrative Fees $ 52
12b-1 Fees* $ 90
Shareholder Service Fees $ 197
Other Expenses
Total
</TABLE>
3
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of No
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .75% .75% .75% After 1 Year $ 62 $ 73 $ 33 $ 23
12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 94 $ 101 $ 71 $ 71
Other Expenses .53% .53% .53% After 5 Years $ 127 $ 142 $ 122 $ 122
Total 1.53% 2.28% 2.28% After 10 Years $ 221 $ 234 $ 262 $ 234
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 23
12b-1 Fees* $ 71
Other Expenses $ 122
Total $ 262
</TABLE>
EVERGREEN FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of No
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .875% .875% .875% After 1 Year $ 61 $ 72 $ 32 $ 22
12b-1 Fees* .250% 1.000% 1.000% After 3 Years $ 89 $ 97 $ 67 $ 67
Other Expenses .265% .265% .265% After 5 Years $ 120 $ 135 $ 115 $ 115
Total 1.390% 2.140% 2.140% After 10 Years $ 206 $ 219 $ 247 $ 219
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 22
12b-1 Fees* $ 67
Other Expenses $ 115
Total $ 247
</TABLE>
EVERGREEN TOTAL RETURN FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of No
ANNUAL OPERATING EXPENSES Period Redemption
Class B Class C Class A Class B Class C Class B
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00% After 1 Year $ 62 $ 73 $ 33 $ 23
12b-1 Fees* .25% 1.00% 1.00% After 3 Years $ 92 $ 100 $ 70 $ 70
Other Expenses .24% .24% .24% After 5 Years $ 125 $ 140 $ 120 $ 120
Total 1.49% 2.24% 2.24% After 10 Years $ 217 $ 230 $ 257 $ 230
<CAPTION>
Class C
<S> <C><C>
Advisory Fees $ 23
12b-1 Fees* $ 70
Other Expenses $ 120
Total $ 257
</TABLE>
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the forseeable future, the Class A 12b-1 Fees will be limited to .25 of 1%
of average net assets. For Class B and Class C Shares of EVERGREEN GROWTH AND
INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND and
EVERGREEN TOTAL RETURN FUND, a portion of the 12b-1 Fees equivalent to .25 of 1%
of average net assets will be shareholder servicing-related.
Distribution-related 12b-1 Fees will be limited to .75 of 1% of average net
assets as permitted under the rules of the National Association of Securities
Dealers, Inc.
From time to time, each Fund's investment adviser may, at its
descretion, reduce or waive its fees or reimburse the Funds for certain of their
expenses in order to reduce their expense ratios. Each Fund's investment adviser
may cease these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements and in the case of Funds that did not offer
all of the above-referenced Classes of shares during such periods, the amounts
set forth in the tables are based on the expenses incurred by the Classes which
were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE
GREATER OR LESS THAN THOSE SHOWN. For a more complete description of the various
costs and expenses borne by the Funds see "Management of the Funds". As a result
of asset-based sales charges, long-term shareholders may pay more than the
economic equivalent of the maximum front-end charges permitted under the rules
of the National Association of Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND has
been audited by KPMG Peat Marwick LLP, each Fund's independent auditors, for
EVERGREEN FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's
independent auditors and for EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN
GROWTH AND INCOME FUND and EVERGREEN TOTAL RETURN FUND has been audited by Ernst
& Young LLP, each Fund's independent auditors. A report of KPMG Peat Marwick
LLP, Price Waterhouse LLP, or Ernst & Young LLP, as the case may be, on the
audited information with respect to each Fund is incorporated by reference in
the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
No financial highlights are shown for Class A, B or C Shares of EVERGREEN
GROWTH and INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND or EVERGREEN
FOUNDATION FUND, since these classes did not have any operations prior to
December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN BALANCED FUND -- CLASS A, B, C AND Y SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS C CLASS Y SHARES
CLASS B SHARES SHARES
JUNE 10, JANUARY 26, SEPTEMBER 2,
1991* 1993* 1994*
YEAR ENDED THROUGH YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1994 1993 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $12.07 $11.41 $11.02 $10.00 $12.08 $11.54 $12.00 $12.07 $11.41 $11.02
Income (loss) from
investment
operations:
Net investment
income............. .43 .42 .42 .30 .36 .34 .18 .46 .45 .46
Net realized and
unrealized gain
(loss) on
investments........ (.71) .75 .43 1.08 (.71) .65 (.61) (.71) .75 .42
Total from
investment
operations....... (.28) 1.17 .85 1.38 (.35) .99 (.43) (.25) 1.20 .88
Less distributions
to shareholders
from:
Net investment
income............. (.43) (.42) (.42) (.35) (.36) (.34) (.21) (.46) (.45) (.45)
Net realized
gains.............. (.19) (.09) (.04) (.01) (.19) (.09) (.19) (.19) (.09) (.04)
In excess of net
investment
income............. -- -- -- -- -- (.02)(a) -- -- -- --
Total
distributions.... (.62) (.51) (.46) (.36) (.55) (.45) (.40) (.65) (.54) (.49)
Net asset value, end
of period.......... $11.17 $12.07 $11.41 $11.02 $11.18 $12.08 $11.17 $11.17 $12.07 $11.41
TOTAL RETURN+....... (2.4%) 10.4% 7.9% 11.8% (3.0%) 8.7% (3.6%) (2.2%) 10.7% 8.2%
RATIOS &
SUPPLEMENTAL
DATA
Net assets, end of
period
(000's omitted).... $41,010 $35,032 $17,408 $334 $100,052 $ 65,475 $195 $778,657 $760,147 $520,232
Ratios to average
net assets:
Expenses........... .89% .91% .91% .92%++ 1.48% 1.41%++ 1.64%++ .64% .66% .66%
Net investment
income............. 3.69% 3.61% 3.93% 4.38%++ 3.12% 3.09%++ 3.23%++ 3.93% 3.86% 4.20%
Portfolio turnover
rate............... 35% 19% 12% 19% 35% 19% 35% 35% 19% 12%
<CAPTION>
APRIL 1,
1991*
THROUGH
DECEMBER 31,
1991
<S> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $10.00
Income (loss) from
investment
operations:
Net investment
income............. .36
Net realized and
unrealized gain
(loss) on
investments........ 1.03
Total from
investment
operations....... 1.39
Less distributions
to shareholders
from:
Net investment
income............. (.36)
Net realized
gains.............. (.01)
In excess of net
investment
income............. --
Total
distributions.... (.37)
Net asset value, end
of period.......... $11.02
TOTAL RETURN+....... 15.0%
RATIOS &
SUPPLEMENTAL
DATA
Net assets, end of
period
(000's omitted).... $247,472
Ratios to average
net assets:
Expenses........... .68%++
Net investment
income............. 4.86%++
Portfolio turnover
rate............... 19%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Distributions in excess of net investment income for the year ended December
31, 1993 were the result of certain book and tax differences. These
differences did not represent a return of capital for federal income tax
purposes for the year ended December 31, 1993.
5
<PAGE>
EVERGREEN GROWTH AND INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988**
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................. $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38
Income (loss) from
investment operations:
Net investment income....... .14 .14 .15 .19 .30 .52 .19
Net realized and unrealized
gain (loss) on
investments............... .12 1.91 1.65 2.58 (.84) 2.17 2.10
Total from investment
operations.............. .26 2.05 1.80 2.77 (.54) 2.69 2.29
Less distributions to
shareholders from:
Net investment income....... (.14) (.14) (.15) (.19) (.30) (.52) (.19)
Net realized gains.......... (1.01) (.68) (.46) (.31) (.47) (.76) (.86)
Total distributions....... (1.15) (.82) (.61) (.50) (.77) (1.28) (1.05)
Net asset value, end of
period.................... $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62
TOTAL RETURN+............... 1.7% 14.4% 13.8% 25.8% (4.5%) 25.4% 24.6%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)........... $73,457 $77,062 $63,841 $47,763 $36,222 $31,540 $24,399
Ratios to average net
assets:
Expenses.................. 1.33% 1.26% 1.33% 1.41% 1.50% 1.54% 1.56%
Net investment income..... .96% .99% 1.18% 1.55% 2.62% 4.13% 1.70%
Portfolio turnover rate..... 29% 28% 30% 23% 41% 53% 41%
<CAPTION>
OCTOBER 15,
1986* THROUGH
DECEMBER 31,
1987** 1986**
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period................. $10.05 $10.00
Income (loss) from
investment operations:
Net investment income....... .20 .07
Net realized and unrealized
gain (loss) on
investments............... (.63) (.02)
Total from investment
operations.............. (.43) .05
Less distributions to
shareholders from:
Net investment income....... (.24) --
Net realized gains.......... -- --
Total distributions....... (.24) --
Net asset value, end of
period.................... $9.38 $10.05
TOTAL RETURN+............... (4.3%) .5%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)........... $21,471 $20,696
Ratios to average net
assets:
Expenses.................. 1.76% 1.73%++
Net investment income..... 1.90% 3.23%++
Portfolio turnover rate..... 48% 4%
</TABLE>
* Commencement of operations.
** Net investment income is based on the average monthly shares outstanding for
the periods indicated.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
6
<PAGE>
EVERGREEN VALUE FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 3, 1991*
THROUGH
YEAR ENDED DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period...................................... $17.63 $17.11 $17.08 $14.28
Income from investment operations:
Net investment income..................................................... .56 .52 .49 .47
Net realized and unrealized gain (loss) on investments.................... (.20) 1.12 .90 3.53
Total from investment operations........................................ .36 1.64 1.39 4.00
Less distributions to shareholders from:
Net investment income..................................................... (.56) (.52) (.49) (.47)
Net realized gains........................................................ (.82) (.58) (.87) (.73)
In excess of net investment income........................................ -- (.02)(b) -- --
Total distributions..................................................... (1.38) (1.12) (1.36) (1.20)
Net asset value, end of period............................................ $16.61 $17.63 $17.11 $17.08
TOTAL RETURN+............................................................. 2.1% 9.7% 8.3% 25.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................. $507,028 $463,087 $326,154 $271,391
Ratios to average net assets:
Expenses................................................................ .68% .65% .68%(a) .69%++(a)
Net investment income................................................... 3.21% 2.98% 2.90%(a) 3.04%++(a)
Portfolio turnover rate................................................... 70% 46% 56% 69%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 3, 1991
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
<S> <C> <C>
Expenses.................................................. .69% .77%
Net investment income..................................... 2.89% 2.96%
</TABLE>
(b) Distributions in excess of net investment income for the period ended
December 31, 1993 were the result of certain book and tax timing
differences. These distributions did not represent a return of capital for
federal income tax purposes for the year ended December 31, 1993.
7
<PAGE>
EVERGREEN VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990* 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83 $14.66
Income (loss) from investment
operations......................
Net investment income............ .52 .47 .44 .46 .36 .54 .36 .26
Net realized and unrealized gain
(loss) on investments........... (.20) 1.10 .89 3.17 (.44) 1.70 2.11 (1.30)
Total from investment
operations.................... .32 1.57 1.33 3.63 (.08) 2.24 2.47 (1.04)
Less distributions to
shareholders from:
Net investment income............ (.51) (.47) (.43) (.43) (.36) (.57) (.38) (.26)
Net realized gains............... (.82) (.58) (.87) (.73) (.02) (1.00) (.47) (.53)
In excess of net investment
income.......................... -- -- -- -- (.05)(c) -- -- --
Total distributions............. (1.33) (1.05) (1.30) (1.16) (.43) (1.57) (.85) (.79)
Net asset value, end of
period.......................... $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83
TOTAL RETURN+.................... 1.9% 9.3% 8.0% 25.1% (.5%) 15.5% 19.7% (7.1%)
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $188,807 $189,983 $169,310 $135,565 $104,637 $95,995 $83,121 $21,914
Ratios to average net assets:
Expenses........................ .93% .99% 1.01%(a) .96%(a) 1.39%++ 1.55% 1.71% 1.74%
Net investment
income........................ 2.96% 2.63% 2.37%(a) 2.78%(a) 3.28%++ 3.42% 2.72% 1.92%
Portfolio turnover
rate (b)........................ 70% 46% 56% 69% 13% 11% 24% 24%
<CAPTION>
1987 1986
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $12.35 $10.04
Income (loss) from investment
operations......................
Net investment income............ .15 .19
Net realized and unrealized gain
(loss) on investments........... 2.38 2.32
Total from investment
operations.................... 2.53 2.51
Less distributions to
shareholders from:
Net investment income............ (.13) (.20)
Net realized gains............... (.09) --
In excess of net investment
income.......................... -- --
Total distributions............. (.22) (.20)
Net asset value, end of
period.......................... $14.66 $12.35
TOTAL RETURN+.................... 20.8% 25.3%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $23,221 $5,595
Ratios to average net assets:
Expenses........................ 1.97% 2.00%
Net investment
income........................ 1.41% 2.34%
Portfolio turnover
rate (b)........................ 20% 20%
</TABLE>
* The Fund changed its fiscal year end to December 31.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991
<S> <C> <C>
Expenses........................................................................... 1.02% 1.05%
Net investment income.............................................................. 2.36% 2.69%
</TABLE>
(b) Portfolio turnover rate for periods ending on or after March 31, 1986
include certain U.S. government obligations.
(c) Distributions in excess of net investment income for the period ended
December 31, 1990 were a result of certain book and tax timing differences.
These distributions did not represent a return of capital for federal
income tax purposes for the year ended December 31, 1990.
8
<PAGE>
EVERGREEN VALUE FUND -- CLASS B AND C SHARES
<TABLE>
<CAPTION>
CLASS C
CLASS B SHARES SHARES
FEBRUARY 2, SEPTEMBER 2,
1993* 1994*
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................................... $17.63 $17.24 $18.28
Income (loss) from investment operations:
Net investment income......................................................... .42 .35 .19
Net realized and unrealized gain (loss) on investments........................ (.20) 1.01 (.81)
Total from investment operations............................................ .22 1.36 (.62)
Less distributions to shareholders from:
Net investment income......................................................... (.41) (.35) (.19)
Net realized gains............................................................ (.82) (.58) (.82)
In excess of net investment income............................................ -- (.04)(a) (.04)(a)
Total distributions......................................................... (1.23) (.97) (1.05)
Net asset value, end of period................................................ $16.62 $17.63 $16.61
TOTAL RETURN+................................................................. 1.3% 8.0% (3.4%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................................... $104,297 $ 59,953 $485
Ratios to average net assets:
Expenses.................................................................... 1.53% 1.48%++ 1.68%++
Net investment income....................................................... 2.36% 2.09%++ 2.16%++
Portfolio turnover rate....................................................... 70% 46% 70%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
(a) Distributions in excess of net investment income, for the Class B Shares,
for the period ended December 31, 1993 and for the Class C Shares, for the
period ended December 31, 1994, were the result of certain book and tax
timing differences. These distributions did not represent a return of
capital for federal income tax purposes for the year ended December 31, 1993
and December 31, 1994.
9
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........... $11.60 $10.95 $10.52 $9.59 $10.41 $10.09
Income (loss) from investment operations:
Net investment income.......................... .60 .56 .66 .60 .60 .57
Net realized and unrealized gain (loss) on
investments.................................. (.93) .96 .55 1.15 (.66) .76
Total from investment operations............. (.33) 1.52 1.21 1.75 (.06) 1.33
Less distributions to shareholders from:
Net investment income.......................... (.60) (.60) (.61) (.60) (.60) ) (.59
Net realized gains............................. -- (.24) (.17) (.22) (.16) ) (.42
In excess of net realized gains................ -- (.03)(b) -- -- -- --
Total distributions.......................... (.60) (.87) (.78) (.82) (.76) )(1.01
Net asset value, end of period................. $10.67 $11.60 $10.95 $10.52 $9.59 $10.41
TOTAL RETURN+.................................. (2.9%) 14.1% 11.8% 18.8% (.5%) 13.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...... $37,176 $37,336 $23,781 $15,632 $12,351 $ 11,610
Ratios to average net assets:
Expenses..................................... 1.28% 1.36% 1.51%(a) 1.50%(a) 1.50%(a) (1.88%a)
Net investment income........................ 5.40% 5.13% 6.23%(a) 5.91%(a) 6.04%(a) (5.49%a)
Portfolio turnover rate........................ 136% 92% 151% 97% 33% 152%
<CAPTION>
MARCH 14,
1988*
THROUGH
DECEMBER 31,
1988**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period........... $10.00
Income (loss) from investment operations:
Net investment income.......................... .39
Net realized and unrealized gain (loss) on
investments.................................. .18
Total from investment operations............. .57
Less distributions to shareholders from:
Net investment income.......................... (.36)
Net realized gains............................. (.12)
In excess of net realized gains................ --
Total distributions.......................... (.48)
Net asset value, end of period................. $10.09
TOTAL RETURN+.................................. 5.8%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)...... $9,449
Ratios to average net assets:
Expenses..................................... 2.00%++
Net investment income........................ 5.01%++
Portfolio turnover rate........................ 52%
</TABLE>
* Commencement of operations.
** Investment income, expenses and net investment income are based upon the
average monthly shares outstanding for the period indicated.
+ Total return is calculated on net asset value for the period indicated and is
not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1992 1991 1990 1989
<S> <C> <C> <C> <C>
Expenses.................................................... 1.59% 1.82% 1.95% 2.03%
Net investment income....................................... 6.15% 5.59% 5.59% 5.34%
</TABLE>
(b) Distributions in excess of net realized gains were the result of certain
book and tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
10
<PAGE>
EVERGREEN FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 2, 1990*
YEAR ENDED DECEMBER 31, THROUGH
1994 1993 1992 1991 DECEMBER 31, 1990
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................. $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income................................................ .42 .31 .27 .33 1.23(b)
Net realized and unrealized gain (loss) on investments............... (.57) 1.55 1.83 2.77 (.59)
Total from investment operations................................... (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income................................................ (.42) (.31) (.24) (.33) (1.17)
Net realized gains................................................... (.28) (.41) (.63) (.97) (.52)
Total distributions................................................ (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period....................................... $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+........................................................ (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in millions).............................. $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses........................................................... 1.14% 1.20% 1.40%(a) 1.20%(a) 0%(a)++
Net investment income.............................................. 3.51% 2.81% 2.93%(a) 2.86%(a) 15.07%(a,b)++
Portfolio turnover rate.............................................. 33% 60% 127% 178% 131%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized
(a) Net of expense waivers and reimbursements by the Adviser. If the Fund had
borne all expenses that were assumed or waived by the investment adviser,
the annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 2, 1990
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1992 1991 1990
<S> <C> <C> <C>
Expenses................................................... 1.43% 2.58% 3.64%
Net investment income...................................... 2.90% 1.48% 11.43%
</TABLE>
(b) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.
11
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
JANUARY 3, 1995*
THROUGH JANUARY 31, 1995
PER SHARE DATA
Net asset value, beginning of period........................................................ $17.09 $17.09 $17.09
Income from investment operations:
Net investment income....................................................................... .02 .02 .01
Net realized and unrealized gain on investments............................................. .17 .17 .17
Total from investment operations.......................................................... .19 .19 .18
Net asset value, end of period.............................................................. $17.28 $17.28 $17.27
TOTAL RETURN+............................................................................... 1.1% 1.1% 1.1%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................................... $119 $599 $24
Ratios to average net assets:
Expenses.................................................................................. 1.45% ++ 2.23% ++ 2.22% ++
Net investment income..................................................................... 4.09% ++ 3.23% ++ 2.68% ++
Portfolio turnover rate**................................................................... 151% 151% 151%
</TABLE>
* Commencement of class operations.
** Portfolio turnover rate is calculated for the ten month period ended January
31, 1995.
+ Total return calculated is for the period indicated and is not annualized.
Initial sales charge or contingent deferred sales charge is not reflected.
++ Annualized.
12
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
JANUARY YEAR ENDED MARCH 31,
31, 1995* 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning
of period........................... $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37 $19.72
Income (loss) from investment
operations:
Net investment income................. 87 1.08 1.11 1.08 1.02 1.07 1.12 1.06 1.14
Net realized and unrealized gain
(loss) on investments............... (.55) (1.41) 2.51 .70 (.08) .36 .79 (2.64) 1.76
Total from investment
operations........................ .32 (.33) 3.62 1.78 .94 1.43 1.91 (1.58) 2.90
Less distributions to shareholders
from:
Net investment income................. (1.08) (1.08) (1.08) (1.08) (1.08) (1.09) (1.08) (.80) (1.14)
Net realized gains.................... (.25) (1.20) (.46) -- -- -- (.02) (.88) (1.11)
Total distributions................. (1.33) (2.28) (1.54) (1.08) (1.08) (1.09) (1.10) (1.68) (2.25)
Net asset value, end of period........ $17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37
TOTAL RETURN+......................... 1.9% (2.1%) 20.2% 10.2% 5.8% 7.9% 1.3% (7.8%) 15.7%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(in millions)....................... $942 $1,065 $1,142 $1,032 $1,151 $1,292 $1,312 $1,346 $1,636
Ratios to average net assets:
Expenses............................ 1.24%++ 1.18% 1.18% 1.21% 1.23% 1.18% 1.02%** 1.01%** 1.02%**
Net investment income............... 5.70%++ 5.29% 5.65% 5.73% 5.90% 5.64% 6.36%** 5.80%** 5.68%**
Portfolio turnover rate............... 151% 106% 164% 137% 137% 89% 86% 81% 44%
<CAPTION>
1986
<S> <C>
PER SHARE DATA
Net asset value, beginning
of period........................... $16.63
Income (loss) from investment
operations:
Net investment income................. 1.03
Net realized and unrealized gain
(loss) on investments............... 4.26
Total from investment
operations........................ 5.29
Less distributions to shareholders
from:
Net investment income................. (1.22)
Net realized gains.................... (.98)
Total distributions................. (2.20)
Net asset value, end of period........ $19.72
TOTAL RETURN+......................... 35.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(in millions)....................... $408
Ratios to average net assets:
Expenses............................ 1.11%**
Net investment income............... 6.06%**
Portfolio turnover rate............... 65%
</TABLE>
* On September 21, 1994, the Fund changed its fiscal year end to January 31.
** Net of expense limitation in fiscal years 1986, 1987, 1988 and 1989.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
13
14
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Balanced Fund
The investment objective of the Evergreen Balanced Fund (formerly First
Union Balanced Portfolio) is to achieve a long-term total return through capital
appreciation, dividends and interest income. This objective is a fundamental
policy and may not be changed without shareholder approval. The Fund invests in
common and preferred stocks for growth and fixed income securities to provide a
stable income flow. There can be no assurance that the Fund's investment
objective will be achieved.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% fixed income securities (including some
convertible securities) and 0-25% cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk.
The Funds invest in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection includes a
company's financial strength (such as cash flow and low debt-to-equity ratio),
earnings growth and price in relation to current earnings, dividends and book
value to identify growth opportunities. The Fund may also invest in American
Depositary Receipts ("ADRs") of foreign companies which are traded on the New
York or American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO"), or which, if unrated, are considered to be of comparable quality by the
Fund's investment adviser. Bonds are selected based upon the outlook for
interest rates and their yield in relation to other bonds of similar quality and
maturity. The maturities of these bonds may be medium (i.e., from five to ten
years) to long-term (i.e., over ten years), but in no event will they be longer
than twenty years.
The Fund also invests in securities which are either issued or
guaranteed by the U.S. government, its agencies or instrumentalities. These
securities include direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds; and notes, bonds and discount notes of U.S.
government agencies or instrumentalities, such as the Farm Credit System,
including the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal National Mortgage Association, Government
National Mortgage Association, Student Loan Marketing Association, Tennessee
Valley Authority, Export-Import Bank of the United State, Commodity Credit
Corporation, Federal Financing Bank and National Credit Union Administration.
Some of these securities are supported by the full faith and credit of the U.S.
government, and others are supported only by the credit of the agency or
instrumentality.
The Fund may also invest short-term in cash equivalents for defensive
purposes; securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities, and repurchase agreements collateralized by
eligible investments.
As of December 31, 1992, 1993 and 1994, approximately 59%, 63% and 55%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen Growth and Income Fund
The investment objective of Evergreen Growth and Income Fund (formerly
known as the Evergreen Value Timing Fund) is to achieve a return composed of
capital appreciation in the value of its shares and current income. (The Fund's
investment objective is a fundamental policy.) There can be no assurance that
the Fund's investment objective will be achieved.
The Fund seeks to achieve its investment objective by investing in the
securities of companies which are undervalued in the marketplace relative to
those companies' assets, breakup value, earnings or potential earnings growth.
These companies are often found among those which have had a record of financial
success but are currently in disfavor in the marketplace for reasons the Fund's
investment adviser perceives as temporary or erroneous. Such investments when
successfully timed are expected to be the means for achieving the Fund's
investment objective. This inherently contrarian approach may require greater
reliance upon the analytical and research capabilities of the Fund's investment
adviser than an investment in certain other equity funds. Consequently, an
investment in the Fund may involve more risk than other equity funds. The Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss inherent in such a program. Nor should the Fund be
considered a balanced or complete investment program.
The Fund will use the "value timing" approach as a process for
purchasing securities when events indicate that fundamental investment values
are being ignored in the marketplace. Fundamental investment value is based on
one or more of the following: assets -- tangible and intangible (examples of the
latter include brand names or licenses), capitalization of earnings, cash flow
or potential earnings growth. A discrepancy between market valuation and
fundamental value often arises due to the presence of unrecognized assets or
business opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary shifts and
legal action (including the initiation of bankruptcy proceedings) are some of
the factors that create these capital appreciation opportunities. If the
securities in which the Fund invests never reach their perceived potential or
the valuation of such securities in the marketplace does not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such securities.
The Fund will invest primarily in common stocks and securities
convertible into or exchangeable for common stock. It is anticipated that the
Fund's investments in these securities will contribute to the Fund's return
primarily through capital appreciation. In addition, the Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated that the
Fund's investments in these securities will also produce capital appreciation
but the current income component of return will be a more significant factor in
their selection. However, the Fund will invest in nonconvertible preferred stock
and debt securities only if the anticipated capital appreciation plus income
from such investments is equivalent to that anticipated from investments in
equity or equity-related securities. The Fund may invest up to 5% of its total
assets in debt securities which are rated below investment grade, commonly known
as "junk bonds". Investments of this type are subject to greater risk of loss of
principal and interest.
It is anticipated that the annual portfolio turnover rate for the Fund
will not exceed 100%. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Value Fund
The investment objective of the Evergreen Value Fund (formerly the
First Union Value Portfolio) is long-term capital appreciation with current
income as a secondary objective. The Fund's objective is a fundamental policy
and may not be changed without shareholder approval. Normally, at least 75% of
the Fund's assets will be invested in equity securities of U.S. companies with
prospects for earnings growth and dividends. There can be no assurance that the
Fund's investment objective will be achieved.
The Fund's investments, in order of priority, consist of:
common and preferred stocks, bonds and convertible preferred
stock of U.S. companies with a minimum market capitalization of $100
million which are listed on the New York or American Stock Exchanges or
traded in over-the-counter markets. The primary consideration is for
those industries and companies with the potential for capital
appreciation; income is a secondary consideration;
ADRs of foreign companies traded on the New York or American
Stock Exchanges or the over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation implications and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions Special Risk Considerations");
convertible bonds rated no lower than BBB by S&P or Baa by
Moody's or, if not rated, determined to be of comparable quality by the
Fund's investment adviser;
money market instruments;
fixed rate notes and bonds and adjustable and variable rate
notes of companies whose common stock the Fund may acquire rated no
lower than BBB by S&P or Baa by Moody's or which, if not rated,
determined to be of comparable quality by the Fund's investment adviser
(up to 5% of total assets);
zero coupon bonds issued or guaranteed by the U.S. government,
its agencies or instrumentalities (up to 5% of total assets);
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
prime commercial paper, including master demand notes rated no
lower than A-1 by S&P or Prime 1 by Moody's.
Bonds rated BBB by S&P or Baa by Moody's may have speculative
characteristics. Changes in economic conditions or other circumstances
are more likely to weaken such bonds' prospects for principal and
interests payments than higher rated bonds. However, like the higher
rated bonds, these securities are considered investment grade.
As of December 31, 1992, 1993 and 1994, approximately 92%, 95% and 97%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen American Retirement Fund
The investment objectives of Evergreen American Retirement Fund in
order of priority are conservation of capital, reasonable income and capital
growth. The Fund offers a structured investment approach designed specifically
for retirees and persons contemplating retirement which may also be appropriate
for the qualified retirement plans of smaller companies. There can be no
assurance that the Fund's investment objectives will be achieved. The Fund's
objective is a fundamental policy and may not be changed without shareholder
approval.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. The balance will be invested in
corporate obligations rated no lower than A by Moody's or S&P.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Foundation Fund
The investment objectives of Evergreen Foundation Fund, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. Government debt obligations,
and short-term debt instruments, such as commercial paper. Additionally, income
from time to time may be generated by the lending of securities. The Fund's
common stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or
not such securities are traded on a national securities exchange. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions. Accordingly, there
can be no assurance that the Fund's investment objectives will be achieved. The
Fund's objective is a fundamental policy and may not be changed without
shareholder approval.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market value of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the value of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities, including issues of the U.S. Treasury, such
as bills, certificates of indebtedness, notes and bonds, and issues of agencies
and instrumentalities established under the authority of an act of Congress.
Some of these securities are supported by the full faith and credit of the U.S.
Government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's or S&P.
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's).
Certain obligations may be entitled to the benefit of standby letters of credit
or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Total Return Fund
The investment objective of Evergreen Total Return Fund is to achieve a
return consisting of current income and capital appreciation in the value of its
shares. The emphasis on current income and capital appreciation will be
relatively equal although, over time, changes in the outlook for market
conditions and the level of interest rates will cause the Fund to vary its
emphasis between these two elements in its search for the optimum return for its
shareholders. The Fund seeks to achieve its investment objective through
investments in common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities. The Fund may invest
up to 20% of its total assets in the securities of foreign issuers either
directly or in the form of ADRs, European Depository Receipts ("EDRs") or other
securities convertible into securities of foreign issuers. The Fund may also
write covered call options. The Fund's investment objective is a fundamental
policy. There can be no assurance that the Fund's investment objective will be
achieved.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders.
The Fund may make investments in securities (other than options)
regardless of whether or not such securities are traded on a national securities
exchange. The value of portfolio securities and their yields, as well as
opportunities to realize net gains from a covered call options writing program,
are expected to fluctuate over time because of varying general economic and
market conditions.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Ordinarily, the Fund anticipates that approximately 75% of its portfolio will
consist of equity securities and the other 25% of debt securities (including
convertible debt securities). As of March 31, 1993 and 1994 and January 31,
1995, approximately 88%, 96% and 91%, respectively, of the Fund's portfolio
consisted of equity securities. The balance of the Fund's portfolio consisted of
debt securities (including convertible debt securities). If, in the judgment of
the Fund's investment adviser, the appreciation potential for equity securities
exceeds the return available from debt securities or government securities,
investments in equity securities could exceed 75% of the Fund's portfolio. Most
equity investments, however, will be income producing. The quality standards for
debt securities include: Obligations of banks having total assets of at least
one billion dollars which are members of the FDIC; commercial paper rated no
lower than P-2 by Moody's or A-2 by S&P; and non-convertible debt securities
rated no lower than Baa by Moody's or BBB by Standard & Poor's. Securities rated
Baa or BBB may have speculative characteristics. See the discussion above with
respect to Evergreen Value Fund.
It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Total Return Fund, Evergreen Growth and
Income Fund, Evergreen American Retirement Fund and Evergreen Foundation Fund on
those exchanges. The portfolio turnover rate for each Fund is set forth in the
tables contained in the section entitled "Financial Highlights". See the
Statement of Additional Information for further information regarding the
brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy, the Funds, except Evergreen
American Retirement Fund, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes.
Evergreen American Retirement Fund may borrow for purposes of leverage. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. The
specific limits applicable to borrowing by each Fund are set forth in the
Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the net assets of the Evergreen
Total Return Fund, Evergreen Growth and Income Fund and Evergreen American
Retirement Fund, 30% of the net assets of the Evergreen Foundation Fund, and 5%
of the value of the total assets of Evergreen Balanced Fund and Evergreen Value
Fund, and must be collateralized by cash or U.S. Government securities that are
maintained at all times in an amount equal to at least 100% of the current
market value of the securities loaned, including accrued interest. While such
securities are on loan, the borrower will pay a Fund any income accruing
thereon, and the Fund may invest the cash collateral in portfolio securities,
thereby increasing its return. Any gain or loss in the market price of the
loaned securities which occurs during the term of the loan would affect a Fund
and its investors. A Fund has the right to call a loan and obtain the securities
loaned at any time on notice of not more than five business days. A Fund may pay
reasonable fees in connection with such loans.
There is the risk that when lending portfolio securities, the
securities may not be available to a Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.
Short Sales. The Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen Balanced Fund, Evergreen American Retirement Fund and Evergreen
Foundation Fund may, as a defensive strategy, make short sales of securities. A
short sale occurs when a seller sells a security and makes delivery to the buyer
by borrowing the security. Short sales of a security are generally made in cases
where the seller expects the market value of the security to decline. To
complete a short sale, the seller must replace the security borrowed by
purchasing it at the market price at the time of replacement, or by delivering
securities from the seller's own position to the lender. In the event the market
value of a security sold short were to increase, the seller would realize a loss
to the extent that the cost of purchasing the security for delivery to the
lender were greater than the proceeds from the short sale. In the event a short
sale is completed by delivery of securities to the lender from the seller's own
position, the seller would forego any gain that would otherwise be realized on
such securities. The Evergreen American Retirement Fund and Evergreen Foundation
Fund may only make short sales "against the box" which means it must own the
securities sold short, or other securities convertible into, or which carry
rights to acquire, such securities.
Illiquid or Restricted Securities. Evergreen Growth and Income Fund, Evergreen
American Retirement Fund, Evergreen Foundation Fund and Evergreen Total Return
Fund may invest up to 15% of their net assets, and Evergreen Balanced Fund and
Evergreen Value Fund may invest up to 10% of their net assets, in illiquid
securities and other securities which are not readily marketable, including
non-negotiable time deposits, certain restricted securities not deemed by the
Trustees to be liquid and repurchase agreements with maturities longer than
seven days. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10 %
limits. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Funds' investment advisers on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in a Fund having more than 15%, or with respect to Evergreen Value Fund 10%, of
its assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. Evergreen Growth and
Income Fund, Evergreen Balanced Fund, Evergreen Value Fund and Evergreen Total
Return Fund may enter into repurchase agreements with member banks of the
Federal Reserve System, including the Custodian or primary dealers in U.S.
Government securities. A repurchase agreement is an arrangement pursuant to
which a buyer purchases a security and simultaneously agrees to resell it to the
vendor at a price that results in an agreed-upon market rate of return which is
effective for the period of time (which is normally one to seven days, but may
be longer) the buyer's money is invested in the security. The arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the holding period. A Fund requires continued maintenance of collateral
with its Custodian in an amount at least equal to the repurchase price
(including accrued interest). In the event a vendor defaults on its repurchase
obligation, a Fund might suffer a loss to the extent that the proceeds from the
sale of the collateral were less than the repurchase price. If the vendor
becomes the subject of bankruptcy proceedings, a Fund might be delayed in
selling the collateral. The Funds' investment advisers will review and
continually monitor the creditworthiness of each institution with which a Fund
enters into a repurchase agreement to evaluate these risks.
Evergreen Balanced Fund and Evergreen Value Fund may borrow money by
entering into a "reverse repurchase agreement" by which it agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers,
and to repurchase them at a mutually agreed upon date and price, for temporary
or emergency purposes. At the time the Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account cash, U.S. government
securities or liquid high grade debt obligations having a value at least equal
to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Each Fund will not enter into reverse repurchase agreements exceeding 5% of the
value of its total assets.
When-Issued and Delayed Delivery Transactions. Evergreen Balanced Fund and
Evergreen Value Fund may purchase securities on a when-issued or delayed
delivery basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more or
less than the market value of the securities on the settlement date. The Funds
may dispose of a commitment prior to settlement if the Funds investment adviser
deems it appropriate to do so. In addition, the Funds may enter into
transactions to sell their purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or losses
upon the sale of such commitments.
Fixed Income Securities - Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Options and Futures. Each of Evergreen Total Return Fund, Evergreen Growth and
Income Fund and Evergreen American Retirement Fund may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Funds
if, afterwards, securities comprising more than 25% of the market value of the
equity securities of Evergreen Growth and Income Fund and Evergreen Total Return
Fund, or 15% of the market value of the equity securities of Evergreen American
Retirement Fund would be subject to call options. A Fund realizes income from
the premium paid to it in exchange for writing the call option. Once it has
written a call option on a portfolio security and until the expiration of such
option, a Fund forgoes the opportunity to profit from increases in the market
price of such security in excess of the exercise price of the call option.
Should the price of the security on which a call has been written decline, a
Fund retains the risk of loss, which would be offset to the extent the Fund has
received premium income. A Fund will only write "covered" call options traded on
U.S. national securities exchanges. An option will be deemed covered when a Fund
either (i) owns the security (or securities convertible into such security) on
which the option has been written in an amount sufficient to satisfy the
obligations arising under the option; or (ii) a Fund's Custodian maintains cash
or high-grade liquid debt securities belonging to the Fund in an amount not less
that the amount needed to satisfy the Fund's obligations with respect to options
written on securities it does not own. A "closing purchase transaction" may be
entered into with respect to a call option written by a Fund for the purpose of
closing its position.
Evergreen Balanced Fund and Evergreen Value Fund may engage in options
and futures transactions. Options and futures transactions are intended to
enable a Fund to manage market, interest rate or exchange rate risk, and the
Funds do not use these transactions for speculation or leverage.
Evergreen Balanced Fund and Evergreen Value Fund may attempt to hedge
all or a portion of their portfolios through the purchase of both put and call
options on their portfolio securities and listed put options on financial
futures contracts for portfolio securities. The Funds may also write covered
call options on their portfolio securities to attempt to increase their current
income. The Funds will maintain their positions in securities, option rights and
segregated cash subject to puts and calls until the options are exercised,
closed or have expired. An option position may be closed out only on an exchange
which provides a secondary market for an option of the same series. The Funds
may purchase listed put options on financial futures contracts. These options
will be used only to protect portfolio securities against decreases in value
resulting from market factors such as an anticipated increase in interest rates.
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
Evergreen Balanced Fund and Evergreen Value Fund may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
Evergreen Balanced Fund and Evergreen Value Fund may also, as stated
previously, purchase futures contracts and options thereon. A futures contract
is a firm commitment by two parties: the seller, who agrees to make delivery of
the specific type of instrument called for in the contract ("going short"), and
the buyer, who agrees to take delivery of the instrument ("going long") at a
certain time in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specific agencies or instrumentalities of the U.S. government. If a Fund would
enter into financial futures contracts directly to hedge its holdings of fixed
income securities, it would enter into contracts to deliver securities at an
undetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. A Fund would "go long" (agree to purchase securities
in the future at a predetermined price) to hedge against a decline in market
interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies or index-based futures contracts in order
to hedge against changes in interest or exchange rates or securities prices. A
futures contract on securities or currencies is an agreement to buy or sell
securities or currencies during a designated month at whatever price exists at
that time. A futures contact on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Funds do not make payment or
deliver securities upon entering into a futures contract. Instead, they put down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in
order to terminate a futures contract and may buy or sell put and call options
for the purpose of closing out their options positions. The Funds ability to
enter into closing transactions depends on the development and maintenance of a
liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. As a result,
there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case the
Funds would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them can result in poorer performance (i.e., the Funds return may
be reduced). The Funds attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contract and
options on financial futures contract as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Funds investment adviser could
be incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements and other
economic factors. Even if the Funds investment adviser correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds ability to establish and close out financial futures contracts and options
on financial futures contract positions depends on this secondary market. If a
Fund is unable to close out its position due to disruptions in the market or
lack of liquidity, the Fund may lose money on the futures contract or option,
and the losses to the Fund could be significant.
Special Risk Considerations
Investment in Foreign Securities. Evergreen Total Return Fund, Evergreen
Balanced Fund and Evergreen Value Fund may invest in foreign securities.
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. For example,
a change in the value of any foreign currency relative to the U.S. dollar will
result in a corresponding change in the U.S. dollar value of securities
denominated in that currency. Accordingly, a change in the value of any foreign
currency relative to the U.S. dollar will result in a corresponding change in
the U.S. dollar value of the assets of the Fund denominated or traded in that
currency. If the value of a particular foreign currency falls relative to the
U.S. dollar, the U.S. dollar value of the assets of a Fund denominated in such
currency will also fall. The performance of a Fund will be measured in U.S.
dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by each Fund's investment adviser before making any of these types of
investments.
ADRs and EDRs and other securities convertible into securities of
foreign issuers may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally ADRs, in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by Evergreen Total Return
Fund, Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund as investment adviser. Evergreen Asset succeeded on
June 30, 1994 to the advisory business of the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), one of the ten largest bank holding companies in
the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Funds. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to Evergreen Balanced Fund and Evergreen Value Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds) . First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Total Return Fund, Evergreen Growth
and Income Fund, Evergreen American Retirement Fund and Evergreen Foundation
Fund, Evergreen Asset manages each Fund's investments, provides various
administrative services and supervises each Fund's daily business affairs,
subject to the authority of the Trustees. Evergreen Asset is entitled to receive
a from each of Evergreen Total Return Fund and Evergreen Growth and Income Fund
fee equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. Evergreen Asset is entitled to receive
from Evergreen Foundation Fund a fee equal to .875 of 1% of average daily net
assets on an annual basis on the first $750 million in assets, .75 of 1% of
average daily net assets on an annual basis on the next $250 million in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion, and from Evergreen American Retirement Fund a fee equal to .75 of 1% of
average daily net assets on an annual basis on the first $1 billion in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion. The fee paid by Evergreen Total Return Fund and Evergreen Growth and
Income Fund is higher than the rate paid by most other investment companies. The
total expenses of each Fund for the fiscal year ended December 31, 1994,
expressed as a percentage of average daily net assets on an annual basis are set
forth in the section entitled "Financial Highlights".
CMG manages investments and supervises the daily business affairs of
Evergreen Balanced Fund and Evergreen Value Fund and, as compensation therefor,
is entitled to receive an annual fee equal to .50 of 1% of average daily net
assets of each Fund. The total annualized operating expenses of Evergreen
Balanced Fund and Evergreen Value Fund for their most recent fiscal year ended
December 31, 1994, are set forth in the section entitled "Financial Highlights".
Evergreen Asset serves as administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee based on the average daily net
assets of these Funds at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .050%
of the first $7 billion; .035% on the next $3 billion; .030% on the next $5
billion; .020% on the next $10 billion; .015% on the next $5 billion; and .010%
on assets in excess of $30 billion. Furman Selz Incorporated, the parent of
Evergreen Funds Distributor, Inc., distributor for the Evergreen group of mutual
funds, serves as sub-administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee from each Fund calculated on the
average daily net assets of each Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Total Return Fund is Nola Maddox
Falcone, C.F.A., who is President and Co-Chief Executive Officer of Evergreen
Asset. Ms. Falcone has served as the principal manager of Evergreen Total Return
Fund since 1985. The portfolio manager for Evergreen Foundation Fund is Stephen
A. Lieber, who is Chairman and Co-Chief Executive Officer of the Evergreen
Asset. Mr. Lieber has served as such Fund's principal manager since its
inception. The portfolio manager for Evergreen Growth and Income Fund is Edmund
H. Nicklin, Jr. C.F.A. Mr. Nicklin has served as the Fund's principal manager
since its inception. The portfolio manager for Evergreen American Retirement
Fund is Irene D. O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal
manager since its inception. Each of the aforementioned individuals has been
associated with the Evergreen Asset and its predecessor since prior to 1989.
The portfolio manager for Evergreen Balanced Fund since its inception
in January 1991 is R. Dean Hawes, who is a Vice President of FUNB and is the
Director of Employee Benefit Portfolio Management. Mr. Hawes joined FUNB in 1981
after spending five years with Merrill Lynch, Pierce, Fenner, & Smith and
Townsend Investments. William T. Davis, Jr., the portfolio manager of Evergreen
Value Fund since March, 1991, is a Vice President of FUNB and has been with
First Union since 1986. Prior to that, Mr. Davis served as a securities analyst
for Seibels Bruce (Insurance) Group.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen American Retirement Fund and Evergreen Foundation Fund. Lieber &
Company will be reimbursed by Evergreen Asset in connection with the rendering
of services on the basis of the direct and indirect costs of performing such
services. There is no additional charge to Evergreen Total Return Fund,
Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund for the services provided by Lieber & Company. The
address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A, Class B and Class C shares a Rule 12b-1 plan (each, a "Plan" or
collectively the "Plans"). Under the Plans, each Fund may incur
distribution-related and shareholder servicing-related expenses which may not
exceed an annual rate of .75 of 1% of the aggregate average daily net assets
attributable to each Fund's Class A shares, 1.00% of the aggregate average daily
net assets attributable to the Class B and Class C shares of Evergreen Total
Return Fund, Evergreen Growth and Income Fund, Evergreen American Retirement
Fund and Evergreen Foundation Fund, and .75 of 1% of the aggregate average daily
net assets attributable to the Class B and Class C shares of Evergreen Balanced
Fund and Evergreen Value Fund. Payments under the Plans adopted with respect to
Class A shares are currently voluntarily limited to .25 of 1% of each Fund's
aggregate average daily net assets attributable to Class A shares. The Plans
provide that a portion of the fee payable thereunder may constitute a service
fee to be used for providing ongoing personal services and/or the maintenance of
shareholder accounts. Evergreen Balanced Fund and Evergreen Value Fund have
each, in addition to the Plans adopted with respect to their Class B and Class C
shares, adopted shareholder service plans ("Service Plans") relating to the
Class B and Class C shares which permit each Fund to incur a fee of up to .25 of
1% of the aggregate average daily net assets attributable to the Class B and
Class C shares for ongoing personal services and/or the maintenance of
shareholder accounts. Such service fee payments to financial intermediaries for
such purposes, whether pursuant to a Plan or Service Plan, will not to exceed
.25% of the aggregate average daily net assets attributable to each Class of
shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, .75 of 1% of a Fund's
aggregate average daily net assets attributable to the Class B shares and .75 of
1% of a Fund's aggregate average daily net assets attributable to the Class C
shares. The Distribution Agreements provide that EFD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans ( and in the case
of Evergreen Balanced Fund and Evergreen Value Fund, the Service Plans), in
amounts up to .25 of 1% of a Fund's aggregate average daily net assets on an
annual basis attributable to Class B and Class C shares, to compensate
organizations, which may include EFD and each Fund's investment adviser or their
affiliates, for personal services rendered to shareholders and/or the
maintenance of shareholder accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
- -------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
- -------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment program. Share certificates are not issued for
Class A, Class B and Class C shares. In states where EFD is not registered as a
broker-dealer shares of a Fund will only be sold through other broker-dealers or
other financial institutions that are registered. See the Share Purchase
Application and Statement of Additional Information for more information. Only
Class A, Class B and Class C shares are offered through this Prospectus (See
"General Information" - "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transactions in shares of a Fund.
Class A shares may also be purchased at net asset value by qualified
and non-qualified employee benefit and savings plans which make shares of the
Funds and the other Evergreen mutual funds available to their participants, and
which: (a) are employee benefit plans having at least $1,000,000 in investable
assets, or 250 or more eligible participants; or (b) are non-qualified benefit
or profit sharing plans which are sponsored by an organization which also makes
the Evergreen mutual funds available through a qualified plan meeting the
criteria specified under (a). In connection with sales made to plans of the type
described in the preceeding sentence that are clients of broker-dealers, and
which do not qualify for sales at net asset value under the conditions set forth
in the paragraph above, payments may be made in an amount equal to .50 of 1% of
the net asset value of shares purchased. These payments are subject to reclaim
in the event shares are redeemed within 12 months after purchase.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
average daily value on an annual basis of Class A shares held by their clients.
Certain purchases of Class A shares may qualify for reduced sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans and
Reinstatement Privilege. Consult the Share Purchase Application and Statement of
Additional Information for additional information concerning these reduced sales
charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which it is expected that they will convert to Class A
shares) . The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
Class C Shares--Level-Load Alternative. You can purchase Class C shares without
any initial sales charge and, therefore, the full amount of your investment will
be used to purchase Fund shares. However, you will pay a 1.0% CDSC if you redeem
shares during the first year after purchase. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of the Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. Shares
obtained from dividend or distribution reinvestment are not subject to the CDSC.
No contingent deferred sales charge will be imposed on Class C shares
purchased by institutional investors, and through employee benefit and savings
plans eligible for the exemption from front-end sales charges described under
"Class A Shares-Front End Sales Charge Alternative", above. Broker-dealers and
other financial intermediaries whose clients have purchased Class C shares may
receive a trailing commission equal to .75 of 1% of the average daily value of
such shares on an annual basis held by their clients more than one year from the
date of purchase. The payment of trailing commissions will commence immediately
with respect to shares eligible for exemption from the contingent deferred sales
charge normally applicable to Class C shares.
With respect to Class B Shares, no CDSC will be imposed on: (1) the
portion of redemption proceeds attributable to increases in the value of the
account due to increases in the net asset value per Share, (2) Shares acquired
through reinvestment of dividends and capital gains, (3) Shares held for more
than seven years after the end of the calendar month of acquisition, (4)
accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution charges and/or shareholder service fees, after
seven years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen mutual funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or its investment adviser
incurs. If such investor is an existing shareholder, a Fund may redeem shares
from an investor's account to reimburse the Fund or its investment adviser for
any loss. In addition, such investors may be prohibited or restricted from
making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B or Class C shares) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 10 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
or C shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The redemption of shares is a taxable transaction for Federal tax
purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for 30 days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the 1940 Act
pursuant to which each Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the Fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B or Class C
shares of the Evergreen mutual fund originally purchased for cash is applied.
Also, Class B shares will continue to age following an exchange for purposes of
conversion to Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the phone number on the front page of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number on the front page of this Prospectus.
Some services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Each Fund's investment adviser may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Internal
Revenue Code of 1986, as amended (the "Code"). Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in December of the previous year. Income dividends and capital
gain distributions are automatically reinvested in additional shares of the Fund
making the distribution at the net asset value per share at the close of
business on the record date, unless the shareholder has made a written request
for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund for their most recent fiscal year is set forth below. A
similar discussion relating to Evergreen Balanced Fund and Evergreen Value Fund
is contained in the annual report of each Fund for the fiscal year ended
December 31, 1994.
Evergreen Growth and Income Fund
The total return of the Class Y no-load shares of the Evergreen Growth
and Income Fund was +1.69% for the year ended December 31, 1994. This return
compared favorably with the +1.31% return of the Standard and Poor's 500
Reinvested Index (the "S&P 500 Index") and the -0.94% return from the Lipper
Growth and Income Fund Average. This performance was achieved through the
implementation of the "value timing" strategy which focuses on undervalued
securities. At year-end 1994, the majority of the portfolio was comprised of
out-of-favor growth companies, restructured companies and other companies which
the Fund's investment adviser believes are substantially undervalued.
While the domestic economy's rate of growth accelerated dramatically in
1994, the Federal Reserve's more stringent monetary policy resulted in a less
hospitable environment for financial assets. The Fund performed well relative to
its competition and the S&P 500 Index in 1994, but the Fed's tightening of
monetary policy kept the absolute return low, in keeping with the depressing
influence on financial assets generally. The principal contributors to the
Fund's positive performance during 1994 were the following industries: (1)
business equipment and services which facilitated the productivity enhancing
efforts of their customers; (2) chemical issues which benefited from the robust
economic growth and previous restructuring efforts that lowered cost structures;
and (3) shares of healthcare companies which continued their rebound from the
market's adverse reaction to the perceived impact of the healthcare program
proposed by the Clinton Administration in 1993. The industry groups which had
the largest negative impact on the Fund's performance were the following: (i)
banks and thrifts, insurance and utilities, all of which suffered from the
Federal Reserve's more stringent monetary policy; (ii) retail which suffered
from lack of pricing flexibility and excess capacity; and (iii) energy which was
negatively impacted by lower prices for natural gas and declining refining
margins.
[CHART]
Evergreen American Retirement Fund
The total return of the Class Y no-load shares of the Evergreen
American Retirement Fund for the fiscal year ended December 31, 1994, was
- -2.86%. This performance lagged the Wilshire 5000 Index which returned -.06% and
exceeded the Lehman General Bond Mutual Fund Index which returned -3.51% for the
year. The Fund concentrated the equity portion of its portfolio in high
dividend-paying common stocks, convertible bonds and convertible preferreds.
Fixed-income issues were represented by investments in U.S. Treasury and agency
obligations and high quality corporate bonds and notes.
Interest rates rose through much of 1994 as the Federal Reserve moved
to slow the rapid and potentially inflationary pace of U.S. economic growth.
Over the course of the year, the Federal Fund's rate was increased from 3.0% to
5.5%, and market forces lifted interest rates on 30 year U.S. Treasury bonds
from 6.35% to 7.88%. This rising interest rate environment was negative for the
bond market and produced mixed results for the stock market. Because of the
Fund's income-oriented style of investing, this period of rising interest rates
negatively affected performance.
The industry groups which had the largest positive impact on the Fund's
performance included the chemicals and metals industries which benefited from
rising demand and product prices, and bank stocks which rose in response to
stronger loan growth and reduced loan loss provisions. The Fund was negatively
impacted by its holdings in the automotive industry and related suppliers, and
utility stocks which declined in response to higher interest rates. The Fund's
exposure to utilities was reduced in early 1994 to a group of special situation
companies. But even the improving fundamentals of these companies could not
overcome the impact of rising rates. Despite strong earnings for the auto
industry and suppliers, these stocks declined as the market anticipated slower
consumer spending in response to higher rates.
The Fund's practice has been to provide a stable quarterly income
dividend. During the past fiscal year, the Fund distributed a dividend of $0.15
per quarter. These distributions were funded entirely from net investment
income. None represented a return of capital. To maintain the dividend rate the
Fund purchased issues which had dividend increases, and frequently repositioned
the portfolio in order to assure participation in large dividends (particularly
from utility stocks or special dividends announced by other types of companies).
The repositioning of the portfolio resulted in higher brokerage commissions.
As noted above, the Fund's investment objectives in order of priority
are conservation of capital, reasonable income and capital growth. To the extent
that the Fund sought to maintain a stable dividend during the past fiscal year
and therefore emphasized current income over capital growth, the Fund's overall
return may have been reduced. Beginning in the first quarter of 1995, the Fund
changed its dividend strategy. The Fund's income dividend distribution will move
toward a fluctuating dividend and away from the stable dividend pattern of the
past.
[CHART]
Evergreen Foundation Fund.
The total return of the Class Y no-load shares of the Evergreen
Foundation Fund for the almost five years since inception on January 2, 1990 to
December 31, 1994 was +99.57%, which calculated to an average annual compounded
return of +14.83%. This compared favorably with the return of the Standard &
Poor's 500 Reinvested Index (+51.45%) and the Lipper Balanced Fund Average
(+44.03%) for the same time period. For the fiscal year ended 1994, the Fund
produced a total return of -1.12% versus returns of +1.31% for the Standard &
Poor's 500 Reinvested Index and -2.52% for the Lipper Balanced Fund Average.
Asset allocation was a primary determinant of performance. Consistent
with the Fund's investment objectives of reasonable income, conservation of
capital and capital appreciation, Evergreen Asset sought to strategically
position the Fund to maximize opportunities in each asset class. The average
allocation during 1994 was 62% equities, 28% fixed-income and 10% short-term
cash equivalents. The equity portion of the portfolio had a return of +4.91% for
1994. The fixed-income segment of the portfolio, whose primary focus is income
and preservation of capital, was comprised on average of three-quarters
long-term U.S. government obligations and one-quarter short-term cash
equivalents. It generated a return of -11.06%, which was in line with its
benchmarks, when assessed in terms of credit quality, liquidity and overall
weighted maturity.
The equity segment of the portfolio was largely responsible for the
capital appreciation during 1994. Stock selection focused on issues believed to
be conservatively valued and financially strong. Concentration on health care
issues provided relative outperformance as these issues benefited from renewed
confidence in the growth of pharmaceutical and medical services industries. A
secondary focus on technological issues (semi-conductors and electronic
components) also provided excellent relative performance, as these sectors
benefited from a resurgence in the U.S. economy. The portfolio was negatively
impacted by its investments in real estate companies, utilities and banks.
Evergreen Total Return Fund.
Steady income flow has been an important goal since the inception of
the Fund. The Fund continued its annual $1.08 per share income dividend. The
dividend was maintained for the seventh successive year. The portfolio of the
Evergreen Total Return Fund, although primarily equities and convertibles, has a
high level of interest rate sensitivity. Since the Fund seeks to pay a
substantial dividend, Evergreen Asset looked toward the utility sector,
financial issues, real estate investment trusts, convertible preferreds and
convertible debentures to provide high yields. The sharp downward swing in the
1994 bond market had a deleterious effect on the interest sensitive sectors of
the equity and convertible markets, particularly impacting utilities, financial
and convertible issues. During the period from March 31, 1994 through January
31, 1995, the Dow Jones Utility Average was down -6.23%, the New York Stock
Exchange Financial Index was down -3.00%, the Merrill Lynch Convertible Index
was down -4.85%, and the Wilshire Real Estate Securities Index was down -3.80%.
The performance of the Class Y no-load shares of the Fund for the same period
was up +1.86%. This compares also with the performance of the Wilshire 5000 of
+6.04% and +3.01% for the Lipper Equity Income Average. One of the best groups
in the portfolio was the health sector which rebounded when the Clinton Health
Care Plan ran into trouble. Restructured companies as well as selected
cyclicals, such as banks and thrift issues and chemicals and energy issues, also
helped the portfolio. Five bank and thrift mergers produced gains.
During the year, the portfolio was restructured to reduce the utility
sector especially electric utilities. Evergreen Asset decided to reduce
dependence on this sector as it faces deregulation and resulting competitive
pressures. Currently, the Fund's focus is on special situations resulting from
such events as rate relief or corporate changes. Evergreen Asset also switched
into international issues in order to diversify risk across country lines and to
reduce the portfolio's sensitivity to changes in U.S. interest rates. Toward the
end of the year, Evergreen Asset added to the portfolio's holdings in the retail
sector as it saw a number of these companies at attractive valuation levels.
Many of these issues were in the process of restructuring, thereby providing the
possibility of improved margins in the near future.
The Fund's dividend was funded entirely from net investment income. It
did not represent a return of capital. To maintain the dividend rate the Fund
purchased issues which had dividend increases, and frequently repositioned the
portfolio in order to assure participation in large dividends, particularly from
utility stocks or special dividends announced by other types of companies. The
repositioning of the portfolio resulted in higher brokerage commissions. As
noted above, the Fund's investment objective is to achieve a return consisting
of current income and capital appreciation. To the extent that the Fund sought
to maintain a stable dividend during the past fiscal year and therefore
emphasized current income over capital appreciation, the Fund's overall return
may have been reduced.
On January 3, 1995, the Fund introduced a multiple class distribution
structure. The Fund's total return for the period 1/3/95 to 1/31/95 for the A,
B, C and Y Class of Shares was -3.45% (reflects maximum front end sales charge
of 4.75%), -3.53% (reflects maximum contingent deferred sales charge of 5%),
- -0.41% (reflects 1% contingent deferred sales charge within first year of
purchase), and 1.47% (no-load), respectively.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Total Return Fund is a Massachusetts business trust
organized in 1986, and was originally organized as Maryland corporation in 1978.
Evergreen Growth and Income Fund is a Massachusetts business trust organized in
1986. The Evergreen American Retirement Fund is a separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust organized in
1987. Evergreen Foundation Fund is a separate series of the Evergreen Foundation
Trust, a Massachusetts business trust organized in 1989. Evergreen Balanced Fund
and Evergreen Value Fund are separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Balanced Fund and Evergreen Value Fund and which
provides certain sub-administrative services to Evergreen Asset in connection
with its role as investment adviser to Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund, including providing personnel to serve as officers of the
Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and distribution and shareholder
servicing related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND, EVERGREEN TOTAL RETURN FUND
Capital Management Group of First Union National Bank, 210 South College
Street, Charlotte, North Carolina, 28228
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
<PAGE>
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) GROWTH AND INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN BALANCED FUND
EVERGREEN GROWTH AND INCOME FUND
EVERGREEN VALUE FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN FOUNDATION FUND
EVERGREEN TOTAL RETURN FUND
CLASS Y SHARES
The Evergreen Growth and Income Funds (the "Funds") are designed
to provide investors with a selection of investment alternatives which seek
to provide capital growth, income and diversification. This Prospectus
provides information regarding the Class Y shares offered by the Funds.
Each Fund is, or is a series of, an open-end, diversified, management
investment company. This Prospectus sets forth concise information about
the Funds that a prospective investor should know before investing. The
address of the Funds is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 235-0064. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Advisers
Sub-Adviser
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND, EVERGREEN FOUNDATION FUND, and EVERGREEN TOTAL RETURN
FUND is Evergreen Asset Management Corp. ("Evergreen Asset") which, with its
predecessors, has served as an investment adviser to the Evergreen Funds since
1971. Evergreen Asset is a wholly-owned subsidiary of First Union National Bank
of North Carolina ("FUNB"), which in turn is a subsidiary of First Union
Corporation, one of the ten largest bank holding companies in the United States.
The Capital Management Group of FUNB ("CMG") serves as investment adviser to
EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND.
EVERGREEN BALANCED FUND (formerly First Union Balanced Portfolio) seeks
to produce long-term total return through capital appreciation, dividends, and
interest income.
EVERGREEN GROWTH AND INCOME FUND seeks to achieve a return composed of
capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
EVERGREEN VALUE FUND (formerly First Union Value Portfolio) seeks
long-term capital growth, with current income as a secondary objective.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities.
EVERGREEN TOTAL RETURN FUND attempts to maximize the "total return" on
its portfolio of investments. It invests primarily in common and preferred
stocks, securities convertible into or exchangeable for common stocks and fixed
income securities.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per year) $5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN BALANCED FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 6
Administrative Fees .06%
After 3 Years $ 20
12b-1 Fees --
After 5 Years $ 35
Other Expenses .06%
After 10 Years $ 77
Total .62%
</TABLE>
EVERGREEN GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.00%
After 1 Year $ 14
12b-1 Fees --
After 3 Years $ 42
Other Expenses .33%
After 5 Years $ 73
After 10 Years $ 160
Total 1.33%
</TABLE>
EVERGREEN VALUE FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 7
Administrative Fees .06%
After 3 Years $ 21
12b-1 Fees --
After 5 Years $ 37
Other Expenses .10%
After 10 Years $ 82
Total .66%
</TABLE>
EVERGREEN AMERICAN RETIREMENT FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .75%
After 1 Year $ 13
12b-1 Fees --
After 3 Years $ 41
Other Expenses .53%
After 5 Years $ 70
After 10 Years $ 155
Total 1.28%
</TABLE>
3
<PAGE>
EVERGREEN FOUNDATION FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .875%
After 1 Year $ 12
12b-1 Fees --
After 3 Years $ 36
Other Expenses .265%
After 5 Years $ 63
After 10 Years $ 139
Total 1.14%
</TABLE>
EVERGREEN TOTAL RETURN FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.00%
After 1 Year $ 13
12b-1 Fees --
After 3 Years $ 39
Other Expenses .24%
After 5 Years $ 68
After 10 Years $ 150
Total 1.24%
</TABLE>
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund's Y Class for the most recent fiscal period. Such expenses have
been restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds". As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent years or the life of the Fund
if shorter for EVERGREEN BALANCED FUND and EVERGREEN VALUE FUND has been audited
by KPMG Peat Marwick LLP, each Fund's independent auditors, for EVERGREEN
FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's independent
auditors and for EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN GROWTH AND INCOME
FUND and EVERGREEN TOTAL RETURN FUND has been audited by Ernst & Young LLP, each
Fund's independent auditors. A report of KPMG Peat Marwick LLP, Price Waterhouse
LLP, or Ernst & Young LLP, as the case may be, on the audited information with
respect to each Fund is incorporated by reference in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
incorporated by reference in the Fund's Statement of Additional Information.
No financial highlights are shown for Class A, B or C shares of EVERGREEN
GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND or EVERGREEN
FOUNDATION FUND, since these classes did not have any operations prior to
December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN BALANCED FUND -- CLASS A, B, C AND Y SHARES
<TABLE>
<CAPTION>
CLASS A CLASS Y
SHARES CLASS B CLASS C SHARES
SHARES SHARES
JUNE 10, JANUARY 26, SEPTEMBER 2,
1991* 1993* 1994*
YEAR ENDED THROUGH YEAR ENDED THROUGH THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992 1991 1994 1993 1994 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $12.07 $11.41 $11.02 $10.00 $12.08 $11.54 $12.00 $12.07 $11.41 $11.02
Income (loss) from
investment
operations:
Net investment
income............. .43 .42 .42 .30 .36 .34 .18 .46 .45 .46
Net realized and
unrealized gain
(loss) on
investments........ (.71) .75 .43 1.08 (.71) .65 (.61) (.71) .75 .42
Total from
investment
operations....... (.28) 1.17 .85 1.38 (.35) .99 (.43) (.25) 1.20 .88
Less distributions
to shareholders
from:
Net investment
income............. (.43) (.42) (.42) (.35) (.36) (.34) (.21) (.46) (.45) (.45)
Net realized
gains.............. (.19) (.09) (.04) (.01) (.19) (.09) (.19) (.19) (.09) (.04)
In excess of net
investment
income............. -- -- -- -- -- (.02)(a) -- -- -- --
Total
distributions..... (.62) (.51) (.46) (.36) (.55) (.45) (.40) (.65) (.54) (.49)
Net asset value, end
of period.......... $11.17 $12.07 $11.41 $11.02 $11.18 $12.08 $11.17 $11.17 $12.07 $11.41
TOTAL RETURN+....... (2.4%) 10.4% 7.9% 11.8% (3.0%) 8.7% (3.6%) (2.2%) 10.7% 8.2%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of
period
(000's omitted).... $41,010 $35,032 $17,408 $334 $100,052 $65,475 $195 $778,657 $760,147 $520,232
Ratios to average
net assets:
Expenses........... .89% .91% .91% .92%++ 1.48% 1.41%++ 1.64%++ .64% .66% .66%
Net investment
income............. 3.69% 3.61% 3.93% 4.38%++ 3.12% 3.09%++ 3.23%++ 3.93% 3.86% 4.20%
Portfolio turnover
rate............... 35% 19% 12% 19% 35% 19% 35% 35% 19% 12%
<CAPTION>
APRIL 1,
1991*
THROUGH
DECEMBER 31,
1991
<S> <C>
PER SHARE DATA
Net asset value,
beginning of
period............. $10.00
Income (loss) from
investment
operations:
Net investment
income............. .36
Net realized and
unrealized gain
(loss) on
investments........ 1.03
Total from
investment
operations....... 1.39
Less distributions
to shareholders
from:
Net investment
income............. (.36)
Net realized
gains.............. (.01)
In excess of net
investment
income............. --
Total
distributions..... (.37)
Net asset value, end
of period.......... $11.02
TOTAL RETURN+....... 15.0%
RATIOS &
SUPPLEMENTAL DATA
Net assets, end of
period
(000's omitted).... $247,472
Ratios to average
net assets:
Expenses........... .68%++
Net investment
income............. 4.86%++
Portfolio turnover
rate............... 19%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Distributions in excess of net investment income for the year ended
December 31, 1993 were the result of certain book and tax differences.
These differences did not represent a return of capital for federal income
tax purposes for the year ended December 31, 1993.
5
<PAGE>
EVERGREEN GROWTH AND INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989 1988** 1987**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period...... $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38 $10.05
Income (loss) from investment operations:
Net investment income..................... .14 .14 .15 .19 .30 .52 .19 .20
Net realized and unrealized gain (loss) on
investments............................. .12 1.91 1.65 2.58 (.84) 2.17 2.10 (.63)
Total from investment operations........ .26 2.05 1.80 2.77 (.54) 2.69 2.29 (.43)
Less distributions to shareholders from:
Net investment income..................... (.14) (.14) (.15) (.19) (.30) (.52) (.19) (.24)
Net realized gains........................ (1.01) (.68) (.46) (.31) (.47) (.76) (.86) --
Total distributions..................... (1.15) (.82) (.61) (.50) (.77) (1.28) (1.05) (.24)
Net asset value, end of period............ $14.52 $15.41 $14.18 $12.99 $10.72 $12.03 $10.62 $9.38
TOTAL RETURN+............................. 1.7% 14.4% 13.8% 25.8% (4.5%) 25.4% 24.6% (4.3%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)................................ $73,457 $77,062 $63,841 $47,763 $36,222 $31,540 $24,399 $21,471
Ratios to average net assets:
Expenses................................ 1.33% 1.26% 1.33% 1.41% 1.50% 1.54% 1.56% 1.76%
Net investment income................... .96% .99% 1.18% 1.55% 2.62% 4.13% 1.70% 1.90%
Portfolio turnover rate................... 29% 28% 30% 23% 41% 53% 41% 48%
<CAPTION>
OCTOBER 15, 1986*
THROUGH
DECEMBER 31, 1986**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period...... $10.00
Income (loss) from investment operations:
Net investment income..................... .07
Net realized and unrealized gain (loss) on
investments............................. (.02)
Total from investment operations........ .05
Less distributions to shareholders from:
Net investment income..................... --
Net realized gains........................ --
Total distributions..................... --
Net asset value, end of period............ $10.05
TOTAL RETURN+............................. .5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)................................ $20,696
Ratios to average net assets:
Expenses................................ 1.73%++
Net investment income................... 3.23%++
Portfolio turnover rate................... 4%
</TABLE>
* Commencement of operations.
** Net investment income is based on the average monthly shares outstanding for
the periods indicated.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
6
<PAGE>
EVERGREEN VALUE FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 3, 1991*
YEAR ENDED DECEMBER 31, THROUGH DECEMBER
1994 1993 1992 31, 1991
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period...................................... $17.63 $17.11 $17.08 $14.28
Income from investment operations:
Net investment income..................................................... .56 .52 .49 .47
Net realized and unrealized gain (loss) on investments.................... (.20) 1.12 .90 3.53
Total from investment operations........................................ .36 1.64 1.39 4.00
Less distributions to shareholders from:
Net investment income..................................................... (.56) (.52) (.49) (.47)
Net realized gains........................................................ (.82) (.58) (.87) (.73)
In excess of net investment income........................................ -- (.02)(b) -- --
Total distributions..................................................... (1.38) (1.12) (1.36) (1.20)
Net asset value, end of period............................................ $16.61 $17.63 $17.11 $17.08
TOTAL RETURN+............................................................. 2.1% 9.7% 8.3% 25.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................. $507,028 $463,087 $326,154 $271,391
Ratios to average net assets:
Expenses................................................................ .68% .65% .68%(a) .69%++(a)
Net investment income................................................... 3.21% 2.98% 2.90%(a) 3.04%++(a)
Portfolio turnover rate................................................... 70% 46% 56% 69%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
JANUARY 3, 1991
YEAR ENDED THROUGH
DECEMBER 31, 1992 DECEMBER 31, 1991
<S> <C> <C>
Expenses.................................................. .69% .77%
Net investment income..................................... 2.89% 2.96%
</TABLE>
(b) Distributions in excess of net investment income for the period ended
December 31, 1993 were the result of certain book and tax timing
differences. These distributions did not represent a return of capital for
federal income tax purposes for the year ended December 31, 1993.
7
<PAGE>
EVERGREEN VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990* 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83 $14.66
Income (loss) from investment
operations:
Net investment income............ .52 .47 .44 .46 .36 .54 .36 .26
Net realized and unrealized gain
(loss) on investments........... (.20) 1.10 .89 3.17 (.44) 1.70 2.11 (1.30)
Total from investment
operations.................... .32 1.57 1.33 3.63 (.08) 2.24 2.47 (1.04)
Less distributions to
shareholders from:
Net investment
income.......................... (.51) (.47) (.43) (.43) (.36) (.57) (.38) (.26)
Net realized gains............... (.82) (.58) (.87) (.73) (.02) (1.00) (.47) (.53)
In excess of net investment
income.......................... -- -- -- -- (.05)(c) -- -- --
Total distributions............. (1.33) (1.05) (1.30) (1.16) (.43) (1.57) (.85) (.79)
Net asset value, end of period... $16.62 $17.63 $17.11 $17.08 $14.61 $15.12 $14.45 $12.83
TOTAL RETURN+.................... 1.9% 9.3% 8.0% 25.1% (.5%) 15.5% 19.7% (7.1%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $188,807 $189,983 $169,310 $135,565 $104,637 $95,995 $83,121 $21,914
Ratios to average net assets:
Expenses........................ .93% .99% 1.01%(a) .96%(a) 1.39%++ 1.55% 1.71% 1.74%
Net investment income........... 2.96% 2.63% 2.37%(a) 2.78%(a) 3.28%++ 3.42% 2.72% 1.92%
Portfolio turnover rate (b)...... 70% 46% 56% 69% 13% 11% 24% 24%
<CAPTION>
1987 1986
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.......................... $12.35 $10.04
Income (loss) from investment
operations:
Net investment income............ .15 .19
Net realized and unrealized gain
(loss) on investments........... 2.38 2.32
Total from investment
operations.................... 2.53 2.51
Less distributions to
shareholders from:
Net investment
income.......................... (.13) (.20)
Net realized gains............... (.09) --
In excess of net investment
income.......................... -- --
Total distributions............. (.22) (.20)
Net asset value, end of period... $14.66 $12.35
TOTAL RETURN+.................... 20.8% 25.3%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted)................. $23,221 $5,595
Ratios to average net assets:
Expenses........................ 1.97% 2.00%
Net investment income........... 1.41% 2.34%
Portfolio turnover rate (b)...... 20% 20%
</TABLE>
* The Fund changed its fiscal year end to December 31.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991
<S> <C> <C>
Expenses........................................................................... 1.02% 1.05%
Net investment income.............................................................. 2.36% 2.69%
</TABLE>
(b) Portfolio turnover rate for periods ended on or after March 31, 1986 include
certain U.S. government obligations.
(c) Distributions in excess of net investment income for the period ended
December 31, 1990 were a result of certain book and tax timing differences.
These distributions did not represent a return of capital for federal
income tax purposes for the year ended December 31, 1990.
8
<PAGE>
EVERGREEN VALUE FUND -- CLASS B AND C SHARES
<TABLE>
<CAPTION>
CLASS B CLASS C
SHARES SHARES
FEBRUARY 2, SEPTEMBER 2,
1993* 1994*
YEAR ENDED THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1994
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................................... $17.63 $17.24 $18.28
Income (loss) from investment operations:
Net investment income......................................................... .42 .35 .19
Net realized and unrealized gain (loss) on investments........................ (.20) 1.01 (.81)
Total from investment operations............................................ .22 1.36 (.62)
Less distributions to shareholders from:
Net investment income......................................................... (.41) (.35) (.19)
Net realized gains............................................................ (.82) (.58) (.82)
In excess of net investment income............................................ -- (.04)(a) (.04)(a)
Total distributions......................................................... (1.23) (.97) (1.05)
Net asset value, end of period................................................ $16.62 $17.63 $16.61
TOTAL RETURN+................................................................. 1.3% 8.0% (3.4%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................................... $104,297 $ 59,953 $485
Ratios to average net assets:
Expenses.................................................................... 1.53% 1.48%++ 1.68%++
Net investment income....................................................... 2.36% 2.09%++ 2.16%++
Portfolio turnover rate....................................................... 70% 46% 70%
</TABLE>
* Commencement of class operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Contingent deferred sales charge is not
reflected.
++ Annualized.
(a) Distributions in excess of net investment income, for the Class B Shares,
for the period ended December 31, 1993 and for the Class C Shares, for the
period ended December 31, 1994, were the result of certain book and tax
timing differences. These distributions did not represent a return of
capital for federal income tax purposes for the year ended December 31, 1993
and December 31, 1994.
9
<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period..... $11.60 $10.95 $10.52 $9.59 $10.41 $ 10.09
Income (loss) from investment operations:
Net investment income.................... .60 .56 .66 .60 .60 .57
Net realized and unrealized gain (loss)
on investments......................... (.93) .96 .55 1.15 (.66) .76
Total from investment operations....... (.33) 1.52 1.21 1.75 (.06) 1.33
Less distributions to shareholders from:
Net investment income.................... (.60) (.60) (.61) (.60) (.60) (.59)
Net realized gains....................... -- (.24) (.17) (.22) (.16) (.42)
In excess of net realized gains.......... -- (.03)(b) -- -- -- --
Total distributions.................... (.60) (.87) (.78) (.82) (.76) (1.01)
Net asset value, end of period........... $10.67 $11.60 $10.95 $10.52 $9.59 $ 10.41
TOTAL RETURN+............................ (2.9%) 14.1% 11.8% 18.8% (.5%) 13.4%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $37,176 $37,336 $23,781 $15,632 $12,351 $11,610
Ratios to average net assets:
Expenses............................... 1.28% 1.36% 1.51%(a) 1.50%(a) 1.50%(a) 1.88%(a)
Net investment income.................. 5.40% 5.13% 6.23%(a) 5.91%(a) 6.04%(a) 5.49%(a)
Portfolio turnover rate.................. 136% 92% 151% 97% 33% 152%
<CAPTION>
MARCH 14, 1988*
THROUGH
DECEMBER 31, 1988**
<S> <C>
PER SHARE DATA
Net asset value, beginning of period..... $ 10.00
Income (loss) from investment operations:
Net investment income.................... .39
Net realized and unrealized gain (loss)
on investments......................... .18
Total from investment operations....... .57
Less distributions to shareholders from:
Net investment income.................... (.36)
Net realized gains....................... (.12)
In excess of net realized gains.......... --
Total distributions.................... (.48)
Net asset value, end of period........... $ 10.09
TOTAL RETURN+............................ 5.8%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted)............................... $9,449
Ratios to average net assets:
Expenses............................... 2.00%++
Net investment income.................. 5.01%++
Portfolio turnover rate.................. 52%
</TABLE>
* Commencement of operations.
** Investment income, expenses and net investment income are based upon the
average monthly shares outstanding for the period indicated.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992 1991 1990 1989
<S> <C> <C> <C> <C>
Expenses...................................................... 1.59% 1.82% 1.95% 2.03%
Net investment income......................................... 6.15% 5.59% 5.59% 5.34%
</TABLE>
(b) Distributions in excess of net realized gains were the result of certain
book and tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
10
<PAGE>
EVERGREEN FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
JANUARY 2, 1990*
YEAR ENDED DECEMBER 31, THROUGH
1994 1993 1992 1991 DECEMBER 31, 1990
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................. $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income................................................ .42 .31 .27 .33 1.23(b)
Net realized and unrealized gain (loss) on investments............... (.57) 1.55 1.83 2.77 (.59)
Total from investment operations................................... (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income................................................ (.42) (.31) (.24) (.33) (1.17)
Net realized gains................................................... (.28) (.41) (.63) (.97) (.52)
Total distributions................................................ (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period....................................... $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+........................................................ (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in millions).............................. $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses........................................................... 1.14% 1.20% 1.40%(a) 1.20%(a) 0%(a)++
Net investment income.............................................. 3.51% 2.81% 2.93%(a) 2.86%(a) 15.07%(a,b)++
Portfolio turnover rate.............................................. 33% 60% 127% 178% 131%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 2, 1990
DECEMBER 31, THROUGH DECEMBER 31,
1992 1991 1990
<S> <C> <C> <C>
Expenses.............................................. 1.43% 2.58% 3.64%
Net investment income................................. 2.90% 1.48% 11.43%
</TABLE>
(b) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.
11
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
TEN MONTHS
ENDED
JANUARY YEAR ENDED MARCH 31,
31, 1995* 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period.............................. $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37 $19.72
Income (loss) from investment
operations:
Net investment income................. .87 1.08 1.11 1.08 1.02 1.07 1.12 1.06 1.14
Net realized and unrealized gain
(loss) on investments............... (.55) (1.41) 2.51 .70 (.08) .36 .79 (2.64) 1.76
Total from investment operations.... .32 (.33) 3.62 1.78 .94 1.43 1.91 (1.58) 2.90
Less distributions to shareholders
from:
Net investment income................. (1.08) (1.08) (1.08) (1.08) (1.08) (1.09) (1.08) (.80) (1.14)
Net realized gains.................... (.25) (1.20) (.46) -- -- -- (.02) (.88) (1.11)
Total distributions................. (1.33) (2.28) (1.54) (1.08) (1.08) (1.09) (1.10) (1.68) (2.25)
Net asset value, end of period........ $17.28 $18.29 $20.90 $18.82 $18.12 $18.26 $17.92 $17.11 $20.37
TOTAL RETURN+......................... 1.9% (2.1%) 20.2% 10.2% 5.8% 7.9% 1.3% (7.8%) 15.7%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in
millions)........................... $942 $1,065 $1,142 $1,032 $1,151 $1,292 $1,312 $1,346 $1,636
Ratios to average net assets:
Expenses............................ 1.24%++ 1.18% 1.18% 1.21% 1.23% 1.18% 1.02%** 1.01%** 1.02%**
Net investment income............... 5.70%++ 5.29% 5.65% 5.73% 5.90% 5.64% 6.36%** 5.80%** 5.68%**
Portfolio turnover rate............... 151% 106% 164% 137% 137% 89% 86% 81% 44%
<CAPTION>
1986
<S> <C>
PER SHARE DATA
Net asset value, beginning of
period.............................. $16.63
Income (loss) from investment
operations:
Net investment income................. 1.03
Net realized and unrealized gain
(loss) on investments............... 4.26
Total from investment operations.... 5.29
Less distributions to shareholders
from:
Net investment income................. (1.22)
Net realized gains.................... (.98)
Total distributions................. (2.20)
Net asset value, end of period........ $19.72
TOTAL RETURN+......................... 35.2%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (in
millions)........................... $408
Ratios to average net assets:
Expenses............................ 1.11%**
Net investment income............... 6.06%**
Portfolio turnover rate............... 65%
</TABLE>
* On September 21, 1994, the Fund changed its fiscal year end to January 31.
** Net of expense limitation in fiscal years 1986, 1987, 1988 and 1989.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
12
<PAGE>
EVERGREEN TOTAL RETURN FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
SHARES SHARES SHARES
<S> <C> <C> <C>
JANUARY 3, 1995*
THROUGH JANUARY 31, 1995
PER SHARE DATA
Net asset value, beginning of period........................................................ $17.09 $17.09 $17.09
Income from investment operations:
Net investment income....................................................................... .02 .02 .01
Net realized and unrealized gain on investments............................................. .17 .17 .17
Total from investment operations.......................................................... .19 .19 .18
Net asset value, end of period.............................................................. $17.28 $17.28 $17.27
TOTAL RETURN+............................................................................... 1.1% 1.1% 1.1%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)................................................... $119 $599 $24
Ratios to average net assets:
Expenses.................................................................................. 1.45% ++ 2.23% ++ 2.22% ++
Net investment income..................................................................... 4.09% ++ 3.23% ++ 2.68% ++
Portfolio turnover rate**................................................................... 151% 151% 151%
</TABLE>
* Commencement of class operations.
** Portfolio turnover rate is calculated for the ten month period ended January
31, 1995.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
13
<PAGE>
14
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Balanced Fund
The investment objective of the Evergreen Balanced Fund (formerly First
Union Balanced Portfolio) is to achieve a long-term total return through capital
appreciation, dividends and interest income. This objective is a fundamental
policy and may not be changed without shareholder approval. The Fund invests in
common and preferred stocks for growth and fixed income securities to provide a
stable income flow. There can be no assurance that the Fund's investment
objective will be achieved.
The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% fixed income securities (including some
convertible securities) and 0-25% cash equivalents. Moderate shifts between
types of assets are made in an attempt to maximize returns or reduce risk.
The Funds invest in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection includes a
company's financial strength (such as cash flow and low debt-to-equity ratio),
earnings growth and price in relation to current earnings, dividends and book
value to identify growth opportunities. The Fund may also invest in American
Depositary Receipts ("ADRs") of foreign companies which are traded on the New
York or American Stock Exchanges or the over-the-counter market.
The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") or any other nationally recognized statistical rating organization
("SRO"), or which, if unrated, are considered to be of comparable quality by the
Fund's investment adviser. Bonds are selected based upon the outlook for
interest rates and their yield in relation to other bonds of similar quality and
maturity. The maturities of these bonds may be medium (i.e., from five to ten
years) to long-term (i.e., over ten years), but in no event will they be longer
than twenty years.
The Fund also invests in securities which are either issued or
guaranteed by the U.S. government, its agencies or instrumentalities. These
securities include direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds; and notes, bonds and discount notes of U.S.
government agencies or instrumentalities, such as the Farm Credit System,
including the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal National Mortgage Association, Government
National Mortgage Association, Student Loan Marketing Association, Tennessee
Valley Authority, Export-Import Bank of the United State, Commodity Credit
Corporation, Federal Financing Bank and National Credit Union Administration.
Some of these securities are supported by the full faith and credit of the U.S.
government, and others are supported only by the credit of the agency or
instrumentality.
The Fund may also invest short-term in cash equivalents for defensive
purposes; securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities, and repurchase agreements collateralized by
eligible investments.
As of December 31, 1992, 1993 and 1994, approximately 59%, 63% and 55%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen Growth and Income Fund
The investment objective of Evergreen Growth and Income Fund (formerly
known as the Evergreen Value Timing Fund) is to achieve a return composed of
capital appreciation in the value of its shares and current income. (The Fund's
investment objective is a fundamental policy.) There can be no assurance that
the Fund's investment objective will be achieved.
The Fund seeks to achieve its investment objective by investing in the
securities of companies which are undervalued in the marketplace relative to
those companies' assets, breakup value, earnings or potential earnings growth.
These companies are often found among those which have had a record of financial
success but are currently in disfavor in the marketplace for reasons the Fund's
investment adviser perceives as temporary or erroneous. Such investments when
successfully timed are expected to be the means for achieving the Fund's
investment objective. This inherently contrarian approach may require greater
reliance upon the analytical and research capabilities of the Fund's investment
adviser than an investment in certain other equity funds. Consequently, an
investment in the Fund may involve more risk than other equity funds. The Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss inherent in such a program. Nor should the Fund be
considered a balanced or complete investment program.
The Fund will use the "value timing" approach as a process for
purchasing securities when events indicate that fundamental investment values
are being ignored in the marketplace. Fundamental investment value is based on
one or more of the following: assets -- tangible and intangible (examples of the
latter include brand names or licenses), capitalization of earnings, cash flow
or potential earnings growth. A discrepancy between market valuation and
fundamental value often arises due to the presence of unrecognized assets or
business opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary shifts and
legal action (including the initiation of bankruptcy proceedings) are some of
the factors that create these capital appreciation opportunities. If the
securities in which the Fund invests never reach their perceived potential or
the valuation of such securities in the marketplace does not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such securities.
The Fund will invest primarily in common stocks and securities
convertible into or exchangeable for common stock. It is anticipated that the
Fund's investments in these securities will contribute to the Fund's return
primarily through capital appreciation. In addition, the Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated that the
Fund's investments in these securities will also produce capital appreciation
but the current income component of return will be a more significant factor in
their selection. However, the Fund will invest in nonconvertible preferred stock
and debt securities only if the anticipated capital appreciation plus income
from such investments is equivalent to that anticipated from investments in
equity or equity-related securities. The Fund may invest up to 5% of its total
assets in debt securities which are rated below investment grade, commonly known
as "junk bonds". Investments of this type are subject to greater risk of loss of
principal and interest.
It is anticipated that the annual portfolio turnover rate for the Fund
will not exceed 100%. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Value Fund
The investment objective of the Evergreen Value Fund (formerly the
First Union Value Portfolio) is long-term capital appreciation with current
income as a secondary objective. The Fund's objective is a fundamental policy
and may not be changed without shareholder approval. Normally, at least 75% of
the Fund's assets will be invested in equity securities of U.S. companies with
prospects for earnings growth and dividends. There can be no assurance that the
Fund's investment objective will be achieved.
The Fund's investments, in order of priority, consist of:
common and preferred stocks, bonds and convertible preferred
stock of U.S. companies with a minimum market capitalization of $100
million which are listed on the New York or American Stock Exchanges or
traded in over-the-counter markets. The primary consideration is for
those industries and companies with the potential for capital
appreciation; income is a secondary consideration;
ADRs of foreign companies traded on the New York or American
Stock Exchanges or the over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation implications and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions Special Risk Considerations");
convertible bonds rated no lower than BBB by S&P or Baa by
Moody's or, if not rated, determined to be of comparable quality by the
Fund's investment adviser;
money market instruments;
fixed rate notes and bonds and adjustable and variable rate
notes of companies whose common stock the Fund may acquire rated no
lower than BBB by S&P or Baa by Moody's or which, if not rated,
determined to be of comparable quality by the Fund's investment adviser
(up to 5% of total assets);
zero coupon bonds issued or guaranteed by the U.S. government,
its agencies or instrumentalities (up to 5% of total assets);
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Insurance Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
prime commercial paper, including master demand notes rated no
lower than A-1 by S&P or Prime 1 by Moody's.
Bonds rated BBB by S&P or Baa by Moody's may have speculative
characteristics. Changes in economic conditions or other circumstances
are more likely to weaken such bonds' prospects for principal and
interests payments than higher rated bonds. However, like the higher
rated bonds, these securities are considered investment grade.
As of December 31, 1992, 1993 and 1994, approximately 92%, 95% and 97%,
respectively, of the Fund's portfolio consisted of equity securities. The Fund
may employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions", below.
Evergreen American Retirement Fund
The investment objectives of Evergreen American Retirement Fund in
order of priority are conservation of capital, reasonable income and capital
growth. The Fund offers a structured investment approach designed specifically
for retirees and persons contemplating retirement which may also be appropriate
for the qualified retirement plans of smaller companies. There can be no
assurance that the Fund's investment objectives will be achieved. The Fund's
objective is a fundamental policy and may not be changed without shareholder
approval.
The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock.
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
value.
Normally, the Fund anticipates that approximately half of the fixed
income portion of the Fund's portfolio will be invested in marketable
obligations of, or guaranteed by, the U.S. government, its agencies or
instrumentalities which are supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the U.S. Treasury. These
include issues of the Treasury, such as bills, certificates of indebtedness,
notes and bonds, and issues of agencies and instrumentalities established under
the authority of an act of Congress. Agencies or instrumentalities whose
securities are supported by the full faith and credit of the United States
include, but are not limited to, the Federal Housing Administration, Farmers
Home Administration, Export-Import Bank of the United States, Small Business
Administration and Government National Mortgage Association. Examples of
agencies or instrumentalities whose securities are supported by the right of the
issuer to borrow from the Treasury include, but are not limited to, the Federal
Home Loan Bank, Federal Intermediate Credit Banks, Federal National Mortgage
Association and Tennessee Valley Authority. The balance will be invested in
corporate obligations rated no lower than A by Moody's or S&P.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Foundation Fund
The investment objectives of Evergreen Foundation Fund, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. Government debt obligations,
and short-term debt instruments, such as commercial paper. Additionally, income
from time to time may be generated by the lending of securities. The Fund's
common stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.
The Fund may make investments in securities regardless of whether or
not such securities are traded on a national securities exchange. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions. Accordingly, there
can be no assurance that the Fund's investment objectives will be achieved. The
Fund's objective is a fundamental policy and may not be changed without
shareholder approval.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).
In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market value of the debt
obligations in the Fund's portfolio can be expected to vary inversely to changes
in prevailing interest rates. The Fund may at times emphasize the generation of
interest income by investing in high-yielding debt securities, with short,
medium or long-term maturities. While fixed income investments will generally be
made for the purpose of generating interest income, investments in medium to
long-term debt securities (i.e., those with maturities from five to ten years
and those with maturities over ten years, respectively) may be made with a view
to realizing capital appreciation when the Fund's investment adviser believes
changes in interest rates will lead to an increase in the value of such
securities. The fixed income portion of the Fund's portfolio may include:
1. Marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities, including issues of the U.S. Treasury, such
as bills, certificates of indebtedness, notes and bonds, and issues of agencies
and instrumentalities established under the authority of an act of Congress.
Some of these securities are supported by the full faith and credit of the U.S.
Government, and others are supported only by the credit of the agency or
instrumentality. Agencies or instrumentalities whose securities are supported by
the full faith and credit of the United States include, but are not limited to,
the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration and Government National
Mortgage Association. Agencies or instrumentalities whose securities are
supported only by the credit of the agency or instrumentality include the
Interamerican Development Bank and the International Bank for Reconstruction and
Development. These obligations are supported by appropriated but unpaid
commitments of their member countries. There are no assurances that the
commitments will be fulfilled in the future.
2. Corporate obligations rated no lower than A by Moody's or S&P.
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's).
Certain obligations may be entitled to the benefit of standby letters of credit
or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Total Return Fund
The investment objective of Evergreen Total Return Fund is to achieve a
return consisting of current income and capital appreciation in the value of its
shares. The emphasis on current income and capital appreciation will be
relatively equal although, over time, changes in the outlook for market
conditions and the level of interest rates will cause the Fund to vary its
emphasis between these two elements in its search for the optimum return for its
shareholders. The Fund seeks to achieve its investment objective through
investments in common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities. The Fund may invest
up to 20% of its total assets in the securities of foreign issuers either
directly or in the form of ADRs, European Depository Receipts ("EDRs") or other
securities convertible into securities of foreign issuers. The Fund may also
write covered call options. The Fund's investment objective is a fundamental
policy. There can be no assurance that the Fund's investment objective will be
achieved.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders.
The Fund may make investments in securities (other than options)
regardless of whether or not such securities are traded on a national securities
exchange. The value of portfolio securities and their yields, as well as
opportunities to realize net gains from a covered call options writing program,
are expected to fluctuate over time because of varying general economic and
market conditions.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Ordinarily, the Fund anticipates that approximately 75% of its portfolio will
consist of equity securities and the other 25% of debt securities (including
convertible debt securities). As of March 31, 1993 and 1994 and January 31,
1995, approximately 88%, 96% and 91%, respectively, of the Fund's portfolio
consisted of equity securities. The balance of the Fund's portfolio consisted of
debt securities (including convertible debt securities). If, in the judgment of
the Fund's investment adviser, the appreciation potential for equity securities
exceeds the return available from debt securities or government securities,
investments in equity securities could exceed 75% of the Fund's portfolio. Most
equity investments, however, will be income producing. The quality standards for
debt securities include: Obligations of banks having total assets of at least
one billion dollars which are members of the FDIC; commercial paper rated no
lower than P-2 by Moody's or A-2 by S&P; and non-convertible debt securities
rated no lower than Baa by Moody's or BBB by Standard & Poor's. Securities rated
Baa or BBB may have speculative characteristics. See the discussion above with
respect to Evergreen Value Fund.
It is anticipated that the annual portfolio turnover rate for the Fund
may exceed 100%. The Fund may employ certain additional investment strategies
which are discussed in "Investment Practices and Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Total Return Fund, Evergreen Growth and
Income Fund, Evergreen American Retirement Fund and Evergreen Foundation Fund on
those exchanges. The portfolio turnover rate for each Fund is set forth in the
tables contained in the section entitled "Financial Highlights". See the
Statement of Additional Information for further information regarding the
brokerage allocation practices of the Funds.
Borrowing. As a matter of fundamental policy, the Funds, except Evergreen
American Retirement Fund, may not borrow money except as a temporary measure to
facilitate redemption requests or for extraordinary or emergency purposes.
Evergreen American Retirement Fund may borrow for purposes of leverage. The
proceeds from borrowings may be used to facilitate redemption requests which
might otherwise require the untimely disposition of portfolio securities. The
specific limits applicable to borrowing by each Fund are set forth in the
Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the net assets of the Evergreen
Total Return Fund, Evergreen Growth and Income Fund and Evergreen American
Retirement Fund, 30% of the net assets of the Evergreen Foundation Fund, and 5%
of the value of the total assets of Evergreen Balanced Fund and Evergreen Value
Fund, and must be collateralized by cash or U.S. Government securities that are
maintained at all times in an amount equal to at least 100% of the current
market value of the securities loaned, including accrued interest. While such
securities are on loan, the borrower will pay a Fund any income accruing
thereon, and the Fund may invest the cash collateral in portfolio securities,
thereby increasing its return. Any gain or loss in the market price of the
loaned securities which occurs during the term of the loan would affect a Fund
and its investors. A Fund has the right to call a loan and obtain the securities
loaned at any time on notice of not more than five business days. A Fund may pay
reasonable fees in connection with such loans.
There is the risk that when lending portfolio securities, the
securities may not be available to a Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.
Short Sales. The Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen Balanced Fund, Evergreen American Retirement Fund and Evergreen
Foundation Fund may, as a defensive strategy, make short sales of securities. A
short sale occurs when a seller sells a security and makes delivery to the buyer
by borrowing the security. Short sales of a security are generally made in cases
where the seller expects the market value of the security to decline. To
complete a short sale, the seller must replace the security borrowed by
purchasing it at the market price at the time of replacement, or by delivering
securities from the seller's own position to the lender. In the event the market
value of a security sold short were to increase, the seller would realize a loss
to the extent that the cost of purchasing the security for delivery to the
lender were greater than the proceeds from the short sale. In the event a short
sale is completed by delivery of securities to the lender from the seller's own
position, the seller would forego any gain that would otherwise be realized on
such securities. The Evergreen American Retirement Fund and Evergreen Foundation
Fund may only make short sales "against the box" which means it must own the
securities sold short, or other securities convertible into, or which carry
rights to acquire, such securities.
Illiquid or Restricted Securities. Evergreen Growth and Income Fund, Evergreen
American Retirement Fund, Evergreen Foundation Fund and Evergreen Total Return
Fund may invest up to 15% of their net assets, and Evergreen Balanced Fund and
Evergreen Value Fund may invest up to 10% of their net assets, in illiquid
securities and other securities which are not readily marketable, including
non-negotiable time deposits, certain restricted securities not deemed by the
Trustees to be liquid and repurchase agreements with maturities longer than
seven days. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933, which have been determined to be liquid, will not be
considered by the Funds' investment advisers to be illiquid or not readily
marketable and, therefore, are not subject to the aforementioned 15% or 10 %
limits. The inability of a Fund to dispose of illiquid or not readily marketable
investments readily or at a reasonable price could impair the Fund's ability to
raise cash for redemptions or other purposes. The liquidity of securities
purchased by a Fund which are eligible for resale pursuant to Rule 144A will be
monitored by the Funds' investment advisers on an ongoing basis, subject to the
oversight of the Trustees. In the event that such a security is deemed to be no
longer liquid, a Fund's holdings will be reviewed to determine what action, if
any, is required to ensure that the retention of such security does not result
in a Fund having more than 15%, or with respect to Evergreen Value Fund 10%, of
its assets invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. Evergreen Growth and
Income Fund, Evergreen Balanced Fund, Evergreen Value Fund and Evergreen Total
Return Fund may enter into repurchase agreements with member banks of the
Federal Reserve System, including the Custodian or primary dealers in U.S.
Government securities. A repurchase agreement is an arrangement pursuant to
which a buyer purchases a security and simultaneously agrees to resell it to the
vendor at a price that results in an agreed-upon market rate of return which is
effective for the period of time (which is normally one to seven days, but may
be longer) the buyer's money is invested in the security. The arrangement
results in a fixed rate of return that is not subject to market fluctuations
during the holding period. A Fund requires continued maintenance of collateral
with its Custodian in an amount at least equal to the repurchase price
(including accrued interest). In the event a vendor defaults on its repurchase
obligation, a Fund might suffer a loss to the extent that the proceeds from the
sale of the collateral were less than the repurchase price. If the vendor
becomes the subject of bankruptcy proceedings, a Fund might be delayed in
selling the collateral. The Funds' investment advisers will review and
continually monitor the creditworthiness of each institution with which a Fund
enters into a repurchase agreement to evaluate these risks.
Evergreen Balanced Fund and Evergreen Value Fund may borrow money by
entering into a "reverse repurchase agreement" by which it agrees to sell
portfolio securities to financial institutions such as banks and broker-dealers,
and to repurchase them at a mutually agreed upon date and price, for temporary
or emergency purposes. At the time the Fund enters into a reverse repurchase
agreement, it will place in a segregated custodial account cash, U.S. government
securities or liquid high grade debt obligations having a value at least equal
to the repurchase price (including accrued interest) and will subsequently
monitor the account to ensure that such equivalent value is maintained. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by the Fund may decline below the repurchase price of those securities.
Each Fund will not enter into reverse repurchase agreements exceeding 5% of the
value of its total assets.
When-Issued and Delayed Delivery Transactions. Evergreen Balanced Fund and
Evergreen Value Fund may purchase securities on a when-issued or delayed
delivery basis. These transactions are arrangements in which a Fund purchases
securities with payment and delivery scheduled for a future time. The seller's
failure to complete these transactions may cause a Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, a Fund may pay more or
less than the market value of the securities on the settlement date. The Funds
may dispose of a commitment prior to settlement if the Funds investment adviser
deems it appropriate to do so. In addition, the Funds may enter into
transactions to sell their purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or losses
upon the sale of such commitments.
Fixed Income Securities - Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Options and Futures. Each of Evergreen Total Return Fund, Evergreen Growth and
Income Fund and Evergreen American Retirement Fund may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Funds
if, afterwards, securities comprising more than 25% of the market value of the
equity securities of Evergreen Growth and Income Fund and Evergreen Total Return
Fund, or 15% of the market value of the equity securities of Evergreen American
Retirement Fund would be subject to call options. A Fund realizes income from
the premium paid to it in exchange for writing the call option. Once it has
written a call option on a portfolio security and until the expiration of such
option, a Fund forgoes the opportunity to profit from increases in the market
price of such security in excess of the exercise price of the call option.
Should the price of the security on which a call has been written decline, a
Fund retains the risk of loss, which would be offset to the extent the Fund has
received premium income. A Fund will only write "covered" call options traded on
U.S. national securities exchanges. An option will be deemed covered when a Fund
either (i) owns the security (or securities convertible into such security) on
which the option has been written in an amount sufficient to satisfy the
obligations arising under the option; or (ii) a Fund's Custodian maintains cash
or high-grade liquid debt securities belonging to the Fund in an amount not less
that the amount needed to satisfy the Fund's obligations with respect to options
written on securities it does not own. A "closing purchase transaction" may be
entered into with respect to a call option written by a Fund for the purpose of
closing its position.
Evergreen Balanced Fund and Evergreen Value Fund may engage in options
and futures transactions. Options and futures transactions are intended to
enable a Fund to manage market, interest rate or exchange rate risk, and the
Funds do not use these transactions for speculation or leverage.
Evergreen Balanced Fund and Evergreen Value Fund may attempt to hedge
all or a portion of their portfolios through the purchase of both put and call
options on their portfolio securities and listed put options on financial
futures contracts for portfolio securities. The Funds may also write covered
call options on their portfolio securities to attempt to increase their current
income. The Funds will maintain their positions in securities, option rights and
segregated cash subject to puts and calls until the options are exercised,
closed or have expired. An option position may be closed out only on an exchange
which provides a secondary market for an option of the same series. The Funds
may purchase listed put options on financial futures contracts. These options
will be used only to protect portfolio securities against decreases in value
resulting from market factors such as an anticipated increase in interest rates.
The Funds may write (i.e., sell) covered call and put options. By
writing a call option, a Fund becomes obligated during the term of the option to
deliver the securities underlying the option upon payment of the exercise price.
By writing a put option, a Fund becomes obligated during the term of the option
to purchase the securities underlying the option at the exercise price if the
option is exercised. The Funds may also write straddles (combinations of covered
puts and calls on the same underlying security).
Evergreen Balanced Fund and Evergreen Value Fund may only write
"covered" options. This means that so long as a Fund is obligated as the writer
of a call option, it will own the underlying securities subject to the option
or, in the case of call options on U.S. Treasury bills, the Fund might own
substantially similar U.S. Treasury bills. A Fund will be considered "covered"
with respect to a put option it writes if, so long as it is obligated as the
writer of the put option, it deposits and maintains with its custodian in a
segregated account liquid assets having a value equal to or greater than the
exercise price of the option.
The principal reason for writing call or put options is to obtain,
through a receipt of premiums, a greater current return than would be realized
on the underlying securities alone. The Funds receive a premium from writing a
call or put option which they retain whether or not the option is exercised. By
writing a call option, the Funds might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Funds might become obligated to purchase the underlying securities for more than
their current market price upon exercise.
Evergreen Balanced Fund and Evergreen Value Fund may also, as stated
previously, purchase futures contracts and options thereon. A futures contract
is a firm commitment by two parties: the seller, who agrees to make delivery of
the specific type of instrument called for in the contract ("going short"), and
the buyer, who agrees to take delivery of the instrument ("going long") at a
certain time in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specific agencies or instrumentalities of the U.S. government. If a Fund would
enter into financial futures contracts directly to hedge its holdings of fixed
income securities, it would enter into contracts to deliver securities at an
undetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. A Fund would "go long" (agree to purchase securities
in the future at a predetermined price) to hedge against a decline in market
interest rates.
The Funds may also enter into currency and other financial futures
contracts and write options on such contracts. The Funds intend to enter into
such contracts and related options for hedging purposes. The Funds will enter
into futures on securities, currencies or index-based futures contracts in order
to hedge against changes in interest or exchange rates or securities prices. A
futures contract on securities or currencies is an agreement to buy or sell
securities or currencies during a designated month at whatever price exists at
that time. A futures contact on a securities index does not involve the actual
delivery of securities, but merely requires the payment of a cash settlement
based on changes in the securities index. The Funds do not make payment or
deliver securities upon entering into a futures contract. Instead, they put down
a margin deposit, which is adjusted to reflect changes in the value of the
contract and which remains in effect until the contract is terminated.
The Funds may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Funds sell futures contracts in order to offset a possible decline in
the profit on their securities or currencies. If a futures contract is purchased
by a Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.
The Funds may enter into closing purchase and sale transactions in
order to terminate a futures contract and may buy or sell put and call options
for the purpose of closing out their options positions. The Funds ability to
enter into closing transactions depends on the development and maintenance of a
liquid secondary market. There is no assurance that a liquid secondary market
will exist for any particular contract or at any particular time. As a result,
there can be no assurance that the Funds will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If the Funds are not able to enter into an offsetting transaction, the
Funds will continue to be required to maintain the margin deposits on the
contract and to complete the contract according to its terms, in which case the
Funds would continue to bear market risk on the transaction.
Risk Characteristics of Options and Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them can result in poorer performance (i.e., the Funds return may
be reduced). The Funds attempt to use such investment devices for hedging
purposes may not be successful. Successful futures strategies require the
ability to predict future movements in securities prices, interest rates and
other economic factors. When the Funds use financial futures contract and
options on financial futures contract as hedging devices, there is a risk that
the prices of the securities subject to the financial futures contracts and
options on financial futures contracts may not correlate perfectly with the
prices of the securities in the Funds' portfolios. This may cause the financial
futures contract and any related options to react to market changes differently
than the portfolio securities. In addition, the Funds investment adviser could
be incorrect in its expectations and forecasts about the direction or extent of
market factors, such as interest rates, securities price movements and other
economic factors. Even if the Funds investment adviser correctly predicts
interest rate movements, a hedge could be unsuccessful if changes in the value
of a Fund's futures position did not correspond to changes in the value of its
financial futures contracts. It is not certain that a secondary market for
positions in financial futures contracts or for options on financial futures
contracts will exist at all times. Although the Funds investment adviser will
consider liquidity before entering into financial futures contracts or options
on financial futures contracts transactions, there is no assurance that a liquid
secondary market on an exchange will exist for any particular financial futures
contract or option on a financial futures contract at any particular time. The
Funds ability to establish and close out financial futures contracts and options
on financial futures contract positions depends on this secondary market. If a
Fund is unable to close out its position due to disruptions in the market or
lack of liquidity, the Fund may lose money on the futures contract or option,
and the losses to the Fund could be significant.
Special Risk Considerations
Investment in Foreign Securities. Evergreen Total Return Fund, Evergreen
Balanced Fund and Evergreen Value Fund may invest in foreign securities.
Investments in foreign securities require consideration of certain factors not
normally associated with investments in securities of U.S. issuers. For example,
a change in the value of any foreign currency relative to the U.S. dollar will
result in a corresponding change in the U.S. dollar value of securities
denominated in that currency. Accordingly, a change in the value of any foreign
currency relative to the U.S. dollar will result in a corresponding change in
the U.S. dollar value of the assets of the Fund denominated or traded in that
currency. If the value of a particular foreign currency falls relative to the
U.S. dollar, the U.S. dollar value of the assets of a Fund denominated in such
currency will also fall. The performance of a Fund will be measured in U.S.
dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by each Fund's investment adviser before making any of these types of
investments.
ADRs and EDRs and other securities convertible into securities of
foreign issuers may not necessarily be denominated in the same currency as the
securities into which they may be converted but rather in the currency of the
market in which they are traded. ADRs are receipts typically issued by an
American bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe by banks or
depositories which evidence a similar ownership arrangement. Generally ADRs, in
registered form, are designed for use in United States securities markets and
EDRs, in bearer form, are designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by Evergreen Total Return
Fund, Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund as investment adviser. Evergreen Asset succeeded on
June 30, 1994 to the advisory business of the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), one of the ten largest bank holding companies in
the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Funds. The Capital Management Group of FUNB ("CMG") serves as investment
adviser to Evergreen Balanced Fund and Evergreen Value Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds) . First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Total Return Fund, Evergreen Growth
and Income Fund, Evergreen American Retirement Fund and Evergreen Foundation
Fund, Evergreen Asset manages each Fund's investments, provides various
administrative services and supervises each Fund's daily business affairs,
subject to the authority of the Trustees. Evergreen Asset is entitled to receive
a from each of Evergreen Total Return Fund and Evergreen Growth and Income Fund
fee equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. Evergreen Asset is entitled to receive
from Evergreen Foundation Fund a fee equal to .875 of 1% of average daily net
assets on an annual basis on the first $750 million in assets, .75 of 1% of
average daily net assets on an annual basis on the next $250 million in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion, and from Evergreen American Retirement Fund a fee equal to .75 of 1% of
average daily net assets on an annual basis on the first $1 billion in assets,
and .7 of 1% of average daily net assets on an annual basis on assets over $1
billion. The fee paid by Evergreen Total Return Fund and Evergreen Growth and
Income Fund is higher than the rate paid by most other investment companies. The
total expenses of each Fund for the fiscal year ended December 31, 1994,
expressed as a percentage of average daily net assets on an annual basis are set
forth in the section entitled "Financial Highlights".
CMG manages investments and supervises the daily business affairs of
Evergreen Balanced Fund and Evergreen Value Fund and, as compensation therefor,
is entitled to receive an annual fee equal to .50 of 1% of average daily net
assets of each Fund. The total annualized operating expenses of Evergreen
Balanced Fund and Evergreen Value Fund for their most recent fiscal year ended
December 31, 1994, are set forth in the section entitled "Financial Highlights".
Evergreen Asset serves as administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee based on the average daily net
assets of these Funds at a rate based on the total assets of the mutual funds
administered by Evergreen Asset for which CMG or Evergreen Asset also serve as
investment adviser, calculated in accordance with the following schedule: .050%
of the first $7 billion; .035% on the next $3 billion; .030% on the next $5
billion; .020% on the next $10 billion; .015% on the next $5 billion; and .010%
on assets in excess of $30 billion. Furman Selz Incorporated, the parent of
Evergreen Funds Distributor, Inc., distributor for the Evergreen group of mutual
funds, serves as sub-administrator to Evergreen Balanced Fund and Evergreen
Value Fund and is entitled to receive a fee from each Fund calculated on the
average daily net assets of each Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Total Return Fund is Nola Maddox
Falcone, C.F.A., who is President and Co-Chief Executive Officer of Evergreen
Asset. Ms. Falcone has served as the principal manager of Evergreen Total Return
Fund since 1985. The portfolio manager for Evergreen Foundation Fund is Stephen
A. Lieber, who is Chairman and Co-Chief Executive Officer of the Evergreen
Asset. Mr. Lieber has served as such Fund's principal manager since its
inception. The portfolio manager for Evergreen Growth and Income Fund is Edmund
H. Nicklin, Jr. C.F.A. Mr. Nicklin has served as the Fund's principal manager
since its inception. The portfolio manager for Evergreen American Retirement
Fund is Irene D. O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal
manager since its inception. Each of the aforementioned individuals has been
associated with the Evergreen Asset and its predecessor since prior to 1989.
The portfolio manager for Evergreen Balanced Fund since its inception
in January 1991 is R. Dean Hawes, who is a Vice President of FUNB and is the
Director of Employee Benefit Portfolio Management. Mr. Hawes joined FUNB in 1981
after spending five years with Merrill Lynch, Pierce, Fenner, & Smith and
Townsend Investments. William T. Davis, Jr., the portfolio manager of Evergreen
Value Fund since March, 1991, is a Vice President of FUNB and has been with
First Union since 1986. Prior to that, Mr. Davis served as a securities analyst
for Seibels Bruce (Insurance) Group.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Total Return Fund, Evergreen Growth and Income Fund,
Evergreen American Retirement Fund and Evergreen Foundation Fund. Lieber &
Company will be reimbursed by Evergreen Asset in connection with the rendering
of services on the basis of the direct and indirect costs of performing such
services. There is no additional charge to Evergreen Total Return Fund,
Evergreen Growth and Income Fund, Evergreen American Retirement Fund and
Evergreen Foundation Fund for the services provided by Lieber & Company. The
address of Lieber & Company is 2500 Westchester Avenue, Purchase, New York
10577. Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible Investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
market value. Non-dollar denominated securities will be valued as of the close
of the Exchange at the closing price of such securities in their principal
trading market.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from an investor's
account to reimburse the Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Funds are an available investment. For
information about the requirements to make such investments, including copies of
the necessary application forms, please call the telephone number set forth on
the cover page of this Prospectus. A Fund cannot accept investments specifying a
certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
Funds. Although not currently anticipated, each Fund reserves the right to
suspend the offer of shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the enclosed Application and choose how the redemption proceeds
are to be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in a Fund
at a designated commercial bank. State Street currently deducts a $5 wire charge
from all redemption proceeds wired. This charge is subject to change without
notice. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Funds will employ reasonable procedures to verify that telephone requests
are genuine. These procedures include requiring some form of personal
identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
- -------------------------------------------------------------------------------
OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Internal
Revenue Code of 1986, as amended (the "Code"). Dividends and distributions
generally are taxable in the year in which they are paid, except any dividends
paid in January that were declared in the previous calendar quarter may be
treated as paid in December of the previous year. Income dividends and capital
gain distributions are automatically reinvested in additional shares of the Fund
making the distribution at the net asset value per share at the close of
business on the record date, unless the shareholder has made a written request
for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund for their most recent fiscal year is set forth below. A
similar discussion relating to Evergreen Balanced Fund and Evergreen Value Fund
is contained in the annual report of each Fund for the fiscal year ended
December 31, 1994.
Evergreen Growth and Income Fund
The total return of the Class Y no-load shares of the Evergreen Growth
and Income Fund was +1.69% for the year ended December 31, 1994. This return
compared favorably with the +1.31% return of the Standard and Poor's 500
Reinvested Index (the "S&P 500 Index") and the -0.94% return from the Lipper
Growth and Income Fund Average. This performance was achieved through the
implementation of the "value timing" strategy which focuses on undervalued
securities. At year-end 1994, the majority of the portfolio was comprised of
out-of-favor growth companies, restructured companies and other companies which
the Fund's investment adviser believes are substantially undervalued.
[CHART]
While the domestic economy's rate of growth accelerated dramatically in
1994, the Federal Reserve's more stringent monetary policy resulted in a less
hospitable environment for financial assets. The Fund performed well relative to
its competition and the S&P 500 Index in 1994, but the Fed's tightening of
monetary policy kept the absolute return low, in keeping with the depressing
influence on financial assets generally. The principal contributors to the
Fund's positive performance during 1994 were the following industries: (1)
business equipment and services which facilitated the productivity enhancing
efforts of their customers; (2) chemical issues which benefited from the robust
economic growth and previous restructuring efforts that lowered cost structures;
and (3) shares of healthcare companies which continued their rebound from the
market's adverse reaction to the perceived impact of the healthcare program
proposed by the Clinton Administration in 1993. The industry groups which had
the largest negative impact on the Fund's performance were the following: (i)
banks and thrifts, insurance and utilities, all of which suffered from the
Federal Reserve's more stringent monetary policy; (ii) retail which suffered
from lack of pricing flexibility and excess capacity; and (iii) energy which was
negatively impacted by lower prices for natural gas and declining refining
margins.
Evergreen American Retirement Fund
The total return of the Class Y no-load shares of the Evergreen
American Retirement Fund for the fiscal year ended December 31, 1994, was
- -2.86%. This performance lagged the Wilshire 5000 Index which returned -.06% and
exceeded the Lehman General Bond Mutual Fund Index which returned -3.51% for the
year. The Fund concentrated the equity portion of its portfolio in high
dividend-paying common stocks, convertible bonds and convertible preferreds.
Fixed-income issues were represented by investments in U.S. Treasury and agency
obligations and high quality corporate bonds and notes.
Interest rates rose through much of 1994 as the Federal Reserve moved
to slow the rapid and potentially inflationary pace of U.S. economic growth.
Over the course of the year, the Federal Fund's rate was increased from 3.0% to
5.5%, and market forces lifted interest rates on 30 year U.S. Treasury bonds
from 6.35% to 7.88%. This rising interest rate environment was negative for the
bond market and produced mixed results for the stock market. Because of the
Fund's income-oriented style of investing, this period of rising interest rates
negatively affected performance.
The industry groups which had the largest positive impact on the Fund's
performance included the chemicals and metals industries which benefited from
rising demand and product prices, and bank stocks which rose in response to
stronger loan growth and reduced loan loss provisions. The Fund was negatively
impacted by its holdings in the automotive industry and related suppliers, and
utility stocks which declined in response to higher interest rates. The Fund's
exposure to utilities was reduced in early 1994 to a group of special situation
companies. But even the improving fundamentals of these companies could not
overcome the impact of rising rates. Despite strong earnings for the auto
industry and suppliers, these stocks declined as the market anticipated slower
consumer spending in response to higher rates.
[CHART]
The Fund's practice has been to provide a stable quarterly income
dividend. During the past fiscal year, the Fund distributed a dividend of $0.15
per quarter. These distributions were funded entirely from net investment
income. None represented a return of capital. To maintain the dividend rate the
Fund purchased issues which had dividend increases, and frequently repositioned
the portfolio in order to assure participation in large dividends (particularly
from utility stocks or special dividends announced by other types of companies).
The repositioning of the portfolio resulted in higher brokerage commissions.
As noted above, the Fund's investment objectives in order of priority
are conservation of capital, reasonable income and capital growth. To the extent
that the Fund sought to maintain a stable dividend during the past fiscal year
and therefore emphasized current income over capital growth, the Fund's overall
return may have been reduced. Beginning in the first quarter of 1995, the Fund
changed its dividend strategy. The Fund's income dividend distribution will move
toward a fluctuating dividend and away from the stable dividend pattern of the
past.
Evergreen Foundation Fund.
The total return of the Class Y no-load shares of the Evergreen
Foundation Fund for the almost five years since inception on January 2, 1990 to
December 31, 1994 was +99.57%, which calculated to an average annual compounded
return of +14.83%. This compared favorably with the return of the Standard &
Poor's 500 Reinvested Index (+51.45%) and the Lipper Balanced Fund Average
(+44.03%) for the same time period. For the fiscal year ended 1994, the Fund
produced a total return of -1.12% versus returns of +1.31% for the Standard &
Poor's 500 Reinvested Index and -2.52% for the Lipper Balanced Fund Average.
Asset allocation was a primary determinant of performance. Consistent
with the Fund's investment objectives of reasonable income, conservation of
capital and capital appreciation, Evergreen Asset sought to strategically
position the Fund to maximize opportunities in each asset class. The average
allocation during 1994 was 62% equities, 28% fixed-income and 10% short-term
cash equivalents. The equity portion of the portfolio had a return of +4.91% for
1994. The fixed-income segment of the portfolio, whose primary focus is income
and preservation of capital, was comprised on average of three-quarters
long-term U.S. government obligations and one-quarter short-term cash
equivalents. It generated a return of -11.06%, which was in line with its
benchmarks, when assessed in terms of credit quality, liquidity and overall
weighted maturity.
The equity segment of the portfolio was largely responsible for the
capital appreciation during 1994. Stock selection focused on issues believed to
be conservatively valued and financially strong. Concentration on health care
issues provided relative outperformance as these issues benefited from renewed
confidence in the growth of pharmaceutical and medical services industries. A
secondary focus on technological issues (semi-conductors and electronic
components) also provided excellent relative performance, as these sectors
benefited from a resurgence in the U.S. economy. The portfolio was negatively
impacted by its investments in real estate companies, utilities and banks.
Evergreen Total Return Fund.
Steady income flow has been an important goal since the inception of
the Fund. The Fund continued its annual $1.08 per share income dividend. The
dividend was maintained for the seventh successive year. The portfolio of the
Evergreen Total Return Fund, although primarily equities and convertibles, has a
high level of interest rate sensitivity. Since the Fund seeks to pay a
substantial dividend, Evergreen Asset looked toward the utility sector,
financial issues, real estate investment trusts, convertible preferreds and
convertible debentures to provide high yields. The sharp downward swing in the
1994 bond market had a deleterious effect on the interest sensitive sectors of
the equity and convertible markets, particularly impacting utilities, financial
and convertible issues. During the period from March 31, 1994 through January
31, 1995, the Dow Jones Utility Average was down -6.23%, the New York Stock
Exchange Financial Index was down -3.00%, the Merrill Lynch Convertible Index
was down -4.85%, and the Wilshire Real Estate Securities Index was down -3.80%.
The performance of the Class Y no-load shares of the Fund for the same period
was up +1.86%. This compares also with the performance of the Wilshire 5000 of
+6.04% and +3.01% for the Lipper Equity Income Average. One of the best groups
in the portfolio was the health sector which rebounded when the Clinton Health
Care Plan ran into trouble. Restructured companies as well as selected
cyclicals, such as banks and thrift issues and chemicals and energy issues, also
helped the portfolio. Five bank and thrift mergers produced gains.
During the year, the portfolio was restructured to reduce the utility
sector especially electric utilities. Evergreen Asset decided to reduce
dependence on this sector as it faces deregulation and resulting competitive
pressures. Currently, the Fund's focus is on special situations resulting from
such events as rate relief or corporate changes. Evergreen Asset also switched
into international issues in order to diversify risk across country lines and to
reduce the portfolio's sensitivity to changes in U.S. interest rates. Toward the
end of the year, Evergreen Asset added to the portfolio's holdings in the retail
sector as it saw a number of these companies at attractive valuation levels.
Many of these issues were in the process of restructuring, thereby providing the
possibility of improved margins in the near future.
The Fund's dividend was funded entirely from net investment income. It
did not represent a return of capital. To maintain the dividend rate the Fund
purchased issues which had dividend increases, and frequently repositioned the
portfolio in order to assure participation in large dividends, particularly from
utility stocks or special dividends announced by other types of companies. The
repositioning of the portfolio resulted in higher brokerage commissions. As
noted above, the Fund's investment objective is to achieve a return consisting
of current income and capital appreciation. To the extent that the Fund sought
to maintain a stable dividend during the past fiscal year and therefore
emphasized current income over capital appreciation, the Fund's overall return
may have been reduced.
On January 3, 1995, the Fund introduced a multiple class distribution
structure. The Fund's total return for the period 1/3/95 to 1/31/95 for the A,
B, C and Y Class of Shares was -3.45% (reflects maximum front end sales charge
of 4.75%), -3.53% (reflects maximum contingent deferred sales charge of 5%),
- -0.41% (reflects 1% contingent deferred sales charge within first year of
purchase), and 1.47% (no-load), respectively.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund.
Organization. The Evergreen Total Return Fund is a Massachusetts business trust
organized in 1986, and was originally organized as Maryland corporation in 1978.
Evergreen Growth and Income Fund is a Massachusetts business trust organized in
1986. The Evergreen American Retirement Fund is a separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust organized in
1987. Evergreen Foundation Fund is a separate series of the Evergreen Foundation
Trust, a Massachusetts business trust organized in 1989. Evergreen Balanced Fund
and Evergreen Value Fund are separate investment series of Evergreen Investment
Trust (formerly First Union Funds), which is a Massachusetts business trust
organized in 1984. The Funds do not intend to hold annual shareholder meetings;
shareholder meetings will be held only when required by applicable law.
Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Balanced Fund and Evergreen Value Fund and which
provides certain sub-administrative services to Evergreen Asset in connection
with its role as investment adviser to Evergreen Growth and Income Fund,
Evergreen American Retirement Fund, Evergreen Foundation Fund and Evergreen
Total Return Fund, including providing personnel to serve as officers of the
Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) all shareholders of record in one or more of the
Funds for which Evergreen Asset serves as investment adviser as of December 30,
1994, (ii) certain institutional investors and (iii) investment advisory clients
of CMG, Evergreen Asset or their affiliates. The dividends payable with respect
to Class A, Class B and Class C shares will be less than those payable with
respect to Class Y shares due to the distribution and distribution and
shareholder servicing related expenses borne by Class A, Class B and Class C
shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission ("SEC"), the average annual compounded rate
of return over the period that would equate an assumed initial amount invested
to the value of the investment at the end of the period. For purposes of
computing total return, dividends and capital gains distributions paid on shares
of a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases of a Fund's shares are assumed to have been
paid. Yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the Fund's share price. The Fund's yield is
calculated according to accounting methods that are standardized by the SEC for
all stock and bond funds. Because yield accounting methods differ from the
method used for other accounting purposes, the Fund's yield may not equal its
distribution rate, the income paid to your account or the net investment income
reported in the Fund's financial statements. To calculate yield, the Fund takes
the interest income it earned from its portfolio of investments (as defined by
the SEC formula) for a 30-day period (net of expenses), divides it by the
average number of shares entitled to receive dividends, and expresses the result
as an annualized percentage rate based on the Fund's share price at the end of
the 30-day period. This yield does not reflect gains or losses from selling
securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN GROWTH AND INCOME FUND, EVERGREEN AMERICAN RETIREMENT FUND,
EVERGREEN FOUNDATION FUND, EVERGREEN TOTAL RETURN FUND
Capital Management Group of First Union National Bank, 210 South College
Street, Charlotte, North Carolina, 28228
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN TOTAL RETURN FUND, EVERGREEN GROWTH AND INCOME FUND, EVERGREEN
AMERICAN RETIREMENT FUND
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219
EVERGREEN BALANCED FUND, EVERGREEN VALUE FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536123
PROSPECTUS July 7, 1995
EVERGREEN(SM) SPECIALTY GROWTH AND INCOME FUNDS (Evergreen Logo appears here)
EVERGREEN UTILITY FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN SMALL CAP EQUITY INCOME FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Specialty Growth and Income Funds (the "Funds") are
designed to provide investors with a selection of investment alternatives
which seek to provide current income, capital appreciation or after-tax
"total return". This Prospectus provides information regarding the Class A,
Class B and Class C shares offered by the Funds. Each Fund is, or is a
series of, an open-end, diversified, management investment company. This
Prospectus sets forth concise information about the Funds that a
prospective investor should know before investing. The address of the Funds
is 2500 Westchester Avenue, Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 807-2940. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS 2
EXPENSE INFORMATION 3
FINANCIAL HIGHLIGHTS 5
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies 8
Investment Practices and Restrictions 10
MANAGEMENT OF THE FUNDS
Investment Advisers 15
Sub-Adviser 16
Distribution Plans and Agreements 17
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares 18
How to Redeem Shares 20
Exchange Privilege 21
Shareholder Services 22
Effect of Banking Laws 23
OTHER INFORMATION
Dividends, Distributions and Taxes 23
Management's Discussion of Fund Performance 24
General Information 25
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN SMALL CAP EQUITY INCOME FUND is Evergreen Asset Management Corp.
("Evergreen Asset") which, with its predecessors, has served as an investment
adviser to the Evergreen Funds since 1971. Evergreen Asset is a wholly-owned
subsidiary of First Union National Bank of North Carolina ("FUNB"), which in
turn is a subsidiary of First Union Corporation, one of the ten largest bank
holding companies in the United States. The Capital Management Group of FUNB
("CMG") serves as investment adviser to EVERGREEN UTILITY FUND.
EVERGREEN UTILITY FUND (formerly First Union Utility Portfolio) seeks
high current income and moderate capital appreciation.
EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.
EVERGREEN SMALL CAP EQUITY INCOME FUND attempts to maximize the "total
return" on its portfolio of investments. The Fund invests in common and
preferred stocks, securities convertible into or exchangeable for common stocks
and fixed income securities. In attempting to achieve its objective, the Fund
invests primarily in companies with total market capitalization of less than
$500 million.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in each Class A, Class B and Class C Shares of the
Fund. For further information see "Purchase and Redemption of Fund Shares" and
"General Information -- Other Classes of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Dividend Reinvestments None None None
Contingent Deferred Sales Charge (as a % of None 5% during the first year, 4% during the 1% during the
original purchase price or redemption second year, 3% during the third and fourth first year and
proceeds, whichever is lower) years, 2% during the fifth year, 1% during 0% thereafter
the sixth and seventh years and 0% after the
seventh year
Redemption Fee None None None
Exchange Fee None None None
</TABLE>
The following tables show for each Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to each Class of
Shares, together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment in each Class for the periods specified assuming
(i) a 5% annual return, and (ii) redemption at the end of each period and,
additionally for Class B and C, no redemption at the end of each period.
In the following examples (i) the expenses for Class A Shares assume
deduction of the maximum 4.75% sales charge at the time of purchase, (ii) the
expenses for Class B Shares and Class C Shares assume deduction at the time of
redemption (if applicable) of the maximum contingent deferred sales charge
applicable for that time period, and (iii) the expenses for Class B Shares
reflects the conversion to Class A Shares eight years after purchase (years
eight through ten, therefore, reflect Class A expenses).
EVERGREEN UTILITY FUND (A)
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class B
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .50% .50% .50%
After 1 Year $ 57 $ 68 $ 28 $ 18
Administrative Fees .06% .06% .06%
After 3 Years $ 78 $ 85 $ 55 $ 55
12b-1 Fees* .25% .75% .75%
After 5 Years $ 100 $ 114 $ 94 $ 94
Shareholder Service Fees -- .25% .25%
After 10 Years $ 163 $ 176 $ 205 $ 176
Other Expenses .18% .18% .18%
Total .99% 1.74% 1.74%
<CAPTION>
Class C
<S> <C> <C>
After 1 Year $ 18
Administrative Fees
After 3 Years $ 55
12b-1 Fees*
After 5 Years $ 94
Shareholder Service Fees
After 10 Years $ 205
Other Expenses
Total
<CAPTION>
Advisory Fees
</TABLE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class B
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees .875% .875% .875%
After 1 Year $ 64 $ 75 $ 35 $ 25
12b-1 Fees* .250% 1.000% 1.000%
After 3 Years $ 100 $ 108 $ 78 $ 78
Other Expenses .625% .625% .625%
After 5 Years $ 138 $ 153 $ 133 $ 133
(after reimbursement)**
After 10 Years $ 244 $ 257 $ 284 $ 257
Total 1.750% 2.500% 2.500%
<CAPTION>
Class C
<S> <C> <C>
After 1 Year $ 25
12b-1 Fees*
After 3 Years $ 78
Other Expenses
After 5 Years $ 133
(after reimbursement)**
After 10 Years $ 284
Total
<CAPTION>
Advisory Fees
</TABLE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming
Assuming Redemption at End of no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class B
Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00%
After 1 Year $ 64 $ 75 $ 35 $ 25
12b-1 Fees* .25% 1.00% 1.00%
After 3 Years $ 100 $ 108 $ 78 $ 78
Other Expenses
After 5 Years $ 138 $ 153 $ 133 $ 133
(after reimbursement)** .50% .50% .50%
After 10 Years $ 244 $ 257 $ 284 $ 257
Total 1.75% 2.50% 2.50%
<CAPTION>
Class C
<S> <C> <C>
After 1 Year $ 25
12b-1 Fees*
After 3 Years $ 78
Other Expenses
After 5 Years $ 133
(after reimbursement)**
After 10 Years $ 284
Total
<CAPTION>
Advisory Fees
</TABLE>
3
<PAGE>
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the forseeable future, the Class A Shares 12b-1 Fees will be limited to .25
of 1% of average net assets. For Class B and Class C Shares of Evergreen Small
Cap Equity Income Fund and Evergreen Tax Strategic Foundation Fund, a portion of
the 12b-1 Fees equivalent to .25 of 1% of average net assets will be shareholder
servicing-related. Distribution-related 12b-1 Fees will be limited to .75 of 1%
of average net assets as permitted under the rules of the National Association
of Securities Dealers, Inc.
**Reflects agreements by Evergreen Asset to limit aggregate operating expenses
(including the Advisory Fees, but excluding interest, taxes, brokerage
commissions, Rule 12b-1 distribution fees and shareholder servicing fees and
extraordinary expenses) of Evergreen Small Cap Equity Income Fund and Evergreen
Tax Strategic Foundation Fund to 1.50% of average net assets until net assets
reach $15 million. Absent such agreements, the estimated annual operating
expenses for each Fund would be 2.75% for Class A and 3.50% for Class B and C
Shares.
(a) Estimated annual operating expenses reflect the combination of First Union
Utility Portfolio and ABT Utility Income Fund.
From time to time, each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the year ended December 31, 1994. Such amounts have been
restated to reflect current fee arrangements and in the case of Funds that did
not offer all of the above-referenced Classes of shares during such periods, the
amounts set forth in the tables are based on the expenses incurred by the
Classes which were offered. THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND
ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more complete
description of the various costs and expenses borne by the Funds see "Management
of the Funds". As a result of asset-based sales charges, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales charges
permitted under the rules of the National Association of Securities Dealers,
Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN UTILITY FUND has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, for EVERGREEN TAX STRATEGIC
FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's independent
auditors and for EVERGREEN SMALL CAP EQUITY INCOME FUND has been audited by
Ernst & Young LLP, the Fund's independent auditors. A report of KPMG Peat
Marwick LLP, Price Waterhouse LLP, or Ernst & Young LLP, as the case may be, on
the audited information with respect to each Fund is incorporated by reference
in the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
No financial highlights are shown for Class A, B or C Shares of Evergreen
Tax Strategic Foundation Fund and Evergreen Small Cap Equity Income Fund since
these classes did not have any operations prior to December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN UTILITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994* 1994* 1994* 1994*
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $10.00 $10.00 $9.33 $9.51
Income (loss) from investment operations:
Net investment income......................................... .45 .39 .12 .37
Net realized and unrealized loss on investments............... (1.01) (1.01) (.33) (.50)
Total from investment operations............................ (.56) (.62) (.21) (.13)
Less distributions to shareholders from:
Net investment income......................................... (.44) (.38) (.11) (.37)
In excess of net investment income............................ -- -- -- (.01)(b)
Total distributions......................................... (.44) (.38) (.11) (.38)
Net asset value, end of period................................ $9.00 $9.00 $9.01 $9.00
TOTAL RETURN+................................................. (5.6%) (6.2%) (2.2%) (1.6%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................... $4,190 $28,792 $128 $5,201
Ratios to average net assets:
Expenses (a)................................................ .53%++ 1.27%++ 1.94%++ .40%++
Net investment income (a)................................... 5.07%++ 4.19%++ 3.96%++ 4.93%++
Portfolio turnover rate....................................... 23% 23% 23% 23%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994 1994 1994 1994
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
<S> <C> <C> <C> <C>
1994 1994 1994 1994
Expenses............................ 1.43% 2.11% 2.78% 1.24%
Net investment income............... 4.17% 3.35% 3.12% 4.09%
</TABLE>
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
5
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 2, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $ 10.31 $ 10.00
Income from investment operations:
Net investment income............................................................... .27 .05
Net realized and unrealized gain on investments..................................... .08 .31
Total from investment operations.................................................. .35 .36
Less distributions to shareholders from:
Net investment income............................................................... (.27) (.05)
Net realized gains.................................................................. (.12) --
Total distributions............................................................... (.39) (.05)
Net asset value, end of period...................................................... $ 10.27 $ 10.31
TOTAL RETURN+....................................................................... 3.4% 3.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $10,575 $5,424
Ratios to average net assets:
Expenses (a)...................................................................... 1.49% 0%++
Net investment income (a)......................................................... 2.87% 3.65%++
Portfolio turnover rate............................................................. 245% 25%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share and for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
NOVEMBER 2, 1993
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 2.41% 3.10%
Net investment income..................................... 1.95% .54%
</TABLE>
6
<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
OCTOBER 1, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $ 10.15 $ 10.00
Income (loss) from investment operations:
Net investment income............................................................... .34 .10
Net realized and unrealized gain (loss) on investments.............................. (.41) .15
Total from investment operations.................................................. (.07) .25
Less distributions to shareholders from:
Net investment income............................................................... (.33) (.10)
Net realized gains.................................................................. (.05) --
Total distributions............................................................. (.38) (.10)
Net asset value, end of period...................................................... $ 9.70 $ 10.15
TOTAL RETURN+....................................................................... (.7%) 2.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $3,613 $2,236
Ratios to average net assets:
Expenses (a)...................................................................... 1.48% 0%++
Net investment income (a)......................................................... 3.72% 4.07%++
Portfolio turnover rate............................................................. 9% 15%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 4.68% 4.39%
Net investment income (loss).............................. .53% (.33%)
</TABLE>
7
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Small Cap Equity Income Fund
The investment objective of Evergreen Small Cap Equity Income Fund is
to achieve a return consisting of current income and capital appreciation in the
value of its shares. The emphasis on current income and capital appreciation
will be relatively equal although, over time, changes in market conditions and
the level of interest rates may cause the Fund to vary its emphasis between
these two elements in its search for the optimum return for its shareholders.
The Fund seeks to achieve its investment objective through investments in common
stocks, preferred stocks, securities convertible into or exchangeable for common
stocks and fixed income securities. Under normal conditions, the Fund will
invest at least 65% of its total assets in equity securities (including
convertible debt securities) of companies that, at the time of purchase, have
"total market capitalization" -- present market value per share multiplied by
the total number of shares outstanding -- of less than $500 million. The Fund's
investment objective is a fundamental policy.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved. The Fund may invest up to 35% of
its total assets in equity securities of companies that at the time of purchase
have a total market capitalization of $500 million or more, and in excess of
that percentage during temporary defensive periods.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be subject
to the discretion of the Fund's investment adviser. Ordinarily, the Fund
anticipates that most of its portfolio will consist of equity securities and
convertible debt securities. A significant portion of the equity investments,
however, will be income producing. If in the judgment of the Fund's investment
adviser a defensive position is appropriate, the Fund may take a defensive
position and invest without limit in debt securities or government securities or
hold its assets in cash or cash equivalents. The quality standards for debt
securities include: Obligations of banks and commercial paper rated no lower
than P-2 by Moody's Investor's Service ("Moody's"), A-2 by Standard and Poor's
Ratings Group ("S&P") or having a comparable rating from another nationally
recognized statistical rating organization ("SRO"); and non-convertible debt
securities rated no lower than Baa by Moody's or BBB by S&P.
Securities rated Baa or BBB may have speculative characteristics.
The Fund may invest in real estate investment trusts ("Reits"). Equity
Reits invest directly in real property while mortgage Reits invest in mortgages
on real property. The Fund does not intend to invest in Reits that are primarily
mortgage Reits. Equity Reits usually provide a high current yield plus the
opportunity of long-term price appreciation of real estate values. Reits may be
subject to certain risks associated with the direct ownership of real estate.
See "Investment Practices and Restrictions - Special Risk Considerations",
below.
It is anticipated that the annual portfolio turnover rate for the Fund
will not generally exceed 100%. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", and "Special Risk Considerations", below.
Evergreen Tax Strategic Foundation Fund
The investment objective of Evergreen Tax Strategic Foundation Fund is
to maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from Federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
""Investment Practices and Restrictions - "Municipal Securities and Taxable
Investments). There can be no assurance that the Funds investment objective
will be achieved. The objective is fundamental and may not be changed without
shareholder approval.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities).
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market value of the
Municipal Securities in the Fund's portfolio can be expected to vary inversely
to changes in prevailing interest rates. The Fund may at times emphasize the
generation of interest income by investing in high-yielding debt securities,
with short, medium or long-term maturities. Investment in medium (i.e., with
maturities from five to ten years) to long-term (i.e., with maturities over ten
years) debt securities may also be made with a view to realizing capital
appreciation when the Fund's investment adviser believes that interest rates on
such investments may decline, thereby increasing their market value.
In general, the Fund will invest in Municipal Securities only if they
are determined to be of high or upper medium quality. These include bonds rated
BBB or higher by S&P or Baa by Moody's or another SRO. For a description of such
ratings see the Statement of Additional Information. The Fund may purchase
Municipal Securities which are unrated at the time of purchase, if such
securities are determined by the Fund's investment adviser to be of comparable
quality. Certain Municipal Securities (primarily variable rate demand notes) may
be entitled to the benefit of standby letters of credit or similar commitments
issued by banks and, in such instances, the Fund's investment adviser will take
into account the obligation of the bank in assessing the quality of such
security. Medium grade bonds are more susceptible to adverse economic conditions
or changing circumstances than higher grade bonds.
Interest income on certain types of bonds issued after August 7, 1986
to finance nongovernmental activities is an item of "tax-preference" subject to
the Federal alternative minimum tax for individuals and corporations. To the
extent the Fund invests in these "private activity" bonds (some of which were
formerly referred to as "industrial development" bonds), individual and
corporate shareholders, depending on their status, may be subject to the
alternative minimum tax on the part of the Fund's distributions derived from the
bonds. As a matter of fundamental policy, 80% of the Fund's investments in
Municipal Securities will be invested in Municipal Securities the interest from
which is not subject to the Federal alternative minimum tax.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Utility Fund
The investment objective of Evergreen Utility Fund is to achieve a
return consisting of high current income and moderate capital appreciation. The
Fund invests primarily in a diversified portfolio of equity and debt securities
of utility companies that produce, transmit or distribute gas or electrical
energy, as well as those companies which provide communications facilities, such
as telephone and telegraph companies. As a matter of investment policy, the Fund
will invest at least 65% of the value of its total assets in utility companies
that derive 50% of their revenues from utilities or assets relating to utility
industries. In addition, the Fund may invest up to 35% of its assets in common
stock of non-utility companies. There can be no assurance that the Fund's
investment objective will be achieved.
<PAGE>
The Fund may invest in:
common and preferred stocks, bonds and convertible preferred
stocks of utility companies selected by the Fund's investment adviser
on the basis of traditional research techniques, including assessment
of earnings and dividend growth prospects and of the risk and
volatility of the individual company's industry. However, other
factors, such as product position, market share or profitability may
also be considered by the Fund's investment adviser. The Fund will only
invest its assets in debt securities rated Baa or higher by Moody's or
BBB or higher by S&P or which, if unrated, are considered to be of
comparable quality by the Fund's investment adviser;
securities which are either issued or guaranteed by the U.S.
government, its agencies or instrumentalities. These securities include
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government
agencies or instrumentaltiies such as the Farm Credit System, including
the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association, Government National Mortgage Association, Student Loan
Marketing Association, Tennessee Valley Authority, Export-Import Bank
of the United State, Commodity Credit Corporation, Federal Financing
Bank and National Credit Union Administration. Some of these securities
are supported by the full faith and credit of the U.S. government, and
others are supported only by the full faith and credit of the agency or
instrumentality;
commercial paper, including master demand notes;
American Depositary Receipts ("ADRs") of foreign companies
traded on the New York or American Stock Exchanges or the
over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in other obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation considerations and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions" - "Other Investment Policies" and "Foreign Investments".)
The Fund will not invest more than 10% of its assets in foreign
securities;
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Mortagage Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
securities of other investment companies.
Bonds rated Baa by Moody's or BBB by S&P may have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken such bonds' prospects for principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered investment grade.
As of December 31, 1994 approximately 88% of the Fund's portfolio
consisted of equity securities. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Small Cap Equity Income Fund and
Evergreen Tax Strategic Foundation Fund on those exchanges. See the Statement of
Additional Information for further information regarding the brokerage
allocation practices of these Funds.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except from banks as a temporary measure to facilitate redemption requests or
for extraordinary or emergency purposes. The proceeds from borrowings may be
used to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio securities. The specific limits applicable to
borrowing by each Fund are set forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the total assets of the Evergreen
Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation Fund, and
15% of the value of the total assets of Evergreen Utility Fund, and must be
collateralized by cash or U.S. Government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
securities loaned, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby increasing its
return. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
has the right to call a loan and obtain the securities loaned at any time on
notice of not more than five business days. A Fund may pay reasonable fees in
connection with such loans.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities files for bankruptcy or becomes insolvent,
dispostion of the securities may be delayed pending court action.
Illiquid or Restricted Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities and other securities which are not readily
marketable, except that Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund may only invest up to 10% of their assets in
repurchase agreements with maturities longer than seven days. Illiquid
securities include certain restricted securities not determined by the Trustees
to be liquid, non-negotiable time deposits and repurchase agreements providing
for settlement in more than seven days after notice. Securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds' investment
advisers to be illiquid or not readily marketable and, therefore, are not
subject to the aforementioned 15% limit. The inability of a Fund to dispose of
illiquid or not readily marketable investments readily or at a reasonable price
could impair the Fund's ability to raise cash for redemptions or other purposes.
The liquidity of securities purchased by a Fund which are eligible for resale
pursuant to Rule 144A will be monitored by each Fund's investment adviser on an
ongoing basis, subject to the oversight of the Trustees. In the event that such
a security is deemed to be no longer liquid, a Fund's holdings will be reviewed
to determine what action, if any, is required to ensure that the retention of
such security does not result in a Fund having more than 15% of its assets
invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. The Funds may enter
into repurchase agreements may be entered into with member banks of the Federal
Reserve System, including the Custodian or primary dealers in U.S. Government
securities. A repurchase agreement is an arrangement pursuant to which a buyer
purchases a security and simultaneously agrees to resell it to the vendor at a
price that results in an agreed-upon market rate of return which is effective
for the period of time (which is normally one to seven days, but may be longer)
the buyer's money is invested in the security. The arrangement results in a
fixed rate of return that is not subject to market fluctuations during the
holding period. A Fund requires continued maintenance of collateral with its
Custodian in an amount at least equal to the repurchase price (including accrued
interest). In the event a vendor defaults on its repurchase obligation, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If the vendor becomes the
subject of bankruptcy proceedings, a Fund might be delayed in selling the
collateral. The Funds' investment advisers will review and continually monitor
the creditworthiness of each institution with which a Fund enters into a
repurchase agreement to evaluate these risks.
The Funds may borrow money by entering into a "reverse repurchase
agreement" by which a Fund may agree to sell portfolio securities to financial
institutions such as banks and broker-dealers, and to repurchase them at a
mutually agreed upon date and price, for temporary or emergency purposes. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, U.S. government securities or liquid high
grade debt obligations having a value at least equal to the repurchase price
(including accrued interest) and will subsequently monitor the account to ensure
that such equivalent value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. A Fund will not enter into
reverse repurchase agreements exceeding 5% of the value of its total assets.
Futures and Related Options. Evergreen Small Cap Equity Income Fund and
Evergreen Utility Fund may, to a limited extent, enter into financial futures
contracts, including futures contracts based on securities indices, purchase and
sell options on such futures contracts, and engage in related closing
transactions to the extent available to hedge all or a portion of its portfolio,
or as an efficient means of regulating its exposure to the equity markets. The
Funds will only use futures instruments for hedging, not speculative, purposes.
The Funds may not enter into futures contracts or related options if,
immediately thereafter, more than 30% of a Fund's total assets would be hedged
thereby or the amounts committed to margin and premiums paid for unexpired
options would exceed 5% of a Fund's total assets. These transactions include
brokerage costs and require each Fund to segregate liquid high grade debt or
cash to cover contracts which would require them to purchase securities. The
Funds may lose the expected benefit of the transactions if securities prices or
interest rates move in an unanticipated manner. In addition, if a Fund purchases
futures contract on indices of securities, their value may not fluctuate in
proportion to the value of the Fund's securities, limiting its ability to hedge
effectively.
While the Evergreen Small Cap Equity Income Fund and Evergreen Utility
Fund will enter into futures contracts only if there appears to be a liquid
secondary market for such contracts, there can be no assurance that the Funds
will be able to close out positions in a specific contract at a specific time.
Each Fund will not enter into a particular index-based futures contract unless
the Fund's investment adviser determines that a correlation exists between price
movements in the index-based futures contract and in securities in a Fund's
portfolio. Such correlation is not likely to be perfect, since each Fund's
portfolio is not likely to contain the same securities used in the index.
Evergreen Small Cap Equity Income Fund and Evergreen Utility Fund may
attempt to earn income from selling (writing) call options on futures contracts
in instances where each Fund's investment adviser believes that the long-term
investments held by the Fund which are the subjects of such contracts will
remain stable or experience a decline with respect to the U.S. dollar during the
term of the option. By selling such an option, a Fund forgoes all or part of the
appreciation potential involved in holding investments that are the subject of
the futures contract on which an option was written and may be forced to make
untimely liquidations of its investments to meet its obligations under the
option contract.
Options And Futures. Evergreen Utility Fund may deal in put and call options. A
call option gives the purchaser the right to buy, and the writer the obligation
to sell, the underlying asset at the exercise price during the option period. A
put option gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by a Fund is exercised, the Fund forgoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that a Fund may be
required to take delivery of the underlying asset at a disadvantageous price.
Municipal Securities. As noted above, Evergreen Tax Strategic Foundation Fund
may invest in Municipal Securities, which include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed. The
term "municipal bonds" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in municipal bonds, including IDBs and PABs, and floating and variable
rate obligations that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature is
backed by an irrevocable letter of credit or guarantee of the bank. A put bond
is a municipal bond which gives the holder the unconditional right to sell the
bond back to the issuer at a specified price and exercise date, which is
typically well in advance of the bond's maturity date. "Short-term municipal
notes" and "tax exempt commercial paper" include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. The Municipal Securities in which
Evergreen Tax Strategic Foundation Fund may invest also include certain variable
rate and floating rate municipal obligations with or without demand features.
These variable rate securities do not have fixed interest rates; rather, those
rates fluctuate based upon changes in specified market rates, such as the prime
rate, or are adjusted at predesignated periodic intervals. Certain of these
obligations may carry a demand feature that gives the Evergreen Tax Strategic
Foundation Fund the right to demand prepayment of the principal amount of the
security prior to its maturity date. The demand obligation may or may not be
backed by letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. The
Evergreen Tax Strategic Foundation Fund will limit the value of its investments
in any floating or variable rate securities which are not readily marketable and
in all other not readily marketable securities to 5% or less of its total
assets.
When-Issued Securities. Evergreen Utility Fund and Evergreen Tax Strategic
Foundation Fund may purchase securities on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price and yield). The
Funds generally would not pay for such securities or start earning interest on
them until they are received. However, when the Funds purchase securities on a
when-issued basis, they assume the risks of ownership at the time of purchase,
not at the time of receipt. Failure of the issuer to deliver a security
purchased by a Fund on a when-issued basis may result in the Fund incurring a
loss or missing an opportunity to make an alternative investment. Commitments to
purchase when-issued securities will not exceed 25% of the total assets of
Evergreen Tax Strategic Foundation Fund and 20% of the total assets of Evergreen
Utility Fund. The Evergreen Tax Strategic Foundation Fund will maintain cash or
high quality short-term securities in a segregated account with its custodian in
an amount equal to such commitments. The Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.
Stand-by Commitments. Evergreen Tax Strategic Foundation Fund may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in a Fund incurring
a loss or missing an opportunity to make an alternative investment. The
Evergreen Tax Strategic Foundation Fund expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Evergreen Tax Strategic Foundation Fund's portfolio will not exceed 10% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality short-term
securities in a segregated account with its Custodian in an amount equal to such
commitments. The Fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Fund's investment adviser, present
minimal credit risks.
Taxable Fixed Income Investments. Evergreen Tax Strategic Foundation Fund may,
however, temporarily invest up to 20% of its total assets in taxable securities
under any one or more of the following circumstances: (a) pending investment of
proceeds of sale of Fund shares or of portfolio securities, (b) pending
settlement of purchases of portfolio securities, and (c) to maintain liquidity
for the purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% of its total assets in taxable securities for
defensive purposes. The Fund may invest for defensive purposes during periods
when the Fund's assets available for investment exceed the available Municipal
Securities that meet the Fund's quality and other investment criteria. Taxable
securities in which the Fund may invest on a short-term basis include
obligations of the U.S. government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of U.S. banks with
assets of $1 billion or more.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Special Risk Considerations
Investments in the Utility Industry. In view of the Evergreen Utility Fund's
investment concentration, investors should be aware of certain risks associated
with the utility industry in general. These include difficulties in earning
adequate returns on investments despite frequent rate increases, restrictions on
operations and increased costs and delays due to governmental regulations,
building or construction delays, environmental regulations, difficulty of the
capital markets in absorbing utility debt and equity securities, and
difficulties in obtaining fuel at reasonable prices.
The Fund's investment adviser believes that the risks of investing in
utility securities can be reduced. The professional portfolio management
techniques used by the Fund's investment adviser to attempt to reduce these
risks include credit research. The Fund's investment adviser will perform its
own credit analysis, in addition to using recognized rating agencies and other
sources, including discussions with an issuer's management, the judgment of
other investment analysts, and its own informed judgment. The credit analysis of
the Fund's investment adviser will consider an issuer's financial soundness, its
responsiveness to changes in interest rates and business conditions, its
anticipated cash flow, interest or dividend coverage, and earnings. In
evaluating an issuer, the Fund's investment adviser places special emphasis on
the estimated current value of the issuer's assets rather than historical costs.
Bond prices move inversely to interest rates, i.e., as interest rates
decline the value of the bonds increase and vice versa. The longer the maturity
of a bond, the greater the exposure to market price fluctuations. The same
market factors are reflected in the share price or net asset value of bond funds
which will vary with interest rates. There is no limit on the maturity of the
fixed income securities purchased by the Fund.
Investment in Foreign Securities. Investments by Evergreen Utility Fund in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of a Fund denominated in such currency will
also fall. The performance of a Fund will be measured in U.S. dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
ADRs and European Depositary Receipts ("EDRs") and other securities
convertible into securities of foreign issuers may not necessarily be
denominated in the same currency as the securities into which they may be
converted but rather in the currency of the market in which they are traded.
ADRs are receipts typically issued by an American bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe by banks or depositories which evidence a
similar ownership arrangement. Generally ADRs, in registered form, are designed
for use in United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Investments in Small Companies. Investment in the securities of small or newly
formed companies involves greater risk than investments in larger, more
established issuers. The Evergreen Small Cap Equity Income Fund may invest to a
large extent in small or newly formed companies which have limited product
lines, markets or financial resources and may lack management depth. The
securities of such companies may have limited marketability and may be subject
to more abrupt or erratic movements in price than securities of larger, more
established companies, or equity securities in general.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which it has been established ("Trustees"). Evergreen Asset Management
Corp. ( "Evergreen Asset") has been retained by Evergreen Tax Strategic
Foundation Fund and Evergreen Small Cap Equity Income Fund as investment
adviser. Evergreen Asset succeeded on June 30, 1994 to the advisory business of
the same name, but under different ownership, which was organized in 1971.
Evergreen Asset, with its predecessors, has served as investment adviser to the
Evergreen mutual funds since 1971. Evergreen Asset is a wholly-owned subsidiary
of First Union National Bank of North Carolina ("FUNB"). The address of
Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a
subsidiary of First Union Corporation ("First Union"), one of the ten largest
bank holding companies in the United States. Stephen A. Lieber and Nola Maddox
Falcone serve as the chief investment officers of Evergreen Asset and, along
with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor
and the former general partners of Lieber & Company, which, as described below,
provides certain subadvisory services to Evergreen Asset in connection with its
duties as investment adviser to the Funds. The Capital Management Group of FUNB
("CMG") serves as investment adviser to Evergreen Utility Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Tax Strategic Foundation Fund and
Evergreen Small Cap Equity Income Fund, Evergreen Asset manages each Fund's
investments, provides various administrative services and supervises each Fund's
daily business affairs, subject to the authority of the Trustees. Evergreen
Asset is entitled to receive from Evergreen Small Cap Equity Income Fund a fee
equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. With respect to Evergreen Tax Strategic
Foundation Fund, Evergreen Asset is entitled to receive a fee equal to .875 of
1% of average daily net assets on an annual basis on the first $750 million in
assets, .75 of 1% of average daily net assets on an annual basis on the next
$250 million in assets, and .7 of 1% of average daily net assets on an annual
basis on assets over $1 billion. The fee paid by Evergreen Small Cap Equity
Income Fund and Evergreen Tax Strategic Foundation Fund is higher than the rate
paid by most other investment companies. Until Evergreen Small Cap Equity Income
Fund and Evergreen Tax Strategic Foundation Fund reach $15 million in net
assets, Evergreen Asset has agreed to reimburse such Funds to the extent that
their aggregate operating expenses exceed 1.50% of its average daily net assets
for any fiscal year. Any reimbursement pursuant to the foregoing will be
exclusive of interest, taxes, brokerage commissions, Rule 12b-1 distribution
fees and shareholder servicing fees and extraordinary expenses. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation
Fund for the fiscal year ended December 31, 1994 are set forth in the section
entitled "Financial Highlights". The above-mentioned expense ratios for
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Retirement
Fund are net of voluntary advisory fee waivers and expense reimbursements by
Evergreen Asset which may, at its discretion, revise or cease this voluntary
waiver at any time.
CMG manages investments and supervises the daily business affairs of
Evergreen Utility Fund and, as compensation therefor, is entitled to receive an
annual fee equal to .50 of 1% of average daily net assets of the Fund. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Utility Fund for the fiscal year ended December 31, 1994 are set forth
in the section entitled "Financial Highlights". Evergreen Asset serves as
administrator to Evergreen Utility Fund and is entitled to receive a fee based
on the average daily net assets of the Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .050% of the first $7 billion; .035% on the next $3 billion;
.030% on the next $5 billion; .020% on the next $10 billion; .015% on the next
$5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
Utility Fund and is entitled to receive a fee from the Fund calculated on the
average daily net assets of the Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Small Cap Equity Income Fund is
Nola Maddox Falcone, C.F.A., who is President and Co-Chief Executive Officer of
Evergreen Asset. Ms. Falcone has served as the principal manager of the Fund
since 1993. Stephen A. Lieber, who is Chairman and Co-Chief Executive Officer of
Evergreen Asset, together with James T. Colby, III, serve as the portfolio
managers for Evergreen Tax Strategic Foundation Fund. Mr. Lieber makes all
allocation decisions and investment decisions for the equity portion of the
portfolio and Mr. Colby manages the fixed-income portion. Mr. Colby has served
as a fixed-income portfolio manager with Evergreen Asset since 1992. Prior to
that, Mr. Colby served as Vice President-Investments at American Express Company
from 1987 to 1992. Both have served as the Fund's principal managers since
inception. The portfolio manager of Evergreen Utility Fund since its inception
is H. Bradley Donovan, who is an Assistant Vice President of FUNB, and has been
with First Union since 1992. Prior to that, Mr. Donovan had served as a
portfolio manager and equity analyst at The Bank of Boston.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap
Equity Income Fund. Lieber & Company will be reimbursed by Evergreen Asset in
connection with the rendering of services on the basis of the direct and
indirect costs of performing such services. There is no additional charge to
Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap Equity Income
Fund for the services provided by Lieber & Company. The address of Lieber &
Company is 2500 Westchester Avenue, Purchase, New York 10577.
Lieber & Company is an indirect, wholly-owned, subsidiary of First Union.
DISTRIBUTION PLANS AND AGREEMENTS
Rule 12b-1 under the Investment Company Act of 1940 permits an
investment company to pay expenses associated with the distribution of its
shares in accordance with a duly adopted plan. Each Fund has adopted for each of
its Class A, Class B and Class C shares a Rule 12b-1 plan (each, a "Plan" or
collectively the "Plans"). Under the Plans, each Fund may incur
distribution-related and shareholder servicing-related expenses which may not
exceed an annual rate of .75 of 1% of the aggregate average daily net assets
attributable to each Fund's Class A shares, 1.00% of the aggregate average daily
net assets attributable to the Class B and Class C shares of Evergreen Tax
Strategic Foundation Fund and Evergreen Small Cap Equity Income Fund, and .75 of
1% of the aggregate average daily net assets attributable to the Class B and
Class C shares of Evergreen Utility Fund. Payments under the Plans adopted with
respect to Class A shares are currently voluntarily limited to .25 of 1% of each
Fund's aggregate average daily net assets attributable to Class A shares. The
Plans provide that a portion of the fee payable thereunder may constitute a
service fee to be used for providing ongoing personal services and/or the
maintenance of shareholder accounts. Evergreen Utility Fund has, in addition to
the Plans adopted with respect to its Class B and Class C shares, adopted
shareholder service plans ("Service Plans") relating to the Class B and Class C
shares which permit the Fund to incur a fee of up to .25 of 1% of the aggregate
average daily net assets attributable to the Class B and Class C shares for
ongoing personal services and/or the maintenance of shareholder accounts. Such
service fee payments to financial intermediaries for such purposes, whether
pursuant to a Plan or Service Plan, will not to exceed .25% of the aggregate
average daily net assets attributable to each Class of shares of each Fund.
Each Fund has also entered into a distribution agreement (each a
"Distribution Agreement" or collectively the "Distribution Agreements") with
Evergreen Funds Distributor, Inc. ("EFD"). Pursuant to the Distribution
Agreements, each Fund will compensate EFD for its services as distributor at a
rate which may not exceed an annual rate of .25 of 1% of a Fund's aggregate
average daily net assets attributable to Class A shares, .75 of 1% of a Fund's
aggregate average daily net assets attributable to the Class B shares and .75 of
1% of a Fund's aggregate average daily net assets attributable to the Class C
shares. The Distribution Agreements provide that EFD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Funds, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EFD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Fund's shareholders. The financing of
payments made by EFD to compensate broker-dealers or other persons for
distributing shares of the Funds may be provided by First Union or its
affiliates. The Funds may also make payments under the Plans ( and in the case
of Evergreen Utility Fund, the Service Plan), in amounts up to .25 of 1% of a
Fund's aggregate average daily net assets on an annual basis attributable to
Class B and Class C shares, to compensate organizations, which may include EFD
and each Fund's investment adviser or their affiliates, for personal services
rendered to shareholders and/or the maintenance of shareholder accounts.
The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above. Since EFD's compensation
under the Distribution Agreements is not directly tied to the expenses incurred
by EFD, the amount of compensation received by it under the Distribution
Agreements during any year may be more or less than its actual expenses and may
result in a profit to EFD. Distribution expenses incurred by EFD in one fiscal
year that exceed the level of compensation paid to EFD for that year may be paid
from distribution fees received from a Fund in subsequent fiscal years.
The Plans are in compliance with rules of the National Association of
Securities Dealers, Inc. which effectively limit the annual asset-based sales
charges and service fees that a mutual fund may pay on a class of shares to .75
of 1% and .25 of 1%, respectively, of the average annual net assets attributable
to that class. The rules also limit the aggregate of all front-end, deferred and
asset-based sales charges imposed with respect to a class of shares by a mutual
fund that also charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per annum.
<PAGE>
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
You can purchase shares of any of the Funds through broker-dealers,
banks or other financial intermediaries, or directly through EFD. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investments of $25 or more are allowed
under the systematic investment program. Share certificates are not issued for
Class A, Class B and Class C shares. In states where EFD is not registered as a
broker-dealer shares of a Fund will only be sold through other broker-dealers or
other financial institutions that are registered. See the Share Purchase
Application and Statement of Additional Information for more information. Only
Class A, Class B and Class C shares are offered through this Prospectus (See
"General Information" - "Other Classes of Shares").
Class A Shares-Front-End Sales Charge Alternative. You can purchase Class A
shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge
------------------------ ----------------- --------------- ------------------
Commission to
Dealer/Agent
as a % of the Net as a % of the as a % of
Amount of Purchase Amount Invested Offering Price Offering Price
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Less than $100,000 4.99% 4.75% 4.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$100,000 - $249,999 3.90% 3.75% 3.25%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$250,000 - $499,999 3.09% 3.00% 2.50%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$500,000 - $999,999 2.04% 2.00% 1.75%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
$1,000,000 - $2,499,999 1.01% 1.00% 1.00%
------------------------ ----------------- --------------- ------------------
------------------------ ----------------- --------------- ------------------
Over $2,500,000 .25% .25% .25%
------------------------ ----------------- --------------- ------------------
No front-end sales charges are imposed on Class A shares purchased by:
institutional investors, which may include bank trust departments and registered
investment advisers; investment advisers, consultants or financial planners who
place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; clients of
investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; institutional clients of broker-dealers, including
retirement and deferred compensation plans and the trusts used to fund these
plans, which place trades through an omnibus account maintained with a Fund by
the broker-dealer; shareholders of record on October 12, 1990 in any series of
Evergreen Investment Trust in existence on that date, and the members of their
immediate families; employees of FUNB and its affiliates, EFD and any
broker-dealer with whom EFD has entered into an agreement to sell shares of the
Funds, and members of the immediate families of such employees; and upon the
initial purchase of an Evergreen mutual fund by investors reinvesting the
proceeds from a redemption within the preceeding thirty days of shares of other
mutual funds, provided such shares were initially purchased with a front-end
sales charge or subject to a CDSC. Certain broker-dealers or other financial
institutions may impose a fee on transaction in shares of the Funds.
Class A shares may also be purchased at net asset value by qualified
and non-qualified employee benefit and savings plans which make shares of the
Funds and the other Evergreen mutual funds available to their participants, and
which: (a) are employee benefit plans having at least $1,000,000 in investable
assets, or 250 or more eligible participants; or (b) are non-qualified benefit
or profit sharing plans which are sponsored by an organization which also makes
the Evergreen mutual funds available through a qualified plan meeting the
criteria specified under (a). In connection with sales made to plans of the type
described in the preceeding sentence that are clients of broker-dealers, and
which do not qualify for sales at net asset value under the conditions set forth
in the paragraph above, payments may be made in an amount equal to .50 of 1% of
the net asset value of shares purchased. These payments are subject to reclaim
in the event shares are redeemed within 12 months after purchase.
When Class A shares are sold, EFD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EFD may also pay fees to
banks from sales charges for services performed on behalf of the bank's
customers in connection with the purchase of shares of the Funds. In addition to
compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to .25 of 1% of the
average daily value on an annual basis of Class A shares held by their clients.
Certain purchases of Class A shares may qualify for reduced sales charges in
accordance with a Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain Retirement Plans and
Reinstatement Privilege. Consult the Share Purchase Application and Statement of
Additional Information for additional information concerning these reduced sales
charges.
Class B Shares-Deferred Sales Charge Alternative. You can purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a contingent deferred sales charge ("CDSC") if you redeem shares within seven
years after purchase. Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The amount of the CDSC (expressed as a percentage
of the lesser of the current net asset value or original cost) will vary
according to the number of years from the purchase of Class B shares as set
forth below.
Year Since Purchase Contingent Deferred Sales Charge
FIRST 5%
SECOND 4%
THIRD and FOURTH 3%
FIFTH 2%
SIXTH and SEVENTH 1%
The CDSC is deducted from the amount of the redemption and is paid to EFD. The
CDSC will be waived on redemptions of shares following the death or disability
of a shareholder, to meet distribution requirements for certain qualified
retirement plans or in the case of certain redemptions made under a Fund's
Systematic Cash Withdrawal Plan. Class B shares are subject to higher
distribution and/or shareholder service fees than Class A shares for a period of
seven years (after which it is expected that they will convert to Class A
shares) . The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. See the Statement of Additional Information for further details.
Class C Shares--Level-Load Alternative. You can purchase Class C shares without
any initial sales charge and, therefore, the full amount of your investment will
be used to purchase Fund shares. However, you will pay a 1.0% CDSC if you redeem
shares during the first year after purchase. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of the Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. Shares
obtained from dividend or distribution reinvestment are not subject to the CDSC.
No contingent deferred sales charge will be imposed on Class C shares
purchased by institutional investors, and through employee benefit and savings
plans eligible for the exemption from front-end sales charges described under
"Class A Shares-Front End Sales Charge Alternative", above. Broker-dealers and
other financial intermediaries whose clients have purchased Class C shares may
receive a trailing commission equal to .75 of 1% of the average daily value of
such shares on an annual basis held by their clients more than one year from the
date of purchase. The payment of trailing commissions will commence immediately
with respect to shares eligible for exemption from the contingent deferred sales
charge normally applicable to Class C shares.
With respect to Class B Shares and Class C Shares, no CDSC will be
imposed on: (1) the portion of redemption proceeds attributable to increases in
the value of the account due to increases in the net asset value per Share, (2)
Shares acquired through reinvestment of dividends and capital gains, (3) Shares
held for more than seven years (in the case of Class B Shares) or one year (in
the case of Class C Shares) after the end of the calendar month of acquisition,
(4) accounts following the death or disability of a shareholder, or (5) minimum
required distributions to a shareholder over the age of 70 1/2 from an IRA or
other retirement plan.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading market.
General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.
In addition to the discount or commission paid to dealers, EFD will
from time to time pay to dealers additional cash or other incentives that are
conditioned upon the sale of a specified minimum dollar amount of shares of a
Fund and/or other Evergreen Mutual Funds. Such incentives will take the form of
payment for attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or its investment adviser
incurs. If such investor is an existing shareholder, a Fund may redeem shares
from an investor's account to reimburse the Fund or or its investment adviser
for any loss. In addition, such investors may be prohibited or restricted from
making further purchases in any of the Evergreen mutual funds.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value (less any
applicable CDSC for Class B or Class C shares) next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check, a Fund will
not send proceeds until it is reasonably satisfied that the check has been
collected (which may take up to 10 days). Once a redemption request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Redeeming Shares Through Your Financial Intermediary. A Fund must receive
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value (less any applicable CDSC for Class B
or C shares). Your financial intermediary is responsible for furnishing all
necessary documentation to a Fund and may charge you for this service. Certain
financial intermediaries may require that you give instructions earlier than
4:00 p.m.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street Bank and Trust Company ("State
Street") which is the registrar, transfer agent and dividend-disbursing agent
for each Fund. Stock power forms are available from your financial intermediary,
State Street, and many commercial banks. Additional documentation is required
for the sale of shares by corporations, financial intermediaries, fiduciaries
and surviving joint owners. Signature guarantees are required for all redemption
requests for shares with a value of more than $10,000 or where the redemption
proceeds are to be mailed to an address other than that shown in the account
registration. A signature guarantee must be provided by a bank or trust company
(not a Notary Public), a member firm of a domestic stock exchange or by other
financial institutions whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling the phone number on the front page of this Prospectus between the
hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each business day (i.e., any
weekday exclusive of days on which the Exchange or State Street's offices are
closed). The Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the Share Purchase Application and choose how the redemption
proceeds are to be paid. Redemption proceeds will either (i) be mailed by check
to the shareholder at the address in which the account is registered or (ii) be
wired to an account with the same registration as the shareholder's account in a
Fund at a designated commercial bank. State Street currently deducts a $5 wire
charge from all redemption proceeds wired. This charge is subject to change
without notice. A shareholder who decides later to use this service, or to
change instructions already given, should fill out a Shareholder Services Form
and send it to State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827, with such shareholder's signature guaranteed by a bank
or trust company (not a Notary Public), a member firm of a domestic stock
exchange or by other financial institutions whose guarantees are acceptable to
State Street. Shareholders should allow approximately ten days for such form to
be processed. The Funds will employ reasonable procedures to verify that
telephone requests are genuine. These procedures include requiring some form of
personal identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The redemption of shares is a taxable transaction for Federal tax
purposes. Under unusual circumstances, a Fund may suspend redemptions or
postpone payment for up to seven days or longer, as permitted by Federal
securities law. The Funds reserve the right to close an account that through
redemption has remained below $1,000 for 30 days. Shareholders will receive
sixty days' written notice to increase the account value before the account is
closed. The Funds have elected to be governed by Rule 18f-1 under the Act
pursuant to which each Fund is obligated to redeem shares solely in cash, up to
the lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen mutual funds through your financial
intermediary, or by telephone or mail as described below. An exchange which
represents an initial investment in another Evergreen mutual fund must amount to
at least $1,000. Once an exchange request has been telephoned or mailed, it is
irrevocable and may not be modified or canceled. Exchanges will be made on the
basis of the relative net asset values of the shares exchanged next determined
after an exchange request is received. Exchanges are subject to minimum
investment and suitability requirements.
Each of the Evergreen mutual funds have different investment objectives
and policies. For complete information, a prospectus of the Fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen mutual
funds. If you redeem shares, the CDSC applicable to the Class B or Class C
shares of the Evergreen mutual fund originally purchased for cash is applied.
Also, Class B shares will continue to age following an exchange for purposes of
conversion to Class A shares and determining the amount of the applicable CDSC.
Exchanges Through Your Financial Intermediary. A Fund must receive exchange
instructions from your financial intermediary before 4:00 p.m. Eastern time for
you to receive that day's net asset value. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling the telephone number on the front of this
Prospectus. Exchange requests made after 4:00 p.m. (Eastern time) will be
processed using the net asset value determined on the next business day. During
periods of drastic economic or market changes, shareholders may experience
difficulty in effecting telephone exchanges. You should follow the procedures
outlined below for exchanges by mail if you are unable to reach State Street by
telephone. If you wish to use the telephone exchange service you should indicate
this on the Share Purchase Application. As noted above, each Fund will employ
reasonable procedures to confirm that instructions for the redemption or
exchange of shares communicated by telephone are genuine. A telephone exchange
may be refused by a Fund or State Street if it is believed advisable to do so.
Procedures for exchanging Fund shares by telephone may be modified or terminated
at any time. Written requests for exchanges should follow the same procedures
outlined for written redemption requests in the section entitled "How to Redeem
Shares", however, no signature guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, EFD or the toll-free number on the front page of this Prospectus.
Some services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically. Any applicable Class B CDSC will be
waived with respect to redemptions occurring under a Systematic Cash Withdrawal
Plan during a calendar year to the extent that such redemptions do not exceed
10% of (i) the initial value of the account plus (ii) the value, at the time of
purchase, of any subsequent investments.
Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen mutual funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Each Fund's investment adviser may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen mutual funds available to their participants.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Tax Strategic Foundation
Fund and Evergreen Small Cap Equity Income Fund for their most recent fiscal
year is set forth below. A similar discussion relating to Evergreen Utility Fund
is contained in the annual report of the Fund for the fiscal year ended December
31, 1994.
Evergreen Small Cap Equity Income Fund.
The Fund's one year performance through December 31, 1994, of -.65% on
the Class Y no-load shares compared favorably with the performance of the NASDAQ
OTC Composite Index (unreinvested) of -3.20% and the Russell 2000 Index of
- -1.82%. The Fund invests in the shares of higher yielding entrepreneurial
companies of smaller size which the Adviser believes will provide faster growth
than the U.S. economy as a whole. The average market capitalization of the
Fund's portfolio holdings on December 31, 1994, was $160 million.
[CHART]
The Fund's portfolio at year-end was composed of 64.5% common stocks,
4.2% convertible preferreds, 19.5% convertible debentures, and 11.8% in cash
equivalents. Sharp downward swings in the 1994 bond market had a deleterious
effect on the interest sensitive sectors of the equity and convertible market.
The largest sector in the portfolio was in banking where Evergreen Asset
believes there are opportunities for gains from mergers and acquisitions.
However, the short-term performance of banks, finance and other interest
sensitive issues was a drag on the performance during the year. Convertible
bonds and preferred stocks which averaged between a 20-30% weighting in the
portfolio were especially hard hit in this rising interest rate environment.
Evergreen Asset maintained the Fund's holdings because it believed the equities
underlying the convertibles represented strong potential growth values. The
positive results in the portfolio were from gains from takeovers and in health
related issues and restructured companies. The Fund also benefited from gains in
companies that provide productivity enhancing services in computerization.
Evergreen Tax Strategic Foundation Fund
The Fund's total return of its Class Y no-load shares for the fiscal
year ended December 31, 1994, was +3.44%, which compared favorably with the S&P
500 Reinvested Index at +1.31% for the same period. Since inception, the Fund's
return has been +7.12% versus the S & P 500 Reinvested Index at +1.14%.
As described in the Fund's objective, the equity portion of the Fund
focused on specific undervalued sectors (including the health care sector),
producing a return of 12.60% during 1994. And since the Fund's investment policy
seeks to minimize taxable gains, the fixed income portion (which is invested in
municipal bonds) initiated year end swaps during the bond market's decline to
offset gains realized from equity sales. This strategy is central to the concept
of the Fund which is to produce significant after-tax returns to shareholders.
Even had Evergreen Asset not done the swaps, the objective of producing tax
advantaged returns would have been realized since the municipal bond portion of
the Fund yielded high current tax-free income. The fixed income portion of the
portfolio returned -7.20% during the fiscal year, reflecting the dramatic
decline in the fixed income markets. The Federal Reserve tightened short-term
rates several times in 1994 which set off a ripple effect in worldwide bond
markets. In addition, tax loss selling drove prices dramatically lower at year
end. The Lehman Municipal Bond Index was -5.14% for 1994.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund. and
Organization. The Evergreen Small Cap Equity Income Fund is a separate series of
The Evergreen American Retirement Trust, a Massachusetts business trust
organized in 1987. Evergreen Tax Strategic Foundation Fund is a separate series
of the Evergreen Foundation Trust, a Massachusetts business trust organized in
1989. Evergreen Utility Fund is a separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Utility Fund and which provides certain
sub-administrative services to Evergreen Asset in connection with its role as
investment adviser to Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund, including providing personnel to serve as officers of
the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) all shareholders of record in one or more of the Funds for
which Evergreen Asset serves as investment adviser as of December 30, 1994, (ii)
certain institutional investors and (iii) investment advisory clients of CMG,
Evergreen Asset or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and distribution and shareholder
servicing-related expenses borne by Class A, Class B and Class C shares and the
fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission, the average annual compounded rate of return
over the period that would equate an assumed initial amount invested to the
value of the investment at the end of the period. For purposes of computing
total return, dividends and capital gains distributions paid on shares of a Fund
are assumed to have been reinvested when paid and the maximum sales charges
applicable to purchases of a Fund's shares are assumed to have been paid. Yield
is a way of showing the rate of income the Fund earns on its investments as a
percentage of the Fund's share price. The Fund's yield is calculated according
to accounting methods that are standardized by the SEC for all stock and bond
funds. Because yield accounting methods differ from the method used for other
accounting purposes, the Fund's yield may not equal its distribution rate, the
income paid to your account or the net investment income reported in the Fund's
financial statements. To calculate yield, the Fund takes the interest income it
earned from its portfolio of investments (as defined by the SEC formula) for a
30-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of the 30-day period.
This yield does not reflect gains or losses from selling securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN TAX STRATEGIC FOUNDATION FUND, EVERGREEN SMALL CAP EQUITY INCOME
FUND
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN UTILITY FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Plaza, Pittsburgh, Pennsylvania 15219
EVERGREEN UTILITY FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN TAX STRATEGIC FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN SMALL CAP INCOME EQUITY FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536116
<PAGE>
PROSPECTUS July 7, 1995
EVERGREEN(SM) SPECIALTY GROWTH AND INCOME FUNDS (Evergreen logo appears here)
EVERGREEN UTILITY FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN SMALL CAP EQUITY INCOME FUND
CLASS Y SHARES
The Evergreen Specialty Growth and Income Funds (the "Funds") are
designed to provide investors with a selection of investment alternatives
which seek to provide current income, capital appreciation or after-tax
"total return". This Prospectus provides information regarding the Class Y
shares offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A "Statement of Additional Information" for the Funds and certain
other funds in the Evergreen Group of mutual funds dated July 7, 1995 has
been filed with the Securities and Exchange Commission and is incorporated
by reference herein. The Statement of Additional Information provides
information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained
without charge by calling the Funds at (800) 235-0064. There can be no
assurance that the investment objective of any Fund will be achieved.
Investors are advised to read this Prospectus carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, ARE NOT ENDORSED OR
GUARANTEED BY FIRST UNION OR ANY SUBSIDIARIES OF FIRST UNION, AND ARE NOT
INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
FINANCIAL HIGHLIGHTS
DESCRIPTION OF THE FUNDS
Investment Objectives and Policies
Investment Practices and Restrictions
MANAGEMENT OF THE FUNDS
Investment Advisers
Sub-Adviser
Distribution Plans and Agreements
PURCHASE AND REDEMPTION OF SHARES
How to Buy Shares
How to Redeem Shares
Exchange Privilege
Shareholder Services
Effect of Banking Laws
OTHER INFORMATION
Dividends, Distributions and Taxes
Management's Discussion of Fund Performance
General Information
</TABLE>
OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN SMALL CAP EQUITY INCOME FUND is Evergreen Asset Management Corp.
("Evergreen Asset") which, with its predecessors, has served as an investment
adviser to the Evergreen Funds since 1971. Evergreen Asset is a wholly-owned
subsidiary of First Union National Bank of North Carolina ("FUNB"), which in
turn is a subsidiary of First Union Corporation, one of the ten largest bank
holding companies in the United States. The Capital Management Group of FUNB
("CMG") serves as investment adviser to EVERGREEN UTILITY FUND.
EVERGREEN UTILITY FUND (formerly First Union Utility Portfolio) seeks
high current income and moderate capital appreciation.
EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.
EVERGREEN SMALL CAP EQUITY INCOME FUND attempts to maximize the "total
return" on its portfolio of investments. The Fund invests in common and
preferred stocks, securities convertible into or exchangeable for common stocks
and fixed income securities. In attempting to achieve its objective, the Fund
invests primarily in companies with total market capitalization of less than
$500 million.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.
2
<PAGE>
EXPENSE INFORMATION
The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Fund. For further
information see "Purchase and Redemption of Shares".
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Sales Charge on Dividend Reinvestments None
Contingent Deferred Sales Charge None
Redemption Fee None
Exchange Fee (only applies after 4 exchanges per
year) $ 5.00
</TABLE>
The following table shows for the Fund the estimated annual operating
expenses (as a percentage of average net assets) attributable to Class Y Shares,
together with examples of the cumulative effect of such expenses on a
hypothetical $1,000 investment for the periods specified assuming (i) a 5%
annual return and (ii) redemption at the end of each period.
EVERGREEN UTILITY FUND (A)
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .50%
After 1 Year $ 8
Administrative Fees .06%
After 3 Years $ 24
12b-1 Fees --
After 5 Years $ 41
Other Expenses .18%
After 10 Years $ 92
Total .74%
</TABLE>
EVERGREEN TAX STRATEGIC FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees .875%
After 1 Year $ 15
12b-1 Fees --
After 3 Years $ 47
Other Expenses (after reimbursement)* .625%
After 5 Years $ 82
After 10 Years $ 179
Total 1.500%
</TABLE>
EVERGREEN SMALL CAP EQUITY INCOME FUND
<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Advisory Fees 1.00%
After 1 Year $ 15
12b-1 Fees --
After 3 Years $ 47
Other Expenses (after reimbursement)* .50%
After 5 Years $ 82
After 10 Years $ 179
Total 1.50%
</TABLE>
3
<PAGE>
(a) Estimated annual operating expenses reflect the combination of First Union
Utility Portfolio and ABT Utility Income Fund.
*Reflects agreements by Evergreen Asset to limit aggregate operating expenses
(including the Advisory Fees, but excluding interest, taxes, brokerage
commissions, Rule 12b-1 distribution fees and shareholder servicing fees and
extraordinary expenses) of EVERGREEN SMALL CAP EQUITY INCOME FUND and EVERGREEN
TAX STRATEGIC FOUNDATION FUND to 1.50% of average net assets until net assets
reach $15 million. Absent such agreements, the estimated annual operating
expenses for each Fund would be 2.50% of average net assets.
From time to time each Fund's investment adviser may, at its discretion,
reduce or waive its fees or reimburse the Funds for certain of their expenses in
order to reduce their expense ratios. Each Fund's investment adviser may cease
these voluntary waivers and reimbursements at any time.
The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the year ended December 31, 1994. Such amounts have been
restated to reflect current fee arrangements. THE EXAMPLES SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR ANNUAL RETURN. ACTUAL
EXPENSES AND ANNUAL RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN. For a more
complete description of the various costs and expenses borne by the Funds see
"Management of the Funds". As a result of asset-based sales charges, long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
4
<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter for EVERGREEN UTILITY FUND has been audited by KPMG Peat
Marwick LLP, the Fund's independent auditors, for EVERGREEN TAX STRATEGIC
FOUNDATION FUND has been audited by Price Waterhouse LLP, the Fund's independent
auditors and for EVERGREEN SMALL CAP EQUITY INCOME FUND has been audited by
Ernst & Young LLP, the Fund's independent auditors. A report of KPMG Peat
Marwick LLP, Price Waterhouse LLP, or Ernst & Young LLP, as the case may be, on
the audited information with respect to each Fund is incorporated by reference
in the Fund's Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Fund's Statement of
Additional Information.
No financial highlights are shown for Class A, B or C Shares of EVERGREEN
TAX STRATEGIC FOUNDATION FUND and EVERGREEN SMALL CAP EQUITY INCOME FUND since
these classes did not have any operations prior to December 31, 1994.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN UTILITY FUND
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994* 1994* 1994* 1994*
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.......................... $10.00 $10.00 $9.33 $9.51
Income (loss) from investment operations:
Net investment income......................................... .45 .39 .12 .37
Net realized and unrealized loss on investments............... (1.01) (1.01) (.33) (.50)
Total from investment operations............................ (.56) (.62) (.21) (.13)
Less distributions to shareholders from:
Net investment income......................................... (.44) (.38) (.11) (.37)
In excess of net investment income............................ -- -- -- (.01)(b)
Total distributions......................................... (.44) (.38) (.11) (.38)
Net asset value, end of period................................ $9.00 $9.00 $9.01 $9.00
TOTAL RETURN+................................................. (5.6%) (6.2%) (2.2%) (1.6%)
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..................... $4,190 $28,792 $128 $5,201
Ratios to average net assets:
Expenses(a)................................................. .53%++ 1.27%++ 1.94%++ .40%++
Net investment income(a).................................... 5.07%++ 4.19%++ 3.96%++ 4.93%++
Portfolio turnover rate....................................... 23% 23% 23% 23%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized. Initial sales charge or contingent deferred
sales charge is not reflected.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS Y
SHARES SHARES SHARES SHARES
JANUARY 4, JANUARY 4, SEPTEMBER 2, FEBRUARY 28,
1994 1994 1994 1994
THROUGH THROUGH THROUGH THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1994 1994 1994
<S> <C> <C> <C> <C>
Expenses............................ 1.43% 2.11% 2.78% 1.24%
Net investment income............... 4.17% 3.35% 3.12% 4.09%
</TABLE>
(b) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
5
<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
NOVEMBER 2, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $10.31 $ 10.00
Income from investment operations:
Net investment income............................................................... .27 .05
Net realized and unrealized gain on investments..................................... .08 .31
Total from investment operations.................................................. .35 .36
Less distributions to shareholders from:
Net investment income............................................................... (.27) (.05)
Net realized gains.................................................................. (.12) --
Total distributions............................................................... (.39) (.05)
Net asset value, end of period...................................................... $10.27 $ 10.31
TOTAL RETURN+....................................................................... 3.4% 3.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $10,575 $5,424
Ratios to average net assets:
Expenses(a)....................................................................... 1.49% 0%++
Net investment income(a).......................................................... 2.87% 3.65%++
Portfolio turnover rate............................................................. 245% 25%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income to average net
assets, exclusive of any applicable state expense limitations, would have
been the following:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 2, 1993
DECEMBER 31, THROUGH
1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 2.41% 3.10%
Net investment income..................................... 1.95% .54%
</TABLE>
6
<PAGE>
EVERGREEN SMALL CAP EQUITY INCOME FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
OCTOBER 1, 1993*
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period................................................ $ 10.15 $ 10.00
Income (loss) from investment operations:
Net investment income............................................................... .34 .10
Net realized and unrealized gain (loss) on investments.............................. (.41) .15
Total from investment operations.................................................. (.07) .25
Less distributions to shareholders from:
Net investment income............................................................... (.33) (.10)
Net realized gains.................................................................. (.05) --
Total distributions............................................................. (.38) (.10)
Net asset value, end of period...................................................... $ 9.70 $ 10.15
TOTAL RETURN+....................................................................... (.7%) 2.5%
RATIOS & SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)........................................... $3,613 $2,236
Ratios to average net assets:
Expenses(a)....................................................................... 1.48% 0%++
Net investment income(a).......................................................... 3.72% 4.07%++
Portfolio turnover rate............................................................. 9% 15%
</TABLE>
* Commencement of operations.
+ Total return is calculated on net asset value per share for the period
indicated and is not annualized.
++ Annualized.
(a) Net of expense waivers and reimbursements. If the Fund had borne all
expenses that were assumed or waived by the investment adviser, the
annualized ratios of expenses and net investment income (loss) to average
net assets, exclusive of any applicable state expense limitations, would
have been the following:
<TABLE>
<CAPTION>
OCTOBER 1, 1993
YEAR ENDED THROUGH
DECEMBER 31, 1994 DECEMBER 31, 1993
<S> <C> <C>
Expenses.................................................. 4.68% 4.39%
Net investment income (loss).............................. .53% (.33%)
</TABLE>
7
<PAGE>
8
23
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DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
Evergreen Small Cap Equity Income Fund
The investment objective of Evergreen Small Cap Equity Income Fund is
to achieve a return consisting of current income and capital appreciation in the
value of its shares. The emphasis on current income and capital appreciation
will be relatively equal although, over time, changes in market conditions and
the level of interest rates may cause the Fund to vary its emphasis between
these two elements in its search for the optimum return for its shareholders.
The Fund seeks to achieve its investment objective through investments in common
stocks, preferred stocks, securities convertible into or exchangeable for common
stocks and fixed income securities. Under normal conditions, the Fund will
invest at least 65% of its total assets in equity securities (including
convertible debt securities) of companies that, at the time of purchase, have
"total market capitalization" -- present market value per share multiplied by
the total number of shares outstanding -- of less than $500 million. The Fund's
investment objective is a fundamental policy.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved. The Fund may invest up to 35% of
its total assets in equity securities of companies that at the time of purchase
have a total market capitalization of $500 million or more, and in excess of
that percentage during temporary defensive periods.
The Fund's portfolio will vary over time depending upon the economic
outlook and market conditions. The composition of its portfolio will be subject
to the discretion of the Fund's investment adviser. Ordinarily, the Fund
anticipates that most of its portfolio will consist of equity securities and
convertible debt securities. A significant portion of the equity investments,
however, will be income producing. If in the judgment of the Fund's investment
adviser a defensive position is appropriate, the Fund may take a defensive
position and invest without limit in debt securities or government securities or
hold its assets in cash or cash equivalents. The quality standards for debt
securities include: Obligations of banks and commercial paper rated no lower
than P-2 by Moody's Investor's Service ("Moody's"), A-2 by Standard and Poor's
Ratings Group ("S&P") or having a comparable rating from another nationally
recognized statistical rating organization ("SRO"); and non-convertible debt
securities rated no lower than Baa by Moody's or BBB by S&P. Securities rated
Baa or BBB may have speculative characteristics.
The Fund may invest in real estate investment trusts ("Reits"). Equity
Reits invest directly in real property while mortgage Reits invest in mortgages
on real property. The Fund does not intend to invest in Reits that are primarily
mortgage Reits. Equity Reits usually provide a high current yield plus the
opportunity of long-term price appreciation of real estate values. Reits may be
subject to certain risks associated with the direct ownership of real estate.
See "Investment Practices and Restrictions - Special Risk Considerations",
below.
It is anticipated that the annual portfolio turnover rate for the Fund
will not generally exceed 100%. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", and "Special Risk Considerations", below.
Evergreen Tax Strategic Foundation Fund
The investment objective of Evergreen Tax Strategic Foundation Fund is
to maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from Federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
""Investment Practices and Restrictions - "Municipal Securities" and "Taxable
Investments"). There can be no assurance that the Fund's investment objective
will be achieved. The objective is fundamental and may not be changed without
shareholder approval.
To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions. Accordingly, there can be no assurance that the
Fund's investment objective will be achieved.
The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities).
With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market value of the
Municipal Securities in the Fund's portfolio can be expected to vary inversely
to changes in prevailing interest rates. The Fund may at times emphasize the
generation of interest income by investing in high-yielding debt securities,
with short, medium or long-term maturities. Investment in medium (i.e., with
maturities from five to ten years) to long-term (i.e., with maturities over ten
years) debt securities may also be made with a view to realizing capital
appreciation when the Fund's investment adviser believes that interest rates on
such investments may decline, thereby increasing their market value.
In general, the Fund will invest in Municipal Securities only if they
are determined to be of high or upper medium quality. These include bonds rated
BBB or higher by S&P or Baa by Moody's or another SRO. For a description of such
ratings see the Statement of Additional Information. The Fund may purchase
Municipal Securities which are unrated at the time of purchase, if such
securities are determined by the Fund's investment adviser to be of comparable
quality. Certain Municipal Securities (primarily variable rate demand notes) may
be entitled to the benefit of standby letters of credit or similar commitments
issued by banks and, in such instances, the Fund's investment adviser will take
into account the obligation of the bank in assessing the quality of such
security. Medium grade bonds are more susceptible to adverse economic conditions
or changing circumstances than higher grade bonds.
Interest income on certain types of bonds issued after August 7, 1986
to finance nongovernmental activities is an item of "tax-preference" subject to
the Federal alternative minimum tax for individuals and corporations. To the
extent the Fund invests in these "private activity" bonds (some of which were
formerly referred to as "industrial development" bonds), individual and
corporate shareholders, depending on their status, may be subject to the
alternative minimum tax on the part of the Fund's distributions derived from the
bonds. As a matter of fundamental policy, 80% of the Fund's investments in
Municipal Securities will be invested in Municipal Securities the interest from
which is not subject to the Federal alternative minimum tax.
It is anticipated that the annual portfolio turnover rate for the Fund
will generally not exceed 100% for the equity portion of its portfolio and 200%
for the fixed income portion. The Fund may employ certain additional investment
strategies which are discussed in "Investment Practices and Restrictions",
below.
Evergreen Utility Fund
The investment objective of Evergreen Utility Fund is to achieve a
return consisting of high current income and moderate capital appreciation. The
Fund invests primarily in a diversified portfolio of equity and debt securities
of utility companies that produce, transmit or distribute gas or electrical
energy, as well as those companies which provide communications facilities, such
as telephone and telegraph companies. As a matter of investment policy, the Fund
will invest at least 65% of the value of its total assets in utility companies
that derive 50% of their revenues from utilities or assets relating to utility
industries. In addition, the Fund may invest up to 35% of its assets in common
stock of non-utility companies. There can be no assurance that the Fund's
investment objective will be achieved.
<PAGE>
The Fund may invest in:
common and preferred stocks, bonds and convertible preferred
stocks of utility companies selected by the Fund's investment adviser
on the basis of traditional research techniques, including assessment
of earnings and dividend growth prospects and of the risk and
volatility of the individual company's industry. However, other
factors, such as product position, market share or profitability may
also be considered by the Fund's investment adviser. The Fund will only
invest its assets in debt securities rated Baa or higher by Moody's or
BBB or higher by S&P or which, if unrated, are considered to be of
comparable quality by the Fund's investment adviser;
securities which are either issued or guaranteed by the U.S.
government, its agencies or instrumentalities. These securities include
direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds; and notes, bonds and discount notes of U.S. government
agencies or instrumentaltiies such as the Farm Credit System, including
the National Bank for Cooperatives, Farm Credit Banks and Banks for
Cooperatives, Farmers Home Administration, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association, Government National Mortgage Association, Student Loan
Marketing Association, Tennessee Valley Authority, Export-Import Bank
of the United State, Commodity Credit Corporation, Federal Financing
Bank and National Credit Union Administration. Some of these securities
are supported by the full faith and credit of the U.S. government, and
others are supported only by the full faith and credit of the agency or
instrumentality;
commercial paper, including master demand notes;
American Depositary Receipts ("ADRs") of foreign companies
traded on the New York or American Stock Exchanges or the
over-the-counter market;
foreign securities (either foreign or U.S. securities traded
in foreign markets). The Fund may also invest in other obligations
denominated in foreign currencies. In making these decisions, the
Fund's investment adviser will consider such factors as the condition
and growth potential of various economies and securities markets,
currency and taxation considerations and other pertinent financial,
social, national and political factors. (See "Investment Practices and
Restrictions" - "Other Investment Policies" and "Foreign Investments".)
The Fund will not invest more than 10% of its assets in foreign
securities;
obligations, including certificates of deposit and bankers'
acceptances, of banks or savings and loan associations having at least
$1 billion in deposits and insured by the Bank Insurance Fund or the
Savings Association Mortagage Fund, including U.S. branches of foreign
banks and foreign branches of U.S. banks; and
securities of other investment companies.
Bonds rated Baa by Moody's or BBB by S&P may have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken such bonds' prospects for principal and interest payments than
higher rated bonds. However, like the higher rated bonds, these securities are
considered investment grade.
As of December 31, 1994 approximately 88% of the Fund's portfolio
consisted of equity securities. The Fund may employ certain additional
investment strategies which are discussed in "Investment Practices and
Restrictions", below.
INVESTMENT PRACTICES AND RESTRICTIONS
Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset and a member of the New York and American Stock
Exchanges, will to the extent practicable effect substantially all of the
portfolio transactions for the Evergreen Small Cap Equity Income Fund and
Evergreen Tax Strategic Foundation Fund on those exchanges. See the Statement of
Additional Information for further information regarding the brokerage
allocation practices of these Funds.
Borrowing. As a matter of fundamental policy, the Funds may not borrow money
except from banks as a temporary measure to facilitate redemption requests or
for extraordinary or emergency purposes. The proceeds from borrowings may be
used to facilitate redemption requests which might otherwise require the
untimely disposition of portfolio securities. The specific limits applicable to
borrowing by each Fund are set forth in the Statement of Additional Information.
Lending of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the total assets of the Evergreen
Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation Fund, and
15% of the value of the total assets of Evergreen Utility Fund, and must be
collateralized by cash or U.S. Government securities that are maintained at all
times in an amount equal to at least 100% of the current market value of the
securities loaned, including accrued interest. While such securities are on
loan, the borrower will pay a Fund any income accruing thereon, and the Fund may
invest the cash collateral in portfolio securities, thereby increasing its
return. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
has the right to call a loan and obtain the securities loaned at any time on
notice of not more than five business days. A Fund may pay reasonable fees in
connection with such loans.
There is the risk that when lending portfolio securities, the securities may not
be available to a Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities files for bankruptcy or becomes insolvent,
dispostion of the securities may be delayed pending court action.
Illiquid or Restricted Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities and other securities which are not readily
marketable, except that Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund may only invest up to 10% of their assets in
repurchase agreements with maturities longer than seven days. Illiquid
securities include certain restricted securities not determined by the Trustees
to be liquid, non-negotiable time deposits and repurchase agreements providing
for settlement in more than seven days after notice. Securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933, which have been
determined to be liquid, will not be considered by the Funds' investment
advisers to be illiquid or not readily marketable and, therefore, are not
subject to the aforementioned 15% limit. The inability of a Fund to dispose of
illiquid or not readily marketable investments readily or at a reasonable price
could impair the Fund's ability to raise cash for redemptions or other purposes.
The liquidity of securities purchased by a Fund which are eligible for resale
pursuant to Rule 144A will be monitored by each Fund's investment adviser on an
ongoing basis, subject to the oversight of the Trustees. In the event that such
a security is deemed to be no longer liquid, a Fund's holdings will be reviewed
to determine what action, if any, is required to ensure that the retention of
such security does not result in a Fund having more than 15% of its assets
invested in illiquid or not readily marketable securities.
Repurchase Agreements and Reverse Repurchase Agreements. The Funds may enter
into repurchase agreements may be entered into with member banks of the Federal
Reserve System, including the Custodian or primary dealers in U.S. Government
securities. A repurchase agreement is an arrangement pursuant to which a buyer
purchases a security and simultaneously agrees to resell it to the vendor at a
price that results in an agreed-upon market rate of return which is effective
for the period of time (which is normally one to seven days, but may be longer)
the buyer's money is invested in the security. The arrangement results in a
fixed rate of return that is not subject to market fluctuations during the
holding period. A Fund requires continued maintenance of collateral with its
Custodian in an amount at least equal to the repurchase price (including accrued
interest). In the event a vendor defaults on its repurchase obligation, a Fund
might suffer a loss to the extent that the proceeds from the sale of the
collateral were less than the repurchase price. If the vendor becomes the
subject of bankruptcy proceedings, a Fund might be delayed in selling the
collateral. The Funds' investment advisers will review and continually monitor
the creditworthiness of each institution with which a Fund enters into a
repurchase agreement to evaluate these risks.
The Funds may borrow money by entering into a "reverse repurchase
agreement" by which a Fund may agree to sell portfolio securities to financial
institutions such as banks and broker-dealers, and to repurchase them at a
mutually agreed upon date and price, for temporary or emergency purposes. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, U.S. government securities or liquid high
grade debt obligations having a value at least equal to the repurchase price
(including accrued interest) and will subsequently monitor the account to ensure
that such equivalent value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. A Fund will not enter into
reverse repurchase agreements exceeding 5% of the value of its total assets.
Futures and Related Options. Evergreen Small Cap Equity Income Fund and
Evergreen Utility Fund may, to a limited extent, enter into financial futures
contracts, including futures contracts based on securities indices, purchase and
sell options on such futures contracts, and engage in related closing
transactions to the extent available to hedge all or a portion of its portfolio,
or as an efficient means of regulating its exposure to the equity markets. The
Funds will only use futures instruments for hedging, not speculative, purposes.
The Funds may not enter into futures contracts or related options if,
immediately thereafter, more than 30% of a Fund's total assets would be hedged
thereby or the amounts committed to margin and premiums paid for unexpired
options would exceed 5% of a Fund's total assets. These transactions include
brokerage costs and require each Fund to segregate liquid high grade debt or
cash to cover contracts which would require them to purchase securities. The
Funds may lose the expected benefit of the transactions if securities prices or
interest rates move in an unanticipated manner. In addition, if a Fund purchases
futures contract on indices of securities, their value may not fluctuate in
proportion to the value of the Fund's securities, limiting its ability to hedge
effectively.
While the Evergreen Small Cap Equity Income Fund and Evergreen Utility
Fund will enter into futures contracts only if there appears to be a liquid
secondary market for such contracts, there can be no assurance that the Funds
will be able to close out positions in a specific contract at a specific time.
Each Fund will not enter into a particular index-based futures contract unless
the Fund's investment adviser determines that a correlation exists between price
movements in the index-based futures contract and in securities in a Fund's
portfolio. Such correlation is not likely to be perfect, since each Fund's
portfolio is not likely to contain the same securities used in the index.
Evergreen Small Cap Equity Income Fund and Evergreen Utility Fund may
attempt to earn income from selling (writing) call options on futures contracts
in instances where each Fund's investment adviser believes that the long-term
investments held by the Fund which are the subjects of such contracts will
remain stable or experience a decline with respect to the U.S. dollar during the
term of the option. By selling such an option, a Fund forgoes all or part of the
appreciation potential involved in holding investments that are the subject of
the futures contract on which an option was written and may be forced to make
untimely liquidations of its investments to meet its obligations under the
option contract.
Options And Futures. Evergreen Utility Fund may deal in put and call options. A
call option gives the purchaser the right to buy, and the writer the obligation
to sell, the underlying asset at the exercise price during the option period. A
put option gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying asset at the exercise price during the option period. The
writer of a covered call owns assets that are acceptable for escrow and the
writer of a secured put invests an amount not less than the exercise price in
eligible assets to the extent that it is obligated as a writer. If a call
written by a Fund is exercised, the Fund forgoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received. In writing puts, there is a risk that a Fund may be
required to take delivery of the underlying asset at a disadvantageous price.
Municipal Securities. As noted above, Evergreen Tax Strategic Foundation Fund
may invest in Municipal Securities, which include municipal bonds, short-term
municipal notes and tax exempt commercial paper. "Municipal bonds" are debt
obligations issued to obtain funds for various public purposes that are exempt
from Federal income tax in the opinion of issuer's counsel. The two principal
classifications of municipal bonds are "general obligation" and "revenue" bonds.
General obligation bonds are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise tax or
other specific source such as from the user of the facility being financed. The
term "municipal bonds" also includes "moral obligation" issues which are
normally issued by special purpose authorities. Industrial development bonds
("IDBs") and private activity bonds ("PABs") are in most cases revenue bonds and
are not payable from the unrestricted revenues of the issuer. The credit quality
of IDBs and PABs is usually directly related to the credit standing of the
corporate user of the facilities being financed. Participation interests are
interests in municipal bonds, including IDBs and PABs, and floating and variable
rate obligations that are owned by banks. These interests carry a demand feature
permitting the holder to tender them back to the bank, which demand feature is
backed by an irrevocable letter of credit or guarantee of the bank. A put bond
is a municipal bond which gives the holder the unconditional right to sell the
bond back to the issuer at a specified price and exercise date, which is
typically well in advance of the bond's maturity date. "Short-term municipal
notes" and "tax exempt commercial paper" include tax anticipation notes, bond
anticipation notes, revenue anticipation notes and other forms of short-term
loans. Such notes are issued with a short-term maturity in anticipation of the
receipt of tax funds, the proceeds of bond placements and other revenues.
Floating Rate and Variable Rate Obligations. The Municipal Securities in which
Evergreen Tax Strategic Foundation Fund may invest also include certain variable
rate and floating rate municipal obligations with or without demand features.
These variable rate securities do not have fixed interest rates; rather, those
rates fluctuate based upon changes in specified market rates, such as the prime
rate, or are adjusted at predesignated periodic intervals. Certain of these
obligations may carry a demand feature that gives the Evergreen Tax Strategic
Foundation Fund the right to demand prepayment of the principal amount of the
security prior to its maturity date. The demand obligation may or may not be
backed by letters of credit or other guarantees of banks or other financial
institutions. Such guarantees may enhance the quality of the security. The
Evergreen Tax Strategic Foundation Fund will limit the value of its investments
in any floating or variable rate securities which are not readily marketable and
in all other not readily marketable securities to 5% or less of its total
assets.
When-Issued Securities. Evergreen Utility Fund and Evergreen Tax Strategic
Foundation Fund may purchase securities on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price and yield). The
Funds generally would not pay for such securities or start earning interest on
them until they are received. However, when the Funds purchase securities on a
when-issued basis, they assume the risks of ownership at the time of purchase,
not at the time of receipt. Failure of the issuer to deliver a security
purchased by a Fund on a when-issued basis may result in the Fund incurring a
loss or missing an opportunity to make an alternative investment. Commitments to
purchase when-issued securities will not exceed 25% of the total assets of
Evergreen Tax Strategic Foundation Fund and 20% of the total assets of Evergreen
Utility Fund. The Evergreen Tax Strategic Foundation Fund will maintain cash or
high quality short-term securities in a segregated account with its custodian in
an amount equal to such commitments. The Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.
Stand-by Commitments. Evergreen Tax Strategic Foundation Fund may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in a Fund incurring
a loss or missing an opportunity to make an alternative investment. The
Evergreen Tax Strategic Foundation Fund expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the Evergreen Tax Strategic Foundation Fund's portfolio will not exceed 10% of
the value of the Fund's total assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality short-term
securities in a segregated account with its Custodian in an amount equal to such
commitments. The Fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Fund's investment adviser, present
minimal credit risks.
Taxable Fixed Income Investments. Evergreen Tax Strategic Foundation Fund may,
however, temporarily invest up to 20% of its total assets in taxable securities
under any one or more of the following circumstances: (a) pending investment of
proceeds of sale of Fund shares or of portfolio securities, (b) pending
settlement of purchases of portfolio securities, and (c) to maintain liquidity
for the purpose of meeting anticipated redemptions. In addition, the Fund may
temporarily invest more than 20% of its total assets in taxable securities for
defensive purposes. The Fund may invest for defensive purposes during periods
when the Fund's assets available for investment exceed the available Municipal
Securities that meet the Fund's quality and other investment criteria. Taxable
securities in which the Fund may invest on a short-term basis include
obligations of the U.S. government, its agencies or instrumentalities, including
repurchase agreements with banks or securities dealers involving such
securities; time deposits maturing in not more than seven days; other debt
securities rated within the two highest ratings assigned by any major rating
service; commercial paper rated in the highest grade by Moody's, S&P or any SRO;
and certificates of deposit issued by United States branches of U.S. banks with
assets of $1 billion or more.
Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.
Special Risk Considerations
Investments in the Utility Industry. In view of the Evergreen Utility Fund's
investment concentration, investors should be aware of certain risks associated
with the utility industry in general. These include difficulties in earning
adequate returns on investments despite frequent rate increases, restrictions on
operations and increased costs and delays due to governmental regulations,
building or construction delays, environmental regulations, difficulty of the
capital markets in absorbing utility debt and equity securities, and
difficulties in obtaining fuel at reasonable prices.
The Fund's investment adviser believes that the risks of investing in
utility securities can be reduced. The professional portfolio management
techniques used by the Fund's investment adviser to attempt to reduce these
risks include credit research. The Fund's investment adviser will perform its
own credit analysis, in addition to using recognized rating agencies and other
sources, including discussions with an issuer's management, the judgment of
other investment analysts, and its own informed judgment. The credit analysis of
the Fund's investment adviser will consider an issuer's financial soundness, its
responsiveness to changes in interest rates and business conditions, its
anticipated cash flow, interest or dividend coverage, and earnings. In
evaluating an issuer, the Fund's investment adviser places special emphasis on
the estimated current value of the issuer's assets rather than historical costs.
Bond prices move inversely to interest rates, i.e., as interest rates
decline the value of the bonds increase and vice versa. The longer the maturity
of a bond, the greater the exposure to market price fluctuations. The same
market factors are reflected in the share price or net asset value of bond funds
which will vary with interest rates. There is no limit on the maturity of the
fixed income securities purchased by the Fund.
Investment in Foreign Securities. Investments by Evergreen Utility Fund in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of a Fund denominated in such currency will
also fall. The performance of a Fund will be measured in U.S. dollars.
Securities markets of foreign countries generally are not subject to
the same degree of regulation as the U.S. markets and may be more volatile and
less liquid. Lack of liquidity may affect a Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, a Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by a Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, a Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.
ADRs and European Depositary Receipts ("EDRs") and other securities
convertible into securities of foreign issuers may not necessarily be
denominated in the same currency as the securities into which they may be
converted but rather in the currency of the market in which they are traded.
ADRs are receipts typically issued by an American bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe by banks or depositories which evidence a
similar ownership arrangement. Generally ADRs, in registered form, are designed
for use in United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.
Investments Related to Real Estate. Risks associated with investment in
securities of companies in the real estate industry include: declines in the
value of real estate, risks related to general and local economic conditions,
overbuilding and increased competition, increases in property taxes and
operating expenses, changes in zoning laws, casualty or condemnation losses,
variations in rental income, changes in neighborhood values, the appeal of
properties to tenants and increase in interest rates. In addition, equity real
estate investment trusts may be affected by changes in the value of the
underlying property owned by the trusts, while mortgage real estate investment
trusts may be affected by the quality of credit extended. Equity and mortgage
real estate investment trusts are dependent upon management skills, may not be
diversified and are subject to the risks of financing projects. Such trusts are
also subject to heavy cash flow dependency, defaults by borrowers, self
liquidation and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code (the "Code") and to maintain exemption
from the Investment Company Act of 1940, as amended (the "1940 Act"). In the
event an issuer of debt securities collateralized by real estate defaulted, it
is conceivable that a Fund could end up holding the underlying real estate.
Investments in Small Companies. Investment in the securities of small or newly
formed companies involves greater risk than investments in larger, more
established issuers. The Evergreen Small Cap Equity Income Fund may invest to a
large extent in small or newly formed companies which have limited product
lines, markets or financial resources and may lack management depth. The
securities of such companies may have limited marketability and may be subject
to more abrupt or erratic movements in price than securities of larger, more
established companies, or equity securities in general.
Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of the Trust
under which it has been established ("Trustees"). Evergreen Asset Management
Corp. ( "Evergreen Asset") has been retained by Evergreen Tax Strategic
Foundation Fund and Evergreen Small Cap Equity Income Fund as investment
adviser. Evergreen Asset succeeded on June 30, 1994 to the advisory business of
the same name, but under different ownership, which was organized in 1971.
Evergreen Asset, with its predecessors, has served as investment adviser to the
Evergreen mutual funds since 1971. Evergreen Asset is a wholly-owned subsidiary
of First Union National Bank of North Carolina ("FUNB"). The address of
Evergreen Asset is 2500 Westchester Avenue, Purchase, New York 10577. FUNB is a
subsidiary of First Union Corporation ("First Union"), one of the ten largest
bank holding companies in the United States. Stephen A. Lieber and Nola Maddox
Falcone serve as the chief investment officers of Evergreen Asset and, along
with Theodore J. Israel, Jr., were the owners of Evergreen Asset's predecessor
and the former general partners of Lieber & Company, which, as described below,
provides certain subadvisory services to Evergreen Asset in connection with its
duties as investment adviser to the Funds. The Capital Management Group of FUNB
("CMG") serves as investment adviser to Evergreen Utility Fund.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $77.9 billion in consolidated assets as of March 31, 1995.
First Union and its subsidiaries provide a broad range of financial services to
individuals and businesses through offices in 36 states. The Capital Management
Group of FUNB manages or otherwise oversees the investment of over $36 billion
in assets belonging to a wide range of clients, including all the series of
Evergreen Investment Trust (formerly known as First Union Funds). First Union
Brokerage Services, Inc., a wholly-owned subsidiary of FUNB, is a registered
broker-dealer that is principally engaged in providing retail brokerage services
consistent with its federal banking authorizations. First Union Capital Markets
Corp., a wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
As investment adviser to Evergreen Tax Strategic Foundation Fund and
Evergreen Small Cap Equity Income Fund, Evergreen Asset manages each Fund's
investments, provides various administrative services and supervises each Fund's
daily business affairs, subject to the authority of the Trustees. Evergreen
Asset is entitled to receive from Evergreen Small Cap Equity Income Fund a fee
equal to 1% of average daily net assets on an annual basis on the first $750
million in assets, .9 of 1% of average daily net assets on an annual basis on
the next $250 million in assets, and .8 of 1% of average daily net assets on an
annual basis on assets over $1 billion. With respect to Evergreen Tax Strategic
Foundation Fund, Evergreen Asset is entitled to receive a fee equal to .875 of
1% of average daily net assets on an annual basis on the first $750 million in
assets, .75 of 1% of average daily net assets on an annual basis on the next
$250 million in assets, and .7 of 1% of average daily net assets on an annual
basis on assets over $1 billion. The fee paid by Evergreen Small Cap Equity
Income Fund and Evergreen Tax Strategic Foundation Fund is higher than the rate
paid by most other investment companies. Until Evergreen Small Cap Equity Income
Fund and Evergreen Tax Strategic Foundation Fund reach $15 million in net
assets, Evergreen Asset has agreed to reimburse such Funds to the extent that
their aggregate operating expenses exceed 1.50% of its average daily net assets
for any fiscal year. Any reimbursement pursuant to the foregoing will be
exclusive of interest, taxes, brokerage commissions, Rule 12b-1 distribution
fees and shareholder servicing fees and extraordinary expenses. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Foundation
Fund for the fiscal year ended December 31, 1994 are set forth in the section
entitled "Financial Highlights". The above-mentioned expense ratios for
Evergreen Small Cap Equity Income Fund and Evergreen Tax Strategic Retirement
Fund are net of voluntary advisory fee waivers and expense reimbursements by
Evergreen Asset which may, at its discretion, revise or cease this voluntary
waiver at any time.
CMG manages investments and supervises the daily business affairs of
Evergreen Utility Fund and, as compensation therefor, is entitled to receive an
annual fee equal to .50 of 1% of average daily net assets of the Fund. The total
expenses as a percentage of average daily net assets on an annual basis of
Evergreen Utility Fund for the fiscal year ended December 31, 1994 are set forth
in the section entitled "Financial Highlights". Evergreen Asset serves as
administrator to Evergreen Utility Fund and is entitled to receive a fee based
on the average daily net assets of the Fund at a rate based on the total assets
of the mutual funds administered by Evergreen Asset for which CMG or Evergreen
Asset also serve as investment adviser, calculated in accordance with the
following schedule: .050% of the first $7 billion; .035% on the next $3 billion;
.030% on the next $5 billion; .020% on the next $10 billion; .015% on the next
$5 billion; and .010% on assets in excess of $30 billion. Furman Selz
Incorporated, the parent of Evergreen Funds Distributor, Inc., distributor for
the Evergreen group of mutual funds, serves as sub-administrator to Evergreen
Utility Fund and is entitled to receive a fee from the Fund calculated on the
average daily net assets of the Fund at a rate based on the total assets of the
mutual funds administered by Evergreen Asset for which CMG or Evergreen Asset
also serve as investment adviser, calculated in accordance with the following
schedule: .0100% of the first $7 billion; .0075% on the next $3 billion; .0050%
on the next $15 billion; and .0040% on assets in excess of $25 billion. The
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset serve as investment adviser as of March 31, 1995 were
approximately $8 billion.
The portfolio manager for Evergreen Small Cap Equity Income Fund is
Nola Maddox Falcone, C.F.A., who is President and Co-Chief Executive Officer of
Evergreen Asset. Ms. Falcone has served as the principal manager of the Fund
since 1993. Stephen A. Lieber, who is Chairman and Co-Chief Executive Officer of
Evergreen Asset, together with James T. Colby, III, serve as the portfolio
managers for Evergreen Tax Strategic Foundation Fund. Mr. Lieber makes all
allocation decisions and investment decisions for the equity portion of the
portfolio and Mr. Colby manages the fixed-income portion. Mr. Colby has served
as a fixed-income portfolio manager with Evergreen Asset since 1992. Prior to
that, Mr. Colby served as Vice President-Investments at American Express Company
from 1987 to 1992. Both have served as the Fund's principal managers since
inception. The portfolio manager of Evergreen Utility Fund since its inception
is H. Bradley Donovan, who is an Assistant Vice President of FUNB, and has been
with First Union since 1992. Prior to that, Mr. Donovan had served as a
portfolio manager and equity analyst at The Bank of Boston.
SUB-ADVISER
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provides that Lieber & Company's research department and staff
will furnish Evergreen Asset with information, investment recommendations,
advice and assistance, and will be generally available for consultation on the
portfolios of Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap
Equity Income Fund. Lieber & Company will be reimbursed by Evergreen Asset in
connection with the rendering of services on the basis of the direct and
indirect costs of performing such services. There is no additional charge to
Evergreen Tax Strategic Foundation Fund and Evergreen Small Cap Equity Income
Fund for the services provided by Lieber & Company. The address of Lieber &
Company is 2500 Westchester Avenue, Purchase, New York 10577. Lieber & Company
is an indirect, wholly-owned, subsidiary of First Union.
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PURCHASE AND REDEMPTION OF SHARES
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HOW TO BUY SHARES
Eligible investors may purchase Fund shares at net asset value by mail
or wire as described below. The Funds impose no sales charges on Class Y shares.
Class Y shares are the only class of shares offered by this Prospectus and are
only available to (i) all shareholders of record in one or more of the Evergreen
Funds as of December 30, 1994, (ii) certain institutional investors and (iii)
investment advisory clients of the Adviser and its affiliates. The minimum
initial investment is $1,000, which may be waived in certain situations. There
is no minimum for subsequent investments. Investors may make subsequent
investments by establishing a Systematic Investment Plan or a Telephone
Investment Plan.
Purchases by Mail or Wire. Each investor must complete the enclosed Share
Purchase Application and mail it together with a check made payable to the Fund
whose shares are being purchased, to State Street Bank and Trust Company ("State
Street") at P.O. Box 9021, Boston, Massachusetts 02205-9827. Checks not drawn on
U.S. banks will be subject to foreign collection which will delay an investor's
investment date and will be subject to processing fees.
When making subsequent investments, an investor should either enclose
the return remittance portion of the statement, or indicate on the face of the
check, the name of the Fund in which an investment is to be made, the exact
title of the account, the address, and the Fund account number. Purchase
requests should not be sent to a Fund in New York. If they are, the Fund must
forward them to State Street, and the request will not be effective until State
Street receives them.
Initial investments may also be made by wire by (i) calling State
Street at 800-423-2615 for an account number and (ii) instructing your bank,
which may charge a fee, to wire federal funds to State Street, as follows: State
Street Bank and Trust Company, ABA No.0110-0002-8, Attn: Custodian and
Shareholder Services. The wire must include references to the Fund in which an
investment is being made, account registration, and the account number. A
completed Application must also be sent to State Street indicating that the
shares have been purchased by wire, giving the date the wire was sent and
referencing the account number. Subsequent wire investments may be made by
existing shareholders by following the instructions outlined above. It is not
necessary, however, for existing shareholders to call for another account
number.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
market value. Non-dollar denominated securities will be valued as of the close
of the Exchange at the closing price of such securities in their principal
trading market.
Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Adviser incurs. If such
investor is an existing shareholder, a Fund may redeem shares from an investor's
account to reimburse the Fund or the Adviser for any loss. In addition, such
investors may be prohibited or restricted from making further purchases in any
of the Evergreen Funds.
The Share Purchase Application may not be used to invest in any of the
prototype retirement plans for which the Funds are an available investment. For
information about the requirements to make such investments, including copies of
the necessary application forms, please call the telephone number set forth on
the cover page of this Prospectus. A Fund cannot accept investments specifying a
certain price or date and reserves the right to reject any specific purchase
order, including orders in connection with exchanges from the other Evergreen
Funds. Although not currently anticipated, each Fund reserves the right to
suspend the offer of shares for a period of time.
Shares of each Fund are sold at the net asset value per share next
determined after a shareholder's order is received. Investments by federal funds
wire or by check will be effective upon receipt by State Street. Qualified
institutions may telephone orders for the purchase of Fund shares. Investors may
also purchase shares through a broker/dealer, which may charge a fee for the
service.
HOW TO REDEEM SHARES
You may "redeem", i.e., sell your shares in a Fund to the Fund on any
day the Exchange is open, either directly or through your financial
intermediary. The price you will receive is the net asset value next calculated
after the Fund receives your request in proper form. Proceeds generally will be
sent to you within seven days. However, for shares recently purchased by check,
a Fund will not send proceeds until it is reasonably satisfied that the check
has been collected (which may take up to 15 days). Once a redemption request has
been telephoned or mailed, it is irrevocable and may not be modified or
canceled.
Redeeming Shares Directly by Mail or Telephone. Send a signed letter of
instruction or stock power form to State Street which is the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, State Street, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, financial intermediaries, fiduciaries and surviving joint owners.
Signature guarantees are required for all redemption requests for shares with a
value of more than $10,000 or where the redemption proceeds are to be mailed to
an address other than that shown in the account registration. A signature
guarantee must be provided by a bank or trust company (not a Notary Public), a
member firm of a domestic stock exchange or by other financial institutions
whose guarantees are acceptable to State Street.
Shareholders may withdraw amounts of $1,000 or more from their accounts
by calling State Street (800-423-2615) between the hours of 9:00 a.m. and 4:00
p.m. (Eastern time) each business day (i.e., any weekday exclusive of days on
which the New York Stock Exchange or State Street's offices are closed). The New
York Stock Exchange is closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Redemption requests made after 4:00 p.m. (Eastern time) will be processed using
the net asset value determined on the next business day. Such redemption
requests must include the shareholder's account name, as registered with a Fund,
and the account number. During periods of drastic economic or market changes,
shareholders may experience difficulty in effecting telephone redemptions.
Shareholders who are unable to reach a Fund or State Street by telephone should
follow the procedures outlined above for redemption by mail.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
indicate this on the enclosed Application and choose how the redemption proceeds
are to be paid. Redemption proceeds will either (i) be mailed by check to the
shareholder at the address in which the account is registered or (ii) be wired
to an account with the same registration as the shareholder's account in a Fund
at a designated commercial bank. State Street currently deducts a $5 wire charge
from all redemption proceeds wired. This charge is subject to change without
notice. A shareholder who decides later to use this service, or to change
instructions already given, should fill out a Shareholder Services Form and send
it to State Street Bank and Trust Company, P.O. Box 9021, Boston, Massachusetts
02205-9827, with such shareholder's signature guaranteed by a bank or trust
company (not a Notary Public), a member firm of a domestic stock exchange or by
other financial institutions whose guarantees are acceptable to State Street.
Shareholders should allow approximately ten days for such form to be processed.
The Funds will employ reasonable procedures to verify that telephone requests
are genuine. These procedures include requiring some form of personal
identification prior to acting upon instructions and tape recording of
conversations. If the Fund fails to follow such procedures, it may be liable for
any losses due to unauthorized or fraudulent instructions. The Fund shall not be
liable for following telephone instructions reasonably believed to be genuine.
Also, the Fund reserves the right to refuse a telephone redemption request, if
it is believed advisable to do so. Financial intermediaries may charge a fee for
handling telephonic requests. The telephone redemption option may be suspended
or terminated at any time without notice.
General. The sale of shares is a taxable transaction for Federal tax purposes.
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by Federal securities law. The
Funds reserve the right to close an account that through redemption has remained
below $1,000 for 30 days. Shareholders will receive 60 days' written notice to
increase the account value before the account is closed. The Funds have elected
to be governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant
to which each Fund is obligated to redeem shares solely in cash, up to the
lesser of $250,000 or 1% of a Fund's total net assets during any ninety day
period for any one shareholder. See the Statement of Additional Information for
further details.
EXCHANGE PRIVILEGE
How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Funds by telephone or mail as described
below. An exchange which represents an initial investment in another Evergreen
Fund must amount to at least $1,000. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received.
Exchanges are subject to minimum investment and suitability requirements.
Each of the Evergreen Funds have different investment objectives and
policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Each Fund imposes a
fee of $5 per exchange on shareholders who exchange in excess of four times per
calendar year. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.
Exchanges by Telephone and Mail. You may exchange shares with a value of $1,000
or more by telephone by calling State Street (800-423-2615). Exchange requests
made after 4:00 p.m. (Eastern time) will be processed using the net asset value
determined on the next business day. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach State Street by telephone. If you wish to use the
telephone exchange service you should indicate this on the Share Purchase
Application. As noted above, each Fund will employ reasonable procedures to
confirm that instructions for the redemption or exchange of shares communicated
by telephone are genuine. A telephone exchange may be refused by a Fund or State
Street if it is believed advisable to do so. Procedures for exchanging Fund
shares by telephone may be modified or terminated at any time. Written requests
for exchanges should follow the same procedures outlined for written redemption
requests in the section entitled "How to Redeem Shares", however, no signature
guarantee is required.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services. For more
information about these services or your account, contact your financial
intermediary, Evergreen Funds Distributor, Inc.("EFD"), the distributor of the
Funds, or the toll-free number on the front page of this Prospectus. Some
services are described in more detail in the Share Purchase Application.
Systematic Investment Plan. You may make monthly or quarterly investments into
an existing account automatically in amounts of not less than $25.
Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 3:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Systematic Cash Withdrawal Plan. When an account of $10,000 or more is opened or
when an existing account reaches that size, you may participate in the Fund's
Systematic Cash Withdrawal Plan by filling out the appropriate part of the Share
Purchase Application. Under this plan, you may receive (or designate a third
party to receive) a monthly or quarterly check in a stated amount of not less
than $100. Fund shares will be redeemed as necessary to meet withdrawal
payments. All participants must elect to have their dividends and capital gain
distributions reinvested automatically.
Retirement Plans. Eligible investors may invest in each Fund under the following
prototype retirement plans: (i) Individual Retirement Account (IRA); (ii)
Simplified Employee Pension (SEP) for sole proprietors, partnerships and
corporations; and (iii) Profit-Sharing and Money Purchase Pension Plans for
corporations and their employees.
Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of the
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested. If you elect to receive dividends and
distributions in cash and the U.S. Postal Service cannot deliver the checks, or
if the checks remain uncashed for six months, the checks will be reinvested into
your account at the then current net asset value.
Tax Sheltered Retirement Plans. You may open a pension and profit sharing
account in any Evergreen mutual fund (except those funds having an objective of
providing tax free income), including: (i) Individual Retirement Accounts
("IRAs") and Rollover IRAs; (ii) Simplified Employee Pension (SEP) for sole
proprietors, partnerships and corporations; and (iii) Profit-Sharing and Money
Purchase Pension Plans for corporations and their employees.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB, and CMG are subject to and in
compliance with the aforementioned laws and regulations.
Changes to applicable laws and regulations or future judicial or
administrative decisions could result in CMG or Evergreen Asset being prevented
from continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If CMG or Evergreen Asset were prevented from continuing
to provide the services called for under the investment advisory agreement, it
is expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
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OTHER INFORMATION
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DIVIDENDS, DISTRIBUTIONS AND TAXES
It is the policy of each Fund to distribute to shareholders its
investment company taxable and tax-exempt income, if any, quarterly and any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code. Dividends
and distributions generally are taxable in the year in which they are paid,
except any dividends paid in January that were declared in the previous calendar
quarter may be treated as paid in December of the previous year. Income
dividends and capital gain distributions are automatically reinvested in
additional shares of the Fund making the distribution at the net asset value per
share at the close of business on the record date, unless the shareholder has
made a written request for payment in cash.
Each Fund has qualified and intends to continue to qualify to be
treated as a regulated investment company under the Code. While so qualified, it
is expected that each Fund will not be required to pay any Federal income taxes
on that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income taxes and any state or local taxes on the dividends and distributions
they receive from a Fund whether such dividends and distributions are made in
cash or in additional shares. Questions on how any distributions will be taxed
to the investor should be directed to the investor's own tax adviser.
Under current law, the highest Federal income tax rate applicable to
net long-term capital gains realized by individuals is 28%. The rate applicable
to corporations is 35%. Certain income from a Fund may qualify for a corporate
dividends-received deduction of 70%. Following the end of each calendar year,
every shareholder of the Fund will be sent applicable tax information and
information regarding the dividends and capital gain distributions made during
the calendar year.
A Fund may be subject to foreign withholding taxes which would reduce
the yield on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. Shareholders of a Fund who are
subject to United States Federal income tax may be entitled, subject to certain
rules and limitations, to claim a Federal income tax credit or deduction for
foreign income taxes paid by a Fund. See the Statement of Additional Information
for additional details. A Fund's transactions in options, futures and forward
contracts may be subject to special tax rules. These rules can affect the
amount, timing and characteristics of distributions to shareholders.
Each Fund is required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and
redemptions) paid to certain shareholders. In order to avoid this backup
withholding requirement, you must certify on the Share Purchase Application, or
on a separate form supplied by State Street, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within 90 days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.
The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus,and is subject
to change by legislative or administrative action. As the foregoing discussion
is for general information only, you should also review the discussion of
"Additional Tax Information" contained in the Statement of Additional
Information. In addition, you should consult your own tax adviser as to the tax
consequences of investments in the Funds, including the application of state and
local taxes which may be different from Federal income tax consequences
described above.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Evergreen Tax Strategic Foundation
Fund and Evergreen Small Cap Equity Income Fund for their most recent fiscal
year is set forth below. A similar discussion relating to Evergreen Utility Fund
is contained in the annual report of the Fund for the fiscal year ended December
31, 1994.
Evergreen Small Cap Equity Income Fund.
The Fund's one year performance through December 31, 1994, of -.65% on
the Class Y no-load shares compared favorably with the performance of the NASDAQ
OTC Composite Index (unreinvested) of -3.20% and the Russell 2000 Index of
- -1.82%. The Fund invests in the shares of higher yielding entrepreneurial
companies of smaller size which the Adviser believes will provide faster growth
than the U.S. economy as a whole. The average market capitalization of the
Fund's portfolio holdings on December 31, 1994, was $160 million.
The Fund's portfolio at year-end was composed of 64.5% common stocks,
4.2% convertible preferreds, 19.5% convertible debentures, and 11.8% in cash
equivalents. Sharp downward swings in the 1994 bond market had a deleterious
effect on the interest sensitive sectors of the equity and convertible market.
The largest sector in the portfolio was in banking where Evergreen Asset
believes there are opportunities for gains from mergers and acquisitions.
However, the short-term performance of banks, finance and other interest
sensitive issues was a drag on the performance during the year. Convertible
bonds and preferred stocks which averaged between a 20-30% weighting in the
portfolio were especially hard hit in this rising interest rate environment.
Evergreen Assetr maintained the Fund's holdings because it believed the equities
underlying the convertibles represented strong potential growth values. The
positive results in the portfolio were from gains from takeovers and in health
related issues and restructured companies. The Fund also benefitted from gains
in companies that provide productivity enhancing services in computerization.
[CHART]
Evergreen Tax Strategic Foundation Fund
The Fund's total return of its Class Y no-load shares for the fiscal
year ended December 31, 1994, was +3.44%, which compared favorably with the S&P
500 Reinvested Index at +1.31% for the same period. Since inception, the Fund's
return has been +7.12% versus the S & P 500 Reinvested Index at +1.14%.
As described in the Fund's objective, the equity portion of the Fund
focused on specific undervalued sectors (including the health care sector),
producing a return of 12.60% during 1994. And since the Fund's investment policy
seeks to minimize taxable gains, the fixed income portion (which is invested in
municipal bonds) initiated year end swaps during the bond market's decline to
offset gains realized from equity sales. This strategy is central to the concept
of the Fund which is to produce significant after-tax returns to shareholders.
Even had Evergreen Asset not done the swaps, the objective of producing tax
advantaged returns would have been realized since the municipal bond portion of
the Fund yielded high current tax-free income. The fixed income portion of the
portfolio returned -7.20% during the fiscal year, reflecting the dramatic
decline in the fixed income markets. The Federal Reserve tightened short-term
rates several times in 1994 which set off a ripple effect in worldwide bond
markets. In addition, tax loss selling drove prices dramatically lower at year
end. The Lehman Municipal Bond Index was -5.14% for 1994.
[CHART]
GENERAL INFORMATION
Portfolio Transactions. Consistent with the Rules of Fair Practice of the
National Association of Securities Dealers, Inc., and subject to seeking best
price and execution, a Fund may consider sales of its shares as a factor in the
selection of dealers to enter into portfolio transactions with the Fund. and
Organization. The Evergreen Small Cap Equity Income Fund is a separate series of
The Evergreen American Retirement Trust, a Massachusetts business trust
organized in 1987. Evergreen Tax Strategic Foundation Fund is a separate series
of the Evergreen Foundation Trust, a Massachusetts business trust organized in
1989. Evergreen Utility Fund is a separate investment series of Evergreen
Investment Trust (formerly First Union Funds), which is a Massachusetts business
trust organized in 1984. The Funds do not intend to hold annual shareholder
meetings; shareholder meetings will be held only when required by applicable
law. Shareholders have available certain procedures for the removal of Trustees.
A shareholder in each class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund, and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional classes of shares for any existing or future series. If an
additional series or class were established in a Fund, each share of the series
or class would normally be entitled to one vote for all purposes. Generally,
shares of each series and class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and class in
substantially the same manner. Class A, B, C and Y shares have identical voting,
dividend, liquidation and other rights, except that each class bears, to the
extent applicable, its own distribution, shareholder service and transfer agency
expenses as well as any other expenses applicable only to a specific class. Each
class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.
Registrar, Transfer Agent and Dividend-Disbursing Agent. State Street Bank and
Trust Company, P.O. Box 9021, Boston, Massachusetts 02205-9827 acts as each
Fund's registrar, transfer agent and dividend-disbursing agent for a fee based
upon the number of shareholder accounts maintained for the Funds. The transfer
agency fee with respect to the Class B shares will be higher than the transfer
agency fee with respect to the Class A shares or Class C shares.
Principal Underwriter. EFD, a wholly-owned subsidiary of Furman Selz
Incorporated, located 237 Park Avenue, New York, New York 10017, is the
principal underwriter of the Funds. Furman Selz Incorporated, also acts as
sub-administrator to Evergreen Utility Fund and which provides certain
sub-administrative services to Evergreen Asset in connection with its role as
investment adviser to Evergreen Small Cap Equity Income Fund and Evergreen Tax
Strategic Foundation Fund, including providing personnel to serve as officers of
the Funds.
Other Classes of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) all shareholders of record in one or more of the
Funds for which Evergreen Asset serves as investment adviser as of December 30,
1994, (ii) certain institutional investors and (iii) investment advisory clients
of CMG, Evergreen Asset or their affiliates. The dividends payable with respect
to Class A, Class B and Class C shares will be less than those payable with
respect to Class Y shares due to the distribution and distribution and
shareholder servicing-related expenses borne by Class A, Class B and Class C
shares and the fact that such expenses are not borne by Class Y shares.
Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders, Total return and yield are computed separately
for Class A, Class B and Class C shares. A Fund's total return for each such
period is computed by finding, through the use of a formula prescribed by the
Securities and Exchange Commission, the average annual compounded rate of return
over the period that would equate an assumed initial amount invested to the
value of the investment at the end of the period. For purposes of computing
total return, dividends and capital gains distributions paid on shares of a Fund
are assumed to have been reinvested when paid and the maximum sales charges
applicable to purchases of a Fund's shares are assumed to have been paid. Yield
is a way of showing the rate of income the Fund earns on its investments as a
percentage of the Fund's share price. The Fund's yield is calculated according
to accounting methods that are standardized by the SEC for all stock and bond
funds. Because yield accounting methods differ from the method used for other
accounting purposes, the Fund's yield may not equal its distribution rate, the
income paid to your account or the net investment income reported in the Fund's
financial statements. To calculate yield, the Fund takes the interest income it
earned from its portfolio of investments (as defined by the SEC formula) for a
30-day period (net of expenses), divides it by the average number of shares
entitled to receive dividends, and expresses the result as an annualized
percentage rate based on the Fund's share price at the end of the 30-day period.
This yield does not reflect gains or losses from selling securities
Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the Commission under the Securities Act. Copies of the Registration
Statements may be obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN TAX STRATEGIC FOUNDATION FUND, EVERGREEN SMALL CAP EQUITY INCOME
FUND
Capital Management Group of First Union National Bank, 201 South College
Street, Charlotte, North Carolina 28288
EVERGREEN UTILITY FUND
CUSTODIAN & TRANSFER AGENT
State Street Bank & Trust Company, Box 9021, Boston, Massachusetts 02205-9827
LEGAL COUNSEL
Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C. 20036
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP, One Mellon Bank Plaza, Pittsburgh, Pennsylvania 15219
EVERGREEN UTILITY FUND
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036
EVERGREEN TAX STRATEGIC FOUNDATION FUND
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116-5072
EVERGREEN SMALL CAP INCOME EQUITY FUND
DISTRIBUTOR
Evergreen Funds Distributor, Inc., 237 Park Avenue, New York, New York 10017
536124
