EVERGREEN FOUNDATION TRUST, 485BPOS, 1997-05-01

EVERGREEN FOUNDATION TRUST
485BPOS, 1997-05-01

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Registration No. 33-31803
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------

FORM N-1A

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /x/

Pre-Effective Amendment No. / /

Post-Effective Amendment No. 12 /x/

and/or

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /x/

Amendment No. 13 /x/
(Check appropriate box or boxes)
--------------------

THE EVERGREEN FOUNDATION TRUST
(Exact name of registrant as specified in charter)

2500 Westchester Avenue
Purchase, N.Y. 10577
(Address of Principal Executive Offices)

(Registrant's Telephone Number, Including Area Code (914) 694-2020)

James P. Wallin, Esq.
Evergreen Asset Management Corp.
2500 Westchester Avenue, Purchase, N.Y. 10577
(Name and address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box)
/x/ Immediately upon filing pursuant to paragraph (b) or
/ / on (date) pursuant to paragraph (b) or
/ / 60 days after filing pursuant to paragraph (a)(i) or
/ / on (date) pursuant to paragraph (a)(i) or
/ / 75 days after filing pursuant to paragraph (a)(ii) or
/ / on (date) pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / on (date) pursuant to paragraph (a)(i)

Registrant has registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant's Rule 24f-2 notice for its fiscal year ended December 31, 1996, was
filed on or about February 28, 1997.

<PAGE>

CROSS REFERENCE SHEET
(as required by Rule 481(a))

N-1A Item No. Location in Prospectus(es)

Part A

Item 1. Cover Page Cover Page

Item 2. Synopsis and Fee Table Overview of the Fund(s);
Expense Information

Item 3. Condensed Financial Information Financial Highlights

Item 4. General Description of Registrant Cover Page; Description of
the Funds; Other
Information

Item 5. Management of the Fund Management of the Fund(s);
Other Information

Item 6. Capital Stock and Other Securities Dividends, Distributions and
Taxes; Other Information

Item 7. Purchase of Securities Being Offered Purchase and Redemption of
Shares

Item 8. Redemption or Repurchase Purchase and Redemption of
Shares

Item 9. Pending Legal Proceedings Not Applicable

Location in Statement of
Part B Additional Information

Item 10. Cover Page Cover Page

Item 11. Table of Contents Table of Contents

Item 12. General Information and History Not Applicable

Item 13. Investment Objectives and Policies Investment Objectives and
Policies;Investment
Restrictions; Non-
Fundamental Operating
Policies; and Certain
Risk Considerations

Item 14. Management of the Fund Management

Item 15. Control Persons and Principal Management
Holders of Securities

Item 16. Investment Advisory and Other Services Investment Advisers;
Purchase of Shares

Item 17. Brokerage Allocation Allocation of Brokerage

Item 18. Capital Stock and Other Securities Purchase of Shares

Item 19. Purchase, Redemption and Pricing of Distribution Plans; Purchase
Securities Being Offered of Shares; Net Asset Value

Item 20. Tax Status Additional Tax Information

Item 21. Underwriters Distribution Plans; Purchase
of Shares

Item 22. Calculation of Performance Data Performance Information

Item 23. Financial Statements Financial Statements

Part C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.

<PAGE>
******************************************************************************

<PAGE>
PROSPECTUS May 1, 1997
EVERGREEN(SM) BALANCED FUNDS (Evergreen Logo Goes Here)
EVERGREEN FOUNDATION FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN BALANCED FUND
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
The Evergreen Balanced Funds (the "Funds") are designed to provide
investors with a selection of investment alternatives which seek to provide
current income, capital appreciation or after-tax "total return". This
Prospectus provides information regarding the Class A, Class B and Class C
shares offered by the Funds. Each Fund is, or is a series of, an open-end,
diversified, management investment company. This Prospectus sets forth
concise information about the Funds that a prospective investor should know
before investing. The address of the Funds is 2500 Westchester Avenue,
Purchase, New York 10577.
A Statement of Additional Information for the Funds and certain
other funds in the Evergreen Keystone group of mutual funds dated May 1,
1997 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Evergreen Keystone Funds at (800)
343-2898. There can be no assurance that the investment objective of any
Fund will be achieved. Investors are advised to read this Prospectus
carefully.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.

<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS.................................. 2
EXPENSE INFORMATION.................................... 3
FINANCIAL HIGHLIGHTS................................... 5
DESCRIPTION OF THE FUNDS............................... 10
Investment Objectives and Policies............ 10
Investment Practices and Restrictions......... 13
Special Risk Considerations................... 18
MANAGEMENT OF THE FUNDS................................ 19
Investment Advisers........................... 19
Portfolio Managers............................ 20
Sub-Adviser................................... 20
Administrator................................. 20
Sub-Administrator............................. 21
Distribution Plans and Agreements............. 21
PURCHASE AND REDEMPTION OF SHARES...................... 22
How to Buy Shares............................. 22
How to Redeem Shares.......................... 25
Exchange Privilege............................ 26
Shareholder Services.......................... 27
Effect of Banking Laws........................ 28
OTHER INFORMATION...................................... 28
Dividends, Distributions and Taxes............ 28
General Information........................... 29
</TABLE>

OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN TAX STRATEGIC FOUNDATION FUND is Evergreen Asset
Management Corp. which, with its predecessors, has served as an investment
adviser to the Evergreen mutual funds since 1971. Evergreen Asset Management
Corp. is a wholly-owned subsidiary of First Union National Bank of North
Carolina, which in turn is a subsidiary of First Union Corporation, the sixth
largest bank holding company in the United States. The Capital Management Group
of First Union National Bank of North Carolina serves as investment adviser to
EVERGREEN BALANCED FUND.
EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed-income securities.
EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.
EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.
EVERGREEN BALANCED FUND seeks to produce long-term total return through
capital appreciation, dividends and interest income.
THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE 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
Funds. 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 year and 0% after the sixth 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 seven years after purchase (years
seven through ten, therefore, reflect Class A expenses).
EVERGREEN FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .80% .80% .80%
After 1 Year $ 60 $ 70 $ 30 $ 20 $ 20
12b-1 Fees* .25% 0.75% 0.75%
After 3 Years $ 85 $ 92 $ 62 $ 62 $ 62
Shareholder Service
Fees -- .25% .25% After 5 Years $ 112 $ 127 $ 107 $ 107 $ 107
After 10 Years $ 190 $ 203 $ 232 $ 203 $ 232
Other Expenses .19% .19% .19%
Total 1.24% 1.99% 1.99%
</TABLE>

EVERGREEN TAX STRATEGIC FOUNDATION FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .875% .875% .875%
After 1 Year $ 65 $ 76 $ 36 $ 26 $ 26
12b-1 Fees* .250% .750% .750%
After 3 Years $ 102 $ 110 $ 80 $ 80 $ 80
Shareholder Service
Fees -- .250% .250% After 5 Years $ 141 $ 156 $ 136 $ 136 $ 136
After 10 Years $ 250 $ 262 $ 290 $ 262 $ 290
Other Expenses .685% .685% .685%
Total 1.810% 2.560% 2.560%
</TABLE>

<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming No
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .75% .75% .75%
After 1 Year $ 60 $ 71 $ 31 $ 21 $ 21
12b-1 Fees* .25% .75% .75%
After 3 Years $ 88 $ 95 $ 65 $ 65 $ 65
Shareholder Service
Fees -- .25% .25% After 5 Years $ 117 $ 132 $ 112 $ 112 $ 112
After 10 Years $ 201 $ 213 $ 242 $ 213 $ 242
Other Expenses .34% .34% .34%
Total 1.34% 2.09% 2.09%
</TABLE>

EVERGREEN BALANCED FUND
<TABLE>
<CAPTION>
EXAMPLES
Assuming Redemption at End of Assuming no
ANNUAL OPERATING EXPENSES Period Redemption
Class A Class B Class C Class A Class B Class C Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees .50% .50% .50%
After 1 Year $ 56 $ 67 $ 27 $ 17 $ 17
12b-1 Fees* .25% .75% .75%
After 3 Years $ 75 $ 82 $ 52 $ 52 $ 52
Shareholder Service
Fees -- .25% .25% After 5 Years $ 94 $ 109 $ 89 $ 89 $ 89
After 10 Years $ 152 $ 165 $ 194 $ 165 $ 194
Other Expenses .14% .14% .14%
Total .89% 1.64% 1.64%
</TABLE>

The purpose of the foregoing table is to assist an investor in
understanding the various costs and expenses that an investor in each Class of
Shares of the Funds will bear directly or indirectly. The amounts set forth both
in the tables and in the examples are estimated amounts based on the experience
of each Fund for the most recent fiscal period. Such expenses have been restated
to reflect current fee arrangements. From time to time, each Fund's investment
adviser may, at its descretion, reduce or waive its fees or reimburse the Funds
for certain of their expenses in order to reduce their expense ratios. Each
Fund's investment adviser may cease these waivers and reimbursements at any
time. THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR ANNUAL RETURN. ACTUAL EXPENSES AND ANNUAL RETURN MAY BE GREATER OR
LESS THAN THOSE SHOWN. For a more complete description of the various costs and
expenses borne by the Funds see "Management of the Funds". As a result of
asset-based sales charges, long-term shareholders may pay more than the economic
equivalent of the maximum front-end charges permitted under the rules of the
National Association of Securities Dealers, Inc.
*Class A Shares can pay up to .75 of 1% of average net assets as a 12b-1 Fee.
For the forseeable future, the Class A 12b-1 Fees will be limited to .25 of 1%
of average net assets. For Class B and Class C Shares of 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.
4

<PAGE>
FINANCIAL HIGHLIGHTS
The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter has been audited by the respective Fund's independent
auditors as follows: EVERGREEN TAX STRATEGIC FOUNDATION FUND for the year ended
December 31, 1996 by KPMG Peat Marwick LLP and for each of the years in the
two-year period ended December 31, 1995 and the period from November 2, 1993
through December 31, 1993 by other auditors. EVERGREEN AMERICAN RETIREMENT FUND
for the year ended December 31, 1996 by KPMG Peat Marwick LLP, and for each of
the years in the four-year period ended December 31, 1995 by other auditors; for
EVERGREEN BALANCED FUND by KPMG Peat Marwick LLP; for EVERGREEN FOUNDATION FUND
for the year ended December 31, 1996 by KPMG Peat Marwick LLP, and for each of
the years in the four-year period ended December 31, 1995 by other auditors; and
for A report of KPMG Peat Marwick LLP or other auditors, as the case may be, on
the audited information with respect to each Fund is incorporated by reference
in the Funds' Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Funds' Statement of
Additional Information.
Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.
EVERGREEN FOUNDATION FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
JANUARY 3, JANUARY 3, JANUARY 3,
YEAR 1995* YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period...................... $15.12 $12.24 $15.07 $12.24 $15.07 $12.24
Income from investment
operations:
Net investment income....... .50 .44 .40 .36 .40 .34
Net realized and unrealized
gain on investments....... 1.16 3.14 1.15 3.09 1.14 3.09
Total from investment
operations............ 1.66 3.58 1.55 3.45 1.54 3.43
Less distributions to
shareholders from:
Net investment income....... (.50) (.47) (.40) (.39) (.40) (.37)
Net realized gain on
investments............... (.15) (.23) (.15) (.23) (.15) (.23)
Total distributions..... (.65) (.70) (.55) (.62) (.55) (.60)
Net asset value, end of
period...................... $16.13 $15.12 $16.07 $15.07 $16.06 $15.07
TOTAL RETURN+................. 11.3% 29.7% 10.5% 28.7% 10.4% 28.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(in millions)............. $206 $107 $570 $296 $27 $11
Ratios to average net assets:
Expenses.................... 1.24% 1.33%++# 1.99% 2.07%++ 1.99% 2.23%++#
Net investment income....... 3.39% 3.73%++# 2.64% 2.99%++ 2.64% 2.83%++#
Portfolio turnover rate....... 10% 28% 10% 28% 10% 28%
Average commission rate paid
per share................... $.0649 N/A $.0649 N/A $.0649 N/A
</TABLE>

* Commencement of class operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income to average net assets would
have been the following:
<TABLE>
<CAPTION>
JANUARY 3, 1995*
THROUGH
DECEMBER 31, 1995
CLASS A CLASS C
SHARES SHARES
<S> <C> <C>
Expenses............................................................ 1.34% 2.37%
Net investment income............................................... 3.72% 2.69%
</TABLE>

<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
JANUARY 17, JANUARY 6, MARCH 3,
YEAR 1995* YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period...................... $12.20 $10.44 $12.19 $10.31 $12.19 $10.69
Income from investment
operations:
Net investment income....... .27 .29 .19 .22 .18 .22
Net realized and unrealized
gain on investments....... 1.59 2.24 1.59 2.37 1.58 1.99
Total from investment
operations............ 1.86 2.53 1.78 2.59 1.76 2.21
Less distributions to
shareholders from:
Net investment income....... (.28) (.31) (.20) (.25) (.20) (.25)
Net realized gain on
investments............... (.28) (.46) (.28) (.46) (.28) (.46)
Total distributions..... (.56) (.77) (.48) (.71) (.48) (.71)
Net asset value, end of
period...................... $13.50 $12.20 $13.49 $12.19 $13.47 $12.19
TOTAL RETURN**................ 15.4% 24.8% 14.7% 25.6% 14.5% 21.2%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)............. $ 11,166 $2,702 $ 28,007 $6,559 $4,108 $496
Ratios to average net assets
#:
Expenses.................... 1.52% 1.75%+ 2.27% 2.50%+ 2.25% 2.50%+
Net investment income....... 2.39% 2.79%+ 1.64% 2.03%+ 1.64% 2.07%+
Portfolio turnover rate....... 88% 110% 88% 110% 88% 110%
Average commission rate paid
per share................... $.0648 N/A $.0648 N/A $.0648 N/A
</TABLE>

* Commencement of class operations.
** Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
+ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) to average net assets, exclusive
of any applicable state expense limitations, would have been the following:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
JANUARY 17, JANUARY 6, MARCH 3,
YEAR 1995* YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Expenses.................... 1.76% 5.02% 2.51% 3.65% 2.48% 18.91%
Net investment income
(loss).................... 2.15% (.48%) 1.40% .88% 1.41% (14.34%)
</TABLE>

<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS A, B AND C SHARES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
JANUARY 3, JANUARY 3, JANUARY 3,
YEAR 1995* YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period...................... $12.82 $10.65 $12.80 $10.65 $12.81 $10.65
Income from investment
operations:
Net investment income....... .45 .41 .36 .35 .36 .36
Net realized and unrealized
gain on investments....... 1.12 2.22 1.09 2.20 1.11 2.19
Total from investment
operations............ 1.57 2.63 1.45 2.55 1.47 2.55
Less distributions to
shareholders from:
Net investment income....... (.42) (.46) (.34) (.40) (.34) (.39)
Net realized gain on
investments............... (.11) -- (.11) -- (.11) --
Total distributions..... (.53) (.46) (.45) (.40) (.45) (.39)
Net asset value, end of
period...................... $13.86 $12.82 $13.80 $12.80 $13.83 $12.81
TOTAL RETURN**................ 12.5% 24.9% 11.5% 24.1% 11.6% 24.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted)........... $ 11,116 $1,335 $ 57,622 $4,839 $1,487 $110
Ratios to average net assets:
Expenses #.................. 1.30% 1.37%+ 2.06% 2.12%+ 2.05% 2.10%+
Net investment income #..... 3.53% 3.73%+ 2.79% 2.97%+ 2.80% 2.96%+
Portfolio turnover rate....... 16% 49% 16% 49% 16% 49%
Average commission rate paid
per share................... $.0619 N/A $.0619 N/A $.0619 N/A
</TABLE>

* Commencement of class operations.
** Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
+ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of operating expenses and net investment income (loss) to average net assets,
exclusive of any applicable state expense limitations, would have been the
following:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
JANUARY 3, JANUARY 3, JANUARY 3,
YEAR 1995* YEAR 1995* YEAR 1995*
ENDED THROUGH ENDED THROUGH ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Expenses...................... 1.33% 10.96% 2.09% 4.20% 2.08% 103.52%
Net investment income
(loss)...................... 3.50% (5.86%) 2.76% .89% 2.77% (98.46%)
</TABLE>

<PAGE>
EVERGREEN BALANCED FUND -- CLASS A AND B SHARES
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES
JUNE 10,
1991*
YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 1991 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period... $13.12 $11.17 $12.07 $11.41 $11.02 $10.00 $13.13 $11.18 $12.08
Income (loss) from
investment operations:
Net investment
income.............. .54 .51 .43 .42 .42 .30 .43 .42 .36
Net realized and
unrealized gain
(loss) on
investments......... .94 2.40 (.71) .75 .43 1.08 .95 2.40 (.71)
Total from
investment
operations........ 1.48 2.91 (.28) 1.17 .85 1.38 1.38 2.82 (.35)
Less distributions to
shareholders from:
Net investment
income.............. (.54) (.50) (.43) (.42) (.42) (.35) (.44) (.41) (.36)
Net realized gain on
investments......... (1.11) (.46) (.19) (.09) (.04) (.01) (1.11) (.46) (.19)
In excess of net
investment income... -- -- -- -- -- -- -- -- --
Total
distributions..... (1.65) (.96) (.62) (.51) (.46) (.36) (1.55) (.87) (.55)
Net asset value, end of
period................ $12.95 $13.12 $11.17 $12.07 $11.41 $11.02 $12.96 $13.13 $11.18
TOTAL RETURN+........... 11.4% 26.5% (2.4%) 10.4% 7.9% 11.8% 10.6% 25.6% (3.0%)
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of
period
(000's omitted)....... $43,169 $41,849 $41,010 $35,032 $17,408 $334 $109,591 $108,983 $100,052
Ratios to average net
assets:
Expenses.............. .89% .88% .89% .91% .91% .92%++ 1.64% 1.62% 1.48%
Net investment
income.............. 3.95% 4.05% 3.69% 3.61% 3.93% 4.38%++ 3.19% 3.30% 3.12%
Portfolio turnover
rate.................. 34% 37% 35% 19% 12% 19% 34% 37% 35%
Average commission rate
paid per share........ $.0593 N/A N/A N/A N/A N/A 0.0593 N/A N/A
<CAPTION>

CLASS B SHARES
JANUARY 26,
1993*
THROUGH
DECEMBER 31,
1993
<S> <C>
PER SHARE DATA:
Net asset value,
beginning of period... $11.54
Income (loss) from
investment operations:
Net investment
income.............. .34
Net realized and
unrealized gain
(loss) on
investments......... .65
Total from
investment
operations........ .99
Less distributions to
shareholders from:
Net investment
income.............. (.34)
Net realized gain on
investments......... (.09)
In excess of net
investment income... (.02)
Total
distributions..... (.45)
Net asset value, end of
period................ $12.08
TOTAL RETURN+........... 8.7%
RATIOS &
SUPPLEMENTAL DATA:
Net assets, end of
period
(000's omitted)....... $65,475
Ratios to average net
assets:
Expenses.............. 1.41%++
Net investment
income.............. 3.09%++
Portfolio turnover
rate.................. 19%
Average commission rate
paid per share........ N/A
</TABLE>

<PAGE>
EVERGREEN BALANCED FUND -- CLASS C SHARES
<TABLE>
<CAPTION>
CLASS C SHARES
SEPTEMBER 2,
1994*
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period................................................ $13.11 $11.17 $12.00
Income (loss) from investment operations:
Net investment income............................................................. .40 .41 .18
Net realized and unrealized gain (loss) on investments............................ .93 2.40 (.61)
Total from investment operations................................................ 1.33 2.81 (.43)
Less distributions to shareholders from:
Net investment income............................................................. (.45) (.41) (.21)
Net realized gain on investments.................................................. (1.11) (.46) (.19)
Total distributions............................................................. (1.56) (.87) (.40)
Net asset value, end of period...................................................... $12.88 $13.11 $11.17
TOTAL RETURN+....................................................................... 10.2% 25.5% (3.6%)
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)........................................... $355 $300 $195
Ratios to average net assets:
Expenses.......................................................................... 1.65% 1.62% 1.64%++
Net investment income............................................................. 3.19% 3.31% 3.23%++
Portfolio turnover rate............................................................. 34% 37% 35%
Average commission rate paid per share.............................................. $.0593 N/A N/A
</TABLE>

<PAGE>
DESCRIPTION OF THE FUNDS

Each Fund's investment objective is fundamental and may not be changed
without shareholder approval.

In addition to the investment policies detailed below, each Fund may
employ certain additional investment strategies which are discussed in
"Investment Practices and Restrictions" below. There can be no assurance that
any Fund's investment objective will be achieved.

INVESTMENT OBJECTIVES AND POLICIES

EVERGREEN FOUNDATION FUND

The investment objectives of EVERGREEN FOUNDATION FUND, in order of
priority, are reasonable income, conservation of capital and capital
appreciation. The Fund seeks to achieve these objectives by investing in a
combination of common stocks, preferred stocks, securities convertible into or
exchangeable for common stocks, corporate and U.S. government debt obligations,
and short-term debt instruments, such as commercial paper. The Fund's common
stock investments will include those which (at the time of purchase) pay
dividends and in the view of the Fund's investment adviser have potential for
capital enhancement.

The Fund may make investments in securities regardless of whether or not
such securities are traded on a national securities exchange. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions.

The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that at least 25% of its net
assets will consist of fixed income securities. The balance will be invested in
equity securities (including securities convertible into equity securities).

In selecting fixed income securities for the Fund's portfolio, emphasis
will be placed on issues expected to fluctuate little in value other than as a
result of changes in prevailing interest rates. The market 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 Investor's
Service ("Moody's"), A-2 by Standard and Poor's Ratings Service, a division of
McGraw-Hill Companies, Inc. ("S&P").

3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.

<PAGE>
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's). For a description of such ratings see the Statement of Additional
Information.

Certain obligations may be entitled to the benefit of standby letters of
credit or similar commitments issued by banks and, in such instances, the Fund's
investment adviser will take into account the obligation of the bank in
assessing the quality of such security.

EVERGREEN TAX STRATEGIC FOUNDATION FUND

The investment objective of EVERGREEN TAX STRATEGIC FOUNDATION FUND is to
maximize the after-tax "total return" on its portfolio of investments. Total
return consists of current income and capital appreciation in the value of its
shares. The Fund seeks to achieve this objective by investing in common stocks,
preferred stocks and securities convertible into or exchangeable for common
stocks. It will also invest in debt obligations issued by states and possessions
of the United States and by the District of Columbia, and their political
subdivisions and duly constituted authorities, the interest from which is exempt
from Federal income tax. Such securities are generally known as Municipal
Securities. The Fund may also invest in taxable debt securities. (See
"Investment Practices and Restrictions -- Municipal Securities, and Taxable
Fixed-Income Investments" below.)

To the extent that the Fund seeks capital appreciation, it expects that
its investments will provide growth over the long-term. Investments, however,
may be made on occasion for the purpose of short-term capital appreciation if
the Fund believes that such investments will benefit its shareholders. The Fund
may make investments in securities regardless of whether or not such securities
are traded on a national securities exchange. The value of portfolio securities
and their yields are expected to fluctuate over time because of varying general
economic and market conditions.

The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities). As of
December 31, 1994, 1995 and 1996, approximately 54%, 52% and 52%, respectively,
of the Fund's portfolio consisted of investments in Municipal Securities.

With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring issues expected to fluctuate little in
value, except with changes in prevailing interest rates. The market 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 any other nationally recognized
statistical rating organization ("SRO"). The Fund may purchase Municipal
Securities which are unrated at the time of purchase, if such securities are
determined by the Fund's investment adviser to be of comparable quality. 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. For a description of such ratings see the
Statement of Additional Information.

Interest income on certain types of bonds issued after August 7, 1986 to
finance nongovernmental activities is an item of "tax-preference" subject to the
Federal alternative minimum tax for individuals and corporations. To the extent
the Fund invests in these "private activity" bonds (some of which were formerly
referred to as "industrial development" bonds), individual and corporate
shareholders, depending on their status, may be subject to the alternative
minimum tax on the part of the Fund's distributions derived from the bonds. As a
matter of

<PAGE>
fundamental policy, 80% of the Fund's investments in Municipal Securities will
be invested in Municipal Securities, the interest from which is not subject to
the Federal alternative minimum tax.

EVERGREEN AMERICAN RETIREMENT FUND

The investment objectives of EVERGREEN AMERICAN RETIREMENT FUND in order
of priority are conservation of capital, reasonable income and capital growth.
The Fund offers a structured investment approach designed specifically for
retirees and persons contemplating retirement which may also be appropriate for
the qualified retirement plans of smaller companies.

The Fund will invest in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital enhancement. Ordinarily, the Fund
anticipates that approximately 50% of its portfolio will consist of equity
securities (including securities convertible into equity securities) and 50% of
fixed income securities. The Fund's investment adviser may vary the amount
invested in each type of security in response to changing market conditions to
take advantage of relative undervaluation in either the stock or bond markets.
The Fund will, however, not make an additional investment in equity securities
if more than 75% of its total assets at the time the investment is made would
include investments in equity securities. Generally, approximately half of the
equity portion of the Fund's portfolio will be invested in common stocks which
the Fund's investment adviser believes will yield current income and have
potential for long-term capital growth and half in bonds and preferred stocks
convertible into such common stock. As of December 31, 1994, 1995 and 1996,
approximately 74%, 66% and 59%, respectively, of the Fund's portfolio consisted
of equity securities.

With respect to the fixed income portion of the Fund's portfolio,
emphasis will be placed on acquiring non-speculative issues expected to
fluctuate little in value, except with changes in prevailing interest rates. The
market value of the debt obligations in the Fund's portfolio can be expected to
vary inversely to changes in prevailing interest rates. The Fund may at times
emphasize the generation of interest income by investing in high-yielding debt
securities, with short and medium to long-term maturities. Investment in medium
(i.e., with maturities from five to ten years) to long-term (i.e., with
maturities over ten years) debt securities may also be made with a view to
realizing capital appreciation when the Fund's investment adviser believes that
interest rates on such investments may decline, thereby increasing their market
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.

EVERGREEN BALANCED FUND

The investment objective of the EVERGREEN BALANCED FUND is to achieve a
long-term total return through capital appreciation, dividends and interest
income. The Fund invests in common and preferred stocks for growth and fixed
income securities to provide a stable income flow.

The percentage of the Fund's assets invested in common and preferred
stocks will vary from time to time in accordance with changing economic and
market conditions. It is anticipated that over the long term the Fund's
portfolio will average 60% in common and preferred stocks and 40% in bonds.
However, normally the Fund's asset allocation will range between 40-75% in
common and preferred stocks, 25-50% 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. As of
December 31, 1994, 1995 and 1996, approximately 55%, 60% and 54%, respectively,
of the Fund's portfolio consisted of equity securities.

<PAGE>
The Fund invests in common, preferred and convertible preferred stocks
and bonds of U.S. companies with a minimum of $100 million in market
capitalization and which are listed on major stock exchanges or traded
over-the-counter. The criteria for such investment selection include a company's
financial strength (such as cash flow and low debt-to-equity ratio), earnings
growth and price in relation to current earnings, dividends and book value to
identify growth opportunities. The Fund may also invest in American Depositary
Receipts ("ADRs") of foreign companies which are traded on the New York or
American Stock Exchanges or the over-the-counter market.

The fixed income portion of the Fund's portfolio may be invested in
corporate bonds (including convertible bonds) which are rated A or higher by S&P
or Moody's or any other SRO, or which, if unrated, are considered to be of
comparable quality by the Fund's investment adviser. For a description of such
ratings see the Statement of Additional Information. Bonds are selected based
upon the outlook for interest rates and their 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 States, Commodity Credit Corporation, Federal
Financing Bank and National Credit Union Administration. Some of these
securities are supported by the full faith and credit of the U.S. government,
and others are supported only by the credit of the agency or instrumentality.

INVESTMENT PRACTICES AND RESTRICTIONS

Defensive Investments. The Funds may invest without limitation in high quality
money market instruments, such as notes, certificates of deposit or bankers'
acceptances, or U.S. government securities if, in the opinion of the Funds'
investment advisers, market conditions warrant a temporary defensive investment
strategy.

Portfolio Turnover And Brokerage. It is anticipated that the annual portfolio
turnover rate for the EVERGREEN BALANCED FUND will generally not exceed 100%,
and that the annual portfolio turnover rate for the EVERGREEN FOUNDATION FUND,
EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND
will generally not exceed 100% for the equity portion of their portfolio and
200% for the fixed income portion. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The portfolio
turnover rate experienced by a Fund directly affects brokerage commissions and
other transaction costs which the Fund must pay. A high rate of portfolio
turnover will increase such costs. It is contemplated that Lieber & Company, an
affiliate of Evergreen Asset Management Corp. and a member of the New York and
American Stock Exchanges, will to the extent practicable effect substantially
all of the portfolio transactions for the EVERGREEN FOUNDATION FUND, EVERGREEN
TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND on those
exchanges. See the Statement of Additional Information for further information
regarding the brokerage allocation practices of the Funds.

Borrowing. As a matter of fundamental policy the Funds, except EVERGREEN
AMERICAN RETIREMENT FUND, may not borrow money except 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. In addition to borrowing for temporary or emergency purposes,
EVERGREEN AMERICAN RETIREMENT FUND may borrow for purposes of leverage. The
specific limits applicable to borrowing by each Fund are set forth in the
Statement of Additional Information.

Lending Of Portfolio Securities. In order to generate income and to offset
expenses, the Funds may lend portfolio securities to brokers, dealers and other
financial institutions. The Funds' investment advisers will monitor the
creditworthiness of such borrowers. Loans of securities by the Funds, if and
when made, may not exceed 30% of the value of the total assets of the EVERGREEN
FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN
RETIREMENT FUND, and 5% of the value of the total assets of EVERGREEN BALANCED
FUND, and must be collateralized by cash or U.S. government securities that are
maintained at all times in an amount equal to at least 100% of the current
market value of the securities loaned, including accrued interest. While such
securities are on loan, the borrower will pay a Fund any income accruing
thereon, and the Fund may

<PAGE>
invest the cash collateral in portfolio securities, thereby increasing its
return. Any gain or loss in the market price of the loaned securities which
occurs during the term of the loan would affect a Fund and its investors. A Fund
has the right to call a loan and obtain the securities loaned at any time on
notice of not more than five business days. A Fund may pay reasonable fees in
connection with such loans.

There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and the Fund may, therefore,
lose the opportunity to sell the securities at a desirable price. In addition,
in the event that a borrower of securities files for bankruptcy or becomes
insolvent, dispostion of the securities may be delayed pending court action.

Short Sales. EVERGREEN AMERICAN RETIREMENT FUND, EVERGREEN BALANCED FUND and
EVERGREEN FOUNDATION may, as a defensive strategy, make short sales of
securities. A short sale occurs when a seller sells a security and makes
delivery to the buyer by borrowing the security. Short sales of a security are
generally made in cases where the seller expects the market value of the
security to decline. To complete a short sale, the seller must replace the
security borrowed by purchasing it at the market price at the time of
replacement, or by delivering securities from the seller's own position to the
lender. In the event the market value of a security sold short were to increase,
the seller would realize a loss to the extent that the cost of purchasing the
security for delivery to the lender were greater than the proceeds from the
short sale. In the event a short sale is completed by delivery of securities to
the lender from the seller's own position, the seller would forgo any gain that
would otherwise be realized on such securities. The EVERGREEN AMERICAN
RETIREMENT FUND 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 FOUNDATION FUND, EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND may invest up
to 15% of their net assets, and EVERGREEN BALANCED FUND may invest up to 10% of
its net assets in illiquid securities and other securities which are not readily
marketable. EVERGREEN TAX STRATEGIC FOUNDATION FUND may only invest up to 10% of
its net assets in repurchase agreements with maturities longer than seven days.
Illiquid securities include certain restricted securities 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, as
amended, which have been determined to be liquid, will not be considered by the
Funds' investment advisers to be illiquid or not readily marketable and,
therefore, are not subject to the aforementioned 15% or 10% limits. Risks
related to investment in these securities include the possibility that a Fund
may not be able to dispose of illiquid or not readily marketable investments
readily or at a reasonable price which could impair the Fund's ability to raise
cash for redemptions or other purposes. The liquidity of securities purchased by
a Fund which are eligible for resale pursuant to Rule 144A will be monitored by
each Fund's investment adviser on an ongoing basis, subject to the oversight of
the Trustees. In the event that such a security is deemed to be no longer
liquid, a Fund's holdings will be reviewed to determine what action, if any, is
required to ensure that the retention of such security does not result in a Fund
having more than 15% of its net assets invested in illiquid or not readily
marketable securities.

Repurchase Agreements And Reverse Repurchase Agreements. EVERGREEN TAX STRATEGIC
FOUNDATION FUND and EVERGREEN BALANCED FUND may enter into repurchase agreements
with member banks of the Federal Reserve System, including the Funds' custodian
or primary dealers in U.S. government securities. A repurchase agreement is an
arrangement pursuant to which a buyer purchases a security and simultaneously
agrees to resell it to the vendor at a price that results in an agreed-upon
market rate of return which is effective for the period of time (which is
normally one to seven days, but may be longer) the buyer's money is invested in
the security. The arrangement results in a fixed rate of return that is not
subject to market fluctuations during the holding period. A Fund requires
continued maintenance of collateral with its custodian in an amount at least
equal to the repurchase price (including accrued interest). In the event a
vendor defaults on its repurchase obligation, a Fund might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. If the vendor becomes the subject of bankruptcy proceedings, a
Fund might be delayed in selling the collateral. The Funds' investment advisers
will review and continually monitor the creditworthiness of each institution
with which a Fund enters into a repurchase agreement to evaluate these risks.

EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN BALANCED FUND may
borrow money by entering into 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

<PAGE>
in a segregated custodial account cash, U.S. government securities or liquid
high grade debt obligations having a value at least equal to the repurchase
price (including accrued interest) and will subsequently monitor the account to
ensure that such equivalent value is maintained. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the repurchase price of those securities. A Fund will not enter
into reverse repurchase agreements exceeding 5% of the value of its net assets.

Options And Futures. EVERGREEN AMERICAN RETIREMENT FUND may write covered call
options on certain portfolio securities in an attempt to earn income and realize
a higher return on its portfolio. A call option may not be written by the Fund
if afterwards securities comprising more than 15% of the market value of the
equity securities of the Fund would be subject to call options. The Fund
realizes income from the premium paid to it in exchange for writing the call
option. Once it has written a call option on a portfolio security and until the
expiration of such option, the Fund forgoes the opportunity to profit from
increases in the market price of such security in excess of the exercise price
of the call option. Should the price of the security on which a call has been
written decline, the Fund retains the risk of loss, which would be offset to the
extent the Fund has received premium income. The Fund will only write "covered"
call options traded on U.S. national securities exchanges. An option will be
deemed covered when either (i) the Fund owns the security (or securities
convertible into such security) on which the option has been written in an
amount sufficient to satisfy the obligations arising under the option, or (ii)
the Fund's custodian maintains cash or high-grade liquid debt securities
belonging to the Fund in an amount not less than the amount needed to satisfy
the Fund's obligations with respect to such options. A "closing purchase
transaction" may be entered into with respect to a call option written by a Fund
for the purpose of closing its position.

EVERGREEN BALANCED FUND may engage in options and futures transactions.
Options and futures transactions are intended to enable a Fund to manage market,
interest rate or exchange rate risk. The Fund does not use these transactions
for speculation or leverage.

EVERGREEN BALANCED FUND may attempt to hedge all or a portion of its
portfolio through the purchase of both put and call options on its portfolio
securities and listed put options on financial futures contracts for portfolio
securities. The Fund may also write covered call options on its portfolio
securities to attempt to increase its current income. The Fund will maintain its
position in securities, option rights and segregated cash subject to puts and
calls until the options are exercised, closed or have expired. An option
position may be closed out only on an exchange which provides a secondary market
for an option of the same series. The Fund may purchase listed put options on
financial futures contracts. These options will be used only to protect
portfolio securities against decreases in value resulting from market factors
such as an anticipated increase in interest rates.

All the Funds may write (i.e., sell) covered call options and EVERGREEN
BALANCED FUND may write covered put options. By writing a call option, a Fund
becomes obligated during the term of the option to deliver the securities
underlying the option upon payment of the exercise price. By writing a put
option, a Fund becomes obligated during the term of the option to purchase the
securities underlying the option at the exercise price if the option is
exercised. The Funds may also write straddles (combinations of covered puts and
calls on the same underlying security).

EVERGREEN BALANCED FUND may only write "covered" options. This means that
so long as 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 Fund receives a premium from writing a
call or put option which it retains whether or not the option is exercised. By
writing a call option, the Fund might lose the potential for gain on the
underlying security while the option is open, and by writing a put option the
Fund might become obligated to purchase the underlying securities for more than
their current market price upon exercise.

EVERGREEN BALANCED FUND may also, as previously stated, purchase futures
contracts and options thereon. A futures contract is a firm commitment by two
parties: the seller, who agrees to make delivery of the specific type of
instrument called for in the contract ("going short"), and the buyer, who agrees
to take delivery of the instrument ("going long") at a certain time in the
future. Financial futures contracts call for the delivery of particular debt
instruments issued or guaranteed by the U.S. Treasury or by specific agencies or
instrumentalities

<PAGE>
of the U.S. government. If the Fund would enter into financial futures contracts
directly to hedge its holdings of fixed income securities, it would enter into
contracts to deliver securities at an undetermined price (i.e., "go short") to
protect itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period. The Fund
would "go long" (agree to purchase securities in the future at a predetermined
price) to hedge against a decline in market interest rates.

EVERGREEN BALANCED FUND may also enter into currency and other financial
futures contracts and write options on such contracts. The Fund intends to enter
into such contracts and related options for hedging purposes. The Fund will
enter into futures on securities, currencies or index-based futures contracts in
order to hedge against changes in interest or exchange rates or securities
prices. A futures contract on securities or currencies is an agreement to buy or
sell securities or currencies during a designated month at whatever price exists
at that time. A futures contract on a securities index does not involve the
actual delivery of securities, but merely requires the payment of a cash
settlement based on changes in the securities index. The Fund does not make
payment or deliver securities upon entering into a futures contract. Instead, it
puts down a margin deposit, which is adjusted to reflect changes in the value of
the contract and which remains in effect until the contract is terminated.

The Fund may sell or purchase currency and other financial futures
contracts. When a futures contract is sold by a Fund, the profit on the contract
will tend to rise when the value of the underlying securities or currencies
declines and to fall when the value of such securities or currencies increases.
Thus, the Fund sells futures contracts in order to offset a possible decline in
the profit on the securities or currencies. If a futures contract is purchased
by the Fund, the value of the contract will tend to rise when the value of the
underlying securities or currencies increases and to fall when the value of such
securities or currencies declines.

The Fund may enter into closing purchase and sale transactions in order
to terminate a futures contract and may buy or sell put and call options for the
purpose of closing out its options positions. The Fund's ability to enter into
closing transactions depends on the development and maintenance of a liquid
secondary market. There is no assurance that a liquid secondary market will
exist for any particular contract or at any particular time. As a result, there
can be no assurance that the Fund will be able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the contract and to complete the contract according to its terms, in
which case the Fund would continue to bear market risk on the transaction.

Risk Characteristics Of Options And Futures. Although options and futures
transactions are intended to enable the Funds to manage market, exchange or
interest rate risks, these investment devices can be highly volatile, and the
Funds use of them 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 EVERGREEN BALANCED FUND uses 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' portfolio. This may cause the
financial futures contract and any related options to react to market changes
differently than the portfolio securities. In addition, the Funds' investment
advisers could be incorrect in their expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities price
movements and other economic factors. Even if the Funds' investments advisers
correctly predict 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 EVERGREEN BALANCED
FUND'S investment adviser will consider liquidity before entering into financial
futures contracts or options on financial futures contracts transactions, there
is no assurance that a liquid secondary market on an exchange will exist for any
particular financial futures contract or option on a financial futures contract
at any particular time. The EVERGREEN BALANCED FUND'S ability to establish and
close out financial futures contracts and options on financial futures 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.

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

<PAGE>
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 net assets.

When Issued And Delayed Delivery Transactions. EVERGREEN TAX STRATEGIC
FOUNDATION FUND and EVERGREEN BALANCED FUND may purchase securities on a
when-issued or delayed delivery basis. These transactions are arrangements in
which a Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause a
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date. A Fund may dispose of a commitment prior to
settlement if the Fund's investment adviser deems it appropriate to do so. In
addition, a Fund may enter into transactions to sell its purchase commitments to
third parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. A Fund may realize
short-term profits or losses upon the sale of such commitments. Commitments to
purchase when-issued securities will not exceed 25% of the net assets of
EVERGREEN TAX STRATEGIC FOUNDATION FUND and 20% of the net assets of EVERGREEN
BALANCED FUND. The Funds will maintain cash or high quality short-term
securities in a segregated account with their custodian in an amount equal to
such commitments. Neither Fund intends to purchase when-issued securities for
speculative purposes but only in furtherance of its investment objective.

Stand-By Commitments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may also acquire
"stand-by commitments" with respect to Municipal Securities held in its
portfolio. Under a stand-by commitment, a dealer agrees to purchase, at the
Fund's option, specified Municipal Securities at a specified price. Failure of
the dealer to purchase such Municipal Securities may result in the Fund
incurring a loss or missing an opportunity to make an alternative investment.
The EVERGREEN TAX STRATEGIC FOUNDATION FUND expects that stand-by commitments
generally will be available without the payment of direct or indirect
consideration. However, if necessary and advisable, the Fund may pay for
stand-by commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to such a commitment (thus
reducing the yield to maturity otherwise available for the same securities). The
total amount paid in either manner for outstanding stand-by commitments held in
the EVERGREEN TAX STRATEGIC FOUNDATION FUND'S portfolio will not exceed 10% of
the value of the Fund's net assets calculated immediately after each stand-by
commitment is acquired. The Fund will maintain cash or high quality short-term
securities in a segregated account with its custodian in an amount equal to such
commitments. The Fund will enter into stand-by commitments only with banks and
broker-dealers that, in the judgment of the Fund's investment adviser, present
minimal credit risks.

<PAGE>
Taxable Fixed-Income Investments. EVERGREEN TAX STRATEGIC FOUNDATION FUND may
temporarily invest up to 20% of its net assets in taxable securities under any
one or more of the following circumstances: (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 net assets in taxable securities for defensive purposes.
The Fund may invest for defensive purposes during periods when the Fund's assets
available for investment exceed the available Municipal Securities that meet the
Fund's quality and other investment criteria. Taxable securities in which the
Fund may invest on a short-term basis include obligations of the U.S.
government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest ratings assigned by any major rating service; commercial paper rated in
the highest grade by Moody's, S&P or any SRO; and certificates of deposit issued
by United States branches of U.S. banks with assets of $1 billion or more.

Fixed-Income Securities -- Downgrades. If any security invested in by any of the
Funds loses its rating or has its rating reduced after the Fund has purchased
it, the Fund is not required to sell or otherwise dispose of the security, but
may consider doing so.

SPECIAL RISK CONSIDERATIONS

Investment in Foreign Securities. Investments by EVERGREEN BALANCED FUND in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of the Fund denominated in such currency
will also fall. The performance of the Fund will be measured in U.S. dollars.

Securities markets of foreign countries generally are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid. Lack of liquidity may affect the Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries. In addition, the Fund may incur costs
associated with currency hedging and the conversion of foreign currency into
U.S. dollars and may be adversely affected by restrictions on the conversion or
transfer of foreign currency. Other considerations include political and social
instability, expropriation, the lack of available information, higher
transaction costs (including brokerage charges), increased custodian charges
associated with holding foreign securities and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. These
different settlement practices may cause missed purchasing opportunities and/or
the loss of interest on money market and debt investments pending further equity
or long-term debt investments. In addition, foreign securities held by the Fund
may be traded on days that the Fund does not value its portfolio securities,
such as Saturdays and customary business holidays, and, accordingly, the Fund's
net asset value may be significantly affected on days when shareholders do not
have access to the Fund.

Additionally, accounting procedures and government supervision may be
less stringent than those applicable to U.S. companies. It may also be more
difficult to enforce contractual obligations abroad than would be the case in
the United States because of differences in the legal systems. Foreign
securities may be subject to foreign taxes, which may reduce yield, and may be
less marketable than comparable U.S. securities. All these factors are
considered by each Fund's investment adviser before making any of these types of
investments.

ADRs and European Depositary Receipts ("EDRs") and other securities
convertible into securities of foreign issuers may not necessarily be
denominated in the same currency as the securities into which they may be
converted but rather in the currency of the market in which they are traded.
ADRs are receipts typically issued by an American bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe by banks or depositories which evidence a
similar ownership arrangement. Generally ADRs, in registered form, are designed
for use in United States securities markets and EDRs, in bearer form, are
designed for use in European securities markets.

<PAGE>
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 increases 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 of 1986, as amended (the
"Code") and to maintain exemption from the Investment Company Act of 1940, as
amended (the "1940 Act"). In the event an issuer of debt securities
collateralized by real estate defaulted, it is conceivable that a Fund could end
up holding the underlying real estate.

Other Investment Restrictions. Each Fund has adopted additional investment
restrictions that are set forth in the Statement of Additional Information.
Unless otherwise noted, the restrictions and policies set forth above are not
fundamental and may be changed without shareholder approval. Shareholders will
be notified of any changes in policies that are not fundamental.

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISERS

The management of each Fund is supervised by the Trustees of the Trust
under which the Fund has been established ("Trustees"). Evergreen Asset
Management Corp. ("Evergreen Asset") has been retained by EVERGREEN FOUNDATION
FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT
FUND as investment adviser. Evergreen Asset succeeded on June 30, 1994 to the
advisory business of a corporation with the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank 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"), the sixth largest bank holding company in the
United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset. The Capital Management Group of FUNB
("CMG") serves as investment adviser to EVERGREEN BALANCED FUND.

First Union is headquartered in Charlotte, North Carolina, and had $132
billion in consolidated assets as of February 28, 1997. First Union and its
subsidiaries provide a broad range of financial services to individuals and
businesses throughout the United States. CMG manages or otherwise oversees the
investment of over $45 billion in assets belonging to a wide range of clients,
including all the series of Evergreen Investment Trust and certain of the other
Evergreen mutual funds. First Union Brokerage Services, Inc., a wholly-owned
subsidiary of FUNB, is a registered broker-dealer that is principally engaged in
providing retail brokerage services consistent with its federal banking
authorizations. First Union Capital Markets Corp., a wholly-owned subsidiary of
First Union, is a registered broker-dealer principally engaged in providing,
consistent with its federal banking authorizations, private placement,
securities dealing, and underwriting services.

As investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN TAX
STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN RETIREMENT FUND, Evergreen
Asset manages each Fund's investments, provides various administrative services
and supervises each Fund's daily business affairs, subject to the authority of
the Trustees. Evergreen Asset is entitled to receive from EVERGREEN AMERICAN
RETIREMENT FUND a fee equal to .75 of 1% of average daily net assets on an
annual basis on the first $1 billion and .7 of 1% of average daily net assets on
an annual basis on assets over $1 billion; and from EVERGREEN FOUNDATION FUND
and EVERGREEN TAX STRATEGIC FOUNDATION FUND a fee equal to .875 of 1% of average
daily net assets on an annual basis on the first $750 million in assets, .75 of
1% of average daily net assets on an annual basis on the next $250 million in
assets, and .7 of 1% of average daily net assets on an annual basis on assets
over $1 billion.

CMG manages the investments and supervises the daily business affairs of
EVERGREEN BALANCED FUND and, as compensation therefor, is entitled to receive an
annual fee equal to .50 to 1% of average daily net assets of the Fund.

<PAGE>
The total expenses as a percentage of average daily net assets on an
annual basis of the Funds for the fiscal year ended December 31, 1996, are set
forth in the section entitled "Financial Highlights". Such expenses reflect all
voluntary advisory fee waivers and expense reimbursements which may be revised
or terminated at any time.

PORTFOLIO MANAGERS

Stephen A. Lieber together with James T. Colby, III have served as the
portfolio managers for EVERGREEN TAX STRATEGIC FOUNDATION FUND since its
inception. Mr. Lieber, who is Chairman and Co-Chief Executive Officer of
Evergreen Asset, makes all allocation decisions and investment decisions for the
equity portion of the portfolio and Mr. Colby manages the fixed-income portion.
Mr. Colby has served as a fixed-income portfolio manager with Evergreen Asset
since 1992. Mr. Lieber is also the portfolio manager for the EVERGREEN
FOUNDATION FUND.

The portfolio manager for EVERGREEN AMERICAN RETIREMENT FUND is Irene D.
O'Neill, C.F.A. Ms. O'Neill has served as the Fund's principal manager since its
inception, and has been associated with Evergreen Asset and its predecessor
since 1981.

R. Dean Hawes has been the portfolio manager of EVERGREEN BALANCED FUND
since its inception. Mr. Hawes, a Vice President of FUNB and the Director of
Employee Benefit Portfolio Management, joined FUNB in 1981.

SUB-ADVISER

Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company which provide that Lieber & Company's research department and staff will
furnish Evergreen Asset with information, investment recommendations, advice and
assistance, and will be generally available for consultation on the portfolios
of EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND. Lieber & Company will be reimbursed by
Evergreen Asset in connection with the rendering of services on the basis of the
direct and indirect costs of performing such services. There is no additional
charge to EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and
EVERGREEN AMERICAN RETIREMENT FUND for the services provided by Lieber &
Company. The address of Lieber & Company is 2500 Westchester Avenue, Purchase,
New York 10577. Lieber & Company is an indirect, wholly-owned, subsidiary of
First Union.

ADMINISTRATOR

Evergreen Keystone Investment Services, Inc. ("EKIS") serves as
administrator to EVERGREEN BALANCED FUND, subject to the supervision and control
of the Trustees of the Fund. As administrator EKIS provides facilities,
equipment and personnel to the EVERGREEN BALANCED FUND and is entitled to
receive an administration fee from the Fund based on the aggregate average daily
net assets of all the mutual funds for which CMG, Evergreen Asset or Keystone
Investment Management Company ("Keystone") serve as investment adviser,
calculated in accordance with the following schedule:

<TABLE>
<CAPTION>
Administration Fee
<S> <C>
0.0600% on the first $7 billion
0.0425% on the next $3 billion
0.0350% on the next $5 billion
0.0250% on the next $10 billion
0.0190% on the next $5 billion
0.0140% on assets in excess of $30 billion
</TABLE>

EKIS also provides facilities, equipment and personnel to EVERGREEN
FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN
RETIREMENT FUND on behalf of each Fund's investment adviser.

<PAGE>
SUB-ADMINISTRATOR

BISYS Fund Services ("BISYS"), an affiliate of Evergreen Keystone
Distributor, Inc. ("EKD"), distributor for the Evergreen Keystone Funds, serves
as sub-administrator to the Funds and is entitled to receive a fee from EKIS
based on the aggregate average daily net assets of all the mutual funds
administered by EKIS for which CMG, Evergreen Asset or Keystone serve as
investment adviser, calculated in accordance with the following schedule:

<TABLE>
<CAPTION>
Sub-Administration Fee
<S> <C>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion
</TABLE>

The total assets of the mutual funds administered by EKIS for which FUNB
affiliates also serve as investment advisers were approximately $29.2 billion as
of February 28, 1997.

DISTRIBUTION PLANS AND AGREEMENTS

Distribution Plans. Each Fund's Class A, Class B and Class C shares pay for the
expenses associated with the distribution of its shares according to a
distribution plan that it has adopted pursuant to Rule 12b-1 under the 1940 Act
(each a "Plan" or collectively the "Plans"). Under the Plans, each Fund may
incur distribution-related and shareholder servicing-related expenses which are
based upon a maximum annual rate as a % of each Fund's average daily net assets
attributable to the Class, as follows:

<TABLE>
<S> <C>
Class A shares 0.75%, currently limited to 0.25%
Class B shares 1.00%
Class C shares 1.00%
</TABLE>

Of the amount that each Class may pay under its respective Plan, up to
0.25% may constitute a service fee to be used to compensate organizations, which
may include each Fund's investment adviser or their affiliates, for personal
services rendered to shareholders and/or the maintenance of shareholder
accounts. The Funds may not pay any distribution or services fees during any
fiscal period in excess of the amounts set forth above.

Distribution Agreements. Each Fund has also entered into a distribution
agreement (each a "Distribution Agreement" or collectively the "Distribution
Agreements") with EKD. Pursuant to the Distribution Agreements, each Fund will
compensate EKD for its services as distributor based upon the maximum annual
rate as a % of each Fund's average daily net assets attributable to the Class,
as follows:

<TABLE>
<S> <C>
Class A shares 0.25%
Class B shares 1.00%
Class C shares 1.00%
</TABLE>

The Distribution Agreements provide that EKD will use the distribution
fee received from a Fund for payments (i) to compensate broker-dealers or other
persons for distributing shares of the Fund, including interest and principal
payments made in respect of amounts paid to broker-dealers or other persons that
have been financed (EKD may assign its rights to receive compensation under the
Plans to secure such financings), (ii) to otherwise promote the sale of shares
of the Fund, and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to the Funds' shareholders. FUNB or its affiliates
may finance the payments made by EKD to compensate broker-dealers or other
persons for distributing shares of the Fund.

Since EKD's compensation under the Distribution Agreements is not
directly tied to the expenses incurred by EKD, the amount of compensation
received by it under the Distribution Agreements during any year may be more or
less than its actual expenses and may result in a profit to EKD. Distribution
expenses incurred by EKD in one fiscal year that exceed the level of
compensation paid to EKD for that year may be paid from distribution fees
received from a Fund in subsequent fiscal years.

The Plans are in compliance with the Conduct Rules of the National
Association of Securities Dealers, Inc. which effectively limit the annual
asset-based sales charges and service fees that a mutual fund may pay on a class
of shares to an annual rate of 0.75% and 0.25%, respectively, of the average
aggregate annual net assets attributable to that class. The rules also limit the
aggregate of all front-end, deferred and asset-based sales charges imposed with
respect to a class of shares by a mutual fund that also charges a service fee to
6.25% of

<PAGE>
cumulative gross sales of shares of that class, plus interest on the unpaid
amount at the prime rate plus 1% per annum.

PURCHASE AND REDEMPTION OF SHARES

HOW TO BUY SHARES

You may purchase shares of any of the Funds through broker-dealers, banks
or other financial intermediaries, or directly through EKD. In addition, you may
purchase shares of any of the Funds by mailing to that Fund, c/o Evergreen
Keystone Service Company ("EKSC"), P.O. Box 2121, Boston, Massachusetts 02106-
2121, a completed Share Purchase Application and a check payable to the Fund.
You may also telephone 1-800-343-2898 to obtain the number of an account to
which you can wire or electronically transfer funds and then send in a completed
Share Purchase Application. The minimum initial investment is $1,000, which may
be waived in certain situations. Subsequent investments in any amount may be
made by check, by wiring Federal funds, by direct deposit or by an electronic
funds transfer.

There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. Share certificates are
not issued. See the Share Purchase Application for more information. Only Class
A, Class B and Class C shares are offered through this Prospectus (see "General
Information" -- "Other Classes of Shares").

Class A Shares-Front-End Sales Charge Alternative. You may purchase Class A
shares of each Fund at net asset value plus an initial sales charge on purchases
under $1,000,000. You may purchase $1,000,000 of Class A shares without a
front-end sales charge; however, a contingent deferred sales charge ("CDSC")
equal to the lesser of 1% of the purchase price or the redemption value will be
imposed on shares redeemed during the month of purchase and the 12- month period
following the month of purchase. The schedule of charges for Class A shares is
as follows:

Initial Sales Charge

<TABLE>
<CAPTION>
As a % of the Net As a % of the Commission to Dealer/Agent
Amount of Purchase Amount Invested Offering Price as a % of Offering Price
<S> <C> <C> <C>
Less than $ 50,000 4.99% 4.75% 4.25%
$ 50,000 - $ 99,999 4.71% 4.50% 4.25%
$ 100,000 - $ 249,999 3.90% 3.75% 3.25%
$ 250,000 - $ 499,999 2.56% 2.50% 2.00%
$ 500,000 - $ 999,999 2.04% 2.00% 1.75%
1.00% of the amount invested up
to $2,999,999;
.50% of the amount invested over
$1,000,000 or more None None $2,999,999, up to $4,999,999;
and .25% of the excess over $4,999,999
</TABLE>

No front-end sales charges are imposed on Class A shares purchased by (a)
institutional investors, which may include bank trust departments and registered
investment advisers; (b) investment advisers, consultants or financial planners
who place trades for their own accounts or the accounts of their clients and who
charge such clients a management, consulting, advisory or other fee; (c) clients
of investment advisers or financial planners who place trades for their own
accounts if the accounts are linked to the master account of such investment
advisers or financial planners on the books of the broker-dealer through whom
shares are purchased; 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; current and retired employees of FUNB and its affiliates,
EKD and any broker-dealer with whom EKD has entered into an agreement to sell
shares of the Funds, and members of the immediate families of such employees;
and upon the initial purchase of an Evergreen Keystone Fund by investors
reinvesting the proceeds from a redemption within the preceding thirty days of
shares of other mutual funds, provided such shares were initially purchased with
a front-end sales charge or subject to a CDSC. Certain broker-dealers or other
financial institutions may impose a fee on transactions in shares of the Funds.

<PAGE>
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 Keystone 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 make
the Evergreen Keystone Funds available through a qualified plan meeting the
criteria specified under (a) above. In connection with sales made to plans of
the type described in the preceding sentence that are clients of broker-dealers,
and which do not qualify for sales at net asset value under the conditions set
forth in the paragraph above, payments may be made in an amount equal to 0.50%
of the net asset value of shares purchased. These payments are subject to
reclaim in the event shares are redeemed within twelve months after purchase.

When Class A shares are sold, EKD will normally retain a portion of the
applicable sales charge and pay the balance to the broker-dealer or other
financial intermediary through whom the sale was made. EKD may also pay fees to
banks from sales charges for services performed on behalf of the customers of
such banks in connection with the purchase of shares of the Funds. In addition
to compensation paid at the time of sale, entities whose clients have purchased
Class A shares may receive a trailing commission equal to 0.25% of the average
daily value on an annual basis of Class A shares held by their clients. Certain
purchases of Class A shares may qualify for reduced sales charges in accordance
with a Fund's Concurrent Purchases, Rights of Accumulation, Letter of Intent,
Privilege for Certain Retirement Plans and Reinstatement Privilege. Consult the
Share Purchase Application for additional information concerning these reduced
sales charges.

Class B Shares -- Deferred Sales Charge Alternative. You may purchase Class B
shares at net asset value without an initial sales charge. However, you may pay
a CDSC if you redeem shares within six years after the month of purchase. The
amount of the CDSC (expressed as a percentage of the lesser of the current net
asset value or original cost) will vary according to the number of years from
the month of purchase of Class B shares as set forth below.

<TABLE>
<CAPTION>
CDSC
Redemption Timing Imposed
<S> <C>
Month of purchase and the first twelve-month period following the month of purchase............................... 5.00%
Second twelve-month period following the month of purchase........................................................ 4.00%
Third twelve-month period following the month of purchase......................................................... 3.00%
Fourth twelve-month period following the month of purchase........................................................ 3.00%
Fifth twelve-month period following the month of purchase......................................................... 2.00%
Sixth twelve-month period following the month of purchase......................................................... 1.00%
No CDSC is imposed on amounts redeemed thereafter.
</TABLE>

The CDSC is deducted from the amount of the redemption and is paid to EKD
or its predecessor. Class B shares are subject to higher distribution and/or
shareholder service fees than Class A shares for a period of seven years after
the month of purchase (after which it is expected that they will convert to
Class A shares without imposition of a front-end sales charge or exchange fee).
The higher fees mean a higher expense ratio, so Class B shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares. The maximum amount of Class B Shares that may be purchased is
$250,000.

Class C Shares -- Level-Load Alternative. Class C shares are only offered
through broker-dealers who have special distribution agreements with EKD. You
may purchase Class C shares at net asset value without any initial sales charge
and, therefore, the full amount of your investment will be used to purchase Fund
shares. However, you will pay a 1.00% CDSC, if you redeem shares during the
month of purchase and the 12-month period following the month of purchase. No
CDSC is imposed on amounts redeemed thereafter. Class C shares incur higher
distribution and/or shareholder service fees than Class A shares but, unlike
Class B shares, do not convert to any other class of shares of a Fund. The
higher fees mean a higher expense ratio, so Class C shares pay correspondingly
lower dividends and may have a lower net asset value than Class A shares. The
maximum amount of Class C shares that may be purchased is $500,000. No CDSC will
be imposed on Class C shares purchased by institutional investors, and through
employee benefit and savings plans eligible for the exemption from front-end
sales charges described under "Class A Shares-Front End Sales Charge
Alternative", above. Broker-dealers and other financial intermediaries whose
clients have purchased Class C shares may receive a trailing commission equal to
0.75% of the average daily value of such shares on an annual basis held by their
clients more than one year from the date of purchase. The payment of trailing
commissions will commence immediately with respect to shares eligible for
exemption from the CDSC normally applicable to Class C shares.

<PAGE>
Contingent Deferred Sales Charge. Shares obtained from dividend or distribution
reinvestment are not subject to a CDSC. Any CDSC imposed upon the redemption of
Class A, Class B or Class C shares is a percentage of the lesser of (1) the net
asset value of the shares redeemed or (2) the net asset value at the time of
purchase of such shares.

No CDSC is imposed on a redemption of shares of the Fund in the event of
(1) death or disability of the shareholder; (2) a lump-sum distribution from a
401(k) plan or other benefit plan qualified under the Employee Retirement Income
Security Act of 1974 ("ERISA"); (3) automatic withdrawals from ERISA plans if
the shareholder is at least 59 1/2 years old; (4) involuntary redemptions of
accounts having an aggregate net asset value of less than $1.00; (5) automatic
withdrawals under the Systematic Withdrawal Plan of up to 1.00% per month of the
shareholder's initial account balance; (6) withdrawals consisting of loan
proceeds to a retirement plan participant; (7) financial hardship withdrawals
made by a retirement plan participant; or (8) withdrawals consisting of returns
of excess contributions or excess deferral amounts made to a retirement plan
participant.

The Funds may also sell Class A, Class B or Class C shares at net asset
value without any initial sales charge or a CDSC to certain Directors, Trustees,
officers and employees of the Funds, Keystone, FUNB, Evergreen Asset, EKD and
certain of their affiliates, and to members of the immediate families of such
persons, to registered representatives of firms with dealer agreements with EKD,
and to a bank or trust company acting as a trustee for a single account.

How The Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading markets.

General. The decision as to which Class of shares is more beneficial to you
depends on the amount of your investment and the length of time you will hold
it. If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider Class A shares. If you are making a smaller
investment, you might consider Class B shares since 100% of your purchase is
invested immediately and since such shares will convert to Class A shares, which
incur lower ongoing distribution and/or shareholder service fees, after seven
years. If you are unsure of the time period of your investment, you might
consider Class C shares since there are no initial sales charges and, although
there is no conversion feature, the CDSC only applies to redemptions made during
the first year. Consult your financial intermediary for further information. The
compensation received by dealers and agents may differ depending on whether they
sell Class A, Class B or Class C shares. There is no size limit on purchases of
Class A shares.

In addition to the discount or commission paid to broker-dealers, EKD may
from time to time pay to broker-dealers additional cash or other incentives that
are conditioned upon the sale of a specified minimum dollar amount of shares of
a Fund and/or other Evergreen Keystone Funds. Such incentives will take the form
of payment for attendance at seminars, lunches, dinners, sporting events or
theater performances, or payment for travel, lodging and entertainment incurred
in connection with travel by persons associated with a broker-dealer and their
immediate family members to urban or resort locations within or outside the
United States. Such a dealer may elect to receive cash incentives of equivalent
amount in lieu of such payments. EKD may also limit the availability of such
incentives to certain specified dealers. EKD from time to time sponsors
promotions involving First Union Brokerage Services, Inc. ("FUBS"), an affiliate
of each Fund's investment adviser, and select broker-dealers, pursuant to which
incentives are paid, including gift certificates and payments in amounts up to
1% of the dollar amount of shares of a Fund sold. Awards may also be made based
on the opening of a minimum number of accounts. Such promotions are not being
made available to all broker-dealers. Certain broker-dealers may also receive
payments from EKD or a Fund's investment adviser over and above the usual trail
commissions or shareholder servicing payments applicable to a given Class of
shares.

Additional Purchase Information. As a condition of this offering, if a purchase
is canceled due to nonpayment or because an investor's check does not clear, the
investor will be responsible for any loss a Fund or the Fund's investment
adviser incurs. If such investor is an existing shareholder, a Fund may redeem
shares from an investor's account to reimburse the Fund or its investment
adviser for any loss. In addition, such investors may be prohibited or
restricted from making further purchases in any of the Evergreen Keystone Funds.
The Funds will not

<PAGE>
accept third party checks other than those payable directly to a shareholder
whose account has been in existence at least thirty days.

HOW TO REDEEM SHARES

You may "redeem" ( i.e., sell) your shares in a Fund to the Fund for
cash, (at the net redemption value) on any day the Exchange is open, either
directly by writing to the Fund, c/o EKSC, or through your financial
intermediary. The amount you will receive is based on the net asset value
adjusted for fractions of a cent (less any applicable CDSC for Class B or Class
C shares) next calculated after the Fund receives your request in proper form.
Proceeds generally will be sent to you within seven days. However, for shares
recently purchased by check, a Fund will not send proceeds until it is
reasonably satisfied that the check has been collected (which may take up to 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). Your
financial intermediary is responsible for furnishing all necessary documentation
to a Fund and may charge you for this service. Certain financial intermediaries
may require that you give instructions earlier than 4:00 p.m. (Eastern time).

Redeeming Shares Directly By Mail Or Telephone. Send a signed letter of
instruction or stock power form to the Fund, c/o EKSC, the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, EKSC, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
financial intermediaries, fiduciaries and surviving joint owners. Signature
guarantees are required for all redemption requests for shares with a value of
more than $50,000. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. Each Fund and EKSC reserve the
right to withdraw this waiver at any time. A signature guarantee must be
provided by a bank or trust company (not a Notary Public), a member firm of a
domestic stock exchange or by other financial institutions whose guarantees are
acceptable under the Securities Exchange Act of 1934 and EKSC's policies.

Shareholders may withdraw amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
Prospectus between the hours of 8:00 a.m. and 5:30 p.m. (Eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or
EKSC's offices are closed). The Exchange is closed on New Year's Day, Presidents
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. Redemption requests received after 4:00 p.m. (Eastern time)
will be processed using the net asset value determined on the next business day.
Such redemption requests must include the shareholder's account name, as
registered with a Fund, and the account number. During periods of drastic
economic or market changes, shareholders may experience difficulty in effecting
telephone redemptions. If you cannot reach the Fund by telephone, you should
follow the procedures for redeeming by mail or through a broker-dealer as set
forth herein. The telephone redemption service is not made available to
shareholders automatically. Shareholders wishing to use the telephone redemption
service must complete the appropriate sections on the 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.

In order to insure that instructions received by EKSC are genuine when
you initiate a telephone transaction, you will be asked to verify certain
criteria specific to your account. At the conclusion of the transaction, you
will be given a transaction number confirming your request, and written
confirmation of your transaction will be mailed the next business day. Your
telephone instructions will be recorded. Redemptions by telephone are allowed
only if the address and bank account of record have been the same for a minimum
period of 30 days. Each Fund reserves the right at any time to terminate,
suspend, or change the terms of any redemption method described in this
Prospectus, except redemption by mail, and to impose fees.

Except as otherwise noted, the Funds, EKSC and EKD will not assume
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Evergreen Keystone Express Line, or by
telephone. EKSC will employ reasonable procedures to confirm that instructions
received over the Evergreen Keystone Express Line or by telephone are genuine.
The Funds, EKSC and EKD will not be liable when following

<PAGE>
instructions received over the Evergreen Keystone Express Line or by telephone
that EKSC reasonably believes are genuine.

Evergreen Keystone Express Line. Evergreen Keystone Express Line offers you
specific fund account information and price and yield quotations as well as the
ability to do account transactions, including investments, exchanges and
redemptions. You may access the Evergreen Keystone Express Line by dialing toll
free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a
week.

General. The sale of shares is a taxable transaction for Federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists and
the Funds cannot dispose of their investments or fairly determine their value;
or (4) the Securities and Exchange Commission ("SEC")so orders. The Funds
reserve the right to close an account that through redemption has fallen below
$1,000 and has remained so for thirty days. Shareholders will receive sixty
days' written notice to increase the account value to at least $1,000 before the
account is closed. The Funds have elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which each Fund is obligated to redeem shares solely in
cash, up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder.

EXCHANGE PRIVILEGE

How To Exchange Shares. You may exchange some or all of your shares for shares
of the same Class in the other Evergreen Keystone Funds through your financial
intermediary, by calling or writing to EKSC or by using the Evergreen Keystone
Express Line as described above. Once an exchange request has been telephoned or
mailed, it is irrevocable and may not be modified or canceled. Exchanges will be
made on the basis of the relative net asset values of the shares exchanged next
determined after an exchange request is received. An exchange which represents
an initial investment in another Evergreen Keystone Fund is subject to the
minimum investment and suitability requirements of each Fund.

Each of the Evergreen Keystone Funds has different investment objectives
and policies. For complete information, a prospectus of the fund into which an
exchange will be made should be read prior to the exchange. An exchange order
must comply with the requirement for a redemption or repurchase order and must
specify the dollar value or number of shares to be exchanged. An exchange is
treated for Federal income tax purposes as a redemption and purchase of shares
and may result in the realization of a capital gain or loss. Shareholders are
limited to five exchanges per calendar year, with a maximum of three per
calendar quarter. This exchange privilege may be modified or discontinued at any
time by the Fund upon sixty days' notice to shareholders and is only available
in states in which shares of the fund being acquired may lawfully be sold.

No CDSC will be imposed in the event Class B or Class C shares are
exchanged for Class B or Class C shares, respectively, of other Evergreen
Keystone Funds. If you redeem shares, the CDSC applicable to the Class B or
Class C shares of the Evergreen or Keystone Fund originally purchased for cash
is applied. Also, Class B shares will continue to age following an exchange for
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. Exchange requests received by a Fund after 4:00
p.m. (Eastern time) will be processed using the net asset value determined at
the close of the next business day. During periods of drastic economic or market
changes, shareholders may experience difficulty in effecting telephone
exchanges. You should follow the procedures outlined below for exchanges by mail
if you are unable to reach EKSC by telephone. If you wish to use the telephone
exchange service you should indicate this on the 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 EKSC if it is
believed advisable to do so. Procedures for exchanging Fund shares by telephone
may be modified or terminated at any time. Written requests for exchanges should
follow the same procedures outlined for written redemption requests in the
section entitled "How to Redeem Shares"; however, no signature guarantee is
required.

<PAGE>
SHAREHOLDER SERVICES

The Funds offer the following shareholder services. For more information
about these services or your account, contact your financial intermediary, EKSC
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 per month or
$75 per quarter. You may open a Systematic Investment Plan in the EVERGREEN
FOUNDATION FUND and EVERGREEN BALANCED FUND for a minimum of $50 per month with
no initial investment required.

Telephone Investment Plan. You may make investments into an existing account
electronically in amounts of not less than $100 or more than $10,000 per
investment. Telephone investment requests received by 4:00 p.m. (Eastern time)
will be credited to a shareholder's account the day the request is received.
Shares purchased under the Systematic Investment Plan or Telephone Investment
Plan may not be redeemed for ten days from the date of investment.

Systematic Withdrawal Plan. When an account of $10,000 or more is opened or when
an existing account reaches that size, you may participate in the Systematic
Withdrawal Plan by filling out the appropriate part of the Share Purchase
Application. Under this Plan, you may receive (or designate a third party to
receive) a monthly or quarterly fixed-withdrawal payment in a stated amount of
at least $75, or a maximum of 1.0% per month or 3.0% per quarter of the total
net asset value of your account when the Plan was established. Fund shares will
be redeemed as necessary to meet withdrawal payments. All participants must
elect to have their dividends and capital gain distributions reinvested
automatically. Any applicable Class B CDSC will be waived with respect to
redemptions occurring under a Systematic Withdrawal Plan during a calendar year
to the extent that such redemptions do not exceed 10% of (i) the initial value
of the account plus (ii) the value, at the time of purchase, of any subsequent
investments. Excessive withdrawals may decrease or deplete the value of your
account. Moreover, because of the effect of the applicable sales charge, a Class
A investor should not make continuous purchases of a Fund's shares while
participating in a Systematic Withdrawal Plan.

Investments Through Employee Benefit and Savings Plans. Certain qualified and
non-qualified benefit and savings plans may make shares of the Funds and the
other Evergreen Keystone Funds available to their participants. Investments made
by such employee benefit plans may be exempt from front-end sales charges if
they meet the criteria set forth under "Class A Shares-Front End Sales Charge
Alternative". Evergreen Asset, Keystone or CMG may provide compensation to
organizations providing administrative and recordkeeping services to plans which
make shares of the Evergreen Keystone Funds available to their participants.

Automatic Reinvestment Plan. For the convenience of investors, all dividends and
distributions are automatically reinvested in full and fractional shares of a
Fund at the net asset value per share at the close of business on the record
date, unless otherwise requested by a shareholder in writing. If the transfer
agent does not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days prior to a
given record date, the dividends and/or distributions to be paid to a
shareholder will be reinvested.

Dollar Cost Averaging. Through dollar cost averaging you can invest a fixed
dollar amount each month or each quarter in any Evergreen Keystone Fund. This
results in more shares being purchased when the selected Fund's net asset value
is relatively low and fewer shares being purchased when the Fund's net asset
value is relatively high and may result in a lower average cost per share than a
less systematic investment approach.

Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen Keystone Fund. You should designate on the Share
Purchase Application (1) the dollar amount of each monthly or quarterly
investment you wish to make and (2) the Fund in which the investment is to be
made. Thereafter, on the first day of the designated month, an amount equal to
the specified monthly or quarterly investment will automatically be redeemed
from your initial account and invested in shares of the designated fund.

If you are a Class A investor and paid a sales charge on your initial
purchase, the shares purchased will be eligible for Rights of Accumulation and
the sales charge applicable to the purchase will be determined accordingly. In
addition, the value of shares purchased will be included in the total amount
required to fulfill a Letter of Intent. If a sales charge was not paid on the
initial purchase, a sales charge will be imposed at the time of subsequent
purchases, and the value of shares purchased will become eligible for Rights of
Accumulation and Letters of Intent.

<PAGE>
Two Dimensional Investing. You may elect to have income and capital gains
distributions from any class of Evergreen Keystone mutual fund shares you own
automatically invested to purchase the same class of shares of any other
Evergreen Keystone Fund. You may select this service on your Share Purchase
Application and indicate the Evergreen Keystone Fund(s) into which distributions
are to be invested. The value of shares purchased will be ineligible for Rights
of Accumulation and Letters of Intent.

Tax Sheltered Retirement Plans. The Funds have various retirement plans
available to eligible investors, including Individual Retirement Accounts
(IRAs); Rollover IRAs; Simplified Employee Pension Plans (SEPs); Salary
Reduction Plans (SARSEPs); Tax Sheltered Annuity Plans; 403(b)(7) Plans; 401(k)
Plans; Keogh Plans; Corporate Profit-Sharing Plans; and Money Purchase Plans.
For details, including fees and application forms, call toll free 1-800-247-4075
or write to EKSC.

EFFECT OF BANKING LAWS

The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of its customer. Evergreen
Asset and Keystone, since they are subsidiaries 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 and Keystone
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 and
Keystone 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 any net
realized capital gains annually or more frequently as required as a condition of
continued qualification as a regulated investment company by the Code, and to
distribute their investment company taxable income, if any, quarterly, such
distributions of EVERGREEN TAX STRATEGIC FOUNDATION FUND to include any tax
exempt income. Dividends and distributions generally are taxable in the year in
which they are paid, except any dividends paid in January that were declared in
the previous calendar quarter may be treated as paid in December of the previous
year. Income dividends and capital gain distributions are automatically
reinvested in additional shares of the Fund making the distribution at the net
asset value per share at the close of business on the record date, unless the
shareholder has made a written request for payment in cash.

Each Fund has qualified and intends to continue to qualify to be treated
as a regulated investment company under the Code. While so qualified, it is
expected that each Fund will not be required to pay any Federal income tax on
that portion of its investment company taxable income and any net realized
capital gains it distributes to shareholders. The Code imposes a 4%
nondeductible excise tax on regulated investment companies, such as the Funds,
to the extent they do not meet certain distribution requirements by the end of
each calendar year. Each Fund anticipates meeting such distribution
requirements. Most shareholders of the Funds normally will have to pay Federal
income tax and any state or local taxes on the dividends and distributions they
receive from a Fund whether such dividends and distributions are made in cash or
in additional shares. Questions on how any distributions will be taxed to the
investor should be directed to the investor's own tax adviser.

<PAGE>
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 the transfer agent, that your social security or
taxpayer identification number is correct and that you are not currently subject
to backup withholding or are exempt from backup withholding. A shareholder who
acquires Class A shares of a Fund and sells or otherwise disposes of such shares
within ninety days of acquisition may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain and
loss realized upon a sale or exchange of shares of the Fund.

The foregoing discussion of Federal income tax consequences is based on
tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, you should also review the
discussion of "Additional Tax Information" contained in the Statement of
Additional Information. In addition, you should consult your own tax adviser as
to the tax consequences of investments in the Funds, including the application
of state and local taxes which may be different from Federal income tax
consequences described above.

GENERAL INFORMATION

Portfolio Transactions. Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, a Fund may consider sales of its shares as a factor in the selection
of dealers to enter into portfolio transactions with the Fund.

Organization. The EVERGREEN FOUNDATION FUND and EVERGREEN TAX STRATEGIC
FOUNDATION FUND are separate series of the Evergreen Foundation Trust, a
Massachusetts business trust organized in 1989. EVERGREEN AMERICAN RETIREMENT
FUND is a separate series of The Evergreen American Retirement Trust, a
Massachusetts business trust organized in 1987. EVERGREEN BALANCED FUND is a
separate investment series of Evergreen Investment Trust (formerly First Union
Funds), a Massachusetts business trust organized in 1984. The Funds do not
intend to hold annual shareholder meetings; shareholder meetings will be held
only when required by applicable law. Shareholders have available certain
procedures for the removal of Trustees, including the right to demand that a
meeting of shareholders be called for the purpose of voting thereon if 10% of
the shareholders so request in writing.

A shareholder in each Class of a Fund will be entitled to his or her
share of all dividends and distributions from a Fund's assets, based upon the
relative value of such shares to those of other Classes of the Fund and, upon
redeeming shares, will receive the then current net asset value of the Class of
shares of the Fund represented by the redeemed shares less any applicable CDSC.
Each Trust named above is empowered to establish, without shareholder approval,
additional investment series, which may have different investment objectives,
and additional Classes of shares for any existing or future series. If an
additional series or Class were established in a Fund, each share of the series
or Class would normally be entitled to one vote for all purposes. Generally,
shares of each series and Class would vote together as a single class on
matters, such as the election of Trustees, that affect each series and Class in
substantially the same manner. Class A, Class B, Class C and Class Y shares have
identical voting, dividend, liquidation and other rights, except that each Class
bears, to the extent applicable, its own distribution and shareholder service
expenses as well as any other expenses applicable only to a specific Class. Each
Class of shares votes separately with respect to Rule 12b-1 distribution plans
and other matters for which separate Class voting is appropriate under
applicable law. Shares are entitled to dividends as determined by the Trustees
and, in liquidation of a Fund, are entitled to receive the net assets of the
Fund.

<PAGE>
Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as each Fund's custodian.

Registrar, Transfer Agent And Dividend-Disbursing Agent. Evergreen Keystone
Service Company, Inc., P.O. Box 2121, Boston, Massachusetts 02106-2121 acts as
registrar, transfer agent and dividend-disbursing agent for each of the Funds.

Principal Underwriter. EKD, an affiliate of BISYS Fund Services, is located at
120 Clove Road, Little Falls, New Jersey 07424, and is the principal underwriter
of the Funds. BISYS Fund Services also acts as sub-administrator to the Funds
and provides personnel to serve as officers of the Funds.

Other Classes Of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are not offered by this Prospectus and are only
available to (i) persons who at or prior to December 31, 1994, owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain institutional investors and
(iii) investment advisory clients of CMG, Evergreen Asset, Keystone or their
affiliates. The dividends payable with respect to Class A, Class B and Class C
shares will be less than those payable with respect to Class Y shares due to the
distribution and shareholder servicing-related expenses borne by Class A, Class
B and Class C shares and the fact that such expenses are not borne by Class Y
shares.

Performance Information. From time to time, the Funds may quote their "total
return" or "yield" for a specified period in advertisements, reports or other
communications to shareholders. Total return and yield are computed separately
for Class A, Class B, Class C and Class Y shares. A Fund's total return for each
such period is computed by finding, through the use of a formula prescribed by
the SEC, the average annual compounded rate of return over the period that would
equate an assumed initial amount invested to the value of the investment at the
end of the period. For purposes of computing total return, dividends and capital
gains distributions paid on shares of a Fund are assumed to have been reinvested
when paid and the maximum sales charges applicable to purchases of a Fund's
shares are assumed to have been paid. Yield is a way of showing the rate of
income the Fund earns on its investments as a percentage of the Fund's share
price. The Fund's yield is calculated according to accounting methods that are
standardized by the SEC for all stock and bond funds. Because yield accounting
methods differ from the method used for other accounting purposes, the Fund's
yield may not equal its distribution rate, the income paid to your account or
the net investment income reported in the Fund's financial statements. To
calculate yield, the Fund takes the interest and dividend income it earned from
its portfolio of investments (as defined by the SEC formula) for a 30-day period
(net of expenses), divides it by the average number of shares entitled to
receive dividends, and expresses the result as an annualized percentage rate
based on the Fund's share price at the end of the 30-day period. This yield does
not reflect gains or losses from selling securities.

Performance data for each class of shares will be included in any
advertisement or sales literature using performance data of a Fund. These
advertisements may quote performance rankings or ratings of a Fund by financial
publications or independent organizations such as Lipper Analytical Services,
Inc. and Morningstar, Inc. or compare a Fund's performance to various indices.
The Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed by dividing the total ordinary income distributed (which
may include the excess of short-term capital gains over losses) to shareholders
for the latest twelve month period by the maximum public offering price per
share on the last day of the period. Investors should be aware that past
performance may not be reflective of future results.

In marketing a Fund's shares, information may be provided that is
designed to help individuals understand their investment goals and explore
various financial strategies. Such information may include publications
describing general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting; a questionnaire designed to
help create a personal financial profile; and an action plan offering investment
alternatives. The information provided to investors may also include discussions
of other Evergreen Keystone Funds, products, and services, which may include:
retirement investing; brokerage products and services; the effects of periodic
investment plans and dollar cost averaging; saving for college; and charitable
giving. In addition, the information provided to investors may quote financial
or business publications and periodicals, including model portfolios or
allocations, as they relate to fund management, investment philosophy, and
investment techniques. The Principal Underwriter may also reprint, and use as
advertising and sales literature, articles from EVERGREEN KEYSTONE EVENTS, a
quarterly magazine provided to Evergreen Keystone Fund shareholders.

<PAGE>
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust shall contain a provision to that effect. If any Trustee or shareholder
were required to pay any liability of the Trust, that person would be entitled
to reimbursement from the general assets of the Trust.

Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trusts
with the SEC under the Securities Act of 1933. Copies of the Registration
Statements may be obtained at a reasonable charge from the SEC or may be
examined, without charge, at the offices of the SEC in Washington, D.C.

<PAGE>

INVESTMENT ADVISERS
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
EVERGREEN FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND,
EVERGREEN AMERICAN RETIREMENT INCOME FUND

Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
EVERGREEN BALANCED FUND

CUSTODIAN
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827

TRANSFER AGENT
Evergreen Keystone Service Company, Inc., P.O. Box 2121, Boston, Massachusetts
02106-2121

LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110

DISTRIBUTOR
Evergreen Keystone Distributor, Inc., 120 Clove Road, Little Falls, New Jersey
07424
48692 540392
******************************************************************************

<PAGE>

PROSPECTUS May 1, 1997

EVERGREEN(SM) BALANCED FUNDS (Evergreen Logo Goes Here)

EVERGREEN FOUNDATION FUND
EVERGREEN TAX STRATEGIC FOUNDATION FUND
EVERGREEN AMERICAN RETIREMENT FUND
EVERGREEN BALANCED FUND

CLASS Y SHARES

The Evergreen Balanced Funds (the "Funds") are designed to provide
investors with a selection of investment alternatives which seek to provide
current income, capital appreciation or after-tax "total return". This
Prospectus provides information regarding the Class Y shares offered by the
Funds. Each Fund is, or is a series of, an open-end, diversified,
management investment company. This Prospectus sets forth concise
information about the Funds that a prospective investor should know before
investing. The address of the Funds is 2500 Westchester Avenue, Purchase,
New York 10577.

A Statement of Additional Information for the Funds and certain
other funds in the Evergreen Keystone group of mutual funds dated May 1,
1997 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus
and other matters which may be of interest to investors, and may be
obtained without charge by calling the Evergreen Keystone Funds at (800)
343-2898. There can be no assurance that the investment objective of any
Fund will be achieved. Investors are advised to read this Prospectus
carefully.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED
OR OTHERWISE PROTECTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

KEEP THIS PROSPECTUS FOR FUTURE REFERENCE

EVERGREEN(SM) is a Service Mark of Evergreen Asset Management Corp.
Copyright 1995, Evergreen Asset Management Corp.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
OVERVIEW OF THE FUNDS.................................. 2
EXPENSE INFORMATION.................................... 3
FINANCIAL HIGHLIGHTS................................... 5
DESCRIPTION OF THE FUNDS............................... 9
Investment Objectives and Policies............ 9
Investment Practices and Restrictions......... 12
Special Risk Considerations................... 17

MANAGEMENT OF THE FUNDS................................ 18
Investment Advisers........................... 18
Portfolio Managers............................ 19
Sub-Adviser................................... 19
Administrator................................. 19
Sub-Administrator............................. 20
PURCHASE AND REDEMPTION OF SHARES...................... 20
How to Buy Shares............................. 20
How to Redeem Shares.......................... 21
Exchange Privilege............................ 22
Shareholder Services.......................... 22
Effect of Banking Laws........................ 23

OTHER INFORMATION...................................... 24
Dividends, Distributions and Taxes............ 24
General Information........................... 25
</TABLE>

OVERVIEW OF THE FUNDS

The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".

The investment adviser to EVERGREEN FOUNDATION FUND, EVERGREEN AMERICAN
RETIREMENT FUND and EVERGREEN TAX STRATEGIC FOUNDATION FUND is Evergreen Asset
Management Corp. which, with its predecessors, has served as an investment
adviser to the Evergreen mutual funds since 1971. Evergreen Asset Management
Corp. is a wholly-owned subsidiary of First Union National Bank of North
Carolina, which in turn is a subsidiary of First Union Corporation, the sixth
largest bank holding company in the United States. The Capital Management Group
of First Union National Bank of North Carolina serves as investment adviser to
EVERGREEN BALANCED FUND.

EVERGREEN FOUNDATION FUND seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed-income securities.

EVERGREEN TAX STRATEGIC FOUNDATION FUND attempts to maximize the
after-tax "total return" on its portfolio of investments. The Fund invests in
common and preferred stocks and securities convertible into or exchangeable for
common stocks and municipal securities. Under normal circumstances, the Fund
anticipates that, at the close of each quarter of its taxable year, at least 50%
of the value of its total assets will be invested in municipal securities.

EVERGREEN AMERICAN RETIREMENT FUND seeks, in order of priority,
conservation of capital, reasonable income and capital growth. To achieve these
objectives, the Fund invests in a diversified and balanced portfolio of equity
and fixed income securities, with emphasis on income-producing securities which
appear to have potential for capital appreciation. Investments in equity
securities will be limited to 75% of the value of the Fund's total assets
measured at the time any such investment is made. Normally, the Fund anticipates
that approximately half of the fixed income portion of the Fund's portfolio will
be invested in marketable obligations of, or guaranteed by, the U.S. government,
its agencies or instrumentalities.

EVERGREEN BALANCED FUND seeks to produce long-term total return through
capital appreciation, dividends and interest income.

THERE IS NO ASSURANCE THAT THE INVESTMENT OBJECTIVE OF ANY FUND WILL BE
ACHIEVED.

<PAGE>
EXPENSE INFORMATION

The table set forth below summarizes the shareholder transaction costs
associated with an investment in the Class Y Shares of the Funds. 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 None
</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 FOUNDATION FUND

<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Management Fees 0.80%
After 1 Year $ 10
12b-1 Fees --
After 3 Years $ 32
Other Expenses 0.19%
After 5 Years $ 55
After 10 Years $ 121
Total 0.99%
</TABLE>

EVERGREEN TAX STRATEGIC FOUNDATION FUND

<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES** EXAMPLE
<S> <C> <C> <C>
Management Fees 0.875%
After 1 Year $ 16
12b-1 Fees --
After 3 Years $ 49
Other Expenses 0.685%
After 5 Years $ 85
After 10 Years $ 186
Total 1.560%
</TABLE>

EVERGREEN AMERICAN RETIREMENT FUND

<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES** EXAMPLE
<S> <C> <C> <C>
Management Fees 0.75%
After 1 Year $ 11
12b-1 Fees --
After 3 Years $ 35
Other Expenses 0.34%
After 5 Years $ 60
After 10 Years $ 133
Total 1.09%
</TABLE>

EVERGREEN BALANCED FUND

<TABLE>
<CAPTION>
ANNUAL OPERATING
EXPENSES EXAMPLE
<S> <C> <C> <C>
Management Fees 0.50%
After 1 Year $ 7
12b-1 Fees --
After 3 Years $ 20
Other Expenses 0.14%
After 5 Years $ 36
After 10 Years $ 80
Total 0.64%
</TABLE>

<PAGE>
** The estimated annual operating expenses and examples do not reflect fee
waivers and expense reimbursements for the year end December 31, 1996. Actual
expenses for the year then ended including fee waivers and expense
reimbursements were as follows:

<TABLE>
<CAPTION>
CLASS Y
<S> <C>
Evergreen American Retirement Fund.......................................................... 1.05%
Evergreen Tax Strategic Foundation Fund..................................................... 1.30%
</TABLE>

From time to time, each Fund's investment adviser may, at its discretion, reduce
or waive its fees or reimburse the Funds for certain of their expenses in order
to reduce their expense ratios. Each Fund's investment adviser may cease these
waivers and reimbursements at any time.

<PAGE>
FINANCIAL HIGHLIGHTS

The tables on the following pages present, for each Fund, financial
highlights for a share outstanding throughout each period indicated. The
information in the tables for the five most recent fiscal years or the life of
the Fund if shorter has been audited by the respective Fund's independent
auditors as follows: for EVERGREEN FOUNDATION FUND for the year ended December
31, 1996 by KPMG Peat Marwick LLP, and for each of the years in the four-year
period ended December 31, 1995 by other auditors; for EVERGREEN TAX STRATEGIC
FOUNDATION FUND for the year ended December 31, 1996 by KPMG Peat Marwick LLP
and for each of the years in the two-year ended December 31, 1995 and the period
from November 2, 1993 through December 31, 1993 other auditors; for EVERGREEN
AMERICAN RETIREMENT FUND for the year ended December 31, 1996 by KPMG Peat
Marwick LLP, and for each of the years in the four-year period ended December
31, 1995 by other auditors; and for EVERGREEN BALANCED FUND by KPMG Peat Marwick
LLP. A report of KPMG Peat Marwick LLP or other auditors, as the case may be, on
the audited information with respect to each Fund is incorporated by reference
in the Funds' Statement of Additional Information. The following information for
each Fund should be read in conjunction with the financial statements and
related notes which are incorporated by reference in the Funds' Statement of
Additional Information.

Further information about a Fund's performance is contained in the Fund's
annual report to shareholders, which may be obtained without charge.

EVERGREEN FOUNDATION FUND -- CLASS Y SHARES

<TABLE>
<CAPTION>
JANUARY 2, 1990*
YEAR ENDED DECEMBER 31, THROUGH
1996 1995 1994 1993 1992 1991 DECEMBER 31, 1990
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period............... $15.13 $12.27 $13.12 $11.98 $10.75 $8.95 $10.00
Income (loss) from investment operations:
Net investment income............................ .54 .51 .42 .31 .27 .33 1.23(a)
Net realized and unrealized gain (loss) on
investments.................................... 1.16 3.07 (.57) 1.55 1.83 2.77 (.59)
Total from investment operations............... 1.70 3.58 (.15) 1.86 2.10 3.10 .64
Less distributions to shareholders from:
Net investment income............................ (.54) (.49) (.42) (.31) (.24) (.33) (1.17)
Net realized gain on investments................. (.15) (.23) (.28) (.41) (.63) (.97) (.52)
Total distributions............................ (.69) (.72) (.70) (.72) (.87) (1.30) (1.69)
Net asset value, end of period..................... $16.14 $15.13 $12.27 $13.12 $11.98 $10.75 $8.95
TOTAL RETURN+...................................... 11.5% 29.7% (1.1%) 15.7% 20.0% 36.4% 6.6%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (in millions)............ $809 $623 $332 $240 $64 $11 $2
Ratios to average net assets:
Expenses......................................... .99% 1.07% 1.14% 1.20% 1.40%# 1.20%# 0%#++
Net investment income............................ 3.64% 3.89% 3.51% 2.81% 2.93%# 2.86%# 15.07%#(a)++
Portfolio turnover rate............................ 10% 28% 33% 60% 127% 178% 131%
Average commission rate paid per share............. $.0649 N/A N/A N/A N/A N/A N/A
</TABLE>

* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets, 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>

(a) Includes receipt of a special dividend representing $.62 per share net
investment income and 7.59% of average net assets.

<PAGE>
EVERGREEN TAX STRATEGIC FOUNDATION FUND -- CLASS Y SHARES

<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 2, 1993*
DECEMBER 31, THROUGH
1996 1995 1994 DECEMBER 31, 1993
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................................... $12.22 $10.27 $10.31 $10.00
Income from investment operations:
Net investment income.................................................... .34 .35 .27 .05
Net realized and unrealized gain on investments.......................... 1.56 2.39 .08 .31
Total from investment operations....................................... 1.90 2.74 .35 .36
Less distributions to shareholders from:
Net investment income.................................................... (.30) (.33) (.27) (.05)
Net realized gain on investments......................................... (.28) (.46) (.12) --
Total distributions.................................................... (.58) (.79) (.39) (.05)
Net asset value, end of period............................................. $13.54 $12.22 $10.27 $10.31
TOTAL RETURN+*............................................................. 15.8% 27.3% 3.4% 3.5%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).................................. $15,002 $13,485 $10,575 $5,424
Ratios to average net assets:
Expenses #............................................................... 1.30% 1.50% 1.49% .00%++
Net investment income #.................................................. 2.63% 3.06% 2.87% 3.65%++
Portfolio turnover rate.................................................... 88% 110% 245% 25%
Average commission rate paid per share..................................... $0.0648 N/A N/A N/A
</TABLE>

* Commencement of class operations.
*+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized. Initial sales charge or contingent deferred
sales charges are not reflected.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income (loss) 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
1996 1995 1994 DECEMBER 31, 1993
<S> <C> <C> <C> <C>
Expenses......................................................................... 1.56% 2.23% 2.41% 3.10%
Net investment income (loss)..................................................... 2.37% 2.33% 1.95% .54%
</TABLE>

<PAGE>
EVERGREEN AMERICAN RETIREMENT FUND -- CLASS Y SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period.......................... $12.83 $10.67 $11.60 $10.95 $10.52 $9.59 $10.41 $ 10.09
Income (loss) from investment
operations:
Net investment income........... .48 .47 .60 .56 .66 .60 .60 .57
Net realized and unrealized gain
(loss) on investments......... 1.10 2.16 (.93) .96 .55 1.15 (.66) .76
Total from investment
operations.................. 1.58 2.63 (.33) 1.52 1.21 1.75 (.06) 1.33
Less distributions to shareholders
from:
Net investment income........... (.44) (.47) (.60) (.60) (.61) (.60) (.60) (.59)
Net realized gain on
investments................... (.11) -- -- (.24) (.17) (.22) (.16) (.42)
In excess of net realized
gains......................... -- -- -- (.03) -- -- -- --
Total distributions........... (.55) (.47) (.60) (.87) (.78) (.82) (.76) (1.01)
Net asset value, end of period.... $13.86 $12.83 $10.67 $11.60 $10.95 $10.52 $9.59 $ 10.41
TOTAL RETURN+..................... 12.6% 25.1% (2.9%) 14.1% 11.8% 18.8% (.5%) 13.4%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted)........................ $41,243 $39,327 $37,176 $37,336 $23,781 $15,632 $12,351 $11,610
Ratios to average net assets:
Expenses........................ 1.05%# 1.26% 1.28% 1.36% 1.51%# 1.50%# 1.50%# 1.88%#
Net investment income........... 3.65%# 3.96% 5.40% 5.13% 6.23%# 5.91%# 6.04%# 5.49%#
Portfolio turnover rate........... 16% 49% 136% 92% 151% 97% 33% 152%
Average commission rate paid per
share........................... $.0619 N/A N/A N/A N/A N/A N/A N/A

<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 gain on
investments................... (.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%
Average commission rate paid per
share........................... N/A
</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 periods
indicated and is not annualized.
++ Annualized.
# Net of expense waivers and reimbursements. If the Fund had borne all expenses
that were assumed or waived by the investment adviser, the annualized ratios
of expenses and net investment income to average net assets would have been
the following:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Expenses............................................ 1.09% 1.59% 1.82% 1.95% 2.03%
Net investment income............................... 3.61% 6.15% 5.59% 5.59% 5.34%
</TABLE>

<PAGE>
EVERGREEN BALANCED FUND -- CLASS Y SHARES

<TABLE>
<CAPTION>
APRIL 1,
1991*
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period........................... $13.12 $11.17 $12.07 $11.41 $11.02 $10.00
Income (loss) from investment operations:
Net investment income........................................ .57 .54 .46 .45 .46 .36
Net realized and unrealized gain (loss) on investments....... .95 2.40 (.71) .75 .42 1.03
Total from investment operations........................... 1.52 2.94 (.25) 1.20 .88 1.39
Less distributions to shareholders from:
Net investment income........................................ (.58) (.53) (.46) (.45) (.45) (.36)
Net realized gain on investments............................. (1.11) (.46) (.19) (.09) (.04) (.01)
Total distributions........................................ (1.69) (.99) (.65) (.54) (.49) (.37)
Net asset value, end of period................................. $12.95 $13.12 $11.17 $12.07 $11.41 $11.02
TOTAL RETURN+.................................................. 11.7% 26.8% (2.2%) 10.7% 8.2% 15.0%
RATIOS & SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...................... $778,641 $818,137 $778,657 $760,147 $520,232 $247,472
Ratios to average net assets:
Expenses..................................................... .64% .62% .64% .66% .66% .68%++
Net investment income........................................ 4.19% 4.30% 3.93% 3.86% 4.20% 4.86%++
Portfolio turnover rate........................................ 34% 37% 35% 19% 12% 19%
Average commission rate paid per share......................... $.0593 N/A N/A N/A N/A N/A
</TABLE>

* Commencement of operations.
+ Total return is calculated on net asset value per share for the periods
indicated and is not annualized.
++ Annualized.

<PAGE>
DESCRIPTION OF THE FUNDS

Each Fund's investment objective is fundamental and may not be changed
without shareholder approval.

INVESTMENT OBJECTIVES AND POLICIES

EVERGREEN FOUNDATION FUND

2. Corporate obligations rated no lower than A by Moody's Investor's
Service ("Moody's"), A-2 by Standard and Poor's Ratings Service, a division of
McGraw-Hill Companies, Inc. ("S&P").

3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.

EVERGREEN TAX STRATEGIC FOUNDATION FUND

The Fund's asset allocation will vary from time to time in accordance
with changing economic and market conditions, including: inflation rates,
business cycle trends, business regulations and tax law impacts on the
investment markets. The composition of its portfolio will be largely
unrestricted and subject to the discretion of the Fund's investment adviser.
Under normal circumstances, the Fund anticipates that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets will
be invested in Municipal Securities. The balance will be invested in equity
securities (including securities convertible into equity securities). As of
December 31, 1994, 1995 and 1996, approximately 54%, 52% and 52%, respectively,
of the Fund's portfolio consisted of investments in Municipal Securities.

EVERGREEN AMERICAN RETIREMENT FUND

EVERGREEN BALANCED FUND

INVESTMENT PRACTICES AND RESTRICTIONS

<PAGE>
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.

<PAGE>
institutions such as banks and broker-dealers, and to repurchase them at a
mutually agreed upon date and price, for temporary or emergency purposes. At the
time a Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account cash, U.S. government securities or liquid high
grade debt obligations having a value at least equal to the repurchase price
(including accrued interest) and will subsequently monitor the account to ensure
that such equivalent value is maintained. Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Fund may decline
below the repurchase price of those securities. A Fund will not enter into
reverse repurchase agreements exceeding 5% of the value of its net assets.

<PAGE>
specific type of instrument called for in the contract ("going short"), and the
buyer, who agrees to take delivery of the instrument ("going long") at a certain
time in the future. Financial futures contracts call for the delivery of
particular debt instruments issued or guaranteed by the U.S. Treasury or by
specific agencies or instrumentalities of the U.S. government. If the Fund would
enter into financial futures contracts directly to hedge its holdings of fixed
income securities, it would enter into contracts to deliver securities at an
undetermined price (i.e., "go short") to protect itself against the possibility
that the prices of its fixed income securities may decline during the Fund's
anticipated holding period. The Fund would "go long" (agree to purchase
securities in the future at a predetermined price) to hedge against a decline in
market interest rates.

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 EVERGREEN BALANCED FUND uses 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 Fund's portfolio. This may cause the
financial futures contract and any related options to react to market changes
differently than the portfolio securities. In addition, the Funds' investment
advisers could be incorrect in their expectations and forecasts about the
direction or extent of market factors, such as interest rates, securities price
movements and other economic factors. Even if the Funds' investments advisers
correctly predict 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 EVERGREEN
BALANCED FUND'S investment adviser will consider liquidity before entering into
financial futures contracts or options on financial futures contracts
transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular financial futures contract or option on a
financial futures contract at any particular time. The EVERGREEN BALANCED FUND'S
ability to establish and close out financial futures contracts and options on
financial futures 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.

<PAGE>
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.

<PAGE>
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
temporarily invest up to 20% of its net assets in taxable securities under any
one or more of the following circumstances: (a) pending investment of proceeds
of sale of Fund shares or of portfolio securities, (b) pending settlement of
purchases of portfolio securities, and (c) to maintain liquidity for the purpose
of meeting anticipated redemptions. In addition, the Fund may temporarily invest
more than 20% of its net assets in taxable securities for defensive purposes.
The Fund may invest for defensive purposes during periods when the Fund's assets
available for investment exceed the available Municipal Securities that meet the
Fund's quality and other investment criteria. Taxable securities in which the
Fund may invest on a short-term basis include obligations of the U.S.
government, its agencies or instrumentalities, including repurchase agreements
with banks or securities dealers involving such securities; time deposits
maturing in not more than seven days; other debt securities rated within the two
highest ratings assigned by any major rating service; commercial paper rated in
the highest grade by Moody's, S&P or any SRO; and certificates of deposit issued
by United States branches of U.S. banks with assets of $1 billion or more.

SPECIAL RISK CONSIDERATIONS

<PAGE>
corporation. EDRs are receipts issued in Europe by banks or depositories which
evidence a similar ownership arrangement. Generally ADRs, in registered form,
are designed for use in United States securities markets and EDRs, in bearer
form, are designed for use in European securities markets.

Investments Related To Real Estate. EVERGREEN BALANCED FUND and EVERGREEN
FOUNDATION FUND may invest up to 15% of their net assets in investment related
to real estate, including real estate investment trusts ("REITS"). 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 increases 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 of 1986, as amended (the
"Code") and to maintain exemption from the Investment Company Act of 1940, as
amended (the "1940 Act"). In the event an issuer of debt securities
collateralized by real estate defaulted, it is conceivable that a Fund could end
up holding the underlying real estate.

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISERS

<PAGE>
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.

The total expenses as a percentage of average daily net assets on an
annual basis of the Funds for the fiscal year ended December 31, 1996, are set
forth in the section entitled "Financial Highlights". Such expenses reflect all
voluntary advisory fee waivers and expense reimbursements which may be revised
or terminated at any time.

PORTFOLIO MANAGERS

SUB-ADVISER

ADMINISTRATOR

<PAGE>
EKIS also provides facilities, equipment and personnel to EVERGREEN
FOUNDATION FUND, EVERGREEN TAX STRATEGIC FOUNDATION FUND and EVERGREEN AMERICAN
RETIREMENT FUND on behalf of each Fund's investment adviser.

SUB-ADMINISTRATOR

<TABLE>
<CAPTION>
Sub-Administration Fee
<S> <C>
0.0100% on the first $7 billion
0.0075% on the next $3 billion
0.0050% on the next $15 billion
0.0040% on assets in excess of $25 billion
</TABLE>

The total assets of the mutual funds administered by EKIS for which FUNB
affiliates also serve as investment advisers were approximately $29.2 billion as
of February 28, 1997.

PURCHASE AND REDEMPTION OF SHARES

HOW TO BUY SHARES

Class Y shares are offered at net asset value without a front-end sales
charge or a contingent deferred sales load. Class Y shares are only offered to
(1) persons who at or prior to December 31, 1994, owned shares in a mutual fund
advised by Evergreen Asset, (2) certain institutional investors and (3)
investment advisory clients of CMG, Evergreen Asset, Keystone or their
affiliates.

Eligible investors may purchase Class Y shares of any of the Funds
through broker-dealers, banks or other financial intermediaries, or directly
through EKD. In addition, you may purchase Class Y shares of any of the Funds by
mailing to that Fund, c/o Evergreen Keystone Service Company ("EKSC"), P.O. Box
2121, Boston, Massachusetts 02106-2121, a completed Share Purchase Application
and a check payable to the Fund. You may also telephone 1-800-343-2898 to obtain
the number of an account to which you can wire or electronically transfer funds
and then send in a completed Share Purchase Application. The minimum initial
investment is $1,000, which may be waived in certain situations. Subsequent
investments in any amount may be made by check, by wiring Federal funds, by
direct deposit or by an electronic funds transfer.

There is no minimum amount for subsequent investments. Investments of $25
or more are allowed under the Systematic Investment Plan. Share certificates are
not issued. See the Share Purchase Application for more information. Only Class
Y shares are offered through this Prospectus (see "General Information" --
"Other Classes of Shares").

How The Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as a Fund's Trustees believe would accurately reflect fair
value. Non-dollar denominated securities will be valued as of the close of the
Exchange at the closing price of such securities in their principal trading
markets.

<PAGE>
accept third party checks other than those payable directly to a shareholder
whose account has been in existence at least thirty days.

HOW TO REDEEM SHARES

You may "redeem" (i.e., sell) your Class Y shares in a Fund to the Fund
for cash, (at the net redemption value) on any day the Exchange is open, either
directly by writing to the Fund, c/o EKSC, or through your financial
intermediary. The amount you will receive is the net asset value adjusted for
fractions of a cent next calculated after the Fund receives your request in
proper form. Proceeds generally will be sent to you within seven days. However,
for shares recently purchased by check, a Fund will not send proceeds until it
is reasonably satisfied that the check has been collected (which may take up to
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. Your financial intermediary is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service. Certain financial intermediaries may require that you give
instructions earlier than 4:00 p.m. (Eastern time).

Redeeming Shares Directly By Mail Or Telephone. Send a signed letter of
instruction or stock power form to the Fund, c/o EKSC; the registrar, transfer
agent and dividend-disbursing agent for each Fund. Stock power forms are
available from your financial intermediary, EKSC, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
financial intermediaries, fiduciaries and surviving joint owners. Signature
guarantees are required for all redemption requests for shares with a value of
more than $50,000. Currently, the requirement for a signature guarantee has been
waived on redemptions of $50,000 or less when the account address of record has
been the same for a minimum period of 30 days. Each Fund and EKSC reserve the
right to withdraw this waiver at any time. A signature guarantee must be
provided by a bank or trust company (not a Notary Public), a member firm of a
domestic stock exchange or by other financial institutions whose guarantees are
acceptable under the Securities Exchange Act of 1934 and EKSC's policies.

Shareholders may withdraw amounts of $1,000 or more (up to $50,000) from
their accounts by calling the telephone number on the front page of this
Prospectus between the hours of 8:00 a.m. and 5:30 p.m.(Eastern time) each
business day (i.e., any weekday exclusive of days on which the Exchange or EKSCs
offices are closed). The Exchange is closed on New Years Day, Presidents Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Redemption requests received after 4:00 p.m. (Eastern time) will
be processed using the net asset value determined on the next business day. Such
redemption requests must include the shareholder's account name, as registered
with a Fund, and the account number. During periods of drastic economic or
market changes, shareholders may experience difficulty in effecting telephone
redemptions. If you cannot reach the Fund by telephone, you should follow the
procedures for redeeming by mail or through a broker-dealer as set forth herein.
The telephone redemption service is not made available to shareholders
automatically. Shareholders wishing to use the telephone redemption service must
complete the appropriate sections on the 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.

Except as otherwise noted, the Funds, EKSC, and EKD will not assume
responsibility for the authenticity of any instructions received by any of them
from a shareholder in writing, over the Evergreen Keystone Express Line, or by
telephone. EKSC will employ reasonable procedures to confirm that instructions
received over the Evergreen Keystone Express Line or by telephone are genuine.
The Funds, EKSC, and EKD will not be liable when following instructions received
over the Evergreen Keystone Express Line or by telephone that EKSC reasonably
believes are genuine.

<PAGE>
Evergreen Keystone Express Line. Evergreen Keystone Express Line offers you
specific fund account information and price and yield quotations as well as the
ability to do account transactions, including investments, exchanges and
redemptions. You may access the Evergreen Keystone Express Line by dialing toll
free 1-800-346-3858 on any touch-tone telephone, 24 hours a day, seven days a
week.

General. The sale of shares is a taxable transaction for Federal income tax
purposes. The Funds may temporarily suspend the right to redeem their shares
when (1) the Exchange is closed, other than customary weekend and holiday
closings; (2) trading on the Exchange is restricted; (3) an emergency exists and
the Funds cannot dispose of their investments or fairly determine their value;
or (4) the Securities and Exchange Commission ("SEC") so orders. The Funds
reserve the right to close an account that through redemption has fallen below
$1,000 and has remained so for thirty days. Shareholders will receive sixty
days' written notice to increase the account value to at least $1,000 before the
account is closed. The Funds have elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which each Fund is obligated to redeem shares solely in
cash, up to the lesser of $250,000 or 1% of a Fund's total net assets during any
ninety day period for any one shareholder.

EXCHANGE PRIVILEGE

How To Exchange Shares. You may exchange some or all of your Class Y shares for
shares of the same Class in the other Evergreen Keystone Funds through your
financial intermediary, by calling or writing to EKSC or by using the Evergreen
Keystone Express Line as described above. Once an exchange request has been
telephoned or mailed, it is irrevocable and may not be modified or canceled.
Exchanges will be made on the basis of the relative net asset values of the
shares exchanged next determined after an exchange request is received. An
exchange which represents an initial investment in another Evergreen Keystone
Fund is subject to the minimum investment and suitability requirements of each
Fund.

SHAREHOLDER SERVICES

<PAGE>
Investment Plan in the EVERGREEN FOUNDATION FUND and EVERGREEN BALANCED FUND for
a minimum of $50 per month with no initial investment required.

Prior to participating in dollar cost averaging, you must establish an
account in an Evergreen Keystone Fund. You should designate on the Share
Purchase Application (1) the dollar amount of each monthly or quarterly
investment you wish to make, and (2) the Fund in which the investment is to be
made. Thereafter, on the first day of the designated month, an amount equal to
the specified monthly or quarterly investment will automatically be redeemed
from your initial account and invested in shares of the designated fund.

Two Dimensional Investing. You may elect to have income and capital gains
distributions from any Class Y Evergreen Keystone Fund shares you own
automatically invested to purchase the same class of shares of any other
Evergreen Keystone Fund. You may select this service on your Share Purchase
Application and indicate the Evergreen Keystone Fund(s) into which distributions
are to be invested.

EFFECT OF BANKING LAWS

<PAGE>
customers. If CMG or Evergreen Asset and Keystone 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

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.

<PAGE>
GENERAL INFORMATION

Custodian. State Street Bank and Trust Company, P.O. Box 9021, Boston,
Massachusetts 02205-9827 acts as each Fund's custodian.

Other Classes Of Shares. Each Fund currently offers four classes of shares,
Class A, Class B, Class C and Class Y, and may in the future offer additional
classes. Class Y shares are the only class of shares offered by this Prospectus
and are only available to (i) persons who at or prior to December 31, 1994,
owned shares in a mutual fund advised by Evergreen Asset, (ii) certain
institutional investors and (iii) investment advisory clients of CMG, Evergreen
Asset, Keystone or their affiliates. The dividends payable with respect to Class
A, Class B and Class C shares will be less than those payable with respect to
Class Y shares due to the distribution and shareholder servicing-related
expenses borne by Class A, Class B and Class C shares and the fact that such
expenses are not borne by Class Y shares.

<PAGE>
Fund earns on its investments as a percentage of the Fund's share price. The
Fund's yield is calculated according to accounting methods that are standardized
by the SEC for all stock and bond funds. Because yield accounting methods differ
from the method used for other accounting purposes, the Fund's yield may not
equal its distribution rate, the income paid to your account or the net
investment income reported in the Fund's financial statements. To calculate
yield, the Fund takes the interest and dividend income it earned from its
portfolio of investments (as defined by the SEC formula) for a 30-day period
(net of expenses), divides it by the average number of shares entitled to
receive dividends, and expresses the result as an annualized percentage rate
based on the Fund's share price at the end of the 30-day period. This yield does
not reflect gains or losses from selling securities.

Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust shall contain a provision to that effect. If any Trustee or shareholder
were required to pay any liability of the Trust, that person would be entitled
to reimbursement from the general assets of the Trust.

<PAGE>

Capital Management Group of First Union National Bank of North Carolina, 201
South College Street, Charlotte, North Carolina 28288
EVERGREEN BALANCED FUND

CUSTODIAN
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827

TRANSFER AGENT
Evergreen Keystone Service Company, Inc., P.O. Box 2121, Boston, Massachusetts
02106-2121

LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 99 High Street, Boston, Massachusetts 02110

DISTRIBUTOR
Evergreen Keystone Distributor, Inc., 120 Clove Road, Little Falls, New Jersey
07424

48693 540394

*******************************************************************************

STATEMENT OF ADDITIONAL INFORMATION

May 1, 1997

THE EVERGREEN KEYSTONE GROWTH AND INCOME AND BALANCED FUNDS

The Evergreen Funds
2500 Westchester Avenue, Purchase, New York 10577-2555
1-800-807-2940

The Keystone Funds
200 Berkeley Street, Boston, Massachusetts 02116-5034
1-800-343-2898

Growth and Income Funds

Evergreen Growth and Income Fund ("Growth and Income")
Evergreen Income and Growth Fund (formerly Evergreen Total Return Fund)
("Income and Growth")
Evergreen Small Cap Equity Income Fund ("Small Cap")
Evergreen Utility Fund ("Utility")
Evergreen Value Fund ("Value")
Keystone Fund for Total Return ("Total Return")

Balanced Funds

Evergreen Foundation Fund ("Foundation")
Evergreen Tax Strategic Foundation Fund ("Tax Strategic")
Evergreen American Retirement Fund ("American Retirement")
Evergreen Balanced Fund ("Balanced")

This Statement of Additional Information pertains to all classes of shares of
the Funds listed above. It is not a prospectus and should be read in conjunction
with the Prospectus dated May 1, 1997, for the Fund in which you are making or
contemplating an investment. The Evergreen Keystone Growth and Income and
Balanced Funds are offered through four separate prospectuses: one offering
Class A, Class B and Class C shares and a separate prospectus offering Class Y
shares of Growth and Income, Income and Growth, Small Cap, Utilty, Value and
Total Return; and one offering Class A, Class B and Class C shares and a
separate prospectus offering Class Y shares of Foundation, Tax Strategic,
American Retirement and Balanced.

<PAGE>

TABLE OF CONTENTS

Investment Objectives and Policies.................................2
Investment Restrictions............................................7
Non-Fundamental Operating Policies................................15
Certain Risk Considerations.......................................16
Management........................................................17
Investment Advisers...............................................29
Distribution Plans................................................34
Allocation of Brokerage...........................................38
Additional Tax Information........................................41
Net Asset Value...................................................43
Purchase of Shares................................................45
Performance Information...........................................59
Financial Statements..............................................64
Appendix A - Description of Bond, Municipal Note
and Commercial Paper Ratings.....................................64

INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objectives
and Policies" in each Fund's Prospectus)

The investment objective of each Fund and a description of the securities
in which each Fund may invest is set forth under "Description of the Funds
"Investment Objectives and Policies" in the relevant Prospectus. The investment
objectives are fundamental and cannot be changed without the approval of
shareholders. The following expands upon the discussion in the Prospectus
regarding certain investments of each Fund.

U.S. Government Securities (All Funds)

The types of U.S. government securities in which the Funds may invest
generally include direct obligations of the U.S. Treasury such as U. S.
Treasury bills, notes and bonds and obligations issued or guaranteed by U.S.
government agencies or instrumentalities. These securities are backed by:

(i) the full faith and credit of the U.S. Treasury;

(ii) the issuer's right to borrow from the U.S. Treasury;

(iii) the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or

(iv) the credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities that may not always receive
financial support from the U.S. government are:

(i) Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks and Banks for Cooperatives;

(ii) Farmers Home Administration;

(iii) Federal Home Loan Banks;

<PAGE>

(iv) Federal Home Loan Mortgage Corporation;

(v) Federal National Mortgage Association; and

(vi) Student Loan Marketing Association

Restricted and Illiquid Securities (All Funds)

Each Fund may invest in restricted and illiquid securities. The ability
of the Board of Trustees ("Trustees") to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange Commission
("SEC") Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for sale under the
Rule. The Funds which invest in Rule 144A securities believe that the Staff of
the SEC has left the question of determining the liquidity of all restricted
securities (eligible for resale under the Rule) for determination by the
Trustees. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:

(i) the frequency of trades and quotes for the security;

(ii) the number of dealers willing to purchase or sell the security and
the number of other potential buyers;

(iii) dealer undertakings to make a market in the security; and

(iv) the nature of the security and the nature of the marketplace trades.

Restricted securities would generally be acquired either from
institutional investors who originally acquired the securities in private
placements or directly from the issuers of the securities in private placements.
Restricted securities and securities that are not readily marketable may sell at
a discount from the price they would bring if freely marketable.

When-Issued and Delayed Delivery Securities
(Balanced, Tax Strategic, Utility, Value and Total Return)

Securities puchased on a when-issued or delayed delivery basis are made
to secure what is considered to be an advantageous price or yield for a Fund. No
fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of a Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and are maintained until the transaction has
been settled. Balanced, Utility and Value do not intend to engage in when-
issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of their assets and Tax
Strategic's commitment to purchase when-issued securities will not exceed 25% of
the Fund's total assets. Total Return does not intend to invest more than 5%
of its net assets in when-issued or delayed delivery transactions.

<PAGE>

Lending of Portfolio Securities (All Funds)

Each Fund may lend its portfolio securities to generate income and to
offset expenses. The collateral received when a Fund lends portfolio securities
must be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the lending Fund.
During the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to termination
at the option of the Fund or the borrower. A Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent collateral
to the borrower or placing broker. A Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote if
that were considered important with respect to the investment.

Reverse Repurchase Agreements
(Small Cap, Utility, Value, Tax Strategic, Balanced and Total Return)

Reverse repurchase agreements are similar to borrowing cash. In a reverse
repurchase agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon rate.

The use of reverse repurchase agreements may enable a Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.

When effecting reverse repurchase agreements, liquid assets of a Fund, in
a dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.

Options and Futures Transactions (All Funds)

Options which Balanced, Utility and Value trade must be listed on
national securities exchanges.

Purchasing Put and Call Options on Financial Futures Contracts

Balanced, Utility, Value and Total Return may purchase put and call
options on financial futures contracts (in the case of Utility and Value limited
to options on financial futures contracts for U.S. government securities).
Unlike entering directly into a futures contract, which requires the purchaser
to buy a financial instrument on a set date at an undetermined price, the
purchase of a put option on a futures contract entitles (but does not obligate)
its purchaser to decide on or before a future date whether to assume a short
position at the specified price.

A Fund may purchase put and call options on futures to protect portfolio
securities against decreases in value resulting from an anticipated increase in
market interest rates. Generally, if the hedged portfolio securities decrease in
value during the term of an option, the related futures contracts will also
decrease in value and the put option will increase in value. In such an event,

<PAGE>

a Fund will normally close out its option by selling an identical put option. If
the hedge is successful, the proceeds received by the Fund upon the sale of the
put option plus the realized gain offsets the decrease in value of the hedged
securities.

Alternately, a Fund may exercise its put option to close out the
position. To do so, it would enter into a futures contract of the type
underlying the option. If the Fund neither closes out nor exercises an option,
the option will expire on the date provided in the option contract, and only the
premium paid for the contract will be lost.

Purchasing Options

Balanced, Utility, Value and Total Return may purchase both put and call
options on their portfolio securities. These options will be used as a hedge to
attempt to protect securities which a Fund holds or will be purchasing against
decreases or increases in value. A Fund may purchase call and put options for
the purpose of offsetting previously written call and put options of the same
series. If the Fund is unable to effect a closing purchase transaction with
respect to covered options it has written, the Fund will not be able to sell the
underlying securities or dispose of assets held in a segregated account until
the options expire or are exercised.

Balanced, Utility, Value and Total Return intend to purchase put and call
options on currency and other financial futures contracts for hedging purposes.
A put option purchased by a Fund would give it the right to assume a position as
the seller of a futures contract. A call option purchased by the Fund would give
it the right to assume a position as the purchaser of a futures contract. The
purchase of an option on a futures contract requires the Fund to pay a premium.
In exchange for the premium, the Fund becomes entitled to exercise the benefits,
if any, provided by the futures contract, but is not required to take any action
under the contract. If the option cannot be exercised profitably before it
expires, the Fund's loss will be limited to the amount of the premium and any
transaction costs.

Utility and Value currently do not intend to invest more than 5% of their
net assets in options transactions. Total Return will not purchase a put option
if as a result of such purchase, more than 10% of its total assets would be
invested in premiums for such option.

"Margin" in Futures Transactions

Unlike the purchase or sale of a security, a Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, a Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with its custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contract initial margin does not involve the
borrowing of funds by a Fund to finance the transactions. Initial margin is in
the nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.

A futures contract held by a Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking to market." Variation
margin does not represent a borrowing or loan by the Fund but is

<PAGE>

instead settlement between the Fund and the broker of the amount one would owe
the other if the futures contract expired. In computing its daily net asset
value, a Fund will mark-to-market its open futures positions. The Fund is also
required to deposit and maintain margin when it writes call options on futures
contracts.

Balanced will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss on
those open positions, adjusted for the correlation of volatility between the
hedged securities and the futures contracts. If this limitation is exceeded at
any time, the Fund will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.

Income and Growth and Growth and Income may write covered call options to
a limited extent on their portfolio securities ("covered options") in an attempt
to earn additional income. A Fund will write only covered call option contracts
and will receive premium income from the writing of such contracts. Income and
Growth and Growth and Income may purchase call options to close out a previously
written call option. In order to do so, the Fund will make a "closing purchase
transaction" -- the purchase of a call option on the same security with the same
exercise price and expiration date as the call option which it has previously
written. A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. If an option is exercised, a Fund
realizes a long-term or short-term gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.

Junk Bonds (Growth and Income and Total Return)

Consistent with its strategy of investing in "undervalued" securities,
Growth and Income may invest in lower medium and low-quality bonds also known as
"junk bonds" and may also purchase bonds in default if, in the opinion of the
Fund's investment adviser, there is significant potential for capital
appreciation. Growth and Income, however, will not invest more than 5% of its
total assets in debt securities which are rated below investment grade. These
bonds are regarded as speculative with respect to the issuer's continuing
ability to meet principal and interest payments. High yield bonds may be more
susceptible to real or perceived adverse economic and competitive industry
conditions than investment grade bonds. A projection of an economic downturn, or
higher interest rates, for example, could cause a decline in high yield bond
prices because such events could lessen the ability of highly leveraged
companies to make principal and interest payments on their debt securities. In
addition, the secondary trading market for high yield bonds may be less liquid
than the market for higher grade bonds, which can adversely affect the ability
to dispose of such securities.

Variable and Floating Rate Securities (Foundation)

Foundation may invest no more than 5% of its total assets, at the time of
the investment in question, in variable and floating rate securities. The terms
of variable and floating rate instruments provide for the interest rate to be
adjusted according to a formula on certain predetermined dates. Variable and
floating rate instruments that are repayable on demand at a future date are
deemed to have a maturity equal to the time remaining until the principal will

<PAGE>

be received on the assumption that the demand feature is exercised on the
earliest possible date. For the purposes of evaluating the interest-rate
sensitivity of the Fund, variable and floating rate instruments are deemed to
have a maturity equal to the period remaining until the next interest-rate
readjustment. For the purposes of evaluating the credit risks of variable and
floating rate instruments, these instruments are deemed to have a maturity equal
to the time remaining until the earliest date the Fund is entitled to demand
repayment of principal.

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS

Except as noted, the investment restrictions set forth below are
fundamental and may not be changed with respect to each Fund without the
affirmative vote of a majority of the outstanding voting securities of the Fund.
Where an asterisk (*) appears after a Fund's name, the relevant policy is
non-fundamental with respect to that Fund and may be changed by the Fund's
investment adviser without shareholder approval, subject to review and approval
by the Trustees. As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding voting securities of the Fund" means
the lesser of (1) the holders of more than 50% of the outstanding shares of
beneficial interest of the Fund or (2) 67% of the shares present if more than
50% of the shares are present at a meeting in person or by proxy.

1. Concentration of Assets in Any One Issuer

Neither Growth and Income nor Income and Growth may invest more than 5%
of their net assets, at the time of the investment in question, in the
securities of any one issuer other than the U.S. government and its agencies or
instrumentalities.

American Retirement may not invest more than 5% of its total assets, at
the time of the investment in question, in the securities of any one issuer
other than the U.S. government and its agencies or instrumentalities.

None of Balanced, Foundation, Small Cap, Utility, Value or Total Return
may invest more than 5% of its total assets, at the time of the investment in
question, in the securities of any one issuer other than the U.S. government and
its agencies or instrumentalities, except that up to 25% of the value of a
Fund's total assets may be invested without regard to such 5% limitation.

Tax Strategic may not invest more than 5% of its total assets, at the
time of the investment in question, in the securities of any one issuer other
than the U.S. government and its agencies or instrumentalities, except that up
to 25% of the value of the Fund's total assets may be invested without regard to
such 5% limitation. For this purpose each political subdivision, agency, or
instrumentality and each multi-state agency of which a state is a member, and
each public authority which issues industrial development bonds on behalf of a
private entity, will be regarded as a separate issuer for determining the
diversification of the Fund's portfolio.

2. Ten Percent Limitation on Securities of Any One Issuer

None of American Retirement, Foundation, Small Cap, Growth and Income or
Income and Growth may purchase more than 10% of any class of securities of any
one issuer other than the U.S. government and its agencies or instrumentalities.

<PAGE>

Neither Value nor Utility may purchase more than 10% of the outstanding
voting securities of any one issuer.

Neither Tax Strategic nor Total Return may not purchase more than 10% of
the voting securities of any one issuer other than the U.S. government and its
agencies or instrumentalities.

3. Investment for Purposes of Control or Management

None of American Retirement, Foundation, Growth and Income, Small Cap*,
Tax Strategic*, Income and Growth, Utility*, Value or Total Return may invest in
companies for the purpose of exercising control or management.

4. Purchase of Securities on Margin

None of American Retirement, Balanced, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Income and Growth, Utility, Value or Total Return
may purchase securities on margin, except that each Fund may obtain such
short-term credits as may be necessary for the clearance of transactions. A
deposit or payment by a Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not considered
the purchase of a security on margin.

5. Unseasoned Issuers

Neither American Retirement nor Foundation may invest in the securities
of unseasoned issuers that have been in continuous operation for less than three
years, including operating periods of their predecessors.

None of Income and Growth, Value*, Utility* or Total Return may invest
more than 5% of its total assets in securities of unseasoned issuers that have
been in continuous operation for less than three years, including operating
periods of their predecessors.

None of Growth and Income, Small Cap* and Tax Strategic* may invest more
than 15% of its total assets (10% of total net assets in the case of Growth and
Income) in securities of unseasoned issuers that have been in continuous
operation for less than three years, including operating periods of their
predecessors.

6. Underwriting

American Retirement, Foundation, Growth and Income, Small Cap, Tax
Strategic, Income and Growth, Balanced, Utility, Value and Total Return will not
underwrite any issue of securities except as they may be deemed an underwriter
under the Securities Act of 1933 in connection with the sale of securities in
accordance with their investment objectives, policies and limitations.

7. Interests in Oil, Gas or Other Mineral Exploration or Development
Programs.

None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Income and Growth may purchase, sell or invest in interests in
oil, gas or other mineral exploration or development programs.

Neither Balanced* nor Utility* will purchase interests in oil, gas or
other mineral exploration or development programs or leases, although each Fund
may

<PAGE>

purchase the securities of other issuers which invest in or sponsor such
programs.

Value will not purchase interests in oil, gas or other mineral
exploration or development programs or leases, although it may purchase the
publicly traded securities of companies engaged in such activities.

8. Concentration in Any One Industry

Neither Growth and Income nor Income and Growth may concentrate its
investments in any one industry, except that each Fund may invest up to 25% of
its total net assets in any one industry.

None of American Retirement, Foundation, Small Cap and Tax Strategic may
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry; provided, that this
limitation shall not apply (i) with respect to each Fund, to obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities, or
(ii) with respect to Tax Strategic, to municipal securities. For purposes of
this restriction, utility companies, gas, electric, water and telephone
companies will be considered separate industries.

Balanced and Value will not invest 25% or more of the value of their
total assets in any one industry except Balanced may invest more than 25% and
Value may invest 25% or more of its total assets in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.

Utility will not invest more than 25% of its total assets (valued at the
time of investment) in securities of companies engaged principally in any one
industry other than the utilities industry, except that this restriction does
not apply to cash or cash items and securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

Total Return will not purchase any security (other than U.S. government
securities) of any issuer if as a result more than 25% of its total assets would
be invested in a single industry; except that (a) there is no restriction with
respect to obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities; (b) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily related
to financing the activities of the parents; (c) the industry classification of
utilities will be determined according to their services (for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry); and (d) the industry classification of medically related industries
will be determined according to their services (for example, management,
hospital supply, medical equipment and pharmaceuticals will each be considered a
separate industry).

9. Warrants

None of American Retirement, Growth and Income, Income and Growth, Small
Cap*, Foundation or Tax Strategic* may invest more than 5% of its net assets in
warrants and, of this amount, no more than 2% of each Fund's net assets may be
invested in warrants that are listed on neither the New York nor the American
Stock Exchange.

Utility* and Value* will not invest more than 5% of their net assets in
warrants, including those acquired in units or attached to other securities.

<PAGE>

For purposes of this restriction, warrants acquired by the Funds in units or
attached to securities may be deemed to be without value.

10. Ownership by Trustees/Officers

None of American Retirement, Balanced*, Foundation, Growth and Income,
Small Cap*, Tax Strategic*, Income and Growth, Utility* or Value* may purchase
or retain the securities of any issuer if (i) one or more officers or Trustees
of a Fund or its investment adviser individually owns or would own, directly or
beneficially, more than 1/2 of 1% of the securities of such issuer, and (ii) in
the aggregate, such persons own or would own, directly or beneficially, more
than 5% of such securities.

Portfolio securities of any Fund may not be purchased from or sold or
loaned to its Adviser or any affiliate thereof, or any of their directors,
officers or employees.

11. Short Sales

Neither American Retirement nor Foundation may make short sales of
securities unless, at the time of each such sale and thereafter while a short
position exists, each Fund owns the securities sold or securities convertible
into or carrying rights to acquire such securities.

None of Growth and Income, Tax Strategic* and Income and Growth may make
short sales of securities unless, at the time of each such sale and thereafter
while a short position exists, each Fund owns an equal amount of securities of
the same issue or owns securities which, without payment by the Fund of any
consideration, are convertible into, or are exchangeable for, an equal amount of
securities of the same issue.

Small Cap,* may not make short sales of securities unless, at the time of
each such sale and thereafter while a short position exists, each Fund owns an
equal amount of securities of the same issue or owns securities which, without
payment by the Fund of any consideration, are convertible into, or are
exchangeable for, an equal amount of securities of the same issue (and provided
that transactions in futures contracts and options are not deemed to constitute
selling securities short).

Neither Balanced nor Total Return will make short sales of securities or
maintain a short position, unless at all times when a short position is open it
owns an equal amount of such securities or of securities which, without payment
of any further consideration are convertible into or exchangeable for securities
of the same issue as, and equal in amount to, the securities sold short. With
respect to Balanced, the use of short sales will allow the Fund to retain
certain bonds in its portfolio longer than it would without such sales. To the
extent that the Fund receives the current income produced by such bonds for a
longer period than it might otherwise, the Fund's investment objective is
furthered.

Utility and Value will not sell any securities short.

12. Lending of Funds and Securities

Neither Small Cap nor Tax Strategic may lend its funds to other persons,
except through the purchase of a portion of an issue of debt securities publicly
distributed or the entering into of repurchase agreements.

<PAGE>

None of American Retirement, Foundation, Growth and Income and Income and
Growth may lend its funds to other persons, except through the purchase of a
portion of an issue of debt securities publicly distributed.

None of Foundation, Small Cap or Tax Strategic, may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the current market value of the loaned securities,
including accrued interest, provided that the aggregate amount of such loans
shall not exceed 30% of the Fund's total assets.

Neither American Retirement or Growth and Income may lend its portfolio
securities, unless the borrower is a broker, dealer or financial institution
that pledges and maintains collateral with the Fund consisting of cash or
securities issued or guaranteed by the U.S. government having a value at all
times not less than 100% of the value of the loaned securities (100% of the
current market value for American Retirement), provided that the aggregate
amount of such loans shall not exceed 30% of the Fund's net assets.

Income and Growth may not lend its portfolio securities, unless the
borrower is a broker, dealer or financial institution that pledges and maintains
collateral with the Fund consisting of cash, letters of credit or securities
issued or guaranteed by the U.S. government having a value at all times not less
than 100% of the current market value of the loaned securities (100% of the
value of the loaned securities for Income and Growth), including accrued
interest, provided that the aggregate amount of such loans shall not exceed 30%
of the Fund's net assets.

Balanced will not lend any of its assets except portfolio securities in
accordance with its investment objective, policies and limitations.

Utility will not lend any of its assets, except portfolio securities up
to 15% of the value of its total assets. This does not prevent the Fund from
purchasing or holding corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, repurchase
agreements, or other transactions which are permitted by the Fund's investment
objectives and policies or the Declaration of Trust governing the Fund.

Value will not lend any of its assets except that it may purchase or hold
corporate or government bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, repurchase agreements or other
transactions which are permitted by the Fund's investment objectives and
policies or the Declaration of Trust by which the Fund is governed or lend
portfolio securities valued at not more than 5% of its total assets to
broker-dealers.

Total Return will not make loans, except that the Fund may purchase or hold
debt securities consistent with its investment objective, lend portfolio
securities valued at not more than 15% of its total assets to broker-dealers and
enter into repurchase agreements.

13. Commodities

Tax Strategic may not purchase, sell or invest in commodities, commodity
contracts or financial futures contracts.

<PAGE>

Small Cap may not purchase, sell or invest in physical commodities unless
acquired as a result of ownership of securities or other instruments (but this
shall not prevent the Fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities).

None of American Retirement, Foundation, Growth and Income, Income and
Growth may purchase, sell or invest in commodities or commodity contracts.

None of Balanced, Utility, Value or Total Return will purchase or sell
commodities or commodity contracts; however, each Fund may enter into futures
contracts on financial instruments or currency and sell or buy options on such
contracts.

Total Return will not purchase or sell real estate, except that it may
purchase and sell securities secured by real estate and securities of companies
which invest in real estate.

14. Real Estate

Small Cap may not purchase or invest in real estate or interests in real
estate (but this shall not prevent the Fund from investing in marketable
securities issued by companies such as real estate investment trusts which deal
in real estate or interests therein).

None of American Retirement, Foundation, Growth and Income, Tax Strategic
or Income and Growth may purchase, sell or invest in real estate or interests in
real estate, except that (i) each Fund may purchase, sell or invest in
marketable securities of companies holding real estate or interests in real
estate, including real estate investment trusts, and (ii) Tax Strategic may
purchase, sell or invest in municipal securities or other debt securities
secured by real estate or interests therein.

None of Balanced, Utility or Value will buy or sell real estate although
each Fund may invest in securities of companies whose business involves the
purchase or sale of real estate or in securities which are secured by real
estate or interests in real estate. Neither Utility nor Value will invest in
limited partnership interests in real estate.

15. Borrowing, Senior Securities, Repurchase Agreements and Reverse
Repurchase Agreements

None of American Retirement, Foundation or Income and Growth may borrow
money except from banks as a temporary measure to facilitate redemption requests
which might otherwise require the untimely disposition of portfolio investments
and for extraordinary or emergency purposes (and, with respect to American
Retirement only, for leverage), provided that the aggregat amount of such
borrowings shall not exceed 5% of the value of the Fund's total net assets (5%
of total assets for American Retirement and Foundation) at the time of any such
borrowing, or mortgage, pledge or hypothecate its assets, except in an amount
sufficient to secure any such borrowing. Neither American Retirement nor
Foundation may issue senior securities, except as permitted by the Investment
Company Act of 1940. Neither Foundation nor American Retirement may enter into
repurchase agreements or reverse repurchase agreements.

Neither Small Cap nor Tax Strategic may borrow money, issue senior
securities or enter into reverse repurchase agreements, except for temporary or

<PAGE>

emergency purposes, and not for leveraging, and then in amounts not in excess of
10% of the value of each Fund's total assets at the time of such borrowing; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of each Fund's total assets at the time of such
borrowing, provided that each of Small Cap, Tax Strategic will not purchase any
securities at any time when borrowings, including reverse repurchase agreements,
exceed 5% of the value of its total assets. Neither Fund will enter into reverse
repurchase agreements exceeding 5% of the value of its total assets.

Growth and Income may not borrow money except from banks as a temporary
measure for extraordinary or emergency purposes, provided that the aggregate
amount of such borrowings shall not exceed 5% of the value of the Fund's total
assets at the time of such borrowing; or mortgage, pledge or hypothecate its
assets, except in an amount not exceeding 15% of its assets taken at cost to
secure such borrowing. Growth and Income may not issue senior securities, as
defined in the Investment Company Act of 1940, except that this restriction
shall not be deemed to prohibit the Fund from (i) making any permitted
borrowings, mortgages or pledges, (ii) lending its portfolio securities, or
(iii) entering into permitted repurchase transactions.

Balanced and Utility will not issue senior securities except that each
Fund may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets, including the amounts borrowed
and except to the extent a Fund may enter into futures contracts. The Funds will
not borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary or emergency measure to
facilitate management of their portfolios by enabling them to, for example, meet
redemption requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. Balanced will not purchase any securities while
any borrowings are outstanding. Utility will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding. Neither Balanced
nor Utility will mortgage, pledge or hypothecate any assets except to secure
permitted borrowings. In these cases, Balanced and Utility may pledge assets
having a market value not exceeding the lesser of the dollar amounts borrowed or
15% of the value of total assets at the time of borrowing. Margin deposits for
the purchase and sale of financial futures contracts and related options and
segregation or collateral arrangements made in connection with options
activities are not deemed to be a pledge.

Value will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary measure
for extraordinary or emergency purposes and then only in amounts not in excess
of 10% of the value of its total assets; provided that while borrowings exceed
5% of the Fund's total assets, any such borrowings will be repaid before
additional investments are made. The Fund will not purchase any securities while
borrowings in excess of 5% of the value of its total assets are outstanding. The
Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage purposes. The Fund will not mortgage, pledge or hypothecate
any assets except to secure permitted borrowings. In these cases, the Fund may
pledge assets having a market value not exceeding the lesser of the dollar
amounts borrowed or 10% of the value of total assets at the time of borrowing.
Margin deposits for the purchase and sale of financial futures contracts and
related options and segregation or collateral arrangements made in connection
with options activities are not deemed to be a pledge.

<PAGE>

Total Return will not borrow money or enter into reverse repurchase
agreements, except that the Fund may enter into reverse repurchase agreements or
borrow money from banks for temporary or emergency purposes in aggregate amounts
up to one-third of the value of the Fund's net assets; provided that while
borrowings from banks (not including reverse repurchase agreements) exceed 5% of
the Fund's net assets, any such borrowings will be repaid before additional
investments are made. The Fund will not pledge more than 15% of its net assets
to secure indebtedness; the purchase or sale of securities on a "when issued"
basis or collateral arrangement with respect to the writing of options on
securities are not deemed to be a pledge of assets. The Fund will not issue
senior securities; the purchase or sale of securities on a "when issued" basis
or collateral arrangement with respect to the writing of options on securities
are not deemed to be the issuance of a senior security. The Fund will not make
loans, except that the Fund may purchase or hold debt securities consistent with
its investment objective, lend portfolio securities valued at not more than 15%
of its total assets to broker-dealers and enter into repurchase agreements.

16. Joint Trading

None of American Retirement, Foundation, Growth and Income, Small Cap,*
Tax Strategic,* or Income and Growth may participate on a joint or joint and
several basis in any trading account in any securities. (The "bunching of orders
or the purchase or sale of portfolio securities with its investment adviser or
accounts under its management to reduce brokerage commissions, to average prices
among them or to facilitate such transactions is not considered a trading
account in securities for purposes of this restriction).

17. Options

Foundation and Tax Strategic* may not write, purchase or sell put or call
options, or combinations thereof.

Neither Growth and Income nor Income and Growth may write, purchase or
sell put or call options, or combinations thereof, except that each Fund is
authorized to write covered call options on portfolio securities and to purchase
call options in closing purchase transactions, provided that (i) such options
are listed on a national securities exchange, (ii) the aggregate market value of
the underlying securities does not exceed 25% of the Fund's net assets, taken at
current market value on the date of any such writing, and (iii) the Fund retains
the underlying securities for so long as call options written against them make
the shares subject to transfer upon the exercise of any options.

American Retirement may not write, purchase or sell put or call options,
or combinations thereof, except that the Fund is authorized (i) to write call
options traded on a national securities exchange against no more than 15% of the
value of the equity securities (including securities convertible into equity
securities) held in its portfolio, provided that the Fund owns the optioned
securities or securities convertible into or carrying rights to acquire the
optioned securities and (ii) to purchase call options in closing purchase
transactions.

Utility* will not purchase put options on securities unless the
securities are held in the Fund's portfolio and not more than 5% of the Fund's
total assets would be invested in premiums on open put options. Utility* will
not write call options on securities unless securities are held in the Fund's

<PAGE>

portfolio or unless the Fund is entitled to them in deliverable form without
further payment or after segregating cash in the amount of any further payment.

18. Investment in Equity Securities

American Retirement may not invest more than 75% of the value of its
total assets in equity securities (including securities convertible into equity
securities).

19. Investing in Securities of Other Investment Companies

Balanced*, Utility and Value will purchase securities of investment
companies only in open-market transactions involving customary broker's
commissions. However, these limitations are not applicable if the securities are
acquired in a merger, consolidation or acquisition of assets. It should be noted
that investment companies incur certain expenses such as management fees and
therefore any investment by a Fund in shares of another investment company would
be subject to such duplicate expenses.

Total Return may not purchase securities of other investment companies,
except as part of a merger, consolidation, purchase or assets or similar
transaction.

Each other Fund may purchase the securities of other investment
companies, except to the extent such purchases are not permitted by applicable
law.

20. Restricted Securities

Balanced and Value will not invest more than 10% of their net assets in
securities subject to restrictions on resale under the Securities Act of 1933
(except for, in the case of Balanced, certain restricted securities which meet
criteria for liquidity established by the Trustees).

Utility* will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities Act of
1933 and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees.

NON FUNDAMENTAL OPERATING POLICIES

Certain Funds have adopted additional non-fundamental operating policies.
Operating policies may be changed by the Board of Trustees without a shareholder
vote.

1. Futures and Options Transactions

Small Cap will not: (i) sell futures contracts, purchase put options or
write call options if, as a result, more than 30% of the Fund's total assets
would be hedged with futures and options under normal conditions; (ii) purchase
futures contracts or write put options if, as a result, the Fund's total
obligations upon settlement or exercise of purchased futures contracts and
written put options would exceed 30% of its total assets; or (iii) purchase call
options if, as a result, the current value of option premiums for options
purchased by the Fund would exceed 5% of the Fund's total assets. These
limitations do not apply to options attached to, or acquired or traded together

<PAGE>

with their underlying securities, and do not apply to securities that
incorporate features similar to options.

2. Illiquid Securities.

None of American Retirement, Foundation, Growth and Income, Small Cap,
Tax Strategic or Income and Growth may invest more than 15% of its net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements which have a maturity of longer than seven days,
but excluding securities eligible for resale under Rule 144A of the Securities
Act of 1933, as amended, which the Trustees have determined to be liquid.

Balanced and Utility will not invest more than 10% (in the case of
Balanced) or 15% (in the case of Utility) of its net assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain securities determined by the Trustees
not to be liquid and, in the case of Utility, in non-negotiable time deposits.

Except with respect to borrowing money (and with respect to Total Return,
including borrowing money), if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such
restriction.

CERTAIN RISK CONSIDERATIONS

There can be no assurance that a Fund will achieve its investment
objective and an investment in the Fund involves certain risks which are
described under "Description of the Funds - Investment Objectives and Policies"
in each Fund's Prospectus.

In addition, the ability of Tax Strategic to achieve its investment
objective is dependent on the continuing ability of the issuers of Municipal
Securities in which the Fund invests -- and of banks issuing letters of credit
backing such securities -- to meet their obligations with respect to the payment
of interest and principal when due. The ratings of Moody's Investors Service,
Inc., Standard & Poor's Ratings Service, a division of McGraw Hill Companies,
Inc. and other nationally recognized rating organizations represent their
opinions as to the quality of Municipal Securities which they undertake to rate.
Ratings are not absolute standards of quality; consequently, Municipal
Securities with the same maturity, coupon, and rating may have different yields.
There are variations in Municipal Securities, both within a particular
classification and between classifications, resulting from numerous factors.

Unlike other types of investments, Municipal Securities have
traditionally not been subject to regulation by, or registration with, the SEC,
although there have been proposals which would provide for regulation in the
future.

The federal bankruptcy statutes relating to the debts of political
subdivisions and authorities of states of the United States provide that, in
certain circumstances, such subdivisions or authorities may be authorized to
initiate bankruptcy proceedings without prior notice to or consent of creditors,
which proceedings could result in material and adverse changes in the rights of
holders of their obligations. In addition, there have been lawsuits challenging
the issuance of pollution control revenue bonds or the validity of their
issuance under state or federal law which could ultimately

<PAGE>

affect the validity of those Municipal Securities or the tax-free nature of the
interest thereon.

MANAGEMENT

The Evergreen Keystone Funds consist of seventy-three mutual funds. Each
mutual fund is, or is a series of, a registered, open-end management company.

The Trustees and executive officers of each mutual fund, their age, address
and principal occupations during the past five years are set forth below:

TRUSTEES

JAMES S. HOWELL (72), 4124 Crossgate Road, Charlotte, NC Chairman of the
Evergreen group of mutual funds, and Trustee. Retired Vice President of Lance
Inc. (food manufacturing); Chairman of the Distribution Comm. Foundation for the
Carolinas from 1989 to 1993.

RUSSELL A. SALTON, III, M.D. (49), 205 Regency Executive Park, Charlotte, NC
Trustee. Medical Director, U.S. Healthcare of the Charlotte, NC Carolinas since
1996; President, Primary Physician Care from 1990 to 1996.

MICHAEL S. SCOFIELD (53), 212 S. Tryon Street Suite 980, Charlotte, NC Trustee.
Attorney, Law Offices of Michael S. Scofield since 1969.

Messrs. Howell, Salton and Scofield are Trustees of all seventy-three investment
companies:

GERALD M. MCcDONNELL (57), 821 Regency Drive, Charlotte, NC Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.

THOMAS L. McVERRY (58), 4419 Parkview Drive, Charlotte, NC Trustee. Director of
Carolina Cooperative Federal Credit Union since 1990 and Rexham Corporation from
1988 to 1990; Vice President of Rexham Industries, Inc. (diversified
manufacturer) from 1989 to 1990; Vice President-Finance and Resources, Rexham
Corporation from 1979 to 1990.

WILLIAM WALT PETTIT*(41), Holcomb and Pettit, P.A., 227 West Trade St.,
Charlotte, NC Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990.

Messrs. McDonnell, McVerry and Pettit are Trustees of forty-three of the
investment companies (excluded are those established within the Evergreen
Variable Trust).

LAURENCE B. ASHKIN (68), 180 East Pearson Street, Chicago, IL Trustee. Real
estate developer and construction consultant since 1980; President of Centrum
Equities since 1987 and Centrum Properties, Inc. since 1980.

FOSTER BAM (70), Greenwich Plaza, Greenwich, CT Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.

Messrs. Ashkin and Bam are Trustees of forty-two of the investment companies
(excluded are those established within the Evergreen Variable Trust and
Evergreen Investment Trust).

FREDERICK AMLING (69)

<PAGE>

Trustee. Professor, Finance Department, George Washington University;
President, Amling & Company (investment advice); Member, Board of Advisers,
Credito Emilano (banking); and former Economics and Financial Consultant,
Riggs National Bank.

CHARLES A. AUSTIN III (61)
Trustee. Investment Counselor to Appleton Partners, Inc.; former Managing
Director, Seaward Management Corporation (investment advice); and former
Director, Executive Vice President and Treasurer, State Street Research &
Management Company (investment advice).

GEORGE S. BISSELL* (67) Chairman of the Keystone group of mutual Funds, and
Trustee. Director of Keystone Investments Inc.; Chairman of the Board and
Trustee of Anatolia College; Trustee of University Hospital (and Chairman
of its Investment Committee); former Director and Chairman of the Board of
Hartwell Keystone; and former Chairman of the Board and Chief Executive
Officer of Keystone Investments.

EDWIN D. CAMPBELL (69) Trustee. Director and former Executive Vice
President, National Alliance of Business; former Vice President,
Educational Testing Services; former Dean, School of Business, Adelphi
University; and former Executive Director, Coalition of Essential Schools,
Brown University.

CHARLES F. CHAPIN (67)
Trustee. Former Group Vice President, Textron Corp.; and former Director,
Peoples Bank (Charlotte, NC).

K. DUN GIFFORD (57)
Trustee. Chairman of the Board, Director, and Executive Vice President, The
London Harness Company; Managing Partner, Roscommon Capital Corp.; Trustee,
Cambridge College; Chairman Emeritus and Director, American Institute of
Food and Wine; Chief Executive Officer, Gifford Gifts of Fine Foods;
Chairman, Gifford, Drescher & Associates (environmental consulting);
President, Oldways Preservation and Exchange Trust (education); and former
Director, Keystone Investments Inc. and Keystone Investment Management
Company.

LEROY KEITH, JR. (57) Trustee. Director of Phoenix Total Return Fund and
Equifax, Inc.; Trustee of Phoenix Series Fund, Phoenix Multi-Portfolio
Fund, and The Phoenix Big Edge Series Fund; and former President,
Morehouse College.

F. RAY KEYSER, JR. (69)
Trustee and Advisor to the Boards of Trustees of the Evergreen Funds.
Counsel, Keyser, Crowley & Meub, P.C.; Member, Governor's (VT) Council of
Economic Advisers; Chairman of the Board and Director, Central Vermont
Public Service Corporation and Hitchcock Clinic; Director, Vermont Yankee
Nuclear Power Corporation, Vermont Electric Power Company, Inc., Grand Trunk
Corporation, Central Vermont Railway, Inc., S.K.I. Ltd., Sherburne
Corporation, Union Mutual Fire Insurance Company, New England Guaranty
Insurance Company, Inc., and the Investment Company Institute; former
Governor of Vermont.

DAVIDM. RICHARDSON (55) Trustee. Executive Vice President, DHR
International, Inc. (executive recruitment); former Senior Vice
President, Boyden International Inc. (executive recruitment); and
Director, Commerce and Industry Association of New Jersey, 411
International, Inc., and J&M Cumming Paper Co.

<PAGE>

RICHARD J. SHIMA (57)
Trustee and Advisor to the Boards of Trustees of the Evergreen Funds.
Chairman, Environmental Warranty, Inc., and Consultant, Drake Beam Morin,
Inc. (executive outplacement); Director of Connecticut Natural Gas
Corporation, Trust Company of Connecticut, Hartford Hospital, Old State
House Association, and Enhance Financial Services, Inc.; Chairman, Board of
Trustees, Hartford Graduate Center; Trustee, Kingswood- Oxford School and
Greater Hartford YMCA; former Director, Executive Vice President, and Vice
Chairman of The Travelers Corporation.

ANDREW J. SIMONS (57) Trustee. Partner, Farrell, Fritz, Caemmerer, Cleary,
Barnosky & Armentano, P.C.; former President, Nassau County Bar
Association; former Associate Dean and Professor of Law, St. John's
University School of Law.

Messrs. Amling, Austin, Bissell, Campbell, Chapin, Gifford, Keith, Keyser,
Richardson, Shima and Simons are Trustees or Directors of the thirty-one funds
in the Keystone group of mutual funds. Their address is 200 Berkeley Street,
Boston, Massachusetts 02116-5034.

ROBERT J. JEFFRIES (74), 2118 New Bedford Drive, Sun City Center, FL
Trustee Emeritus. Corporate consultant since 1967.

Mr. Jeffries has been serving as a Trustee Emeritus of eleven of the investment
companies since January 1, 1996 (excluded are Evergreen Variable Trust,
Evergreen Investment Trust, as well as the Keystone Group of Funds).

EXECUTIVE OFFICERS

JOHN J. PILEGGI (37), 230 Park Avenue, Suite 910, New York, NY President
and Treasurer. Consultant to BISYS Fund Services since 1996. Senior
Managing Director, Furman Selz LLC since 1992, Managing Director from
1984 to 1992.

GEORGE O. MARTINEZ (37), 3435 Stelzer Road, Columbus, OH Secretary. Senior
Vice President/Director of Administration and Regulatory Services,
BISYS Fund Services since April 1995. Vice President/Assistant General
Counsel, Alliance Capital Management from 1988 to 1995.
- --------
* Messrs. Pettit and Bissell may both be deemed to be an
"interested person" within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").

The officers of the Trusts are all officers and/or employees of The BISYS Group,
Inc.("BISYS") Services, except for Mr. Pileggi, who is a consultant to BISYS.
BISYS is an affiliate of Evergreen Keystone Distributor, Inc., the distributor
of each Class of shares of each Fund.

The Funds do not pay any direct remuneration to any officer or Trustee who is an
"affiliated person" of either First Union National Bank of North Carolina,
Evergreen Asset Management Corp. or Keystone Investment Management Company or
their affiliates. See "Investment Advisers". Currently, none of the Trustees is
an "affiliated person" as defined in the 1940 Act. The Trusts pay each Trustee
who is not an "affiliated person" an annual retainer and a fee per meeting
attended, plus expenses, as follows:

<PAGE>

Name of Trust/Fund Annual Retainer Meeting Fee

Income and Growth $ 5,500 $ 300
Growth and Income 500 100
The Evergreen American Retirement Trust 1,000
American Retirement 100
Small Cap 100
Evergreen Foundation Trust 500
Foundation 100
Tax Strategic 100
Evergreen Investment Trust* 15,000 2,000
Balanced
Utility
Value
Keystone Total Return** -0- -0-
- --------------------

* The annual retainer and meeting fee paid by Evergreen Investment Trust to each
Trustee are allocated among its fourteen series based on assets.

** See Item No. 7 below.

In addition:

(1) The Chairman of the Board of the Evergreen group of mutual funds is paid an
annual retainer of $5,000, and the Chairman of the Audit Committee is paid an
annual retainer of $2,000. These retainers are allocated among all the funds in
the Evergreen group of mutual funds, based upon assets.

(2) Each member of the Audit Committee of the Evergreen group of mutual funds is
paid an annual retainer of $500.

(3) Each non-affiliated Trustee of the Evergreen group of mutual funds is paid a
fee of $500 for each special telephonic meeting in which he participates,
regardless of the number of Funds for which the meeting is called.

(4) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $300 for each special telephonic meeting in which he participates,
regardless of the number of Funds for which the meeting is called.

(5) Each non-affiliated Trustee of the Evergreen group of mutual funds is paid a
fee of $250 for each special Committee of the Board telephone conference call
meeting of one or more Funds in which he participates.

(6) The members of the Advisory Committee to the Boards of Trustees of the
Evergreen Funds are paid an annual retainer of $17,500 and a fee of $2,200 for
each meeting of the Boards of Directors or Trustees of the Evergreen Funds
attended.

<PAGE>

(7) Each non-affiliated Trustee of the Keystone group of mutual funds is paid an
annual retainer of $30,000, and a fee of $1,200 for each meeting attended, which
fees are charged to the Funds as follows:
Annual Meeting
Retainer Fee
Keystone Global Opportunities Fund $ 500 $ 20
Keystone Global Resources and Development Fund $2,000 $ 80
Keystone Omega Fund $2,000 $ 80
Keystone Small Company Growth Fund II $ 500 $ 20
Keystone Strategic Income Fund $2,000 $ 80
Keystone Tax Free Income Fund $ 500 $ 20
Keystone Quality Bond Fund (B-1) $2,000 $ 80
Keystone Diversified Bond Fund (B-2) $2,500 $ 100
Keystone High Income Bond Fund (B-4) $2,500 $ 100
Keystone Balanced Fund (K-1) $3,000 $ 120
Keystone Strategic Growth Fund (K-2) $2,000 $ 80
Keystone Growth and Income Fund (S-1) $ 500 $ 20
Keystone Mid-Cap Growth Fund (S-3) $ 500 $ 20
Keystone Small Company Growth Fund (S-4) $3,000 $ 120
Keystone International Fund Inc. $ 500 $ 20
Keystone Precious Metals Holdings, Inc. $ 500 $ 20
Keystone Tax Free Fund $5,500 $ 220

(8)Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $600 for attendance at each Committee meeting held on the same day as a
regular meeting.

(9) Each non-affiliated Trustee of the Keystone group of mutual funds is paid a
fee of $1,200 for attendance at each Committee meeting held on a non-meeting
day.

(10) Any individual who has been appointed as a Trustee Emeritus of one or more
funds in the Evergreen group of mutual funds is paid one-half of the annual
retainer fees that are payable to regular Trustees, and one-half of the meeting
fees for each meeting attended.

<PAGE>

Set forth below for each of the Trustees is the aggregate compensation
(and expenses) paid to such Trustees by each Trust for the fiscal year ended
December 31, 1996 (fiscal year ended November 30, 1996 for Total Return and
January 31, 1997 for Income and Growth).

Aggregate Compensation From Each Trust

Evergreen Evergreen Evergreen Evergreen Evergreen Keystone
Income Growth American Foundation Investment Fund for
and Growth and Incmome Retirement Trust Trust Total
Name of Fund Fund Trust Return
Trustee

<PAGE>

L.B. Ashkin 7,249 1,121 2,020 1,861 0 0
F. Bam 6,949 1,021 1,820 1,661 0 0
J.S. Howell 7,410 1,187 2,031 2,055 26,007 0
G.M. McDonnell 6,834 966 1,811 1,496 22,355 0
T.L. McVerry 7,238 1,111 2,018 1,839 24,902 0
W.W. Pettit 7,071 1,029 2,005 1,597 23,504 0
R.A. Salton 7,071 1,029 2,005 1,597 23,804 0
M.S. Scofield 7,071 1,029 2,005 1,597 23,804 0
F.Amling 0 0 0 0 0 0
C.A. Austin 0 0 0 0 0 0
G.S. Bissell 0 0 0 0 0 0
E.D. Campbell 0 0 0 0 0 0
C.F. Chapin 0 0 0 0 0 0
K.D. Gifford 0 0 0 0 0 0
L. Keith 0 0 0 0 0 0
F.R. Keyser 0 0 0 0 0 0
D.M. Richardson 0 0 0 0 0 0
R.J. Shima 0 0 0 0 0 0
A.J. Simons 0 0 0 0 0 0
R.J. Jeffries 3,239 409 802 594 0 0
- -------------------------------------

Total
Compensation
From Trusts
and Fund
Complex Paid
To Trustees

L.B. Ashkin 33,000
F. Bam 30,300
J.S. Howell 66,000
G.M. McDonnell 53,300
T.L. McVerry 59,500
W.W. Pettit 57,000
R.A. Salton 61,000
M.S. Scofield 61,000
F.Amling 42,600
C.A. Austin 42,600
G.S. Bissell 0
E.D. Campbell 40,800
C.F. Chapin 40,800
K.D. Gifford 38,400
L. Keith 40,200
F.R. Keyser 42,600
D.M. Richardson 42,600
R.J. Shima 39,600
A.J. Simons 40,800
R.J. Jeffries 13,050

As of the date of this Statement of Additional Information, the officers
and Trustees of the Trusts owed as a group less than 10% of the outstanding
Class A, Class B, Class C or Class Y shares of any of the Funds.

Set forth below is information with respect to each person, who, to each
Fund's knowledge, owned beneficially or of record more than 5% of a class of
each Fund's total outstanding shares and their aggregate ownership of the Fund's
total outstanding shares as of February 28, 1997.

Name of % of
Name and Address Fund/Class No. of Shares Class/Fund
- ---------------- ---------- ------------- ------------

Merrill Lynch Balanced/C 7,370 24.09%/.01%
Trade House Account - AID
Private Client Group
Attn Book Entry
301 S. Tryon Street
Charlotte, NC 28288-0001

<PAGE>

Fubs & Co. Febo Balanced/C 2,937 9.60%/0%
FUNB NC F B O Goldston S. Bldg.
Supply Loan Acct.
Attn: Frank Pierce *Loan Account*
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Balanced/C 2,179 7.12%/0%
First Union National Bank-FL F/B/O
Leroy Selby, Jr. *Loan Account*
Attn: Carol Moening
301 S. Tryon Street
Charlotte, NC 28288-0001

First Union National Bank Balanced/Y 32,905,313 55.34%/46.29%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001

First Union National Bank Balanced/Y 26,468,493 44.51%/37.23%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001

<PAGE>

Fubs & Co. Febo Income and Growth/C 5,161 11.39%/.01%
T. James Bell Jr.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

First Union Natl. Bank-FL C/F Income and Growth/C 2,397 5.29%/0%
Fred W. Cookson IRA
301 S. Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Income and Growth/C 2,542 5.61%/0%
Last Stop Inc.
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Merrill Lynch Growth and Income/C 144,946 24.72%/.37%
Trade House Account - AID
Private Client Group
Attn: Book Entry
301 S. Tryon Street
Charlotte, NC 28288-0001

<PAGE>

First Union National Bank/EB/INT Growth and Income/Y 3,832,484 18.51%/9.67%
Cash Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911

First Union National Bank/EB/INT Growth and Income/Y 11,135,655 53.80%/28.11%
Reinvest Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911

<PAGE>

Fubs & Co. Febo American Retirement/C 15,584 12.70%/.18%
Adron G. Hollowell Trust
Robert E. Bryan JR. Trustee
U/A/D 9/23/63
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001

Charles Schwab & Co. Inc. American Retirement/Y 510,226 18.77%/5.73%
Special Custody Account for the
Exclusive Benefit of Customers
Reinvest Account Mut Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122

First Union National Bank/EB/INT American Retirement/Y 222,747 8.20%/2.50%
Reinvest Account
Attn. Trust Operations Fund Group
401 S. Tryon Street, 3rd Floor
CMG 1151
Charlotte, NC 28202-1911

FUNB NC CUST for the IRA of Small Cap/A 2,768 8.49%/.17%
Charletta B. Phillips
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

FUNB NC CUST for the IRA of Small Cap/A 2,768 8.49%/.17%
NR Phillips
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

<PAGE>

BHC Securities, Inc. Small Cap/A 2,619 8.03%/.17%
FAO 35532803
ATTN: Mutual Funds
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103-7042

BHC Securities, Inc. Small Cap/A 1,793 5.50%/.12%
FAO 35501632
ATTN: Mutual Funds Dept.
One Commerce Square
2005 Market Street Suite 1200
Philadelphia PA 19103-7042

First Union Natl.Bank GA C/F Small Cap/B 7,356 8.86%/.47%
Lawrence Pelowski-IRA Roll
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

<PAGE>

Merrill Lynch Small Cap/C 1,728 9.85%/.11%
Trade House Account AID
Private Client Group
Attn: Book Entry
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484

William B. Read University Small Cap/C 1,531 8.72%/.10%
William B. Read III Thomas W. Read &
Sally R. Rouston NKD Own
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Roland J. Dupuy Jr. SEP Prop Small Cap/C 1,495 8.52%/.10%
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Rhona B. Miller Small Cap/C 1,912 10.90%/.12%
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001

Dupuy Dufour PSRP & Trust Small Cap/C 2,240 12.77%/1.14%
Don P Dufour & Harvey J. Dupuy
U/A/D 1/180
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Small Cap/C 891 5.08%/.01%
John Ellis Gibson
C/O First Union National Bank
301 S Tryon Street
Charlotte, NC 28288-0001

Nola Maddox Falcone Small Cap/Y 133,937 9.42%/ 8.61%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577

Stephen A. Lieber Small Cap/Y 122,609 8.62%/ 7.88%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577

First Union National Bank/EB Small Cap/Y 617,153 43.40%/39.68%
Cash Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911

First Union National Bank/EB Small Cap/Y 76,632 5.39%/ 4.93%
Reinvest Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911

Citibank NA Small Capy/Y 185,518 13.05%/11.93%
Delta Airlines Master Trust
308235
c/o Lieber & Co.
2500 Westchester Ave.
Purchase, NY 10577

Charles Schwab & Co. Inc. Foundation/A 1,032,516 7.63%/1.02%
Special Custody Account For the
Exclusive Benefit of Customers
Reinvest Account MUT Funds Dept

<PAGE>

101 Montgomery St.
San Francisco, CA 94104-4122

Merrill Lynch Foundation/C 350,345 20.52%/.34%
Trade House Account AID
Private Client Group
Attn: Book Entry
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484

Charles Schwab & Co. Inc. Foundation/Y 3,482,596 7.03%/3.42%
Special Custody Account for
the Eclusive Benefit of Cusotmers
101 Montgomery Street
San Francisco, CA 94104-4122

First Union National Bank/EB Foundation/Y 4,592,905 9.27%/ 4.52%
Cash Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911

First Union National Bank/EB/INT Foundation/Y 15,824,132 31.94%/15.56%
Reinvest Account
Attn: Trust Operations Fund
401 S. Tryon Street
3rd Floor CMG 11
Charlotte, NC 28202-1911

Mac & Co. Foundation/Y 6,620,154 13.36%/6.51%
Aetna Retirement Services
Central Valuation Unit
Attn: Mutual Funds Operations
P.O. Box 320
Pittsburgh, PA 15230-0320

Fubs & Co. Febo Tax Strategic /A 77,975 7.81%/1.27%
Ray D. Russenberger
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Merrill Lynch Tax Strategic /C 125,500 35.59%/2.05%
Trade House Account AID
Private Client Group
Attn: Book Entry
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville FL 32246-6484

Fubs & Co. Febo Tax Strategic /C 21,678 6.15%/.35%
Hossein Golabchi and
Margot R. Golabachi
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Tax Strategic /C 76,731 21.76%/1.25%
Brenda Dykgraaf
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Nola Maddox Falcone Tax Strategic /Y 102,130 9.29%/1.67%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577

<PAGE>

Constance E. Lieber Tax Strategic /Y 59,814 5.44%/ .97%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577

Stephen A. Lieber Tax Strategic/Y 518,372 47.13%/ 8.45%
C/O Lieber & Co.
2500 Westchester Avenue
Purchase, NY 10577

Fubs & Co. Febo Utility/C 6,268 18.42%/.05%
Elsie B. Strom
Lewis F. Strom
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Utility/C 3,692 10.85%/.03%
Laura Alyce Hulbert
Ronald F. Hulbert
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Utility/C 1,179 5.17%/.01%
Evelyn L. Smith
Creg Smith
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Utility/C 2,040 6.00%/.02%
Max Ray and
Jeralyne Ray
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

Fubs & Co. Febo Utility/C 2,140 6.29%/.01%
Thomas McKinney and
Lottie McKinney
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

First Union National Bank Utility/Y 93,556 49.88%/.75%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001

First Union National Bank Utility/Y 79,811 42.55%/ .64%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001

<PAGE>

First Union National Bank- Value/C 6,387 8.58%/0%
Clara Caudill
C/O First Union National Bank
301 S. Tryon Street
Charlotte, NC 28288-0001

First Union National Bank Value/Y 15,617,664 32.59%/21.10%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001

First Union National Bank Value/Y 31,793,001 66.34%/42.96%
Trust Accounts
Attn: Ginny Batten
11th Floor CMG-1151
301 S. Tryon Street
Charlotte, NC 28288-0001

Keystone Investments Keys Tot Return/A 228,248,118 9.12%
Savings & Investment Trust
NYL Benefits Services Co. Inc.
Attn: Defined Contributions Dept
846 University Ave.
Norwood, MA 02062-2641

MLPF&S for the sole benefit Key Tot Return/A 132,989,000 5.31%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484

MLPF&S for the sole benefit Key Tot Return/B 368,928,000 9.61%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484

SSN/TIN: 866168037 Key Tot Return/C 134,654,925 21.50%
Lavedna Ellingson
Douglas Ellingson TTEES
Lavedna Ellingson Martial Trust
U/A DTD 5-1-86
8510 McClintock
Tempe, AZ 85284-2527

MLPF&S for the sole benefit Key Tot Return/C 120,950,000 19.31%
of its customers
Attn: Fund Admin
4800 Deer Lake Dr. E, 3rd Floor
Jacksonville, FL 32246-6484
- - ---------------------------------

First Union National Bank of North Carolina and its affiliates act in
various capacities for numerous accounts. As a result of its ownership on
February 28, 1997, of 44.61% of the shares of Evergreen Small Cap Equity
Income Fund, 37.78% of Evergreen Growth and Income Fund, 83.52% of Evergreen
Balanced Fund and 64.06% of Evergreen Value Fund, First Union may be deemed
to "control" these Funds as that Term is defined in the 1940 Act.

<PAGE>

INVESTMENT ADVISERS
(See also "Management of the Fund" in each Fund's Prospectus)

The investment adviser of Income and Growth, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic is Evergreen Asset
Management Corp., a New York corporation, with offices at 2500 Westchester
Avenue, Purchase, New York or ("Evergreen Asset" or the "Adviser"). Evergreen
Asset is owned by First Union National Bank of North Carolina ("FUNB" or the
"Adviser") which, in turn, is a subsidiary of First Union Corporation ("First
Union"), a bank holding company headquartered in Charlotte, North Carolina.

The investment adviser of Balanced, Utility and Value is FUNB which
provides investment advisory services through its Capital Management Group.

The investment adviser of Total Return is Keystone Investment Management
Company ("Keystone" or the "Adviser"), a Delaware corporation, with offices at
200 Berkeley Street, Boston, Massachusetts. Keystone is an indirectly owned
subsidiary of FUNB.

The Directors of Evergreen Asset are Richard K. Wagoner and Barbara I.
Colvin. The executive officers of Evergreen Asset are Stephen A. Lieber,
Chairman and Co-Chief Executive Officer, Nola Maddox Falcone, President and
Co-Chief Executive Officer, and Theodore J. Israel, Jr., Executive Vice
President. The Directors of Keystone are Donald McMullen, William M. Ennis, II
and Barbara I. Colvin. The executive officers of Keystone are James R. McCall,
President, Edward F. Godfrey, Senior Vice President, Chief Financial Officer
and Treasurer, Philip M. Bryne, Senior Vice President, and Rosemary D. Van
Antwerp, Senior Vice President, General Counsel and Secretary.

On June 30, 1994, Evergreen Asset and Lieber & Company ("Lieber"), were
acquired by First Union through certain of its subsidiaries. Contemporaneously
with the acquisition, Income and Growth, Growth and Income, American Retirement,
Small Cap, Foundation and Tax Strategic entered into a new investment advisory
agreement with Evergreen Asset and into a distribution agreement with Evergreen
Keystone Distributor, Inc. (formerly known as Evergreen Funds Distributor,
(Inc.) (the "Distributor"), an affiliate of BISYS Fund Services. At that time,
Evergreen Asset also entered into a new sub-advisory agreement with Lieber
pursuant to which Lieber provides certain services to Evergreen Asset in
connection with its duties as investment adviser. The new advisory and
sub-advisory agreements were approved by the shareholders of Income and Growth,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
at their meeting held on June 23, 1994, and became effective on June 30, 1994.

On September 6, 1996, First Union and FUNB entered into an Agreeement
and Plan of Acquisition and Merger (the "Merger") with Keystone Investments,
Inc. ("Keystone Investments"), the corporate parent of Keystone, which provided,
among other things, for the merger of Keystone Investments with and into a

<PAGE>

wholly-owned subsidiary of FUNB. The Merger was consummated on December 11,
1996. Keystone continues to provide investment advisory services to the Keystone
Investments Family of Funds. Contemporaneously with the Merger, Total Return
entered into a new investment advisory agreement with Keystone and into a
principal underwriting agreement with the Distributor.

Under the Investment Advisory Agreement with each Fund, each Adviser
has agreed to furnish reports, statistical and research services and
recommendations with respect to each Fund's portfolio of investments. In
addition, each Adviser provides office facilities to the Funds and performs a
variety of administrative services. Each Fund pays the cost of all of its other
expenses and liabilities, including expenses and liabilities incurred in
connection with maintaining their registration under the Securities Act of 1933,
as amended, and the 1940 Act, printing prospectuses (for existing shareholders)
as they are updated, state qualifications, mailings, brokerage, custodian and
stock transfer charges, printing, legal and auditing expenses, expenses of
shareholder meetings and reports to shareholders. Notwithstanding the foregoing,
each Adviser will pay the costs of printing and distributing prospectuses used
for prospective shareholders.

The method of computing the investment advisory fee for each Fund is
described in such Fund's Prospectus. The advisory fees paid by each Fund for the
three most recent fiscal periods reflected in its registration statement are set
forth below:

BALANCED Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $4,765,912 $4,870,748 $4,621,512
========== ========== ==========

INCOME AND GROWTH Year Ended Year Ended Year Ended
1/31/97 1/31/96 1/31/95
Advisory Fee $8,823,541 $9,343,195 $8,542,289
========== =========== ===========
Expense
Reimbursement $ 0 $ 53,576

FOUNDATION Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $11,140,780 $5,387,186 $2,551,768
========== ========== ========
Expense
Reimbursement $ 0 $ 11,064

SMALL CAP Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $63,333 $45,397 $29,075

Waiver ($63,333) ($45,397) ($29,075)
--------- -------- --------
Net Advisory Fee $ 0 $ 0 $ 0
========= ========= =========
Expense
Reimbursement $133,406 $164,584 $63,704
--------- ------- -------

<PAGE>

UTILITY Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $725,733 $456,021 $153,458

Waiver ($396,483) ($299,028) ($152,038)
--------- --------- ----------
Net Advisory Fee $ 329,300 $156,993 $ 1,420
========= ========= =========
Expense
Reinbursement 0 $ 51,894 $106,957
-------- -------- ---------

GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $5,287,338 $1,332,685 $684,891
======== ======== ========
Expense
Reimbursement $(5,000) $ 38,106

--------- --------

AMERICAN Year Ended Year Ended Year Ended
RETIREMENT 12/31/96 12/31/95 12/31/94
Advisory Fee $549,949 $297,242 $292,628
======== ========
Waiver ($24,841)
Net Advisory Fee $525,108
========
Expense
Reimbursement ($3,400) $ 76,464
--------- --------

TAX STRATEGIC Year Ended Year Ended Year Ended

12/31/96 12/31/95 12/31/94
Advisory Fee $354,958 $140,386 $ 65,915

Waiver ($90,551) ($96,975) ($65,915)
------- -------- --------
Net Advisory Fee $264,407 $ 43,411 $ 0
========== ========= =========
Expense
Reimbursement ($11,339) $ 85,543 $ 3,777
-------- ------ ------

VALUE Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Advisory Fee $6,950,730 $5,120,579 $3,850,673

TOTAL RETURN Year Ended Year Ended Year Ended
11/30/96 11/30/95 11/30/94
Advisory Fee $448,266 $300,290 $242,315

Utility commenced operations on January 4, 1994 and, therefore, the
first year's figures set forth in the table above reflect for Utility investment
advisory fees paid for the period from commencement of operations through
December 31, 1994.

Expense Limitations

<PAGE>

Evergreen Asset has voluntarily agreed to reimburse Small Cap to the
extent that any of the Fund's aggregate operating expenses (including the
Adviser's fee but excluding interest, taxes, brokerage commissions, Rule 12b-1
distribution fees and shareholder servicing fees and extraordinary expenses)
exceed 1.50% of its average net assets until such time as said Fund's net assets
reach $15 million.

Keystone has voluntarily agreed to limit Total Return's Class A expenses to
1.50% of the average daily net assets of Class A shares, such expense limitation
to be reevaluated on a calendar month basis and to be modified or eliminated in
the future at the discretion of Keystone.

The Investment Advisory Agreements are terminable, without the payment
of any penalty, on sixty days' written notice, by a vote of the holders of a
majority of each Fund's outstanding shares, or by a vote of a majority of each
Trust's Trustees or by the respective Adviser. The Investment Advisory
Agreements will automatically terminate in the event of their assignment. Each
Investment Advisory Agreement provides in substance that the Adviser shall not
be liable for any action or failure to act in accordance with its duties
thereunder in the absence of willful misfeasance, bad faith or gross negligence
on the part of the Adviser or of reckless disregard of its obligations
thereunder.

The Investment Advisory Agreements with respect to Income and Growth,
Growth and Income, American Retirement, Small Cap, Foundation and Tax Strategic
were approved by each Fund's shareholders on June 23, 1994, became effective on
June 30, 1994, and were last approved by the Trustees of each Trust on March
11, 1997

The Investment Advisory Agreement with respect to Balanced, Utility and
Value dated February 28, 1985, and amended from time to time thereafter, was
last approved by the Trustees of Evergreen Investment Trust on March 11, 1997.

The Investment Advisory Agreement with respect to Total Return was
approved by the Fund's shareholders on December 9, 1996, and became effective on
December 11, 1996.

Each Investment Advisory Agreement will continue in effect from year to
year provided that its continuance is approved annually by a vote of a majority
of the Trustees of each Trust including a majority of those Trustees who are not
parties thereto or "interested persons" (as defined in the 1940 Act) of any such
party (the "Independent Trustees"), cast in person at a meeting duly called for
the purpose of voting on such approval or a majority of the outstanding voting
shares of each Fund.

Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.

<PAGE>

Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a particular security meets the different investment objectives
of the various Funds, they may simultaneously purchase or sell the same
security. This could have a detrimental effect on the price and quantity of the
security available to each Fund. If simultaneous transactions occur, each
Adviser attempts to allocate the securities, both as to price and quantity, in
accordance with a method deemed equitable to each Fund and consistent with their
different investment objectives. In some cases, simultaneous purchases or sales
could have a beneficial effect, in that the ability of one Fund to participate
in volume transactions may produce better executions for that Fund.

Each Fund has adopted procedures under Rule 17a-7 of the 1940 Act to
permit purchase and sales transactions to be effected between each Fund and the
other registered investment companies for which Evergreen Asset, FUNB or
Keystone act as investment adviser or between the Fund and any advisory clients
of Evergreen Asset, FUNB, Keystone or Lieber. Each Fund may from time to time
engage in such transactions but only in accordance with these procedures and if
they are equitable to each participant and consistent with each participant's
investment objectives.

Prior to July 7, 1995, Federated Administrative Services, a subsidiary
of Federated Investors, provided legal, accounting and other administrative
personnel and support services to each of the portfolios of Evergreen Investment
Trust. The Trust paid a fee for such services at the following annual rate: .15%
on the first $250 million average daily net assets of the Trust; .125% on the
next $250 million; .10% on the next $250 million and .075% on assets in excess
of $250 million. For the period ended July 7, 1995, and the fiscal years ended
December 31, 1994 and 1993 Balanced incurred $392,991, $779,584 and $597,752,
respectively, in administrative service costs. For the period ended July 7,
1995, and the period from January 4, 1994 (commencement of operations) to
December 31, 1994, Utility incurred $10,384 and $16,382, respectively, in
administrative service costs, all of which were voluntarily waived. For the
period ended July 7,1995, and for the fiscal years ended December 31, 1994 and
1993, Value incurred $374,216, $649,487, and $526,836, respectively, in
administrative service costs.

Evergreen Asset has been providing administrative services to each of the
portfolios of Evergreen Investment Trust since July 8, 1995, for a fee based on
the average daily net assets of each fund administered by Evergreen Asset for
which Evergreen Asset or FUNB also serves as investment adviser, calculated
daily and payable monthly at the following annual rates: .050% on the first $7
billion; .035% on the next $3 billion; .030% on the next $5 billion; .020% on
the next $10 billion; .015% on the next $5 billion; and .010% on assets in
excess of $30 billion. For the period from July 8, 1995 through December 31,
1995, and the fiscal year ended December 31, 1996, Balanced, Utility and Value
incurred the following administration costs: Balanced $283,139 and $459,486,
respectively; Utility $39,330 and $70,215, respectively; and Value $323,050 and
$670,060, respectively. BISYS Fund Services, an affiliate of the Distributor,
serves as sub-administrator to Balanced, Utility and Value and is entitled to
receive a fee from each Fund calculated on the average daily net assets of each
Fund at a rate based on the total assets of the mutual funds administered by
Evergreen Asset for which FUNB or Evergreen Asset also serve as investment
adviser, calculated in accordance with the following schedule:

<PAGE>

.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 Evergreen
Asset, FUNB or Keystone serve as investment adviser were approximately $29.2
billion as of February 28, 1997.

DISTRIBUTION PLANS
Reference is made to "Management of the Funds - Distribution Plans and
Agreements" in the Prospectus of each Fund for additional disclosure regarding
the Funds' distribution arrangements. Distribution fees are accrued daily and
paid monthly on the Class A, Class B Class and Class C shares and are charged as
class expenses, as accrued. The distribution fees attributable to the Class B
shares and Class C shares are designed to permit an investor to purchase such
shares through broker-dealers without the assessment of a front-end sales
charge, and, in the case of Class C shares, without the assessment of a
contingent deferred sales charge after the first year following purchase, while
at the same time permitting the Distributor to compensate broker-dealers in
connection with the sale of such shares. In this regard the purpose and function
of the combined contingent deferred sales charge and distribution services fee
on the Class B shares and the Class C shares, are the same as those of the
front-end sales charge and distribution fee with respect to the Class A shares
in that in each case the sales charge and/or distribution fee provide for the
financing of the distribution of the Fund's shares.

Under the Rule 12b-1 Distribution Plans that have been adopted by each
Fund with respect to each of its Class A, Class B and Class C shares (each a
"Plan" and collectively, the "Plans"), the Treasurer of each Fund reports the
amounts expended under the Plan and the purposes for which such expenditures
were made to the Trustees of each Trust for their review on a quarterly basis.
Also, each Plan provides that the selection and nomination of the disinterested
Trustees are committed to the discretion of such disinterested Trustees then in
office.

Each Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the SEC make payments for distribution
services to the Distributor; the latter may in turn pay part or all of such
compensation to brokers or other persons for their distribution assistance.

Growth and Income, Income and Growth, American Retirement, Small Cap,
Foundation and Tax Strategic commenced offering Class A, Class B or Class C
shares on January 3, 1995. Each Plan with respect to such Funds became effective
on December 30, 1994 and was initially approved by the sole shareholder of each
Class of shares of each Fund with respect to which a Plan was adopted on that
date and by the unanimous vote of the Trustees of each Trust, including the
disinterested Trustees voting separately, at a meeting called for that purpose
and held on December 13, 1994. The Distribution Agreements between each Fund and
the Distributor pursuant to which distribution fees are paid under the Plans by
each Fund with respect to its Class A, Class B and Class C shares were also
approved at the December 13, 1994 meeting by the unanimous vote of the Trustees,
including the disinterested Trustees voting separately.

Each Plan and Distribution Agreement will continue in effect for
successive twelve-month periods provided, however, that such continuance is
specifically approved at least annually by the Trustees of each Trust or by vote
of the holders of a majority of the outstanding voting securities of that

<PAGE>

Class and, in either case, by a majority of the Independent Trustees of the
Trust who have no direct or indirect financial interest in the operation
of the Plan or any agreement related thereto.

Prior to July 8, 1995, Federated Securities Corp., a subsidiary of
Federated Investors, served as the distributor for Balanced, Utility and Value
as well as other portfolios of Evergreen Investment Trust. The Distribution
Agreements between each Fund and the Distributor pursuant to which distribution
fees are paid under the Plans by each Fund with respect to its Class A, Class B
and Class C shares were approved on April 20, 1995 by the unanimous vote of the
Trustees including the Independent Trustees voting separately.

The Plans permit the payment of fees to brokers and others for
distribution and shareholder-related administrative services and to
broker-dealers, depository institutions, financial intermediaries and
administrators for administrative services as to Class A, Class B and Class C
shares. The Plans are designed to (i) stimulate brokers to provide distribution
and administrative support services to each Fund and holders of Class A, Class B
and Class C shares and (ii) stimulate administrators to render administrative
support services to the Fund and holders of Class A, Class B and Class C shares.
The administrative services are provided by a representative who has knowledge
of the shareholder's particular circumstances and goals, and include, but are
not limited to providing office space, equipment, telephone facilities, and
various personnel including clerical, supervisory, and computer, as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries regarding Class
A, Class B and Class C shares; assisting clients in changing dividend options,
account designations, and addresses; and providing such other services as the
Fund reasonably requests for its Class A, Class B and Class C shares.

In addition to the Plans, Balanced, Utility and Value have each adopted
a Shareholder Services Plan whereby shareholder servicing agents may receive
fees from the Fund for providing services which include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance, and communicating or facilitating purchases and redemptions of Class
B and Class C shares of the Fund.

In the event that a Plan or Distribution Agreement is terminated or not
continued with respect to one or more Classes of a Fund, (i) no distribution
fees (other than current amounts accrued but not yet paid) would be owed by the
Fund to the Distributor with respect to that Class or Classes, and (ii) the Fund
would not be obligated to pay the Distributor for any amounts expended under the
Distribution Agreement not previously recovered by the Distributor from
distribution services fees in respect of shares of such Class or Classes through
deferred sales charges.

All material amendments to any Plan or Distribution Agreement must be
approved by a vote of the Trustees of a Trust or the holders of the Fund's
outstanding voting securities, voting separately by Class, and in either case,
by a majority of the disinterested Trustees, cast in person at a meeting called
for the purpose of voting on such approval; and any Plan or Distribution
Agreement may not be amended in order to increase materially the costs that a
particular Class of shares of a Fund may bear pursuant to the Plan or
Distribution Agreement without the approval of a majority of the holders of the
outstanding voting shares of the Class affected. With respect to Balanced,
Utility, and Value, amendments to the Shareholder Services Plan require a
majority vote of the disinterested Trustees but do not require a shareholders

<PAGE>

vote. Any Plan, Shareholder Services Plan or Distribution Agreement may be
terminated (a) by a Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting separately by
Class or by a majority vote of the disinterested Trustees, or (b) by the
Distributor. To terminate any Distribution Agreement, any party must give the
other parties 60 days' written notice; to terminate a Plan only, the Fund need
give no notice to the Distributor. Any Distribution Agreement will terminate
automatically in the event of its assignment.

Income and Growth, Growth and Income, American Retirement, Small Cap,
Foundation and Tax Strategic incurred the following Distribution Services Plans
and Shareholder Services Plan fees:

Distribution Services Fees:

INCOME AND GROWTH. For the fiscal period from January 3, 1995 (commencement of
class operations) through January 31, 1995, the fiscal years ended January 31,
1996 and 1997, $7, $4,915 and $18,106 on behalf of its Class A shares, $126,
$46,636 and $189,323, respectively on behalf of its Class B shares, and $7,
$1,516 and $6,382, respectively on behalf of its Class C shares.

GROWTH AND INCOME. For the fiscal period from January 3,1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, $22,055 and $122,222, respectively, on behalf of its Class A shares,
$159,114 and $934,314, respectively, on behalf of its Class B shares, and $6,902
and $36,055, respectively, on behalf of its Class C shares.

AMERICAN RETIREMENT. For the fiscal period from January 3,1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, $659 and $14,426, respectively, on behal of its Class A shares, $9,137
and $199,829, respectively, on behalf of its Class B shares, and $187 and
$5,713, respectively, on behalf of its Class C shares.

SMALL CAP. For the fiscal period from January 3, 1995 (commencement of class
operations) through December 31, 1995 and the fiscal year ended December 31,
1996, $340 and $618, respectively, on behalf of its Class A shares, $1,298 and
$3,199, respectively, on behalf of its Class B shares, and $111 and $267,
respecively, on behalf of its Class C shares.

FOUNDATION. For the fiscal period from January 3, 1995 (commencement of class
operations) through December 31, 1995 and the fiscal year ended December 31,
1996, $116,677 and $414,289, respectively on behalf of its Class A shares,
$972,541 and $3,487,899, respectively, on behalf of its Class B shares, and
$37,823 and $152,488, respectively, on behalf of its Class C shares.

TAX STRATEGIC. For the fiscal period from January 3, 1995 (commencement of class
operations) through December 31, 1995 and the fiscal year ended December 31,
1996, $2,582 and $16,426, respectively, on behalf of its Class A shares, $21,725
and $131,282, respectively, on behalf of its Class B shares, and $1,292 and
$16,493, respectively, on behalf of its Class C shares.

TOTAL RETURN. For the fiscal years ended November 30, 1994, 1995 and 1996,
$44,889, $101,222 and $195,178, respectively, on behalf of its Class B shares,
and $36,580, $60,201 and $84,812, respectively, on behalf of its Class C shares.

Shareholder Services Fees:

INCOME AND GROWTH. For the fiscal period from January 3, 1995 (commencement of
class operations) through January 31, 1995, the fiscal years ended January 31,
1996 and 1997, shareholder services fees on behalf of $42, $15,546 and

<PAGE>

$63,108, respectively, on behalf of its Class B shares, and $3, $505 and
$2,127, respectively, on behalf of its Class C shares.

GROWTH AND INCOME. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, shareholder services fees of $53,139 and $311,235 on behalf of its
Class B shares, and $2,301 and $12,018, respectively, on behalf of its Class C
shares.

AMERICAN RETIREMENT. For the fiscal period from January 3, 1995 (commencement of
class operations) through December 31, 1995 and the fiscal year ended December
31, 1996, $3,045 and $66,610, respectively, on behalf of its Class B shares, and
$62 and $1,904, respectively, on behalf of its Class C shares.

SMALL CAP. For the fiscal period from January 3, 1995 (commencement of class
operations) through December 31, 1995 and the fiscal year ended December 31,
1996, $433 and $1,066, respectively, on behalf of its Class B shares, and $37
and $89, respectively, on behalf of its Class C shares.

FOUNDATION. For the fiscal period from January 3, 1995 (commencement of class
operations) through December 31, 1995 and the fiscal year ended December 31,
1996, $324,180 and $1,162,633, respectively, on behalf of its Class B shares,
and $12,608 and $50,829, respectively, on behalf of its Class C shares.

TAX STRATEGIC. For the fiscal period from January 3, 1995 (commencement of class
operations) through December 31, 1995 and the fiscal year ended December 31,
1996, $7,242 and $43,761, respectively, on behalf of its Class B shares, and
$431 and $5,498, respectively, on behalf of its Class C shares.

TOTAL RETURN. For the fiscal years ended November 30, 1994, 1995 and 1996,
$61,955, $61,454 and $75,270, respectivley, on behalf of its Class A shares,
$14,587, $33,741, and $65,059, respectivley, on behalf of Class B shares, and
$20,893, $20,066, and $28,183, respectivley, on behalf of its Class C shares.

Balanced, Value and Utility incurred the following Distribution
Services Plans and Shareholder Services Plans fees:

Distribution Services Fees:

BALANCED. For the fiscal years ended December 31, 1994, 1995 and 1996, $102,621,
$102,400 and $107,023, respectively, on behalf of Class A shares, and $670,202,
$784,084 and $810,803, respectively, on behalf of Class B shares; for the
period from September 2, 1994 (commencement of operations) to December 31, 1994,
and the fiscal years ended December 31, 1995 and 1996, $310, $1,811 and $1,883,
respectively, on behalf of Class C shares.

VALUE. For the fiscal years ended December 31, 1994, 1995 and 1996, $473,347,
$603,896 and $767,254, respectively, on behalf of Class A shares, and $621,330,
$916,221 and $1,255,600, respectively, on behalf of Class B shares; for the
period from September 2, 1994 (commencement of operations) to December 31, 1994,
and the fiscal years ended December 31, 1995 and 1996, $716, $4,798 and $8,706,
respectively, on behalf of Class C shares.

UTILITY. For the fiscal years ended December 31, 1994, 1995 and 1996, $9,658,
$133,582 and $252,753, respectively, on behalf of Class A shares, and $169,007,
$234,357 and $283,875, respectively, on behalf of Class B shares; for the
period from September 2, 1994 (commencement of operations) to December 31, 1994,
and the fiscal years ended December 31, 1995 and 1996, $232, $1,271 and
$2,843, respectively, on behalf of Class C shares.

Shareholder Services Plans fees:

<PAGE>

BALANCED. For the fiscal years ended December 31, 1994, 1995 and 1996, $83,641,
$261,361 and $270,267, respectively, on behalf of Class B shares, and $103, $604
and $628, respectively, on behalf of Class C shares.

VALUE. For the fiscal years ended December 31, 1994, 1995 and 1996, $83,225,
$305,407 and $418,533, respectively, on behalf of Class B shares, and $239,
$1,599 and $2,902, respectively, on behalf of Class C shares.

UTILITY. For the fiscal years ended December 31, 1994, 1995 and 1996, $24,141,
$78,119 and $94,625, respectively, on behalf of Class B shares, and $77, $424
and $948, respectively, on behalf of Class C shares.

ALLOCATION OF BROKERAGE

Decisions regarding each Fund's portfolio are made by its Adviser,
subject to the supervision and control of the Trustees. Orders for the purchase
and sale of securities and other investments are placed by employees of each
Fund's Adviser. In general, the same individuals perform the same functions for
the other funds managed by each Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.

A substantial portion of the transactions in equity securities for each
Fund will occur on domestic stock exchanges. Transactions on stock exchanges
involve the payment of brokerage commissions. In transactions on stock exchanges
in the United States, these commissions are negotiated, whereas on many foreign
stock exchanges these commissions are fixed. In the case of securities traded in
the foreign and domestic over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup.
Over-the-counter transactions will generally be placed directly with a principal
market maker, although the Fund may place an over-the-counter order with a
broker-dealer if a better price (including commission) and execution are
available.

It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes
commission paid by the issuer to the underwriter. Purchases or sales from
dealers will normally reflect the spread between bid and ask prices.

In selecting firms to effect securities transactions, the primary
consideration of each Fund shall be prompt execution at the most favorable
price. Each Adviser will also consider such factors as the price of the
securities and the size and difficulty of execution of the order. If these
objectives may be met with more than one firm, the Adviser will also consider
the availability of statistical and investment data and economic facts and
opinions helpful to the Fund. To the extent that receipt of these services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.

<PAGE>

Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the SEC, Lieber may be compensated for
effecting transactions in portfolio securities for a fund on a national
securities exchange provided the conditions of the rules are met. Each Fund
advised by Evergreen Asset has entered into an agreement with Lieber authorizing
Lieber to retain compensation for brokerage services. In accordance with such
agreement, it is contemplated that Lieber, a member of the New York and American
Stock Exchanges, will, to the extent practicable, provide brokerage services to
Growth and Income, Income and Growth, American Retirement, Small Cap, Foundation
and Tax Strategic with respect to substantially all securities transactions
effected on the New York and American Stock Exchanges. In such transactions, the
Adviser will seek the best execution at the most favorable price while paying a
commission rate no higher than that offered to other clients of Lieber or that
which can be reasonably expected to be offered by an unaffiliated broker-dealer
having comparable execution capability in a similar transaction. However, no
Fund will engage in transactions in which Lieber would be a principal. While no
Fund advised by Evergreen Asset contemplates any ongoing arrangements with other
brokerage firms, brokerage business may be given from time to time to other
firms. In addition, the Trustees have adopted procedures pursuant to Rule 17e-1
under the 1940 Act to ensure that all brokerage transactions with Lieber, as an
affiliated broker-dealer, are fair and reasonable.

Neither Total Return nor Keystone intends on placing securities
transactions with any particular broker. The Fund's Board of Trustees has
determined, however, that the Fund may consider sales of Fund shares as a factor
in the selection of brokers to execute portfolio transactions, subject to the
requirements of best execution described above. The Fund expects that purchases
and sales of securities will usually be effected through brokerage transactions
for which commissions are payable. Purchases from underwriters will include the
underwriting commission or concession, and purchases from dealers serving as
market makers will include a dealer's mark-up or reflect a dealer's mark-down.
Where transactions are made in the over-the-counter market, the Fund will deal
with primary market makers unless more favorable prices are otherwise
obtainable. Under its Investment Advisory Agreement, Keystone is permitted to
pay higher brokerage commissions for brokerage and research services in
accordance with Section 28(e) of the Securities Exchange Act of 1934. In the
event Keystone follows such a practice, it will do so on a basis that is fair
and equitable to the Fund.

Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for the Growth and Income, Income and Growth, American
Retirement, Small Cap, Foundation and Tax Strategic will accrue to FUNB and to
its ultimate parent, First Union. The Investment Advisory Agreements do not
provide for a reduction of the Adviser's fee with respect to any Fund by the
amount of any profits earned by Lieber from brokerage commissions generated by
portfolio transactions of the Fund.

The following chart shows: (1) the brokerage commissions paid by each
Fund advised by Evergreen Asset during their last three fiscal years; (2) the
amount and percentage thereof paid to Lieber; and (3) the percentage of the
total dollar mount of all portfolio transactions with respect to which
commissions have been paid which were effected by Lieber:

INCOME AND GROWTH Year Ended Year Ended Year Ended
1/31/97 1/31/96 1/31/95

<PAGE>

Total Brokerage $3,529,313 $3,255,068 $3,755,606
Commissions
Dollar Amount and % $2,835,293 $2,982,640 $3,465,900
paid to Lieber 80% 92% 92%
% of Transactions
Effected by Lieber 47% 90% 97%

FOUNDATION Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $689,724 $393,121 $282,250
Commissions
Dollar Amount and % $680,252 $380,226 $ 276,985
paid to Lieber 99% 98% 98%
% of Transactions
Effected by Lieber 96% 97% 98%

SMALL CAP Year Ended Year Ended Period Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $14,647 $5,968 $ 3,998
Commissions
Dollar Amount and % $13,246 $4,863 $ 3,618
paid to Lieber 90% 81% 90%
% of Transactions
Effected by Lieber 87% 77% 90%

GROWTH AND INCOME Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $519,064 $210,923 $80,871
Commissions
Dollar Amount and % $429,888 $160,659 $71,721
paid to Lieber 83% 76% 89%
% of Transactions
Effected by Lieber 78% 74% 88%

AMERICAN RETIREMENT Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $55,581 $57,216 $203,922
Commissions
Dollar Amount and % $51,579 $53,276 $202,838
paid to Lieber 93% 93% 99%
% of Transactions
Effected by Lieber 89% 82% 99%

TAX STRATEGIC Year Ended Year Ended Period Ended
12/31/96 12/31/95 12/31/94
Total Brokerage $51,273 $37,374 $24,872
Commissions
Dollar Amount and % $50,033 $35,954 $24,072
paid to Lieber 98% 96% 97%
% of Transactions
Effected by Lieber 97% 94% 98%

Income and Growth changed its fiscal year end from March 31 to January
31 during the first period covered by the foregoing table. Accordingly, the
commissions reported in the foregoing table reflect for Income and Growth the
period from April 1, 1994 to January 31, 1995.

<PAGE>

Balanced, Value, Utility and Total Return did not pay any commissions
to Lieber. For the fiscal years ended December 31, 1996, 1995 and 1994, Balanced
paid $522,227, $615,041 and $450,569, respectively, in commissions on brokerage
transactions. For the fiscal year ended December 31, 1996 and 1995, and for the
period from January 4, 1994 (commencement of operations) to December 31, 1994,
Utility paid $323,978, $272,806 and $66,294, respectively, in commissions on
brokerage transactions. For the fiscal years ended December 31, 1996, 1995 and
1994, Value paid $3,164,292, $1,644,077 and $1,437,338, respectively, in
commissions on brokerage transactions. For the fiscal years ended November 30,
1996, 1995 and 1994, Total Return paid $227,013, $92,665 and $65,514,
respectively, in commissions on brokerage transactions.

ADDITIONAL TAX INFORMATION
(See also "Other Information - Dividends,
Distributions and Taxes" in each Fund's Prospectus)

Each Fund has qualified and intends to continue to qualify for and
elect the tax treatment applicable to regulated investment companies ("RIC")
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). (Such qualification does not involve supervision of management or
investment practices or policies by the Internal Revenue Service.) In order to
qualify as a regulated investment company, a Fund must, among other things, (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to proceeds from securities loans, gains from the sale or other
disposition of securities or foreign currencies and other income (including
gains from options, futures or forward contracts) derived with respect to its
business of investing in such securities; (b) derive less than 30% of its gross
income from the sale or other disposition of securities, options, futures or
forward contracts (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the RIC's principal business of investing in securities (or
options and futures with respect thereto) held for less than three months; and
(c) diversify its holdings so that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Fund's total assets is
represented by cash, U.S. government securities and other securities limited in
respect of any one issuer, to an amount not greater than 5% of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. government securities and securities of other
regulated investment companies). By so qualifying, a Fund is not subject to
Federal income tax if it timely distributes its investment company taxable
income and any net realized capital gains. A 4% nondeductible excise tax will be
imposed on a Fund to the extent it does not meet certain distribution
requirements by the end of each calendar year. Each Fund anticipates meeting
such distribution requirements.

Dividends paid by a Fund from investment company taxable income
generally will be taxed to the shareholders as ordinary income. Investment
company taxable income includes net investment income and net realized
short-term gains (if any). Any dividends received by a Fund from domestic
corporations will constitute a portion of the Fund's gross investment income. It
is anticipated that this portion of the dividends paid by a Fund (other than
distributions of securities profits) will qualify for the 70% dividends-received
deduction for corporations. Shareholders will be informed of the amounts of
dividends which so qualify.

<PAGE>

Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders (who are not exempt from
tax) as long-term capital gain, regardless of the length of time the shares of a
Fund have been held by such shareholders. Short-term capital gains distributions
are taxable to shareholders who are not exempt from tax as ordinary income. Such
distributions are not eligible for the dividends-received deduction. Any loss
recognized upon the sale of shares of a Fund held by a shareholder for six
months or less will be treated as a long-term capital loss to the extent that
the shareholder received a long-term capital gain distribution with respect to
such shares.

Distributions of investment company taxable income and any net
short-term capital gains will be taxable as ordinary income as described above
to shareholders (who are not exempt from tax), whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for Federal income tax purposes in each share so
received equal to the net asset value of a share of a Fund on the reinvestment
date.

Distributions by each Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable as
ordinary income or capital gain as described above to shareholders (who are not
exempt from tax), even though, from an investment standpoint, it may constitute
a return of capital. In particular, investors should be careful to consider the
tax implications of buying shares just prior to a distribution. The price of
shares purchased at that time includes the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will then receive
what is in effect a return of capital upon the distribution which will
nevertheless be taxable to shareholders subject to taxes.

Upon a sale or exchange of its shares, a shareholder will realize a
taxable gain or loss depending on its basis in the shares. Such gains or loss
will be treated as a capital gain or loss if the shares are capital assets in
the investor's hands and will be a long-term capital gain or loss if the shares
have been held for more than one year. Generally, any loss realized on a sale or
exchange will be disallowed to the extent shares disposed of are replaced within
a period of sixty-one days beginning thirty days before and ending thirty days
after the shares are disposed of. Any loss realized by a shareholder on the sale
of shares of the Fund held by the shareholder for six months or less will be
disallowed to the extent of any exempt interest dividends received by the
shareholder with respect to such shares, and will be treated for tax purposes as
a long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.

All distributions, whether received in shares or cash, must be reported
by each shareholder on his or her Federal income tax return. Each shareholder
should consult his or her own tax adviser to determine the state and local tax
implications of Fund distributions.

Shareholders who fail to furnish their taxpayer identification numbers
to a Fund and to certify as to its correctness and certain other shareholders
may be subject to a 31% Federal income tax backup withholding requirement on
dividends, distributions of capital gains and redemption proceeds paid to them
by the Fund. If the withholding provisions are applicable, any such dividends or
capital gain distributions to these

<PAGE>

shareholders, whether taken in cash or reinvested in additional shares, and any
redemption proceeds will be reduced by the amounts required to be withheld.
Investors may wish to consult their own tax advisers about the applicability of
the backup withholding provisions.

The foregoing discussion relates solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e.,U.S. citizens and residents and U.S.
domestic corporations, partnerships, trusts and estates). It does not reflect
the special tax consequences to certain taxpayers (e.g., banks, insurance
companies, tax exempt organizations and foreign persons). Shareholders are
encouraged to consult their own tax advisers regarding specific questions
relating to Federal, state and local tax consequences of investing in shares of
a Fund. Each shareholder who is not a U.S. person should consult his or her tax
adviser regarding the U.S. and foreign tax consequences of ownership of shares
of a Fund, including the possibility that such a shareholder may be subject to a
U.S. withholding tax at a rate of 31% (or at a lower rate under a tax treaty) on
amounts treated as income from U.S. sources under the Code.

Special Tax Considerations for Tax Strategic

With respect to Tax Strategic, to the extent that the Fund distributes
exempt interest dividends to a shareholder, interest on indebtedness incurred or
continued by such shareholder to purchase or carry shares of the Fund is not
deductible. Furthermore, entities or persons who are "substantial users" (or
related persons) of facilities financed by "private activity" bonds (some of
which were formerly referred to as "industrial development" bonds) should
consult their tax advisers before purchasing shares of the Fund. "Substantial
user" is defined generally as including a "non-exempt person" who regularly uses
in its trade or business a part of a facility financed from the proceeds of
industrial development bonds.

The percentage of the total dividends paid by the Fund with respect to
any taxable year that qualifies as exempt interest dividends will be the same
for all shareholders of the Fund receiving dividends with respect to such year.
If a shareholder receives an exempt interest dividend with respect to any share
and such share has been held for six months or less, any loss on the sale or
exchange of such share will be disallowed to the extent of the exempt interest
dividend amount.

NET ASSET VALUE

The following information supplements that set forth in each Fund's
Prospectus under the subheading "How to Buy Shares - How the Funds Value Their
Shares" in the Section entitled "Purchase and Redemption of Shares".

The public offering price of shares of a Fund is its net asset value
plus, in the case of Class A shares, a sales charge which will vary depending
upon the purchase alternative chosen by the investor, as more fully described in
the Prospectus. See "Purchase of Shares - Class A Shares - Front-End Sales
Charge Alternative". On each Fund business day on which a purchase or redemption
order is received by a Fund and trading in the types of securities in which a
Fund invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its

<PAGE>

liabilities, by the total number of its shares then outstanding. A Fund business
day is any weekday, exclusive of national holidays on which the Exchange is
closed and Good Friday.

For each Fund, securities for which the primary market is on a domestic
or foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked prices and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.

The respective per share net asset values of the Class A, Class B, Class C
and Class Y shares are expected to be substantially the same. Under certain
circumstances, however, the per share net asset values of the Class B and Class
C shares may be lower than the per share net asset value of the Class A shares
(and, in turn, that of Class A shares may be lower than Class Y shares) as a
result of the greater daily expense accruals, relative to Class A and Class Y
shares, of Class B and Class C shares relating to distribution services fees
(and, with respect to Balanced, Utility and Value, Shareholder Service Plan fee)
and, to the extent applicable, transfer agency fees and the fact that Class Y
shares bear no additional distribution, shareholder service or transfer agency
related fees. While it is expected that, in the event each Class of shares of a
Fund realizes net investment income or does not realize a net operating loss for
a period, the per share net asset values of the four Classes will tend to
converge immediately after the payment of dividends, which dividends will differ
by approximately the amount of the expense accrual differential among the
Classes, there is no assurance that this will be the case. In the event one or
more Classes of a Fund experiences a net operating loss for any fiscal period,
the net asset value per share of such Class or Classes will remain lower than
that of Classes that incurred lower expenses for the period.

To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York.

Furthermore, trading takes place in various foreign markets on days
which are not business days in New York and on which the Fund's net asset value
is not calculated. Such calculation does not take place contemporaneously with
the determination of the prices of the majority of the portfolio securities used
in such calculation. Events affecting the values of portfolio securities that
occur between the time their prices are determined and the close of the Exchange
will not be reflected in a Fund's calculation of net asset value unless the
Trustees deem that the particular event would materially affect net asset value,
in which case an adjustment will be made. Securities transactions

<PAGE>

are accounted for on the trade date, the date the order to buy or sell is
executed. Dividend income and other distributions are recorded on the
ex-dividend date, except certain dividends and distributions from foreign
securities which are recorded as soon as the Fund is informed after the
ex-dividend date.

PURCHASE OF SHARES

The following information supplements that set forth in each Fund's
Prospectus under the heading "Purchase and Redemption of Shares - How To Buy
Shares."

General

Shares of each Fund will be offered on a continuous basis at a price
equal to their net asset value plus an initial sales charge at the time of
purchase (the "front-end sales charge alternative"), with a contingent deferred
sales charge (the deferred sales charge alternative"), or without any front-end
sales charge, but with a contingent deferred sales charge imposed only during
the first year after purchase (the "level-load alternative"), as described
below. Class Y shares which, as described below, are not offered to the general
public, are offered without any front-end or contingent sales charges. Shares of
each Fund are offered on a continuous basis through (i) investment dealers that
are members of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Distributor ("selected
dealers"), (ii) depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent agreements with the
Distributor ("selected agents"), or (iii) the Distributor. The minimum for
initial investment is $1,000; there is no minimum for subsequent investments.
The subscriber may use the Share Purchase Application available from the
Distributor for his or her initial investment. Sales personnel of selected
dealers and agents distributing a Fund's shares may receive differing
compensation for selling Class A, Class B or Class C shares.

Investors may purchase shares of a Fund in the United States either
through selected dealers or agents or directly through the Distributor. A Fund
reserves the right to suspend the sale of its shares to the public in response
to conditions in the securities markets or for other reasons.

Each Fund will accept unconditional orders for its shares to be
executed at the public offering price equal to the net asset value next
determined (plus for Class A shares, the applicable sales charges), as described
below. Orders received by the Distributor prior to the close of regular trading
on the Exchange on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on the Exchange on
that day (plus for Class A shares the sales charges). In the case of orders for
purchase of shares placed through selected dealers or agents, the applicable
public offering price will be the net asset value as so determined, but only if
the selected dealer or agent receives the order prior to the close of regular
trading on the Exchange and transmits it to the Distributor prior to its close
of business that same day (normally 5:00 p.m. Eastern time). The selected dealer
or agent is responsible for transmitting such orders by 5:00 p.m. If the
selected dealer or agent fails to do so, the investor's right to that day's
closing price must be settled between the investor and the selected dealer or
agent. If the selected dealer or agent receives the order after the close of
regular trading on the Exchange, the price will be based on the net asset value
determined as of the close of regular trading on the Exchange on the next day it
is open for trading.

<PAGE>

Following the initial purchase of shares of a Fund, a shareholder may
place orders to purchase additional shares by telephone if the shareholder has
completed the appropriate portion of the Share Purchase Application. Payment for
shares purchased by telephone can be made only by Electronic Funds Transfer from
a bank account maintained by the shareholder at a bank that is a member of the
National Automated Clearing House Association ("ACH"). If a shareholder's
telephone purchase request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase shares is automatically placed the same Fund
business day for non-money market funds, and two days following the day the
order is received for money market funds, and the applicable public offering
price will be the public offering price determined as of the close of business
on such business day. Full and fractional shares are credited to a subscriber's
account in the amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to a Fund, stock certificates
representing shares of a Fund are not issued. This facilitates later redemption
and relieves the shareholder of the responsibility for and inconvenience of lost
or stolen certificates.

Alternative Purchase Arrangements

Each Fund issues four classes of shares: (i) Class A shares, which are sold
to investors choosing the front-end sales charge alternative; (ii) Class B
shares, which are sold to investors choosing the deferred sales charge
alternative; (iii) Class C shares, which are sold to investors choosing the
level-load sales charge alternative; and (iv) Class Y shares, which are offered
only to (a) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (b) certain investment advisory clients
of the Advisers and their affiliates, and (c) institutional investors. The four
Classes of shares each represent an interest in the same portfolio of
investments of the Fund, have the same rights and are identical in all respects,
except that (I) only Class A, Class B and Class C shares are subject to a Rule
12b-1 distribution fee, (II) Class B and Class C shares of Balanced, Utility and
Value are subject to a Shareholder Service Plan fee, (III) Class A shares bear
the expense of the front-end sales charge and Class B and Class C shares bear
the expense of the deferred sales charge, (IV) Class B shares and Class C shares
each bear the expense of a higher Rule 12b-1 distribution services fee and
shareholder service fee than Class A shares and, in the case of Class B shares,
higher transfer agency costs, (V) with the exception of Class Y shares, each
Class of each Fund has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services (and, to the extent
applicable, Shareholder Service Plan fee) is paid which relates to a specific
Class and other matters for which separate Class voting is appropriate under
applicable law, provided that, if the Fund submits to a simultaneous vote of
Class A, Class B and Class C shareholders an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder with respect to
the Class A shares, the Class A shareholders and the Class B and Class C
shareholders will vote separately by Class, and (VI) only the Class B shares are
subject to a conversion feature. Each Class has different exchange privileges
and certain different shareholder service options available.

The alternative purchase arrangements permit an investor to choose the
method of purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the anticipated life of
their investment in the Fund, the accumulated distribution services (and, to the
extent applicable, shareholder service) fee and contingent deferred sales
charges on Class B shares prior to conversion, or the accumulated distribution

<PAGE>

services (and, to the extent applicable, shareholder service) fee on Class C
shares, would be less than the front-end sales charge and accumulated
distribution services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher return of Class A
shares. Class B and Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at the lowest applicable sales
charge. For this reason, the Distributor will reject any order (except orders
for Class B shares from certain retirement plans) for more than $250,000 for
Class B shares or $500,000 for Class C shares.

Class A shares are subject to a lower distribution services fee and no
Shareholder Service Plan fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares. However, because
front-end sales charges are deducted at the time of purchase, investors
purchasing Class A shares would not have all their funds invested initially and,
therefore, would initially own fewer shares. Investors not qualifying for
reduced front-end sales charges who expect to maintain their investment for an
extended period of time might consider purchasing Class A shares because the
accumulated continuing distribution (and, to the extent applicable, Shareholder
Service Plan) charges on Class B shares or Class C shares may exceed the
front-end sales charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration against the fact
that, because of such front-end sales charges, not all their funds will be
invested initially.

Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares in order to have all
their funds invested initially, although remaining subject to higher continuing
distribution services (and, to the extent applicable, Shareholder Service Plan)
fees and, in the case of Class B shares, being subject to a contingent deferred
sales charge for a six-year period. For example, based on current fees and
expenses, an investor subject to the 4.75% front-end sales charge imposed by
Evergreen Equity and Long-Term Bond Funds would have to hold his or her
investment approximately seven years for the Class B and Class C distribution
services (and, to the extent applicable, shareholders service) fees, to exceed
the front-end sales charge plus the accumulated distribution services fee of
Class A shares. In this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A shares. This
example does not take into account the time value of money, which further
reduces the impact of the Class B and Class C distribution services (and, to the
extent applicable, shareholder service) fees on the investment, fluctuations in
net asset value or the effect of different performance assumptions.

Those investors who prefer to have all of their funds invested
initially but may not wish to retain Fund shares for the six year period during
which Class B shares are subject to a contingent deferred sales charge may find
it more advantageous to purchase Class C shares.

With respect to each Fund, the Trustees have determined that currently
no conflict of interest exists between or among the Class A, Class B, Class C
and Class Y shares. On an ongoing basis, the Trustees, pursuant to their
fiduciary duties under the 1940 Act and state laws, will seek to ensure that no
such conflict arises.

Front-End Sales Charge Alternative--Class A Shares

<PAGE>

The public offering price of Class A shares for purchasers choosing the
front-end sales charge alternative is the net asset value plus a sales charge as
set forth in the Prospectus for each Fund.

Shares issued pursuant to the automatic reinvestment of income
dividends or capital gains distributions are not subject to any sales charges.
The Fund receives the entire net asset value of its Class A shares sold to
investors. The Distributor's commission is the sales charge set forth in the
Prospectus for each Fund, less any applicable discount or commission "reallowed"
to selected dealers and agents. The Distributor will reallow discounts to
selected dealers and agents in the amounts indicated in the table in the
Prospectus. In this regard, the Distributor may elect to reallow the entire
sales charge to selected dealers and agents for all sales with respect to which
orders are placed with the Distributor.

Set forth below is an example of the method of computing the offering
price of the Class A shares of each Fund. The example assumes a purchase of
Class A shares of a Fund aggregating less than $100,000 subject to the schedule
of sales charges set forth in the Prospectus at a price based upon the net asset
value of Class A shares of each Fund at the end of each Fund's latest fiscal
year.

Net Per Share Offering
Asset Sales Price
Value Charge Date Per Share

Balanced $12.95 $0.65 12/31/96 $13.60

Growth and Income $22.53 $1.12 12/31/96 $23.65

Income and Growth $21.79 $1.09 1/31/97 $22.88

American Retirement $13.86 $0.69 12/31/96 $14.55

Small Cap $13.10 $0.65 12/31/96 $13.75

Foundation $16.13 $0.80 12/31/96 $16.93

Tax Strategic $13.50 $0.67 12/31/96 $14.17

Utility $10.57 $0.53 12/31/96 $11.10

Value $20.57 $1.03 12/31/96 $21.60

Total Return $17.33 $1.06 11/30/96 $18.39

Prior to January 3, 1995, shares of Growth and Income, Income and
Growth, American Retirement, Small Cap, Foundation and Tax Strategic were
offered exclusively on a no-load basis and, accordingly, no underwriting
commissions were paid in respect of sales of shares of these Funds or retained
by the Distributor. In addition, since Class B and Class C shares were not
offered by Growth and Income, Income and Growth, American Retirement, Small Cap,
Foundation or Tax Strategic prior to January 3, 1995, contingent deferred sales
charges have been paid to the distributor with respect to Class B or Class C
shares only since January 3, 1995.

With respect to Balanced, Utility and Value, the following commissions
were paid to and amounts were retained by Federated Securities Corp. through

<PAGE>

July 7, 1995, which until such date was the principal underwriter of portfolios
of Evergreen Investment Trust. For the period from July 8 through December 31,
1995, commissions were paid to and amounts were retained by the current
Distributor as noted below:

Year Ended Year Ended Period Ended
Year Ended
12/31/96 7/8/95 to 1/1/95 to 7/7/95
12/31/95
BALANCED

Commissions Received $77,026 $15,844 $11,841
Commissions Retained $ 9,150 $ 1,731 $ 1,303

VALUE

Commissions Received $522,573 $58,797 $56,058
Commissions Retained $ 56,609 $ 6,615 $ 6,001

UTILITY

Commissions Received $74,988 $15,692 $20,958
Commissions Retained $ 7,857 $ 1,727 $ 2,228

With respect to Income and Growth, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic, the following commissions
were paid to and amounts were retained by the Distributor for the periods
indicated:

Year Ended Year Ended Period from 1/3/95
INCOME AND GROWTH 1/31/97 1/31/96 to 1/31/95

Commissions Received $187,403 $ 98,890 $4,585
Commissions Retained $ 20,208 $ 10,733 ---

Year Ended Year Ended
GROWTH AND INCOME 12/31/96 12/31/95

Commissions Received $1,473,258 $ 326,249
Commissions Retained $ 158,858 $ 37,300

AMERICAN RETIREMENT

Commissions Received $ 317,718 $ 42,447

<PAGE>

Commissions Retained $ 20,024 $ 7,397

SMALL CAP

Commissions Received $ 3,568 $ 778
Commissions Retained $ 340 $ 284

FOUNDATION

Commissions Received $2,418,388 $1,604,275
Commissions Retained $ 57,736 $ 178,885

TAX STRATEGIC

Commissions Received $ 199,131 $ 28,976
Commissions Retained $ 25,078 $ 3,266

With respect to Total Return, the following commissions were paid to and
amounts were retained by Keystone Investment Distributors Comapany, which prior
to December 1, 1996, was the distributor for Total Return.

Year Ended Year Ended Year Ended
TOTAL RETURN 11/30/96 11/30/95 11/30/94

Commissions Received $355,043 $190,327 $106,144
Commissions Retained ($595,877) ($243,621) ($ 90,031)

Investors choosing the front-end sales charge alternative may under
certain circumstances be entitled to pay reduced sales charges. The
circumstances under which such investors may pay reduced sales charges are
described below.

Combined Purchase Privilege. Certain persons may qualify for the sales
charge reductions by combining purchases of shares of one or more Evergreen
Keystone Funds other than the money market funds into a single "purchase", if
the resulting "purchase" totals at least $100,000. The term "purchase" refers
to:(i) a single purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an individual,
his or her spouse and their children under the age of 21 years purchasing shares
for his, her or their own account(s); (ii) a single purchase by a trustee or
other fiduciary purchasing shares for a single trust, estate or single fiduciary
account although more than one beneficiary is involved; or (iii) a single
purchase for the employee benefit plans of a single employer. The term
"purchase" also includes purchases by any "company", as the term is defined in
the 1940 Act, but does not include purchases by any such company which has not
been in existence for at least six months or which has no purpose other than the
purchase of shares of a Fund or shares of other registered investment companies
at a discount. The term "purchase" does not include purchases by any group of
individuals whose sole organizational nexus is that the participants therein are
credit card holders of a company, policy holders of an insurance company,
customers of either a bank or broker-dealer or clients of an investment adviser.
A "purchase" may also include shares, purchased at the same time through a
single selected dealer or agent, of any Evergreen Keystone Fund. Currently, the
Evergreen Keystone Funds include:

Evergreen Trust:
Evergreen Fund
Evergreen Aggressive Growth Fund

Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund

The Evergreen Limited Market Fund, Inc.

Evergreen Growth and Income Fund

Evergreen Income and Growth Fund

The Evergreen American Retirement Trust:
The Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund

52
<PAGE>
Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund

Evergreen Municipal Trust:
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-CA
Evergreen Florida High Income Municipal Bond Fund
Evergreen Tax Exempt Money Market Fund
Evergreen Institutional Tax Exempt Money Market Fund

Evergreen Money Market Trust:
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen Investment Trust:
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short Intermediate Bond Fund
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund

Evergreen Lexicon Fund:
Evergreen Intermediate Term Government Securities Fund
Evergreen Intermediate Term Bond Fund

Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen New Jersey Tax Free Income Fund

Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
Evergreen VA Strategic Income Fund
Evergreen VA Aggressive Growth Fund

Keystone America Fund Family:
Keystone Fund for Total Return
Keystone America Hartwell Emerging Growth Fund, Inc.
Keystone Balanced Fund II
Keystone Capital Preservation and Income Fund
Keystone Small Company Growth Fund II
Keystone Fund of the Americas
Keystone Global Opportunities Fund
Keystone Government Securities Fund
Keystone Intermediate Term Bond Fund
Keystone Omega Fund
Keystone Global Resources and Development Fund
Keystone Strategic Income Fund
Keystone State Tax Free Fund
Keystone State Tax Free Fund - Series II
Keystone Tax Free Income Fund
Keystone World Bond Fund

53
<PAGE>

Prospectuses for the Evergreen Keystone Funds may be obtained without
charge by contacting the Distributor or the Advisers at the address or telephone
number shown on the front cover of this Statement of Additional Information.

Cumulative Quantity Discount (Right of Accumulation). An investor's
purchase of additional Class A shares of a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:

(i) the investor's current purchase;

(ii) the net asset value (at the close of business on the
previous day) of (a) all Class A, Class B and Class C shares
of the Fund held by the investor and (b) all such shares of
any other Evergreen Keystone Fund held by the investor; and

(iii) the net asset value of all shares described in paragraph
(ii) owned by another shareholder eligible to combine his or
her purchase with that of the investor into a single
"purchase" (see above).

For example, if an investor owned Class A, B or C shares of an
Evergreen Keystone Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of a Fund worth an additional
$100,000, the sales charge for the $100,000 purchase, in the case of any
Evergreen Equity or Long-Term Bond Fund, would be at the 2.50% rate applicable
to a single $300,000 purchase of shares of the Fund, rather than the 3.75% rate.

To qualify for the Combined Purchase Privilege or to obtain the
Cumulative Quantity Discount on a purchase through a selected dealer or agent,
the investor or selected dealer or agent must provide the Distributor with
sufficient information to verify that each purchase qualifies for the privilege
or discount.

Statement of Intention. Class A investors may also obtain the reduced sales
charges shown in the Prospectus by means of a written Statement of Intention,
which expresses the investor's intention to invest not less than $100,000 within
a period of 13 months in Class A shares (or Class A, Class B and/or Class C
shares) of the Fund or any other Evergreen Keystone Fund. Each purchase of
shares under a Statement of Intention will be made at the public offering price
or prices applicable at the time of such purchase to a single transaction of the
dollar amount indicated in the Statement of Intention. At the investor's option,
a Statement of Intention may include purchases of Class A, Class B or Class C
shares of the Fund or any other Evergreen Keystone Fund made not more than 90
days prior to the date that the investor signs a Statement of Intention;
however, the 13-month period during which the Statement of Intention is in
effect will begin on the date of the earliest purchase to be included.

Investors qualifying for the Combined Purchase Privilege described
above may purchase shares of the Evergreen Keystone Funds under a single
Statement of ntention. For example, if at the time an investor signs a Statement
of Intention to invest at least $100,000 in Class A shares of the Fund, the
investor and the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to invest a total of
$60,000 during the following 13 months in shares of the Fund or any other
Evergreen Keystone Fund, to qualify for the 3.75% sales charge applicable to

<PAGE>

puchases in any Evergreen Equity or Long-Term Bond Fund on the total amount
being invested (the sales charge applicable to an investment of $100,000).

The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial investment
under a Statement of Intention is 5% of such amount. Shares purchased with the
first 5% of such amount will be held in escrow (while remaining registered in
the name of the investor) to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount indicated is not
purchased, and such escrowed shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. Dividends on escrowed shares, whether
paid in cash or reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow will be released.
To the extent that an investor purchases more than the dollar amount indicated
on the Statement of Intention and qualifies for a further reduced sales charge,
the sales charge will be adjusted for the entire amount purchased at the end of
the 13-month period. The difference in sales charge will be used to purchase
additional shares of the Fund subject to the rate of sales charge applicable to
the actual amount of the aggregate purchases.

Investors wishing to enter into a Statement of Intention in conjunction
with their initial investment in Class A shares of a Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting a Fund at the address or telephone number
shown on the cover of this Statement of Additional Information.

Investments Through Employee Benefit and Savings Plans. Certain qualified
and non-qualified benefit and savings plans may make shares of the Evergreen
Keystone Funds available to their participants. Investments made by such
employee benefit plans may be exempt from any applicable front-end sales charges
if they meet the criteria set forth in the Prospectus under "Class A
Shares-Front End Sales Charge Alternative". The Advisers may provide
compensation to organizations providing administrative and recordkeeping
services to plans which make shares of the Evergreen Keystone Funds available to
their participants.

Reinstatement Privilege. A Class A shareholder who has caused any or
all of his or her shares of the Fund to be redeemed or repurchased may reinvest
all or any portion of the redemption or repurchase proceeds in Class A shares of
the Fund at net asset value without any sales charge, provided that such
reinvestment is made within 30 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined as described above. A reinstatement pursuant to this privilege will
not cancel the redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal income tax purposes except that no
loss will be recognized to the extent that the proceeds are reinvested in shares
of the Fund. The reinstatement privilege may be used by the shareholder only
once, irrespective of the number of shares redeemed or repurchased, except that
the privilege may be used without limit in connection with transactions whose
sole purpose is to transfer a shareholder's interest in the Fund to his or her
individual retirement account or other qualified retirement plan account.
Investors may exercise the reinstatement privilege by written request sent to
the Fund at the address shown on the cover of this Statement of Additional
Information.

Sales at Net Asset Value. In addition to the categories of investors
set forth in the Prospectus, each Fund may sell its Class A shares at net asset

<PAGE>

value, i.e., without any sales charge, to: (i) certain investment advisory
clients of the Advisers or their affiliates; (ii) officers and present or former
Trustees of the Trusts; present or former trustees of other investment companies
managed by the Advisers; officers, directors and present or retired full-time
employees of the Advisers, the Distributor, and their affiliates; officers,
directors and present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant (collectively
"relatives") of any such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or relative; or the
estate of any such person or relative, if such shares are purchased for
investment purposes (such shares may not be resold except to the Fund); (iii)
certain employee benefit plans for employees of the Advisers, the Distributor
and their affiliates; (iv) persons participating in a fee-based program,
sponsored and maintained by a registered broker-dealer and approved by the
Distributor, pursuant to which such persons pay an asset-based fee to such
broker-dealer, or its affiliate or agent, for service in the nature of
investment advisory or administrative services. These provisions are intended to
provide additional job-related incentives to persons who serve the Funds or work
for companies associated with the Funds and selected dealers and agents of the
Funds. Since these persons are in a position to have a basic understanding of
the nature of an investment company as well as a general familiarity with the
Fund, sales to these persons, as compared to sales in the normal channels of
distribution, require substantially less sales effort. Similarly, these
provisions extend the privilege of purchasing shares at net asset value to
certain classes of institutional investors who, because of their investment
sophistication, can be expected to require significantly less than normal sales
effort on the part of the Funds and the Distributor.

Deferred Sales Charge Alternative--Class B Shares

Investors choosing the deferred sales charge alternative purchase Class
B shares at the public offering price equal to the net asset value per share of
the Class B shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold without a front-end
sales charge so that the full amount of the investor's purchase payment is
invested in the Fund initially.

Proceeds from the contingent deferred sales charge are paid to the
Distributor and are used by the Distributor to defray the expenses of the
Distributor related to providing distribution-related services to the Fund in
connection with the sale of the Class B shares, such as the payment of
compensation to selected dealers and agents for selling Class B shares. The
combination of the contingent deferred sales charge and the distribution
Services Plan fee (and, with respect to Balanced, Utility and Value, the
Shareholder Service Plan fee) enables the Fund to sell the Class B shares
without a sales charge being deducted at the time of purchase. The higher
distribution services fee (and, with respect to Balanced, Utility and Value, the
Shareholder Service Plan fee) incurred by Class B shares will cause such shares
to have a higher expense ratio and to pay lower dividends than those related to
Class A shares.

Contingent Deferred Sales Charge. Class B shares which are redeemed
within six years of purchase will be subject to a contingent deferred sales
charge at the rates set forth in the Prospectus charged as a percentage of the
dollar amount subject thereto. The charge will be assessed on an amount equal to
the lesser of the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be imposed on
increases in net asset value above the initial purchase price. In addition, no
contingent deferred sales charge will be assessed on shares derived from

<PAGE>

reinvestment of dividends or capital gains distributions. The amount of the
contingent deferred sales charge, if any, will vary depending on the number of
years from the time of payment for the purchase of Class B shares until the time
of redemption of such shares.

In determining the contingent deferred sales charge applicable to a
redemption, it will be assumed that the redemption is first of any Class A
shares or Class C shares in the shareholder's Fund account, second of Class B
shares held for over seven years or Class B shares acquired pursuant to
reinvestment of dividends or distributions and third of Class B shares held
longest during the seven-year period.

To illustrate, assume that an investor purchased 100 Class B shares at
$10 per share (at a cost of $1,000) and in the second year after purchase, the
net asset value per share is $12 and, during such time, the investor has
acquired 10 additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 50 Class B shares, 10
Class B shares will not be subject to charge because of dividend reinvestment.
With respect to the remaining 40 Class B shares, the charge is applied only to
the original cost of $10 per share and not to the increase in net asset value of
$2 per share. Therefore, of the $600 of the shares redeemed $400 of the
redemption proceeds (40 shares x $10 original purchase price) will be charged at
a rate of 4.0% (the applicable rate in the second year after purchase for a
contingent deferred sales charge of $16).

The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a shareholder,
or (ii) to the extent that the redemption represents a minimum required
distribution from an individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2.

Conversion Feature. At the end of the period ending seven years after the
end of the calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A shares and will
no longer be subject to a higher distribution services fee (and, with respect to
Balanced, Utility and Value, the Shareholder Service Plan fee) imposed on Class
B shares. Such conversion will be on the basis of the relative net asset values
of the two classes, without the imposition of any sales load, fee or other
charge. The purpose of the conversion feature is to reduce the distribution
services fee paid by holders of Class B shares that have been outstanding long
enough for the Distributor to have been compensated for the expenses associated
with the sale of such shares.

For purposes of conversion to Class A, Class B shares purchased through
the reinvestment of dividends and distributions paid in respect of Class B
shares in a shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's account (other
than those in the sub-account) convert to Class A, an equal pro-rata portion of
the Class B shares in the sub-account will also convert to Class A.

The conversion of Class B shares to Class A shares is subject to the
continuing availability of an opinion of counsel to the effect that (i) the
assessment of the higher distribution services fee (and, with respect to
Balanced, Utility and Value, Shareholder Service Plan fee) and transfer agency
costs with respect to Class B shares does not result in the dividends or
distributions payable with respect to other Classes of a Fund's shares being
deemed "preferential dividends" under the Code, and (ii) the conversion of
57

<PAGE>

Class B shares to Class A shares does not constitute a taxable event under
Federal income tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the time such
conversion is to occur. In that event, no further conversions of Class B shares
would occur, and shares might continue to be subject to the higher distribution
services fee (and, with respect to Balanced, Utility and Value, the Shareholder
Service Plan fee) for an indefinite period which may extend beyond the period
ending seven years after the end of the calendar month in which the
shareholder's purchase order was accepted.

Level-Load Alternative--Class C Shares

Investors choosing the level load sales charge alternative purchase Class C
shares at the public offering price equal to the net asset value per share of
the Class C shares on the date of purchase without the imposition of a front-end
sales charge. However, you will pay a 1.0% contingent deferred sales charge if
you redeem shares during the first year after purchase. No charge is imposed in
connection with redemptions made more than one year from the date of purchase.
Class C shares are sold without a front-end sales charge so that the Fund will
receive the full amount of the investor's purchase payment and after the first
year without a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of his or her
Class C shares. The Class C distribution services fee (and, with respect to
Balanced, Utility and Value, Shareholder Service Plan fee) enables the Fund to
sell Class C of shares without either a front-end or contingent deferred sales
charge. However, unlike Class B shares, Class C shares do not convert to any
other Class shares of the Fund. Class C shares incur higher distribution
services fees (and, with respect to Balanced, Utility and Value, Shareholder
Service Plan fee) than Class A shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares.

Class Y Shares

Class Y shares are not offered to the general public and are available
only to (i) persons who at or prior to December 30, 1994 owned shares in a
mutual fund advised by Evergreen Asset, (ii) certain investment advisory clients
of the Advisers and their affiliates, and (iii) institutional investors. Class Y
shares do not bear any Rule 12b-1 distribution expenses and are not subject to
any front-end or contingent deferred sales charges.

GENERAL INFORMATION ABOUT THE FUNDS (See also "Other
Information - General Information"
in each Fund's Prospectus)

Capitalization and Organization

Each of the Evergreen Growth and Income Fund and Evergreen Income and
Growth Fund is a Massachusetts business trust. Evergreen American Retirement
Fund and Evergreen Small Cap Equity Income Fund are each separate series of The
Evergreen American Retirement Trust, a Massachusetts business trust. The
Evergreen Foundation Fund and Evergreen Tax Strategic Foundation Fund are each
separate series of the Evergreen Foundation Trust, a Massachusetts business
trust. The Evergreen Balanced Fund, Evergreen Utility Fund and Evergreen Value
Fund, which prior to July 7, 1995 were known as the First Union Balanced
Portfolio, First Union Utility Portfolio and First Union Value Portfolio,
respectively, are each separate series of Evergreen Investment Trust, a

<PAGE>

Massachusetts business trust. Keystone Fund for Total Return (formerly Keystone
America Fund for Total Return) is a Massachusetts business trust. On July 7,
1995, First Union Funds changed its name to Evergreen Investment Trust. The
above-named Trusts are individually referred to in this Statement of Additional
Information as the "Trust" and collectively as the "Trusts." Each Trust is
governed by a board of trustees. Unless otherwise stated, references to the
"Board of Trustees" or "Trustees" in this Statement of Additional Information
refer to the Trustees of all the Trusts.

Income and Growth and Growth and Income may issue an unlimited number
of shares of beneficial interest with a $0.001 par value. American Retirement,
Small Cap, Foundation, Tax Strategic, Balanced, Value and Utility may issue an
unlimited number of shares of beneficial interest with a $0.0001 par value.
Total Return may issue an unlimited number of shares of beneficial interest with
a no par value. All shares of these Funds have equal rights and privileges.
Each share is entitled to one vote, to participate equally in dividends and
distributions declared by the Funds and on liquidation to their proportionate
share of the assets remaining after satisfaction of outstanding liabilities.
Shares of these Funds are fully paid, nonassessable and fully transferable when
issued and have no pre-emptive, conversion or exchange rights. Fractional shares
have proportionally the same rights, including voting rights, as are provided
for a full share.

Under each Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Trust or his or her earlier death,
incapacity, resignation or removal. Shareholders can remove a Trustee upon a
vote of two-thirds of the outstanding shares of beneficial interest of the
Trust. Vacancies will be filled by a majority of the remaining Trustees, subject
to the 1940 Act. As a result, normally no annual or regular meetings of
shareholders will be held, unless otherwise required by the Declaration of Trust
of each Trust or the 1940 Act.

Shares have noncumulative voting rights, which means that the holders
of more than 50% of the shares voting for the election of Trustees can elect
100% of the Trustees if they choose to do so and in such event the holders of
the remaining shares so voting will not be able to elect any Trustees.

The Trustees of each Trust are authorized to reclassify and issue any
unissued shares to any number of additional series without shareholder approval.
Accordingly, in the future, for reasons such as the desire to establish one or
more additional portfolios of a Trust with different investment objectives,
policies or restrictions, additional series of shares may be created by one or
more of the Trusts. Any issuance of shares of another series or class would be
governed by the 1940 Act and the law of the Commonwealth of Massachusetts. If
shares of another series of a Trust were issued in connection with the creation
of additional investment portfolios, each share of the newly created portfolio
would normally be entitled to one vote for all purposes. Generally, shares of
all portfolios would vote as a single series on matters, such as the election of
Trustees, that affected all portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of the Investment
Advisory Agreement and changes in investment policy, shares of each portfolio
would vote separately.

In addition any Fund may, in the future, create additional classes of
shares which represent an interest in the same investment portfolio. Except for
the different distribution related and other specific costs borne by such

<PAGE>

additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.

Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of each Fund. The rights of the holders of
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.

An order has been received from the SEC permitting the issuance and
sale of multiple classes of shares representing interests in each Fund. In the
event a Fund were to issue additional Classes of shares other than those
described herein, no further relief from the SEC would be required.

Distributor

Evergreen Keystone Distributor, Inc. (formerly known as Evergreen Funds
Distributor, Inc. (the "Distributor"), 120 Clove Road, Little Falls, NJ 07424
serves as each Fund's principal underwriter, and as such may solicit orders from
the public to purchase shares of any Fund. The Distributor is not obligated to
sell any specific amount of shares and will purchase shares for resale only
against orders for shares. Under the Distribution Agreement between the Fund and
the Distributor, the Fund has agreed to indemnify the Distributor, in the
absence of its willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended.

Counsel

Sullivan & Worcester LLP, Washington, D.C., serves as counsel to the
Funds.

Independent Auditors

Price Waterhouse LLP has been selected to be the independent auditors
of Income and Growth.

KPMG Peat Marwick LLP has been selected to be the independent auditors of
Growth and Income, American Retirement, Small Cap, Balanced, Utility, Value,
Total Return, Foundation and Tax Strategic.

PERFORMANCE INFORMATION

Total Return

From time to time a Fund may advertise its "total return." Computed
separately for each class, the Fund's "total return" is its average annual
compounded total return for recent one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for such a period is
computed by finding, through the use of a formula prescribed by the SEC the
average annual compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment at the end of
the period. For purposes of computing total return, income dividends and capital
gains distributions paid on shares of the Fund are assumed to have been
reinvested when paid and the maximum sales charge applicable to purchases of
Fund shares is assumed to have been paid. The Fund will include performance

<PAGE>

data for Class A, Class B, Class C and Class Y shares in any advertisement or
information including performance data of the Fund.

With respect to Income and Growth, Growth and Income, American
Retirement, Small Cap, Foundation and Tax Strategic, the shares of each Fund
outstanding prior to January 3, 1995 have been reclassified as Class Y shares.
The average annual compounded total return for each Class of shares offered by
the Funds for the most recently completed one, five and ten year fiscal periods
is set forth in the table below.

INCOME AND GROWTH 1 Year 5 Years 10 Years
Ended Ended Ended
1/31/97 1/31/97 1/31/97
Class A 8.4% 9.5% 7.7%
Class B 8.0% 10.0% 8.1%
Class C 11.9% 10.3% 8.1%
Class Y 14.1% 10.7% 8.3%

GROWTH AND INCOME 1 Year 5 Years 10 Years
Ended Ended Ended
12/31/96 12/31/96 12/31/96
Class A 17.6% 15.6% 14.0%
Class B 17.6% 16.2% 14.4%
Class C 21.6% 16.5% 14.4%
Class Y 23.8% 16.9% 14.6%

From
AMERICAN 1 Year 5 Years 3/14/88
RETIREMENT Ended Ended (inception)
12/31/96 12/31/96 to 12/31/96
Class A 7.1% 10.6% 10.2%
Class B 6.5% 11.1% 10.6%
Class C 10.6% 11.4% 10.6%
Class Y 12.6% 11.6% 10.8%

From
SMALL CAP 1 Year 10/1/93
Ended (inception)
12/31/96 to 12/31/96
Class A 16.2% 13.8%
Class B 16.1% 14.3%
Class C 20.1% 15.0%
Class Y 22.4% 15.7%

FOUNDATION 1 Year 5 Years From 1/2/90
Ended Ended (inception)
12/31/96 12/31/96 to 12/31/96
Class A 6.0% 13.5% 15.5%
Class B 5.5% 14.0% 16.0%
Class C 9.4% 14.2% 16.0%
Class Y 11.5% 14.7% 16.3%

TAX STRATEGIC 1 Year From 11/02/93
Ended (inception) to
12/31/96 12/31/96
Class A 9.9% 13.5%

<PAGE>

Class B 9.7% 14.1%
Class C 13.5% 14.8%
Class Y 15.8% 15.5%

BALANCED 1 Year 5 Years
Ended Ended From inception*
12/31/96 12/31/96 to 12/31/96
Class A 6.1% 9.3% 10.4%
Class B 5.7% - 9.6%
Class C 9.3% - 13.1%
Class Y 11.7% 10.7% 11.9%

UTILITY 1 Year From inception**
Ended to 12/31/96
12/31/96
Class A -.6% 7.1%
Class B -1.3% 7.2%
Class C 2.5% 12.4%
Class Y 4.5% 11.2%

VALUE 1 Year 5 Years
Ended Ended From inception***
12/31/96 12/31/96 to 12/31/96
Class A 13.3% 12.4% 13.4%
Class B 13.1% -- 14.1%
Class C 17.1% -- 18.8%
Class Y 19.2% 13.8% 15.7%

1 Year 5 Years
Ended Ended From inception****
11/30/96 11/30/96 to 11/30/96
TOTAL RETURN

Class A 22.4% 13.8% 11.4%
Class B 24.7% __ 13.7%
Class C 28.7% __ 14.3%

Total Return commenced offering Class Y shares effective December 15, 1996.

* Inception date: Class A - June 10, 1991; Class B - January 26, 1993; Class C
- - - September 2, 1994; Class Y - April 1, 1991.

** Inception date: Class A - January 4, 1994; Class B - January 4, 1994; Class
C - - September 2, 1994; Class Y - February 28, 1994.

*** Inception date: Class A - April 12, 1985; Class B - January 25, 1993; Class
C - September 2, 1994; Class Y - December 31, 1990.

****Inception date: Class A-February 13, 1987; Class B and C-February 1, 1993.

The performance numbers for Income and Growth, Growth and Income,
American Retirement, Small Cap, Foundation and Tax Strategic for the Class A,
Class B and Class C shares are hypothetical numbers based on the performance for
Class Y shares as adjusted for any applicable front-end sales charge or
contingent deferred sales charge through January 3, 1995 (commencement of class
operations) and the actual performance of each class subsequent to January 3,
1995. The performance data calculated prior to January 3, 1995, does not reflect
any Rule 12b-1 fees. If such fees were reflected the returns would be lower.

A Fund's total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and quality of the
securities in a Fund's portfolio and its expenses. Total return information is

<PAGE>

useful in reviewing a Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments which pay a fixed
yield for a stated period of time. An investor's principal invested in a Fund is
not fixed and will fluctuate in response to prevailing market conditions.

YIELD CALCULATIONS

From time to time, a Fund may quote its yield in advertisements or in
reports or other communications to shareholders. Yield quotations are expressed
in annualized terms and may be quoted on a compounded basis. Yields are computed
by dividing the Fund's interest income (as defined in the SEC yield formula) for
a given 30-day or one month period, net of expenses, by the average number of
shares entitled to receive distributions during the period, dividing this figure
by the Fund's net asset value per share at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. The formula for calculating yield is as follows:

YIELD = 2[(a-b/cd)+ 1]

Where a = Interest earned during the period
b = Expenses accrued for the period (net of reimbursements) c = The
average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the period

Income is calculated for purposes of yield quotations in accordance
with standardized methods applicable to all stock and bond funds. Gains and
losses generally are excluded from the calculation. Income calculated for
purposes of determining a Fund's yield differs from income as determined for
other accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yields quoted for
a Fund may differ from the rate of distributions a Fund paid over the same
period, or the net investment income reported in a Fund's financial statements.

Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in a Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Funds'
investment portfolios, portfolio maturity, operating expenses and market
conditions.

It should be recognized that in periods of declining interest rates the
yields will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates the yields will tend to be somewhat lower.
Also, when interest rates are falling, the inflow of net new money to a Fund
from the continuous sale of its shares will likely be invested in instruments
producing lower yields than the balance of the Fund's investments, thereby
reducing the current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.

The yield of each Fund, except Total Return, for the thirty-day period
ended December 31, 1996

<PAGE>

(January 31, 1997 with respect to Income and Growth) for each
Class of shares offered by the Funds is set forth in the table below:

Income and Growth Tax Strategic
Class A 3.32% Class A 2.28%
Class B 2.76% Class B 1.64%
Class C 2.76% Class C 1.62%
Class Y 3.73% Class Y 2.64%

Growth and Income Balanced
Class A .54% Class A 3.75%
Class B -.17% Class B 3.12%
Class C -.17% Class C 3.15%
Class Y .81% Class Y 4.21%

American Retirement Utility
Class A 3.03% Class A 3.70%
Class B 2.46% Class B 3.13%
Class C 2.44% Class C 3.13%
Class Y 3.43% Class Y 4.14%

Small Cap Value
Class A 2.13% Class A 1.43%
Class B 1.50% Class B .66%
Class C 1.51% Class C .66%
Class Y 2.48% Class Y 1.78%

Foundation
Class A 2.83%
Class B 2.23%
Class C 2.24%
Class Y 3.22%

Non-Standardized Performance

In addition to the performance information described above, a Fund may
provide total return information for designated periods, such as for the most
recent six months or most recent twelve months. This total return information is
computed as described under "Total Return" above except that no annualization is
made.

GENERAL

From time to time, a Fund may quote its performance in advertising and
other types of literature as compared to the performance of the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average,
Russell 2000 Index, or any other commonly quoted index of common stock prices.
The Standard & Poor's 500 Composite Stock Price Index, the Dow Jones Industrial
Average and the Russell 2000 Index are unmanaged indices of selected common
stock prices. A Fund's performance may also be compared to those of other mutual
funds having similar objectives. This comparative performance would be expressed
as a ranking prepared by Lipper Analytical Services, Inc. or similar independent
services monitoring mutual fund performance. A Fund's performance will be
calculated by assuming, to the extent applicable, reinvestment of all capital
gains distributions and income dividends paid. Any such comparisons may

<PAGE>

be useful to investors who wish to compare a Fund's past performance with that
of its competitors. Of course, past performance cannot be a guarantee of future
results.

Additional Information

Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statements filed by the Trusts with the SEC under the Securities Act of 1933.
Copies of the Registration Statements may be obtained at a reasonable charge
from the SEC or may be examined, without charge, at the offices of the SEC in
Washington, D.C.

FINANCIAL STATEMENTS

Each Fund's financial statements appearing in their most current fiscal
year Annual Report to shareholders and the report thereon of the independent
auditors appearing therein, namely Price Waterhouse LLP (in the case of Income
and Growth) or KPMG Peat Marwick LLP (in the case of Growth and Income, American
Retirement, Small Cap, Balanced, Utility, Foundation, Tax Strategic, Value, and
Total Return) are incorporated by reference in this Statement of Additional
Information. The Annual Reports to Shareholders for each Fund, which contain the
referenced statements, are available upon request and without charge.

APPENDIX "A"

DESCRIPTION OF BOND RATINGS

Standard & Poor's Ratings Service. A Standard & Poor's corporate or
municipal bond rating is a current assessment of the credit worthiness of an
obligor with respect to a specific obligation. This assessment of credit
worthiness may take into consideration obligors such as guarantors, insurers or
lessees. The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

The ratings are based on current information furnished to Standard &
Poor's by the issuer or obtained by Standard & Poor's from other sources it
considers reliable. Standard & Poor's does not perform any audit in connection
with the ratings and may, on occasion, rely on unaudited financial information.
The ratings may be changed, suspended or withdrawn as a result of changes in,
unavailability of such information, or for other circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of default-capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation.

2. Nature of and provisions of the obligation.

<PAGE>

3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or their arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.

AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay interest and
repay any principal.

AA - Debt rated AA also qualifies as high quality debt obligations.
Capacity to pay interest and repay principal is very strong and in the majority
of instances they differ from AAA issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded, on a
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.

BB indicates the lowest degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB - rating.

B - Debt rated B has greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

CCC - Debt rated CCC has a currently indefinable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.

CC - The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

<PAGE>

C - The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

C1 - The rating C1 is reserved for income bonds on which no interest is
being paid.

D - Debt rated D is in payment default. It is used when interest
payments or principal payments are not made on a due date even if the applicable
grace period has not expired, unless Standard & Poor's believes that such
payments will be made during such grace periods; it will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (-) - To provide more detailed indications of credit
quality, the ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.

NR - indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy. Debt
obligations of issuers outside the United States and its territories are rated
on the same basis as domestic corporate and municipal issues. The ratings
measure the credit worthiness of the obligor but do not take into account
currency exchange and related uncertainties.

Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "Investment Grade" ratings)
are generally regarded as eligible for bank investment. In addition, the Legal
Investment Laws of various states may impose certain rating or other standards
for obligations eligible for investment by savings banks, trust companies,
insurance companies and fiduciaries generally.

Moody's Investors Service, Inc. A brief description of the applicable
Moody's rating symbols and their meanings follows:

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but

<PAGE>

elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well. NOTE:
Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol "1" following the rating.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds and
issue so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Phoenix, Duff & Phelps, Inc.: AAA-- highest credit quality, with negligible
risk factors; AA -- high credit quality, with strong protection factors and
modest risk, which may vary very slightly from time to time because of economic
conditions; A--average credit quality with adequate protection factors, but with
greater and more variable risk factors in periods of economic stress. The
indicators "+" and "-" to the AA and A categories indicate the relative position
of a credit within those rating categories.

Fitch Investors Service LLP: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with very strong ability to pay interest and repay
principal; A -- high credit quality, considered strong as regards principal and
interest protection, but may be more vulnerable to adverse changes in economic
conditions and circumstances. The indicators "+" and "-" to the AA, A and BBB
categories indicate the relative position of credit within those rating
categories.

DESCRIPTION OF MUNICIPAL NOTE RATINGS

A Standard & Poor's note rating reflects the liquidity concerns and
market access risks unique to notes. Notes due in three years or less

<PAGE>

will likely receive a note rating. Notes maturing beyond three years will most
likely receive a long-term debt rating. The following criteria will be used in
making that assessment.

o Amortization schedule (the larger the final maturity relative to
other maturities the more likely it will be treated as a note).

o Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note.) Note rating
symbols are as follows:

o SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.

o SP-2 Satisfactory capacity to pay principal and interest.

o SP-3 Speculative capacity to pay principal and interest.

Moody's Short-Term Loan Ratings - Moody's ratings for state and
municipal short-term obligations will be designated Moody's Investment Grade
(MIG). This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the borrower
are uppermost in importance in short-term borrowing, while various factors of
major importance in bond risk are of lesser importance over the short run.

Rating symbols and their meanings follow:

o MIG 1 - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

o MIG 2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.

o MIG 3 - This designation denotes favorable quality. All security
elements are accounted for but this is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

o MIG 4 - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.

COMMERCIAL PAPER RATINGS

Moody's Investors Service, Inc.: Commercial paper rated "Prime" carries
the smallest degree of investment risk. The modifiers 1, 2, and 3 are used to
denote relative strength within this highest classification.

Standard & Poor's Ratings Service: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.

<PAGE>

Phoenix, Duff & Phelps, Inc.: Duff 1 is the highest commercial paper rating
category utilized by Duff & Phelps which uses + or - to denote relative strength
within this classification. Duff 2 represents good certainty of timely payment,
with minimal risk factors. Duff 3 represents satisfactory protection factors,
with risk factors larger and subject to more variation.

Fitch Investors Service LLP: F-1+ -- denotes exceptionally strong
credit quality given to issues regarded as having strongest degree of assurance
for timely payment; F-1 -- very strong, with only slightly less degree of
assurance for timely payment than F-1+; F-2 -- good credit quality, carrying a
satisfactory degree of assurance for timely payment.

<PAGE>
*******************************************************************************

EVERGREEN FOUNDATION TRUST

PART C. OTHER INFORMATION

Item 24.
Financial Statements and Exhibits

a. Financial Statements

Included in Part A of this Registration Statement:

Financial Highlights for the Class Y shares of Evergreen
Foundation Fund for the fiscal period from January 2, 1990
(commencement of operations) through December 31, 1990, and for
the fiscal years ended December 31, 1991 through December 31, 1996

Financial Highlights for the Class A, Class B and Class C shares
of Evergreen Foundation Fund for the fiscal period from January 3,
1995 (commencement of class operations) through December 31, 1995,
and for the fiscal year ended December 31, 1996

Financial Highlights for the Class Y shares of Evergreen Tax
Strategic Foundation Fund for the fiscal period from November 2,
1993 (commencement of operations) through December 31, 1993, and
for the fiscal years ended December 31, 1994 through December 31,
1996

Financial Highlights for the Class A shares of Evergreen Tax
Strategic Foundation Fund for the fiscal period from January 17,
1995 (commencement of class operations) through December 31, 1995,
and for the fiscal year ended December 31, 1996

Financial Highlights for the Class B shares of Evergreen Tax
Strategic Foundation Fund for the fiscal period from January 6,
1995 (commencement of class operations) through December 31, 1995,
and for the fiscal year ended December 31, 1996

Financial Highlights for the Class C shares of Evergreen Tax
Strategic Foundation Fund for the fiscal period from March 3, 1995
(commencement of class operations) through December 31, 1995, and
for the fiscal year ended December 31, 1996

Included in Part B of this Registration Statement:*

Statements of Investments for Evergreen Foundation Fund and Evergreen
Tax Strategic Foundation Fund as of December 31, 1996 (audited)

Statements of Assets and Liabilities for Evergreen Foundation Fund and
Evergreen Tax Strategic Foundation Fund as of December 31, 1996
(audited)

Statements of Operations of Evergreen Foundation Fund and Evergreen Tax
Strategic Foundation Fund for the year ended December 31,
1996 (audited)

Statements of Changes in Net Assets of Evergreen Foundation Fund and
Evergreen Tax Strategic Foundation Fund for the fiscal years
ended December 31, 1995 and 1996 (audited)

Financial Highlights of Evergreen Foundation Fund and Evergreen Tax
Strategic Foundation Fund

Notes to Financial Statements of Evergreen Foundation Fund and
Evergreen Tax Strategic Foundation Fund

Report of Independent Accountants of Evergreen Foundation Fund and
Evergreen Tax Strategic Foundation Fund

Statements, schedules and historical information other than those
listed above have been omitted since they are either not applicable or
are not required or the required information is shown in the financial
statements or notes thereto.

b. Exhibits

Number Description

1(A) Declaration of Trust**
1(B) Amended Declaration of Trust***
1(C) Instrument providing for the Establishment and Designation
of Classes***
2 By-Laws**
3 None
4 Instruments Defining Rights of Shareholders***
5(A) Investment Advisory Agreement***
5(B) Investment Subadvisory Agreement***
6 Distribution Agreement***
7 None
8 Custodian Agreement**
9 None
10 None
11 Consent of KPMG Peat Marwick LLP, independent accountants+
12 None
13 None
14 None
15 Rule 12b-1 Distribution Plans***
16 None
17 Copy of Financial Data Schedules+
18 Not applicable
19 Not Applicable

Other Exhibits:

Power of Attorney****
- --------------------------
* Incorporated by reference to the Annual Report to Shareholders for the fiscal
year ended December 31, 1996 which has been previously filed with the Commission
and by reference to the Semi-Annual and Annual Reports of Registrant on form
NSAR for the aforementioned period.

** Incorporated by reference to Pre-Effective Amendment No. 1 to Registrant's
registration statement on Form N-1A, File No. 33-31803 filed February 1, 1990.

*** Incorporated by reference to Post-Effective Amendment No. 8 to Registrant's
registration statement on Form N-1A, File No. 33-31803 filed January 2, 1995.

**** Incorporated by reference to Post-Effective Amendment No. 11 to
Registrant's registration statement on Form N-1A, File No. 33-31803 filed April
1, 1996.

+ All exhibits have been filed electronically.

Item 25. Persons Controlled by or Under Common Control with Registrant
N/A

Item 26. Number of Holders of Securities (as of February 28, 1997)

(1) (2)
Title of Class Number of
Record Shareholders

Evergreen Foundation Fund:
Class Y Shares of Beneficial Interest ($0.0001 par value) 20,704

Class A Shares of Beneficial Interest ($0.0001 par value) 18,871

Class B Shares of Beneficial Interest ($0.0001 par value) 53,156

Class C Shares of Beneficial Interest ($0.0001 par value) 1,500

Evergreen Tax Strategic Foundation Fund:
Class Y Shares of Beneficial Interest ($0.0001 par value) 295

Class A Shares of Beneficial Interest ($0.0001 par value) 455

Class B Shares of Beneficial Interest ($0.0001 par value) 1,378

Class C Shares of Beneficial Interest ($0.0001 par value) 73

Item 27. Indemnification

Article XI of the Registrant's By-laws contains the following
provisions regarding indemnification of Trustees and officers:

SECTION 11.1 Actions Against Trustee or Officer. The Trust shall
indemnify any individual who is a present or former Trustee or officer of the
Trust and who, by reason of his position as such, was, is, or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
any action or suit by or in the right of the Trust) against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually and
reasonably incurred by him in connection with the claim, action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon the plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Trust, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.

SECTION 11.2 Derivative Actions Against Trustees or Officers. The Trust
shall indemnify any individual who is a present or former Trustee or officer of
the Trust and who, by reason of his position as such, was, is, or is threatened
to be made a party to any threatened, pending or completed action or suit by or
on behalf of the Trust to obtain a judgment or decree in its favor, against
expenses, including attorneys' fees, actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust, except that no indemnification shall be made in
respect of any claim, issue or matter as to which the individual has been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Trust, except to the extent that the court in which the action or
suit was brought determines upon application that, despite the adjudication of
liability but in view of all circumstances of the case, the person is fairly and
reasonably entitled to indemnity for those expenses which the court shall deem
proper, provided such Trustee or officer is not adjudged to be liable by reason
of his wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.

SECTION 11.3 Expenses of Successful Defense. To the extent that a
Trustee or officer of the Trust has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in Section 11.1 or 11.2
or in defense of any claim, issue, or matter therein, he shall be indemnified
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection therewith.

SECTION 11.4 Required Standard of Conduct.

(a) Unless a court orders otherwise, any indemnification under
Section 11.1 or 11.2 may be made by the Trust only as authorized in the specific
case after a determination that indemnification of the Trustee or officer is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 11.1 or 11.2. The determination shall be made by:
(i) the Trustees, by a majority vote of a quorum consisting of Trustees who were
not parties to the action, suit or proceeding; or if the required quorum is not
obtainable, or if a quorum of disinterested Trustees so directs, (ii) an
independent legal counsel in a written opinion.

(b) Nothing contained in this Article XI shall be construed to
protect any Trustee or officer of the Trust against any liability to the Trust
or its Shareholders to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office (any such conduct being hereinafter called
"Disabling Conduct"). No indemnification shall be made pursuant to this Article
XI unless:

(i) There is a final determination on the merits by a court or
other body before whom the action, suit or proceeding was brought that the
individual to be indemnified was not liable by reason of Disabling Conduct; or

(ii) In the absence of such a judicial determination, there is a
reasonable determination, based upon a review of the facts, that such individual
was not liable by reason of Disabling Conduct, which determination shall be made
by:

(A) A majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in section 2(a) (19) of the 1940
Act, nor parties to the action, suit or proceeding; or

(B) An independent legal counsel in a written opinion.

SECTION 11.5 Advance Payments. Notwithstanding any provision of this
Article XI, any advance payment of expenses by the Trust to any Trustee or
officer of the Trust shall be made only upon the undertaking by or on behalf of
such Trustee or officer to repay the advance unless it is ultimately determined
that he is entitled to indemnification as above provided, and only if one of the
following conditions is met:

(a) the Trustee or officer to be indemnified provides a security for his
undertaking; or

(b) The Trust is insured against losses arising by reason of any lawful
advances; or

(c) There is a determination, based on a review of readily available facts,
that there is reason to believe that the Trustee or officer to be indemnified
ultimately will be entitled to indemnification, which determination shall be
made by:

(i) A majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a) (19) of the 1940
Act, nor parties to the action, suit or proceeding; or

(ii) An independent legal counsel in a written opinion.

SECTION 11.6 Former Trustees and Officers. The indemnification provided
by this Article XI shall continue as to an individual who has ceased to be a
Trustee or officer of the Trust and inure to the benefit of the legal
representatives of such individual and shall not be deemed exclusive of any
other rights to which any Trustee, officer, employee or agent of the Trust may
be entitled under any agreement, vote of Trustees or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding office as such; provided, that no Person may satisfy any right of
indemnity granted herein or to which he may be otherwise entitled, except out of
the Trust Property, and no Shareholder shall be personally liable with respect
to any claim for indemnity.

SECTION 11.7 Insurance. The Trust may purchase and maintain insurance
on behalf of any person who is or was a Trustee, officer, employee, or agent of
the Trust, against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such. However, the Trust shall
not purchase insurance to indemnify any Trustee or officer against liability for
any conduct in respect of which the 1940 Act prohibits the Trust itself from
indemnifying him.

SECTION 11.8 Other Rights to Indemnification. The indemnification
provided for herein shall not be deemed exclusive of any other rights to which
those seeking indemnification may be entitled under any By-Law, agreement, vote
of Shareholders or disinterested Trustees or otherwise.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with the
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

Item 28. Business or Other Connections of Investment Adviser

(a) For a description of the other business of the investment adviser, see
the section entitled "Management of the Funds-Investment Adviser" in Part A.

Evergreen Asset Management Corp., the Registrant's investment adviser, and
Lieber and Company, the Registrant's sub-adviser also act as such to the
Evergreen Trust, Evergreen Income and Growth Fund (formerly The Evergreen Total
Return Fund), The Evergreen Limited Market Fund, Inc., Evergreen Growth and
Income Fund, The Evergreen Money Market Trust, The Evergreen American Retirement
Trust, The Evergreen Municipal Trust, Evergreen Equity Trust, Evergreen
Foundation Trust, and Evergreen Variable Trust, all registered investment
companies. Stephen A. Lieber, Theodore J. Israel, Jr. and Nola Maddox Falcone,
officers of the Adviser and Lieber and Company, were, prior to June 30, 1994
officers and/or directors or trustees of the Registrant and the other funds for
which the Adviser acts as investment adviser. Evergreen Asset Management Corp.
and Lieber and Company are wholly-owned subsidiaries of First Union National
Bank Of North Carolina.

The Trustees and principal executive officers of First Union National Bank
of North Carolina, parent of the Registrants's investment adviser and
sub-adviser, and the Directors of First Union National Bank of North Carolina,
are set forth in the following tables:

FIRST UNION NATIONAL BANK OF NORTH CAROLINA
BOARD OF DIRECTORS

George E. Battle, Jr. John R. Belk
President of the Board of Senior Vice President
Bishops of AME Zion Church Belk Stores Services, Inc.
South Atlantic Region 2801 W. Tyvola Road
Two First Union Center-Ste 2040 Charlotte, NC 29217-4500
Charlotte, NC 28202

Daniel T. Blue, Jr. Ben Mayo Boddie
Partner Chairman & CEO
Thigpen, Blue, Stephens & Fellers Boddie-Noell Enterprises, Inc.
205 Fayetteville Street Mall P.O. Box 1908
Raleigh, NC 27602 Rocky Mount, NC 27802

Raymond A. Bryan, Jr. John F.A.V. Cecil
Chairman & CEO President
T.A. Loving Company Biltmore Dairy Farms, Inc.
P.O. Drawer 919 P.O. Box 5355
Goldsboro, NC 27530 Asheville, NC 28813

John W. Copeland John Crosland, Jr.
President Chairman of the Board
Ruddick Corporation The Crosland Group, Inc.
2000 Two First Union Center 135 Scaleybark Road
Charlotte, NC 28282 Charlotte, NC 28209

J. William Disher Malcolm E. Everett, III
Chairman & President President & CEO
Lance Incorporated First Union National Bank
P.O. Box 32368 of North Carolina
Charlotte, NC 28232 310 S. Tryon Street
Charlotte, NC 28288-0006

James F. Goodmon Shelton Gorelick
President & Chief President
Executive Officer SGIC, Inc.
Capitol Broadcasting P.O. Box 35229
Company, Inc. Charlotte, NC 28235-5129
P.O. Box 12000
Raleigh, NC 27605

Charles L. Grace James E. S. Hynes
President Chairman
Cummins Atlantic, Inc. Hynes Sales Company, Inc.
P.O. Box 240729 P.O. Box 220948
Charlotte, NC 28224-0729 Charlotte, NC 28222

Mackey J. McDonald Earl N. Phillips, Jr.
President & CEO President
V F Corporation First Factors Corporation
P.O. Box 1022 P.O. Box 2730
Wyomissing, PA 19610 High Point, NC 27261

J. Gregory Poole, Jr. John P. Rostan, III
Chairman & President General Partner
Gregory Poole Equipment Company Heritage Investments, LLP
P.O. Box 469 P.O. Box 970
Raleigh, NC 27602 Valdese, NC 28690

Nelson Schwab, III George Shinn
Managing Director Owner and Chairman
Carousel Capatal Company Shinn Enterprises, Inc.
4201 Congress St., Suite 440 100 Hive Drive
Charlotte, NC 28209 Charlotte, NC 28217

Harley F. Shuford, Jr. Stanley E. Wright
President and CEO Retired President and Chief
Shuford Industries Executive Officer
P.O. Box 608 219 Fayetteville Street Mall
Hickory, NC 28603 Raleigh Federal Savings Bank
Raleigh, NC 27601

FIRST UNION NATIONAL BANK OF NORTH CAROLINA
EXECUTIVE OFFICERS

Edward E. Crutchfield, Chairman & CEO, First Union Corporation
John R. Georgius, Vice Chairman, First Union Corporation
B.J. Walker, Vice Chariman, First Union Corporation
Malcolm E. Everett, President, FUNB of NC
Austin A. Adams, EVP, First Union Corporation
Marion A. Cowell Jr., EVP, First Union Corporation
Robert T. Atwood, EVP & CFO, First Union Corporation
Leigh Bullen, Controller, FUNB of NC
H. Burt Melton, EVP, First Union Corporation
Don R. Johnson, EVP, First Union Corporation
Malcolm T. Murray, EVP, First Union Corporation
Alvin T. Sale, EVP, First Union Corporation
Richard K. Wagoner, EVP, FUNB of NC
James H. Hatch, SVP & Corporate Controller, First Union Corporation
Richard C. Highfield, SVP, First Union Corporation
Ben C. Maffitt, SVP, FUNB of NC
Donald A. McMullen, EVP, FUNB of NC
Kenneth R. Stancliff, SVP, First Union Corporation
Fred Winkler, EVP, FUNB of NC
Peter J. Schild, SVP, First Union Corporation
Betty Trautwein, SVP, FUNB of NC
Alice Lehman, SVP, First Union Corporation
Nina Archer, SVP, FUNB of NC

All of the Executive Officers are located at the following
address: First Union National Bank of North Carolina, One First
Union Center, Charlotte, NC 28288.

Item 29. Principal Underwriters

Evergreen Keystone Distributor, Inc.(formerly known as Evergreen Funds
Distributor, Inc.) The Director and principal executive officers are:

Director Michael C. Petrycki

Officers Robert A. Hering President
Michael C. Petrycki Vice President
Gordon Forrester Vice President
Lawrence Wagner VP, Chief Financial Officer
Steven D. Blecher VP, Treasurer, Secretary
Elizabeth Q. Solazzo Assistant Secretary
Thalia M. Cody Assistant Secretary

Evergreen Keystone Distributor, Inc. acts as Distributor for the
following registered investment companies or separate series thereof:

Evergreen Trust:
Evergreen Fund
Evergreen Aggressive Growth Fund
Evergreen Income and Growth Fund (formerly Evergreen Total Return Fund)
Evergreen Limited Market Fund, Inc.
Evergreen Growth and Income Fund
Evergreen Money Market Trust:
Evergreen Money Market Fund
Evergreen Institutional Money Market Fund
Evergreen Institutional Treasury Money Market Fund
Evergreen American Retirement Trust:
Evergreen American Retirement Fund
Evergreen Small Cap Equity Income Fund
Evergreen Municipal Trust:
Evergreen Tax Exempt Money Market Fund
Evergreen Short-Intermediate Municipal Fund
Evergreen Short-Intermediate Municipal Fund-California
Evergreen Florida High Income Municipal Bond Fund
Evergreen Institutional Tax Exempt Money Market Fund
Evergreen Equity Trust:
Evergreen Global Real Estate Equity Fund
Evergreen U.S. Real Estate Equity Fund
Evergreen Global Leaders Fund
Evergreen Foundation Trust:
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen Investment Trust:
Evergreen Emerging Markets Growth Fund
Evergreen International Equity Fund
Evergreen Balanced Fund
Evergreen Value Fund
Evergreen Utility Fund
Evergreen Short-Intermediate Bond Fund
Evergreen U.S. Government Fund
Evergreen Florida Municipal Bond Fund
Evergreen Georgia Municipal Bond Fund
Evergreen North Carolina Municipal Bond Fund
Evergreen South Carolina Municipal Bond Fund
Evergreen Virginia Municipal Bond Fund
Evergreen High Grade Tax Free Fund
Evergreen Treasury Money Market Fund
Evergreen Lexicon Trust:
Evergreen Intermediate Term Government Securities Fund
Evergreen Intermediate Term Bond Fund
Evergreen Tax Free Trust:
Evergreen Pennsylvania Tax Free Money Market Fund
Evergreen New Jersey Tax Free Income Fund
Evergreen Variable Trust:
Evergreen VA Fund
Evergreen VA Growth and Income Fund
Evergreen VA Foundation Fund
Evergreem VA Global Leaders Fund
Evergreen VA Strategic Income Fund
Evergreen VA Aggressive Growth Fund

<PAGE>

Keystone America Hartwell Emerging Growth Fund
Keystone Balanced Fund II
Keystone Capital Preservation and Income Fund
Keystone Emerging Markets Fund
Keystone Fund for Total Return
Keystone Fund of the Americas
Keystone Global Opportunities Fund
Keystone Global Resources and Development Fund
Keystone Government Securities Fund
Keystone Intermediate Term Bond Fund
Keystone Liquid Trust
Keystone Omega Fund
Keystone Small Company Growth Fund II
Keystone State Tax Free Fund:
Florida Tax Free Fund
Massachusetts Tax Free Fund
Pennsylvania Tax Free Fund
New York Insured Tax Free Fund
Keystone State Tax Free Fund- Series II:
California Insured Tax Free Fund
Missouri Tax Free Fund
Keystone Strategic Income Fund
Keystone Tax Free Income Fund
Keystone World Bond Fund
Keystone Quality Bond Fund (B-1)
Keystone Diversified Bond Fund (B-2)
Keystone High Income Bond Fund (B-4)
Keystone Balanced Fund (K-1)
Keystone Strategic Growth Fund (K-2)
Keystone Growth and Income Fund (S-1)
Keystone Mid-Cap Growth Fund (S-3)
Keystone Small Company Growth Fund (S-4)
Keystone Institutional Adjustable Rate Fund
Keystone Institutional Trust
Keystone International Fund Inc.
Keystone Precious Metals Holdings, Inc.
Keystone Tax Free Fund

Item 30. Location of Accounts and Records

Accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated thereunder
are maintained at the offices of the Registrant's Custodian, State Street Bank
and Trust Company, 2 Heritage Drive, North Quincy, Massachusetts 02171, the
offices of Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase,
New York 10577, or the offices of Keystone Investment Management Company, 200
Berkley Street, Boston, Massachusetts 02116-5034.

Item 31. Management Services

Not Applicable.

Item 32. Undertakings

Not Applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the Registrant certifies that it
has duly caused this Post-Effective Amendment No. 12 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 1st day of
May, 1997.

EVERGREEN FOUNDATION TRUST

/s/ John J. Pileggi
by-----------------------------
John J. Pileggi, President
by James P. Wallin
Attorney - In - Fact

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 12 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.

Signatures Title Date
- ----------- ----- ----
/s/John J. Pileggi
- ----------------------- President and May 1, 1997
John J. Pileggi Treasurer
by James P. Wallin
Attorney - In - Fact

/s/ Laurence B. Ashkin
- ----------------------- Trustee May 1, 1997
Laurence B. Ashkin
by James P. Wallin
Attorney - In - Fact

/s/Foster Bam
- ----------------------- Trustee May 1, 1997
Foster Bam
by James P. Wallin
Attorney - In - Fact

/s/James S. Howell
- ----------------------- Trustee May 1, 1997
James S. Howell
by James P. Wallin
Attorney - In - Fact

/s/Gerald M. McDonnell
- ----------------------- Trustee May 1, 1997
Gerald M. McDonnell
by James P. Wallin
Attorney - In - Fact

/s/Thomas L. McVerry
- ----------------------- Trustee May 1, 1997
Thomas L. McVerry
by James P. Wallin
Attorney - In - Fact

/s/William Walt Pettit
- ----------------------- Trustee May 1, 1997
William Walt Pettit
by James P. Wallin
Attorney - In - Fact

/s/Russell A. Salton, III, M.D
- ------------------------------ Trustee May 1, 1997
Russell A. Salton, III, M.D
by James P. Wallin
Attorney - In - Fact

/s/Michael S. Scofield
- ----------------------- Trustee May 1, 1997
Michael S. Scofield
by James P. Wallin
Attorney - In - Fact

<PAGE>

JAMES P. WALLIN, ESQ.
2500 WESTCHESTER AVENUE
Purchase, New York 10577

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re Post-Effective Amendment of
EVERGREEN FOUNDATION TRUST
Registration No. 33-31803; Investment Company File No.811-5953

Commissioners:

I have acted as counsel to the above-referenced registrant which proposes
to file, pursuant to paragraph (b) of Rule 485 (the "Rule"), Post-Effective
Amendment No. 12 the "Amendment") to its registration statement under the
Securities Act of 1933, as amended.

Pursuant to paragraph (b)(4) of the Rule, I represent that the Amendment
does not contain disclosures which would render it ineligible to become
effective pursuant to paragraph (b) of the Rule.

Very truly yours,

/s/James P. Wallin
---------------------
James P. Wallin

<PAGE>

INDEX TO EXHIBITS

Exhibit
Number Description

11 Consent of Independent
Accountants

17 Financial Data Schedules

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

The Trustees and Shareholders
Evergreen Utility Fund
Evergreen Growth and Income Fund
Evergreen Value Fund
Evergreen Small Cap Equity Income Fund
Keytone Fund for Total Return
Evergreen Foundation Fund
Evergreen Tax Strategic Foundation Fund
Evergreen American Retirement Fund
Evergreen Balanced Fund

We consent to:

1) the use of our report dated February 19, 1997 for Evergreen
Utility Fund, Evergreen Growth and Income Fund, Evergreen Value
Fund and Evergreen Small Cap Equity Income Fund incorporated by
reference herein;

2) the use of our report dated December 27, 1996 for Keystone Fund
for Total Return incorporated by reference herein;

3.) the use of our report dated February 19, 1997 for Evergreen
Foundation Fund, Evergreen Tax Strategic Foundation Fund,
Evergreen American Retirement Fund and Evergreen Balanced Fund
incorporated by reference herein; and

4) the reference to our firm under the captions "FINANCIAL
HIGHLIGHTS" in the prospectuses for the Evergreen Growth
and Income Funds.

/s/ KPMG Peat Marwick LLP
- --------------------------------
KPMG Peat Marwick LLP

April 30 , 1997

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Foundation Fund Class A
<SERIES>
<NUMBER> 11
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-02-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 1,400,296,181
<INVESTMENTS-AT-VALUE> 1,604,798,782
<RECEIVABLES> 22,144,549
<ASSETS-OTHER> 865,914
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,627,809,245
<PAYABLE-FOR-SECURITIES> 10,955,973
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,697,182
<TOTAL-LIABILITIES> 15,653,155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,398,455,698
<SHARES-COMMON-STOCK> 12,795,763
<SHARES-COMMON-PRIOR> 7,085,085
<ACCUMULATED-NII-CURRENT> 25,764
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,172,027
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 204,502,601
<NET-ASSETS> 206,331,719
<DIVIDEND-INCOME> 15,724,373
<INTEREST-INCOME> 48,429,872
<OTHER-INCOME> 0
<EXPENSES-NET> 18,961,268
<NET-INVESTMENT-INCOME> 45,192,977
<REALIZED-GAINS-CURRENT> 21,629,530
<APPREC-INCREASE-CURRENT> 96,176,448
<NET-CHANGE-FROM-OPS> 162,998,955
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,718,718
<DISTRIBUTIONS-OF-GAINS> 1,819,496
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,413,021
<NUMBER-OF-SHARES-REDEEMED> 3,177,106
<SHARES-REINVESTED> 474,763
<NET-CHANGE-IN-ASSETS> 574,467,234
<ACCUMULATED-NII-PRIOR> 271,849
<ACCUMULATED-GAINS-PRIOR> 2,006,944
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,140,780
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,961,268
<AVERAGE-NET-ASSETS> 165,715,585
<PER-SHARE-NAV-BEGIN> 15.12
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 1.16
<PER-SHARE-DIVIDEND> (0.50)
<PER-SHARE-DISTRIBUTIONS> (0.15)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.13
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Foundation Fund Class B
<SERIES>
<NUMBER> 12
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-02-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 1,400,296,181
<INVESTMENTS-AT-VALUE> 1,604,798,782
<RECEIVABLES> 22,144,549
<ASSETS-OTHER> 865,914
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,627,809,245
<PAYABLE-FOR-SECURITIES> 10,955,973
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,697,182
<TOTAL-LIABILITIES> 15,653,155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,398,455,698
<SHARES-COMMON-STOCK> 35,506,081
<SHARES-COMMON-PRIOR> 19,661,616
<ACCUMULATED-NII-CURRENT> 25,764
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,172,027
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 204,502,601
<NET-ASSETS> 570,405,287
<DIVIDEND-INCOME> 15,724,373
<INTEREST-INCOME> 48,429,872
<OTHER-INCOME> 0
<EXPENSES-NET> 18,961,268
<NET-INVESTMENT-INCOME> 45,192,977
<REALIZED-GAINS-CURRENT> 21,629,530
<APPREC-INCREASE-CURRENT> 96,176,448
<NET-CHANGE-FROM-OPS> 162,998,955
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,786,120
<DISTRIBUTIONS-OF-GAINS> 5,077,907
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,909,215
<NUMBER-OF-SHARES-REDEEMED> 4,174,149
<SHARES-REINVESTED> 1,109,399
<NET-CHANGE-IN-ASSETS> 574,467,234
<ACCUMULATED-NII-PRIOR> 271,849
<ACCUMULATED-GAINS-PRIOR> 2,006,944
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,140,780
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,961,268
<AVERAGE-NET-ASSETS> 465,053,238
<PER-SHARE-NAV-BEGIN> 15.07
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> 1.15
<PER-SHARE-DIVIDEND> (0.40)
<PER-SHARE-DISTRIBUTIONS> (0.15)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.07
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Foundation Fund Class C
<SERIES>
<NUMBER> 13
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-02-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 1,400,296,181
<INVESTMENTS-AT-VALUE> 1,604,798,782
<RECEIVABLES> 22,144,549
<ASSETS-OTHER> 865,914
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,627,809,245
<PAYABLE-FOR-SECURITIES> 10,955,973
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,697,182
<TOTAL-LIABILITIES> 15,653,155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,398,455,698
<SHARES-COMMON-STOCK> 1,654,832
<SHARES-COMMON-PRIOR> 753,726
<ACCUMULATED-NII-CURRENT> 25,764
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,172,027
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 204,502,601
<NET-ASSETS> 26,576,977
<DIVIDEND-INCOME> 15,724,373
<INTEREST-INCOME> 48,429,872
<OTHER-INCOME> 0
<EXPENSES-NET> 18,961,268
<NET-INVESTMENT-INCOME> 45,192,977
<REALIZED-GAINS-CURRENT> 21,629,530
<APPREC-INCREASE-CURRENT> 96,176,448
<NET-CHANGE-FROM-OPS> 162,998,955
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 568,120
<DISTRIBUTIONS-OF-GAINS> 231,947
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,165,822
<NUMBER-OF-SHARES-REDEEMED> 308,109
<SHARES-REINVESTED> 43,393
<NET-CHANGE-IN-ASSETS> 574,467,234
<ACCUMULATED-NII-PRIOR> 271,849
<ACCUMULATED-GAINS-PRIOR> 2,006,944
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,140,780
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,961,268
<AVERAGE-NET-ASSETS> 20,331,754
<PER-SHARE-NAV-BEGIN> 15.07
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> 1.14
<PER-SHARE-DIVIDEND> (0.40)
<PER-SHARE-DISTRIBUTIONS> (0.15)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.06
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Foundation Fund Class Y
<SERIES>
<NUMBER> 14
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-02-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 1,400,296,181
<INVESTMENTS-AT-VALUE> 1,604,798,782
<RECEIVABLES> 22,144,549
<ASSETS-OTHER> 865,914
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,627,809,245
<PAYABLE-FOR-SECURITIES> 10,955,973
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,697,182
<TOTAL-LIABILITIES> 15,653,155
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,398,455,698
<SHARES-COMMON-STOCK> 50,106,550
<SHARES-COMMON-PRIOR> 41,157,032
<ACCUMULATED-NII-CURRENT> 25,764
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,172,027
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 204,502,601
<NET-ASSETS> 808,842,107
<DIVIDEND-INCOME> 15,724,373
<INTEREST-INCOME> 48,429,872
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<EXPENSES-NET> 18,961,268
<NET-INVESTMENT-INCOME> 45,192,977
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<APPREC-INCREASE-CURRENT> 96,176,448
<NET-CHANGE-FROM-OPS> 162,998,955
<EQUALIZATION> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,300,331
<NUMBER-OF-SHARES-REDEEMED> 12,328,011
<SHARES-REINVESTED> 1,977,198
<NET-CHANGE-IN-ASSETS> 574,467,234
<ACCUMULATED-NII-PRIOR> 271,849
<ACCUMULATED-GAINS-PRIOR> 2,006,944
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 18,961,268
<AVERAGE-NET-ASSETS> 735,082,219
<PER-SHARE-NAV-BEGIN> 15.13
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 1.16
<PER-SHARE-DIVIDEND> (0.54)
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.14
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Tax Strategic Foundation Fund
<SERIES>
<NUMBER> 21
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 50,263,081
<INVESTMENTS-AT-VALUE> 57,330,319
<RECEIVABLES> 1,106,682
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<OTHER-ITEMS-LIABILITIES> 207,044
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,216,071
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<ACCUMULATED-NET-GAINS> 0
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<ACCUM-APPREC-OR-DEPREC> 7,067,238
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<NET-INVESTMENT-INCOME> 858,454
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OTHER> 121
<NUMBER-OF-SHARES-SOLD> 652,149
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<SHARES-REINVESTED> 26,949
<NET-CHANGE-IN-ASSETS> 35,040,145
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<EXPENSE-RATIO> 1.52
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Tax Strategic Foundation Fund
<SERIES>
<NUMBER> 22
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 50,263,081
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 306,929
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<NUMBER-OF-SHARES-SOLD> 1,563,566
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<SHARES-REINVESTED> 59,693
<NET-CHANGE-IN-ASSETS> 35,040,145
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<EXPENSE-RATIO> 2.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Tax Strategic Foundation Fund
<SERIES>
<NUMBER> 23
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 50,263,081
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<EXPENSES-NET> 732,118
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<NUMBER-OF-SHARES-SOLD> 263,684
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<NET-CHANGE-IN-ASSETS> 35,040,145
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<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<S> <C>
<ARTICLE> 6
<NAME> Evergreen Tax Strategic Foundation Fund
<SERIES>
<NUMBER> 24
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 50,263,081
<INVESTMENTS-AT-VALUE> 57,330,319
<RECEIVABLES> 1,106,682
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 207,044
<TOTAL-LIABILITIES> 207,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,216,071
<SHARES-COMMON-STOCK> 1,108,180
<SHARES-COMMON-PRIOR> 1,103,476
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 631
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,067,238
<NET-ASSETS> 15,002,007
<DIVIDEND-INCOME> 434,437
<INTEREST-INCOME> 1,156,135
<OTHER-INCOME> 0
<EXPENSES-NET> 732,118
<NET-INVESTMENT-INCOME> 858,454
<REALIZED-GAINS-CURRENT> 1,133,442
<APPREC-INCREASE-CURRENT> 4,531,613
<NET-CHANGE-FROM-OPS> 5,665,055
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 342,618
<DISTRIBUTIONS-OF-GAINS> 303,414
<DISTRIBUTIONS-OTHER> 253
<NUMBER-OF-SHARES-SOLD> 63,086
<NUMBER-OF-SHARES-REDEEMED> 84,857
<SHARES-REINVESTED> 26,475
<NET-CHANGE-IN-ASSETS> 35,040,145
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 354,958
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 834,008
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<PER-SHARE-NAV-BEGIN> 12.22
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<EXPENSE-RATIO> 1.30
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<AVG-DEBT-PER-SHARE> 0

</TABLE>