Registration Nos.33-83100
811-8716
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 10 /x/
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 11 /x/
(Check appropriate box or boxes)
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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)
Joseph J. McBrien, 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)
/ / 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 has not yet filed a Rule 24f-2 notice since it has not yet
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CROSS REFERENCE SHEET
(as required by Rule 481(a))
N-1A Item No.
Part A Location in Prospectus
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Item 1. Cover Page Cover Page
Item 2. Synopsis and Fee Table Overview of the Funds
Item 3. Condensed Financial Information Not Applicable
Item 4. General Description of Registrant Cover Page; Description of
the Funds; General
Information
Item 5. Management of the Fund Management of the Funds;
General Information
Item 5A. Management's Discussion Not Applicable
Item 6. Capital Stock and Other Securities Dividends, Distributions and
Taxes; General
Information
Item 7. Purchase of Securities Being Offered Purchase and Redemption of
Shares; Participating
Insurance Companies
Item 8. Redemption or Repurchase Purchase and Redemption of
Shares; Participating
Insurance Companies
Item 9. Pending Legal Proceedings Not Applicable
Location in Statement of
Part B Additional Information
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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
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 Adviser;
Additional Purchase and
Redemption Information
Item 17. Brokerage Allocation Allocation of Brokerage
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Item 18. Capital Stock and Other Securities Additional Purchase and
Redemption Information
Item 19. Purchase, Redemption and Pricing of Additional Purchase and
Securities Being Offered Redemption Information;
Net Asset Value
Item 20. Tax Status Additional Tax Information
Item 21. Underwriters Additional Purchase and
Redemption Information;
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.
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PROSPECTUS February 1, 1996
Evergreen Variable Investment Trust
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EVERGREEN VA FUND
EVERGREEN VA GROWTH AND INCOME FUND
EVERGREEN VA FOUNDATION FUND
The Evergreen Variable Investment Trust (the "Trust") is designed to
provide investors with a selection of investment alternatives which seek to
provide capital growth, income and diversification through its three investment
series (the "Funds"). The Trust is an open-end management investment company.
This Prospectus sets forth concise information about the Trust and the Funds
that a prospective investor should know before investing. Shares of the Funds
are only sold to (a) separate accounts funding variable annuity and variable
life insurance contracts issued by life insurance companies; and (b) qualified
pension and retirement plans. The address of the Trust is 2500 Westchester
Avenue, Purchase, New York.
A "Statement of Additional Information" for the Trust dated February 1,
1996 has been filed with the Securities and Exchange Commission and is
incorporated by reference herein. The Statement of Additional Information
provides information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to investors, and may be obtained without
charge by calling the Trust at (xxx) xxx-xxxx. 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 or any subsidiaries of a bank, are not endorsed or guaranteed by any bank,
and are not insured or otherwise protected by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other government agency and
involve risk, including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Keep This Prospectus for Future Reference
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TABLE OF CONTENTS
OVERVIEW OF THE FUNDS
EXPENSE INFORMATION
DESCRIPTION OF THE FUNDS
Investment Objectives And Policies
Investment
MANAGEMENT OF THE FUNDS
Investment Adviser
Sub-Adviser
SALE AND REDEMPTION OF SHARES
Participating Insurance Companies
Redemptions
Dividends
Effect of banking Laws
GENERAL INFORMATION
Custodian, and Transfer and
Dividend Paying Agent
Expenses of the Trust
Description of Shares
Performance
General
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OVERVIEW OF THE FUNDS
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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 the Evergreen VA Fund, Evergreen VA
Foundation Fundsand Evergreen VA Growth and Income Fund is Evergreen Asset
Management Corp. ("Evergreen Asset" or the "Adviser") which, with its
predecessors, has served as investment adviser to the Evergreen Group of
Mutual Funds since 1971. Evergreen Asset is a wholly-owned subsidiary of First
Union National Bank of North Carolina ("FUNB"), which in turn is a subsidiary of
First Union Corporation, one of the ten largest bank holding companies in the
United States. Lieber & Company, which is also a wholly-owned subsidiary of
FUNB, furnishes Evergreen Asset with information, investment recommendations,
advice and assistance to augment its investment advisory services.
Evergreen VA Fund seeks to achieve capital appreciation by investing in
the securities of little-known or relatively small companies, or companies
undergoing changes which the Adviser believes will have favorable consequences.
Income will not be a factor in the selection of portfolio investments.
Evergreen VA Growth and Income Fund seeks to achieve a return composed
of capital appreciation in the value of its shares and current income. The Fund
will attempt to meet its objective by investing in the securities of companies
which are undervalued in the marketplace relative to those companies' assets,
breakup value, earnings, or potential earnings growth.
Evergreen VA 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.
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FINANCIAL HIGHLIGHTS
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The Evergreen Variable Investment Trust commenced operations on
February 1, 1995 and has not yet completed an accounting period for which per
share data and ratios are calculated. Accordingly, no per share data and ratios
are available for any of its three investment series.
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DESCRIPTION OF THE FUNDS
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INVESTMENT OBJECTIVES AND POLICIES
Evergreen Fund
The Evergreen VA Fund seeks to achieve its investment objective of
capital appreciation principally through investments in common stock and
securities convertible into or exchangeable for common stock of companies which
are little-known, relatively small or represent special situations which, in the
Adviser's opinion, offer potential for capital appreciation. A "little-known"
company means one whose business is limited to a regional market or whose
securities are closely held with only a small proportion traded publicly. A
"relatively small" company means one which has a small share of the market for
its products or services in comparison with other companies in its field, or
which provides goods or services for a limited market. A "special situation"
company is one which offers potential for capital appreciation because of a
recent or anticipated change in structure, management, products or services. In
addition to the securities described above, the Evergreen VA Fund may invest in
securities of relatively well-known and large companies with potential for
capital appreciation. Investments may also be made to a limited degree in
non-convertible debt securities and preferred stocks which offer an opportunity
for capital appreciation. If in the Adviser's judgment a defensive position is
appropriate, the Fund may take such a position and invest without limit in
non-convertible investment grade debt securities, government securities or
preferred stocks, or hold its assets in cash. Short-term investments may also be
made if the Adviser believes that such action will benefit the Fund. See
"Special Risk Considerations".
The Evergreen VA Fund may also borrow money on a temporary basis,
invest in cash and cash equivalents for defensive purposes and lend portfolio
securities. It is anticipated that the annual portfolio turnover rate for the
Fund will not exceed 100%. See "Investment Practices and Restrictions" and
"Special Risk Considerations", below.
Evergreen VA Growth and Income Fund
The investment objective of the Evergreen VA Growth and Income Fund is
to achieve a return composed of capital appreciation in the value of its shares
and current income. There can be no assurance that the Fund's investment
objective will be achieved.
The Fund seeks to achieve its investment objective by investing in the
securities of companies which are undervalued in the marketplace relative to
those companies' assets, breakup value, earnings or potential earnings growth.
These companies are often found among those which have had a record of financial
success but are currently in disfavor in the marketplace for reasons the Adviser
perceives as temporary or erroneous. Such investments when successfully timed
are expected to be the means for achieving the Fund's investment objective. This
inherently contrarian approach may require greater reliance upon the Adviser's
analytical and research capabilities than an investment in certain other equity
funds. Consequently, an investment in the Fund may involve more risk than other
equity funds.
The Fund will use the "value timing" approach as a process for
purchasing securities when events indicate that fundamental investment values
are being ignored in the marketplace. Fundamental investment value is based on
one or more of the following: assets -- tangible and intangible (examples of the
latter include brand names or licenses), capitalization of earnings, cash flow
or potential earnings growth. A discrepancy between market valuation and
fundamental value often arises due to the presence of unrecognized assets or
business opportunities, or as a result of incorrectly perceived or short-term
negative factors. Changes in regulations, basic economic or monetary shifts and
legal action (including the initiation of bankruptcy proceedings) are some of
the factors that create these capital appreciation opportunities. If the
securities in which the Fund invests never reach their perceived potential or
the valuation of such securities in the marketplace does not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such securities.
The Fund will invest primarily in common stocks and securities
convertible into or exchangeable for common stock. It is anticipated that the
Fund's investments in these securities will contribute to the Fund's return
primarily through capital appreciation. In addition, the Fund will invest in
nonconvertible preferred stocks and debt securities. It is anticipated that the
Fund's investments in these securities will also produce capital appreciation
but the current
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income component of return will be a more significant factor in their selection.
However, the Fund will invest in nonconvertible preferred stock and debt
securities only if the anticipated capital appreciation plus income from such
investments is equivalent to that anticipated from investments in equity or
equity-related securities. The Fund may invest up to 5% of its total assets in
debt securities which are rated below investment grade, commonly known as "junk
bonds". Investments of this type are subject to greater risk of loss of
principal and interest. The Fund may invest up to 25% of its assets in foreign
securities (See "Special Risk Considerations"). Additional information regarding
"junk bonds" is contained in the Statement of Additional Information. See
"Investment Practices and Restrcitions" and "Special Risk Considerations",
below.
Evergreen VA Foundation Fund
The investment objectives of the Evergreen VA 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 Adviser have potential for capital enhancement.
The Fund may also invest up to 25% of its assets in foreign securities (See
"Special Risk Considerations").
The Fund may make investments in securities regardless of whether or
not such securities are traded on a national securities exchange. While income
will be a factor in the selection of equity securities, theAdviser will attempt
to identify securities that offer potential for long term capital appreciation,
but that do not exhibit any speculative characteristics. The Fund will not make
equity investments with a view toward realizing short-term gains. The value of
portfolio securities and their yields are expected to fluctuate over time
because of varying general economic and market conditions. Accordingly, there
can be no assurance that the Fund's investment objectives will be achieved.
The Fund's 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 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 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 United States
Government, its agencies or instrumentalities, including issues of the United
States 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 United States 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 by Moody's Investors
Service, Inc. ("Moody's") or A-2 by Standard & Poor's Ratings Group ("S&P");.
3. Obligations of banks or banking institutions having total assets of
more than $2 billion which are members of the Federal Deposit Insurance
Corporation.
4. Commercial paper of high quality (rated no lower than A-2 by S&P or
Prime-2 by Moody's or, if not rated, issued by companies which have an
outstanding long-term debt issue rated AAA or AA by S&P or Aaa or Aa by
Moody's).
Certain obligations may be entitled to the benefit of standby letters
of credit or similar commitments issued by banks and, in such instances, the
Adviser will take into account the obligation of the bank in assessing the
quality of such security. For a description of the ratings set forth above see
the Statement of Additional Information. See "Investment Practices and
Restrictions" and "Special Risk Considerations", below.
INVESTMENT PRACTICES AND RESTRICTIONS
The Funds may invest without limitation in cash and cash equivalents
and short-term corporate debt securities for defensive purposes, and may also
write covered call options, lend portfolio securities, invest in repurchase
agreements, enter into transactions on a "when issued" or delayed settlement
basis, invest in futures contract and options thereon and invest in the
securities of other investment companies, all in the manner described below.
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 Adviser,
market conditions warrant a temporary defensive investment strategy.
Portfolio Turnover and Brokerage. A portfolio turnover rate of 100% would occur
if all of a Fund's portfolio securities were replaced in one year. The annual
turnover rate for the fixed income portion of the Evergreen VA Foundation Fund
generally will not exceed 200% A 200% turnover rate is greater than that of most
other investment companies. The portfolio turnover rate experienced by a Fund
directly affects brokerage commissions and other transaction costs which the
Fund bears directly. A high rate of portfolio turnover will increase such costs.
It is contemplated that Lieber & Company, an affiliate of Evergreen Asset and a
member of the New York and American Stock Exchanges, will to the extent
practicable effect substantially all of the portfolio transactions for the Funds
effected 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 may not borrow money
except from banks as a temporary measure for extraordinary or emergency
purposes. The proceeds from borrowings may be used to facilitate redemption
requests which might otherwise require the untimely disposition of portfolio
securities. The specific limits and other terms 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 Adviser 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 a Fund's total assets and must be collateralized by cash or
U.S. Government securities that are maintained at all times in an amount equal
to at least 100% of the current market value of the securities loaned, including
accrued interest. While such securities are on loan, the borrower will pay a
Fund any income accruing thereon, and the Fund may invest the cash collateral in
portfolio securities, thereby increasing its return. Any gain or loss in the
market price of the loaned securities which occurs during the term of the loan
would affect a Fund and its investors. A Fund has the right to call a loan and
obtain the securities loaned at any time on notice of not more than five
business days. A Fund may pay reasonable fees in connection with such loans.
lliquid Securities. The Funds may invest up to 15% of their net assets in
illiquid securities and other securities which are not readily marketable,
including repurchase agreements with maturities longer than seven days.
Securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, which have been determined to be liquid, will not be considered by the
Adviser to be illiquid or not readily marketable and, therefore, are not subject
to the aforementioned 15% limit. The inability of a Fund to dispose of illiquid
or not readily marketable investments readily or at a reasonable price could
impair the Fund's ability to raise cash for redemptions or other purposes. The
liquidity of securities purchased by a Fund which are eligible for resale
pursuant to Rule 144A will be monitored by the each Adviser, on an ongoing
basis, subject to the oversight of the Trustees. In the event that such a
security is deemed to be no longer liquid, a Fund's holdings will be reviewed to
determine what action, if any, is required to ensure that the retention of such
security does not result in a Fund having more than 15% of its assets invested
in illiquid or not readily marketable securities.
Repurchase Agreements. Repurchase agreements may be entered into with member
banks of the Federal Reserve System, including a Fund's Custodian or primary
dealers in U.S. Government securities. A repurchase agreement is an
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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 Adviser will review and
continually monitor the creditworthiness of each institution with which a Fund
enters into a repurchase agreement to evaluate these risks.
When-Issued Securities. In the event securities are purchased on a "when-issued"
basis (i.e., for delivery beyond the normal settlement date at a stated price
and yield), a Fund generally would not pay for such securities or start earning
interest on them until they are received. However, when a Fund purchases
securities on a when-issued basis, it assumes the risks of ownership at the time
of purchase, not at the time of receipt. Failure of the issuer to deliver a
security purchased on a when-issued basis may result in the Fund's incurring a
loss or missing an opportunity to make an alternative investment. Commitments to
purchase when-issued securities will not exceed 25% of a Fund's total assets. A
Fund will maintain cash or liquid high grade debt obligations in a segregated
account with its custodian in an amount equal to such commitments. No Fund will
purchase when-issued securities for speculative purposes, but only in
furtherance of its investment objectives.
Securities of Other Investment Companies. Each Fund may invest in the securities
of other open end investment companies that have investment objectives and
policies similar to its own or which are, in the opinion of the Adviser,
suitable short-term investment vehicle. The Adviser will waive its investment
advisory fee on assets invested by a Fund in securities of other open end
investment companies. Any investment by a Fund in the securities of other
investment companies will be subject to the limitations on such investments
contained in the Investment Company Act of 1940.
Fixed Income Investments. Investments by the Funds in fixed income securities
are subject to a number of risks. For example, changes in economic conditions
could result in the weakening of the capacity of the issuers of such securities
to make principal and interest payments, particularly in the case of issuers of
non-investment grade fixed income securities. In addition, the market value of
fixed-income securities in a Fund's portfolio can be expected to vary inversely
to changes in prevailing interest rates. In the event there is a downgrading in
the rating of a fixed income security held in a Fund's portfolio, the Fund may
continue to hold the security if such action is deemed to be in the best
interests of the Fund and its shareholders.
Hedging Techniques
Writing Options. Each Fund may write covered call options on certain portfolio
securities in an attempt to earn income and realize a higher return on their
portfolios. A call option gives the purchaser of the option the right to buy a
security from the writer at the exercise price at any time during the option
period. A call option may not be written if, afterwards, securities comprising
more than 5% of the market value of a Fund's equity securities would be subject
to call options. A Fund realizes income from the premium paid to it in exchange
for writing the call option. Once it has written a call option on a portfolio
security and until the expiration of such option, a Fund forgoes the opportunity
to profit from increases in the market price of such security in excess of the
exercise price of the call option. Should the price of the security on which a
call has been written decline, a Fund retains the risk of loss, which would be
offset to the extent the Fund has received premium income. A Fund will only
write "covered" call options traded on recognized securities exchanges. An
option will be deemed covered when a Fund either 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 that the amount needed to satisfy
the Fund's obligations with respect to options written on securities it does not
own. A "closing purchase transaction" may be entered into with respect to a call
option written by a Fund for the purpose of closing its position.
Special Risk Considerations
Investment in Small Companies. Evergreen VA Fund, Evergreen VA Growth And Income
Fund and, Evergreen VA Foundation Fund may invest from time to time, in
securities of little-known, relatively small and special situation companies.
Investments in such companies may tend to be speculative and volatile. A lack of
management depth in such companies could increase the risks associated with the
loss of key personnel. Also, the material and financial resources of such
companies may be limited, with the consequence that funds or external financing
necessary for growth may be unavailable. Such companies may also be involved in
the development or marketing of new products
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or services for which there are no established markets. If projected markets do
not materialize or only regional markets develop, such companies may be
adversely affected or be subject to the consequences of local events. Moreover,
such companies may be insignificant factors in their industries and may become
subject to intense competition from larger companies. Securities of small and
special situation companies in which the Funds may invest will frequently be
traded only in the over-the-counter market or on regional stock exchanges and
will often be closely held. Securities of this type may have limited liquidity
and be subject to wide price fluctuations. As a result of the risk factors
described above, the net asset value of each Fund's shares can be expected to
vary significantly.
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.
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MANAGEMENT OF THE FUNDS
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INVESTMENT ADVISERS
The management of each Fund is supervised by the Trustees of Evergreen
Variable Trust. Evergreen Asset Management Corp. ("Evergreen Asset") has been
retained by the Trust to serve as investment adviser to Evergreen VA Fund,
Evergreen VA Growth and Income Fund, and Evergreen VA Foundation Fund. Evergreen
Asset, with its predecessors, has served as investment adviser to the Evergreen
Group of Mutual Funds, which have assets in excess of $3 billion, since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of the Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), one of the ten largest bank holding companies in
the United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of the Evergreen Asset's predecessor and the former general
partners of Lieber & Company, which, as described below, provides certain
subadvisory services to Evergreen Asset in connection with its duties as
investment adviser to the aforementioned Funds.
First Union is a bank holding company headquartered in Charlotte, North
Carolina, which had $74.2 billion in consolidated assets as of September 30,
1994. First Union and its subsidiaries provide a broad range of financial
services to individuals and businesses through offices in 36 states. The Capital
Management Group of FUNB ("CMG") manages or otherwise oversees the investment of
over $36 billion in assets belonging to a wide range of clients, including the
First Union family of 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.
Evergreen Asset manages investments and supervises each Fund's daily
business affairs, subject to the authority of the Trustees. Evergreen Asset, as
investment adviser to Evergreen VA Fund and Evergreen VA Growth and Income
Fundand is entitled to receive from such Funds an annual fee equal to .95 of 1%
of average daily net assets thereof. This is higher than the rate paid by most
other investment companies. As compensation for its services as investment
adviser to Evergreen VA Foundation Fund, Evergreen Asset is entitled to receive
an annual fee equal to .825 of 1% of average daily net assets of such Fund.
Evergreen Asset also serves as administrator to each Fund and is
entitled to receive a fee based on the average daily net assets of the Fund at a
rate based on the total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset also serve as investment adviser,
calculated in accordance with the following schedule: .050% of the first $7
billion; .035% on the next $3 billion; .030% on the next $5 billion; .020% on
the next $10 billion; .015% on the next $5 billion; and .010% on assets in
excess of $30 billion. Furman Selz Incorporated, the parent of Evergreen Funds
Distributor, Inc., distributor for the Evergreen group of mutual funds, serves
as sub-administrator tothe Funds and is entitled to receive a fee from the Fund
calculated on the average daily net assets of the Fund at a rate based on the
total assets of the mutual funds administered by Evergreen Asset for which CMG
or Evergreen Asset also serve as investment adviser, calculated in accordance
with the following schedule: .0100% of the first $7 billion; .0075% on the next
$3 billion; .0050% on the next $15 billion; and .0040% on assets in excess of
$25 billion. The total assets of the mutual funds administered by Evergreen
Asset for which CMG or Evergreen Asset serve as investment adviser as of
December 31, 1995 were approximately $10 billion.
The portfolio manager for Evergreen VA Fund and Evergreen VA Foundation
Fund is Stephen A. Lieber, who is Chairman and Co-Chief Executive Officer of
Evergreen Asset and has been associated with Evergreen Asset since prior to
1989. Mr. Lieber has served as such Fund's principal manager since its inception
and is the manager of Evergreen Foundation Fund. The portfolio manager for
Evergreen VA Growth and Income Fund is Edmund H. Nicklin, Jr. C.F.A. Mr. Nicklin
has served as the Fund's principal manager since its inception and has been
associated with Evergreen Asset since prior to 1989, where he serves as the
manager of Evergreen Growth and Income Fund.
SUB-ADVISERS
Evergreen Asset has entered into sub-advisory agreements with Lieber &
Company with respect to Evergreen VA Fund, Evergreen VA Growth and Income Fund
and Evergreen VA Foundation Fund which provides that Lieber & Company's research
department and staff will furnish Evergreen Asset with information, investment
recommendations, advice and assistance, and will be generally available for
consultation on each such Fund's portfolio. 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 the Funds for the services provided by Lieber & Company. It
is contemplated that Lieber & Company will, to the extent practicable, effect
substantially all of the portfolio transactions for these Funds on the New York
and American Stock Exchanges. The address of Lieber & Company is 2500
Westchester Avenue, Purchase, New York 10577. Lieber & Company is an indirect,
wholly-owned, subsidiary of First Union.
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SALE AND REDEMPTION OF SHARES
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PARTICIPATING INSURANCE COMPANIES
The Funds were organized to serve as investment vehicles for (a)
separate accounts funding variable annuity("VA") and variable life insurance
("VLI") contracts issued by certain life insurance companies ("Participating
Insurance Companies"); and (b) qualified pension and retirement plans. The Trust
does not currently forsee any disadvantages to the holders of VA and VLI
contracts arising from the fact that the interests of holders of VA and VLI
contracts may differ. Nevertheless, the Trustees will establish procedures for
the purpose of identifying any material irreconcilable conflicts that may arise
and to determine what action, if any, would be taken in response thereto. The VA
and VLI contracts are described in the separate Prospectuses issued by the
Participating Insurance Companies. The Trust assumes no responsibility for such
Prospectuses.
PURCHASES
Shares of the Trust are sold at net asset value to the separate accounts of
Participating Insurance Companies. All investments in the Trust are credited to
the shareholder's account in the form of full or tractional shares of the
designated Fund (rounded to the nearest 1/1000 of a share). The Trust does not
issue share certificates. Initial and subsequent purchase payments allocated to
a specific Fund are subject to the limits described in the separate Prospectuses
issued by the Participating Insurance Companies.
How the Funds Value Their Shares. The net asset value of each Class of shares of
a Fund is calculated by dividing the value of the amount of the Fund's net
assets attributable to that Class by the number of outstanding shares of that
Class. Shares are valued each day the New York Stock Exchange (the "Exchange")
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Trustees believe would accurately reflect fair value.
Non-dollar denominated securities will be valued as of the close of the Exchange
at the closing price of such securities in their principal trading market.
REDEMPTION
The Separate Account redeems shares to make benefit or surrender payments
under the terms of the VA or VLI contract. Redemptions are processed on any day
on which the Trust is open for business and are effected at net asset value next
determined after the redemption order, in proper form, is received by the
Trust's transfer agent. The net asset value per share of each Fund is determined
once daily, as of 4:00 PM. on each business day the New York Stock Exchange is
open and on such other days as the Trustees determine and on any other day
during which there is a sufficient degree of trading in the Fund's portfolio
securi- ties that the net asset value of the Fund is materially affected by
changes in the value of portfolio securities.
The Trust may suspend the right of redemption only under the following
unusual circumstances: (1) when the New York Stock Exchange is closed (other
than weekends and holidays) or trading is restricted; (2) when an emergency
exists, making disposal of portfolio securities or the valuation of net assets
not reasonably practicable; or (3) during any period when the Securities and
Exchange Com- mission has by order permitted a suspension of redemption for the
protection of shareholders. Net Asset Value
The net asset value per share is calculated by adding the value of all
securities and other assets of a Fund, deducting its liabilities, and dividing
by the number of shares of the Fund that are outstanding.
DIVIDENDS
Dividends All dividends payable by a Fund are distributed to the Separate
Account and will be automatically reinvested in additional shares of such Fund.
Dividends and other distributions made by the Funds to the Separate Account are
taxable, if at all, to the Participating Insurance Company; they are not
currently taxable to the VA or VLI owners,
Tax Status Each Fund is treated as a separate entity for Federal income tax
purposes and is not combined with the Trust's other Funds. It is the intention
of each Fund to qualify as a "regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"), and meet all
other requirements necessary for it to be relieved of Federal taxes on that part
of its net investment income and net capital gains distributed to its
shareholders. Each Fund intends to distribute all of ifs net investment income
and net capital gains to its shareholders.
For a discussion of the tax consequences of VA or VLI contracts, refer to
the prospectus of the VLI or VA offered by the Participating Insurance Company.
VA or VLI contracts purchased through insurance company separate accounts
provide for the accumulation of all earnings from interest, dividends, and
capital appreciation without current federal income tax liability for the owner,
Depending on the VA or VLI contract, distributions from the contract may be
subject to ordinary income tax and, in addition, on distributions before age
59-1/2, a 10% penalty tax. Only the portion of a distribution attributable to
income on the investment in the contract is subject to federal income tax.
Investors should consult with competent tax advisers for a more complete
discussion of possible tax consequences in a particular situation. Section
817(h) of the Code provides that investments of a separate account underlying a
VA or VLI contract (or the investments of a mutual fund, the shares of which are
owned by the VA or VLI separate account) must be "adequately diversified" in
order for the VA or VLI contract to be treated as an annuity for tax purposes.
The Treasury Department has issued regulations prescribing these diversification
requirements. Each Fund intends to comply with these requirements. If a separate
account underlying a VA or VLI contract were not adequately diversified, the
owner of such VA or VLI contract would be immediately subject to tax on the
earnings allocable to the contract. Additional information about the tax status
of the Funds is provided in the Statement of Additional Information.
EFFECT OF BANKING LAWS
The Glass-Steagall Act and other banking laws and regulations presently
prohibit member banks of the Federal Reserve System ("Member Banks") or their
non-bank affiliates from sponsoring, organizing, controlling, or distributing
the shares of registered open-end investment companies such as the Funds. Such
laws and regulations also prohibit banks from issuing, underwriting or
distributing securities in general. However, under the Glass-Steagall Act and
such other laws and regulations, a Member Bank or an affiliate thereof may act
as investment adviser, transfer agent or custodian to a registered open-end
investment company and may also act as agent in connection with the purchase of
shares of such an investment company upon the order of their customer. Evergreen
Asset, since it is a subsidiary of FUNB is 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 Evergreen Asset being prevented from
continuing to perform the services required under the investment advisory
contract or from acting as agent in connection with the purchase of shares of a
Fund by its customers. If Evergreen Asset were prevented from continuing to
provide the services called for under the investment advisory agreement, it is
expected that the Trustees would identify, and call upon each Fund's
shareholders to approve, a new investment adviser. If this were to occur, it is
not anticipated that the shareholders of any Fund would suffer any adverse
financial consequences.
<PAGE>
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GENERAL INFORMATION
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CUSTODIAN, AND TRANSFER AND DIVIDEND PAYING AGENT
State Street Bank and Trust Company (the "Custodian") acts as Custodian
of the assets ot the Trust. Boston Financial Data Services, Inc. ("BFDS"), acts
as the transfer agent and dividend disbursing agent for the Trust and in doing
so performs certain bookkeeping, data processing and administrative services for
the Trust and each Fund.
EXPENSES OF THETRUST
Each Fund bears all expenses of its operations other than those
incurred by the Adviser and the Administrator under their respective Advisory
Agreement and Administration Agreement with the Trust. In particular, the Funds
pay investment advisory fees, custodian fees and expenses, legal, accounting and
auditing tees, brokerage fees, interest and taxes, registration fees and
expenses, expenses of the transfer and dividend disbursing agent, the
compensation and expenses of Trustees who are not otherwise affiliated with the
Trust, Evergreen Asset or any of its affiliates, expenses of printing and
mailing reports and notices and proxy material to beneficial shareholders of the
Trust, and any extraordinary expenses. Expenses incurred jointly by the Funds
are allocated among the Funds in a manner determined by the Trustees to be fair
and equitable.
The organizational expenses of each of the Funds have been capitalized
and will be amortized during the first five years of the Funds' operations. Such
amortization will reduce the amount of income available for payment as
dividends.
Pursuant to current interpretations of the Investment Company Act of
1940, as amended (`"1940 Act"), each Participating Insurance Company will
solicit voting instructions from VA or VLI contract owners with respect to any
matters that are presented to a vote of shareholders. On any matter submitted to
a vote of shareholders, all the shares of the Trust then issued and outstanding
and entitled to vote shall be voted in the aggregate and not by Fund except for
matters concerning only a specific Fund. Certain matters approved by a vote of
shareholders of one Fund of the Trust may not be binding on a Fund whose
shareholders have not approved such matters. The holder of each share of the
Trust shall be entitled to one vote for each full share and a fractional vote
for each fractional share. Shares of one Fund may not bear the same economic
relationship to the Trust as shares of another Fund.
The Trust is not required to hold annual meetings of shareholders and
does not plan to do so. The Trustees may call special meetings of shareholders
for action by shareholder vote as may be required by the 1940 Act or the Trust's
Declaration of Trust. The Declaration of Trust provides that shareholders can
remove Trustees by a vote of two-thirds of the `vote of the outstanding shares
and the Declaration sets out the procedures to be followed. The Trustees will be
a self-perpetuating body until fewer than 50% of the Trustees, then serving as
Trustees, are Trustees who were elected by shareholders. At that time a meeting
of shareholders will be called to elect additional Trustees.
The Declaration of Trust may be amended by a vote of a majority of the
Trustees; provided, if any such amendment materially adversely affects the
rights of any shares of any series or any class with respect to matters to which
such amendment is applicable, such amendment shall be subject to ap- proval by
holders of a majority of the shares of such series or class. Shares have no
pre-emptive or conversion rights and are fully paid and nonassessable. When a
majority is required, it means the lesser of 67% or more of the shares present
at a meeting when the holders of more than 50% of the outstanding shares are
present or represented by proxy, or more than 50% of the outstanding shares.
DESCRIPTION OF SHARES
The Declaration of Trust permits the Trustees to establish and designate
series or classes in addition to the Funds. Each share of any series or class
represents an equal proportionate share in the net assets of that series or
class with each other share of that series or class. The Trustees may divide or
combine the shares of any series or class into a greater or lesser number of
shares of that series or class without thereby changing the proportionate
interests in the assets of that series or class. Upon liquidation of a
particular series or class, the Shareholders of that series or class shall be
entitled to share pro rata in the net assets of such series or class available
for distribution to shareholders inquiries
Any inquiries regarding the Trust should be directed to the Trust at
the telephone number or ad- dress shown on the cover page of this Prospectus.
All inquiries regarding the VA or VLI contracts should be directed to the
Participating insurance Company, as indicated in the VA or VLI prospectus
accompanying this Prospectus.
PERFORMANCE
From time to time, the Trust may advertise the "average annual or
cumulative total return" of the Funds and may compare the performance of the
Funds with that of other mutual funds with similar investment objectives as
listed in rankings prepared by Lipper Analytical Services, Inc., or similar
independent services monitoring mutual fund performance, and with appropriate
securities or other relevant indices. The "average annual total return" of a
Fund refers to the average annual compounded rate of return over the stated
period that would equate an initial investment in that Fund at the beginning of
the period to its ending redeemable value, assuming reinvestment of all
dividends and distribu- tions and deduction of all recurring charges. Figures
will be given for the recent one. five and ten year periods and for the life of
the Fund if it has not been in existence for any such periods. When consider-
ing "average annual total return" figures for periods longer than one year. it
is important to note that a Fund's annual total return for any given year might
have been greater or less than its average for the entire period. "Cumulative
total return" represents the total change in value of an investment in a Fund
for a specified period (again reflecting changes in Fund share prices and
assuming reinvestment of Fund distributions).
The performance of each Fund will vary from time to time in response to
fluctuations in market conditions, interest rates, the composition of the Fund's
investments and expenses. Consequently, a Fund's performance figures are
historical and should not be considered representative of the performance of the
Fund for any future period.
Evergreen Asset is the investment adviser of the Funds and to Evergreen
Fund, Evergreen Foundation Fund and Evergreen Growth and Income Fund. Each of
the Evergreen Fund, Evergreen Foundation Fund and Evergreen Growth and Income
Fund is substantially similar to the Trust's Evergreen VA Fund, Evergreen VA
Foundation Fund and Evergreen VA Growth and Income Fund, respectively, in that
each has the same investment objective and each is managed using substantially
the same investment strategies and techniques. See "Investment Objectives and
Policies."
As of the date of this Prospectus, the Funds had not commenced
operations. Set forth below is certain performance information regarding the
Evergreen VA Fund, Evergreen VA Foundation Fund and Evergreen VA Growth and
Income Fund which has been obtained from Evergreen Asset and is set forth in the
current prospectuses and statements of additional information of the Evergreen
Fund, Evergreen Foundation Fund and Evergreen Growth and Income Fund. Investors
should not rely on the following financial information as an indication of the
future performance of the Funds.
Total Cumulative Return of Comparable Funds
The average annual compounded total return for Class Y shares offered
by Evergreen Fund, Evergreen Foundation Fund and Evergreen Growth and Income
Fund for the most recently completed one, five and ten year fiscal periods is
set forth in the table below.
Evergreen Fund
1 Year 5 Years 10 Years
Ended Ended Ended
9/30/95 9/30/95 9/30/95
Class Y 26.79% 18.71% 12.75%
Evergreen Growth 1 Year 5 Years 10/15/86
and Income Fund Ended Ended (inception)
12/31/94 12/31/94 to 12/31/94
Class A -3.14% 8.69% 10.53%
Class B -3.02% 9.47% 11.19%
Class C 0.75% 9.75% 11.19%
Class Y 1.69% 9.75% 11.19%
<PAGE>
Evergreen 1 Year From 1/2/90
Foundation Fund Ended (inception)
12/31/94 to 12/31/94
Class A -5.82% 13.72%
Class B -5.80% 14.60%
Class C -2.06% 14.83%
Class Y -1.12% 14.83%
The calculations of total return assume the reinvestment of all
dividends and capital gains distributions on the reinvestment dates during the
period and the deduction of all recurring expenses that were charged to
shareholders accounts. The above tables do not reflect charges and deductions
which are, or may be, imposed under the VA or VLI contracts.
GENERAL
Independent Accountants. KPMG Peat Marwick, Two Nationwide Plaza, Columbus, OH
43215, serves as the independent public accountants of the Trust.
Counsel. Sullivan & Worcester, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036, acts as counsel for the ------- Trust.
Liability Under Massachusetts Law. Under Massachusetts law, Trustees and
shareholders of a business trust may, in certain circumstances, be held
personally liable for its obligations. The Declarations of Trust under which the
Funds operate provide that no Trustee or shareholder will be personally liable
for the obligations of the Trust and that every written contract made by the
Trust contain a provision to that effect. If any Trustee or shareholder were
required to pay any liability of the Trust, that person would be entitled to
reimbursement from the general assets of the Trust.
Additional Information. This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do not contain all
the information set forth in the Registration Statements filed by the Trust with
the Commission under the Securities Act. Copies of the Registration Statements
may be obtained at a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Commission in Washington, D.C.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
THE EVERGREEN VARIABLE TRUST
2500 Westchester Avenue, Purchase, New York 10577
800-807-2940
Evergreen VA Fund ("Evergreen")
Evergreen VA Growth and Income Fund ("Growth and Income")
Evergreen VA Foundation Fund ("Foundation")
This Statement of Additional Information pertains to the Funds listed below. It
is not a prospectus and should be read in conjunction with the Prospectus dated
February 1, 1995 for the Fund in which you are making or contemplating an
investment. The Funds are offered to (a) separate accounts funding variable
annuity and variable life insurance contracts issued by life insurance
companies; and (b) qualified pension and retirement plans. Copies of the
Prospectus may be obtained without charge by calling the number listed above.
TABLE OF CONTENTS
Page
Investment Objectives and Policies................................
Investment Restrictions...........................................
Non-Fundamental Operating Policies................................
Certain Risk Considerations.......................................
Management........................................................
Investment Adviser................................................
Allocation of Brokerage...........................................
Additional Tax Information........................................
Net Asset Value...................................................
Additional Purchase and Redemption Information....................
Glass-Steagall Act................................................
General Information...............................................
Performance Information...........................................
Financial Statements..............................................
INVESTMENT OBJECTIVES AND POLICIES
(See also "Description of the Funds - Investment Objective
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 Objective and Policies" in the relevant Prospectus. The investment
objectives of Balanced, Utility and Value 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
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.
<PAGE>
Examples of agencies and instrumentalities that may not always receive
financial support from the U.S. government are:
(i) Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks and Banks for Cooperatives;
(ii) Farmers Home Administration;
(iii) Federal Home Loan Banks;
(iv) Federal Home Loan Mortgage Corporation;
(v) Federal National Mortgage Association;
(vi) Government National Mortgage Association; and
(vii) Student Loan Marketing Association
Restricted and Illiquid Securities
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.
Lending of Portfolio Securities
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.
<PAGE>
Reverse Repurchase Agreements
The Funds may also enter into reverse repurchase agreements. These
transactions 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.
.........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. The Fund will write only covered call option contracts and will receive
premium income from the writing of such contracts. 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
.........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
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 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
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.
<PAGE>
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, 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.........No Fund 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.
2.........No Fund may purchase more than 10% of the voting securities of any one
issuer other than the U.S. government and its agencies or instrumentalities.
3.........No Fund may invest in companies for the purpose of exercising control
or management.
4.........No Fund* 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.........No Fund* 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.........No Fund* will 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.........No Fund* may purchase, sell or invest in interests in oil, gas or
other mineral exploration or development programs.
8.........No Fund 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 municipal securities. For purposes of this restriction,
utility companies, gas, electric, water and telephone companies will be
considered separate industries.
9.........No Fund* 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
Exchanges.
10.........No Fund* 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.
11.........No Fund* 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.
<PAGE>
12.......Lending of Funds and Securities
.........No Fund 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.
13.........No Fund* may purchase, sell or invest in commodities or commodity
contracts.
14.............No Fund* 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.
15.........No Fund may borrow money, issue senior securities or enter into
reverse repurchase agreements, except for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of
each Fund's total assets at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of each Fund's total assets at the time of such borrowing, including
reverse repurchase agreements, exceed 5% of the value of its total assets. No
Fund will enter into reverse repurchase agreements exceeding 5% of the value of
its total assets.
16.........No Fund* may participate on a joint or joint and several basis in any
trading account in any securities. (The "bunching of orders for 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.........No Fund* 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.
19.........Each Fund* 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.
NON FUNDAMENTAL OPERATING POLICIES
.........The Funds have adopted additional non-fundamental operating policies.
Operating policies may be changed by the Board of Trustees without a shareholder
vote.
.........No Fund 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.
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 Objective and Policies"
in the Prospectus.
<PAGE>
MANAGEMENT
The Trustees and executive officers of the Trusts, their ages, addresses
and principal occupations during the past five years are set forth below:
MANAGEMENT OF THE TRUST
Trustees & Officers
Overall responsibility for management of the Trust rests with the Trustees.
who are elected by the Shareholders of the Trust. The Trustees, in turn, elect
the officers of the Trust to supervise actively its day-to-day operations.
The current Trustees and officers of the Trust, their addresses, and
principal occupations during the past five years are set forth below.
<PAGE>
Position(s) Held Principal Occupation
Name and Address With the Trust During Past 5 Years
Mark B. Koogler Trustee and President Associate General
One Nationwide Plaza Counsel, Office of
Columbus, Ohio 43216 General Counsel of
the Nationwide Insurance
Enterprise, since February
1994. Formerly served in
various capacities as an
attorney in the Office of
General Counsel of the
Nationwide Insurance
Enterprise.
Steven R. Savini' Trustee Counsel, Office of General
One Nationwide Plaza Counsel, Nationwide Insur-
Columbus, Ohio 43216 ance Enterprise since June,
1994. Formerly served as
Compliance Specialist for
Nationwide Life Insurance
Company.
David E. Simaitis Trustee and Secretary Counsel, Office
One Nationwide Plaza of General Counsel
Columbus, Ohio 43216 of the Nationwide
Insurance Enterprise,
since January, 1994.
Formerly served in
various capacities
as an attorney in
the Office of General
Counsel of the
Nationwide Insurance
Enterprise.
James P Laird, Jr. Vice President Treasurer of Nationwide One
Nationwide Plaza and Treasurer Financial Services, Inc.
Columbus, Ohio 43216 the Administrator of First
Union Investment Trust
since November, 1987.
The Trustees receive fees and expenses for each meeting of the Trustees
attended. The officers of the Trust receive no compensation directly from the
Trust for performing the duties of their offices.
[THE FOLLOWING TRUSTEES AND OFFICERS WILL BE ELECTED PRIOR TO EFFECTIVENESS]
Laurence B. Ashkin (67), 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*(68), Greenwich Plaza, Greenwich, CT-Trustee. Partner in the law firm
of Cummings and Lockwood since 1968.
James S. Howell (70), 4124 Crossgate Road, Charlotte, NC-Chairman and Trustee.
Retired Vice President of Lance Inc. (food manufacturing); Chairman of the
Distribution Comm. Foundation for the Carolinas from 1989 to 1993.
Robert J. Jeffries (72), 2118 New Bedford Drive, Sun City Center, FL-Trustee.
Corporate consultant since 1967.
Gerald M. McDonnell (55), 821 Regency Drive, Charlotte, NC-Trustee. Sales
Representative with Nucor-Yamoto Inc. (steel producer) since 1988.
Thomas L. McVerry (56), 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*(39), Holcomb and Pettit, P.A., 207 West Trade St.,
Charlotte, NC-Trustee. Partner in the law firm Holcomb and Pettit, P.A. since
1990; Attorney, Clontz and Clontz from 1980 to 1990.
Russell A. Salton, III, M.D. (47), Primary Physician Care, 1515 Mockingbird
Lane, Charlotte, NC-Trustee. President, Primary Physician Care since 1990.
Michael S. Scofield (52), 212 S. Tryon Street Suite 980, Charlotte, NC-Trustee.
Attorney, Law Offices of Michael S. Scofield since prior to 1989.
John J. Pileggi (35), 237 Park Avenue, Suite 910, New York, NY-President and
Treasurer. Senior Managing Director, Furman Selz Incorporated since 1992,
Managing Director from 1984 to 1992.
Joan V. Fiore (39), 237 Park Avenue, Suite 910, New York, NY-Secretary. Managing
Director and Counsel, Furman Selz Incorporated since 1991; Staff Attorney,
Securities and Exchange Commission from 1986 to 1991.
Except for Messrs. Ashkin, Bam and Jeffries, who are not Trustees of Evergreen
Investment Trust, the Trustees and officers listed above hold the same positions
with a total of ten registered investment companies offering a total of
thirty-one investment funds within the Evergreen mutual fund complex.
- --------
* Mr. Bam and Mr.Pettit may each be deemed to be an "interested person"
within the meaning of the Investment Company Act of 1940, as amended (the "1940
Act").
The officers of the Trusts are all officers and/or employees of Furman Selz
Incorporated. Furman Selz Incorporated is the parent of Evergreen Funds
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
or Evergreen Asset Management Corp. or their affiliates. See "Investment
Adviser." Currently, none of the Trustees is an "affiliated person" as defined
in the 1940 Act. The Trust pays each Trustee who is not an "affiliated person"
an annual retainer and a fee per meeting attended, plus expenses as follows:
INVESTMENT ADVISER
(See also "Management of the Fund" in each Fund's Prospectus)
The investment adviser to the Funds 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") 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 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, Theodore J. Israel, Jr., Executive Vice
President, Joseph J. McBrien, Senior Vice President and General Counsel, and
George R. Gaspari, Senior Vice President and Chief Financial Officer.
On June 30, 1994, Evergreen Asset and Lieber and Company ("Lieber") were
acquired by First Union through certain of its subsidiaries. Evergreen Asset was
acquired by FUNB, a wholly-owned subsidiary (except for directors' qualifying
shares) of First Union, by merger into EAMC Corporation ("EAMC") a wholly-owned
subsidiary of FUNB. EAMC then assumed the name "Evergreen Asset Management
Corp." and succeeded to the business of Evergreen Asset. At that time, EAMC 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 partnership interests in Lieber, a New York general
partnership, were acquired by Lieber I Corp. and Lieber II Corp., which are both
wholly-owned subsidiaries of FUNB. The business of Lieber is being continued.
The advisory and sub-advisory agreements were approved by the sole shareholder
of the Funds by written consent on January 30, 1996, and became effective on
February 1, 1996.
Under its Investment Advisory Agreement with each Fund, the Adviser has
agreed to furnish reports, statistical and research services and recommendations
with respect to each Fund's portfolio of investments. 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, share certificates,
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.
Each Adviser's fee will be reduced by, or the Adviser will reimburse
the Funds for any amount necessary to prevent such expenses (exclusive of taxes,
interest, brokerage commissions and extraordinary expenses, but inclusive of the
Adviser's fee) from exceeding the most restrictive of the expense limitations
imposed by state securities commissions of the states in which the Funds' shares
are then registered or qualified for sale.
<PAGE>
Reimbursement, when necessary, will be made monthly in the same manner in which
the advisory fee is paid. Currently the most restrictive state expense
limitation is 2.5% of the first $30,000,000 of the Fund's average daily net
assets, 2% of the next $70,000,000 of such assets and 1.5% of such assets in
excess of $100,000,000.
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 will continue in effect until
June 30, 1997, and thereafter from year to year provided that their 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, cast in
person at a meeting duly called for the purpose of voting on such approval or a
majority of the outstanding voting shares of each Fund.
Certain other clients of each Adviser may have investment objectives
and policies similar to those of the Funds. Each Adviser (including the
sub-adviser) may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients simultaneously
with a Fund. If transactions on behalf of more than one client during the same
period increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or quantity. It
is the policy of each Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the Adviser to the
accounts involved, including the Funds. When two or more of the clients of the
Adviser (including one or more of the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such transactions may be
averaged as to price.
Although the investment objectives of the Funds are not the same, and
their investment decisions are made independently of each other, they rely upon
the same resources for investment advice and recommendations. Therefore, on
occasion, when a
<PAGE>
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, the 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 either Evergreen Asset or FUNB acts as
investment adviser or between the Fund and any advisory clients of Evergreen
Asset, FUNB or Lieber & Company. 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.
Evergreen Asset will provide administrative services to each of the
portfolios of Evergreen Investment Trust for a fee based on the average daily
net assets of each fund administered by Evergreen Asset for which Evergreen
Asset or FUNB also 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. Furman Selz Incorporated, the parent of the Distributor, serves as
sub-administrator to the Funds 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: .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 mutual funds administered by Evergreen Asset
for which Evergreen Asset or FUNB served as investment adviser as of December
31, 1995 were approximately $XXXXX billion.
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 the
Adviser, all of whom, in the case of Evergreen Asset, are associated with
Lieber. In general, the same individuals perform the same functions for the
other funds managed by the Adviser. A Fund will not effect any brokerage
transactions with any broker or dealer affiliated directly or indirectly with
the Adviser unless such transactions are fair and reasonable, under the
circumstances, to the Fund's shareholders. Circumstances that may indicate that
such transactions are fair or reasonable include the frequency of such
transactions, the selection process and the commissions payable in connection
with such transactions.
A substantial portion of the transactions in equity securities for each
Fund will occur on domestic stock exchanges. Transactions on stock exchanges
involve the payment of brokerage commissions. In transactions on stock exchanges
in the United States, these commissions are negotiated, whereas on many foreign
stock exchanges these commissions are fixed. In the case of securities traded in
the foreign and domestic over-the-counter markets, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup.
Over-the-counter transactions will generally be placed directly with a principal
market maker, although the Fund may place an over-the-counter order with a
broker-dealer if a better price (including commission) and execution are
available.
It is anticipated that most purchase and sale transactions involving
fixed income securities will be with the issuer or an underwriter or with major
dealers in such securities acting as principals. Such transactions are normally
on a net basis and generally do not involve payment of brokerage commissions.
However, the cost of securities purchased from an underwriter usually includes a
<PAGE>
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. A Fund 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 Fund will also consider the availability of
statistical and investment data and economic facts and opinions helpful to the
Fund. To the extent that receipt of these services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
Under Section 11(a) of the Securities Exchange Act of 1934, as amended,
and the rules adopted thereunder by the Securities and Exchange Commission,
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 the Fund with respect to substantially all securities
transactions effected on the New York and American Stock Exchanges. In such
transactions, a Fund 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.
Any profits from brokerage commissions accruing to Lieber as a result
of portfolio transactions for the Fund will accrue to FUNB and to its ultimate
parent, First Union. The Investment Advisory Agreements does 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.
ADDITIONAL TAX INFORMATION
(See also "Taxes" in the Prospectus)
It is the policy of each Fund of the Trust to meet the requirements
necessary to qualify as a "regulated investment company" under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). By following such
policy, each Fund expects to eliminate or reduce to a nominal amount the federal
income taxes to which it may be subject.
In order to qualify as a regulated investment company, each Fund must,
among other things, (1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, foreign currencies or other income
(including gains from options, futures or forward contracts) derived with
respect to its business of investing in stock, securities or currencies, (2)
derive less than 30% of its gross income from the sale or other disposition of
stock, securities, options, futures, forward contracts, and certain foreign
currencies (or options, futures, or forward contracts on foreign currencies)
held for less than three months, and (3) 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 assets is represented by cash or cash items, U.S. Government
Securities, securities of other regulated investment companies, and other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the value of the Fund's assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its assets
is invested in the securities of any one issuer (other than U.S. Government
Securities or the securities of other regulated investment companies) or of two
or more issuers that the Fund controls and that are engaged in the same,
similar, or related trades or businesses. These requirements may restrict the
degree to which a Fund may engage in short-term trading and limit the range of
the Fund's investments. If a Fund qualifies as a regulated investment company,
it will not be subject to federal income tax on the part of its income
distributed to Shareholders, provided the Fund distributes during its taxable
year at least (a) 90% of its taxable net investment income (generally,
dividends, interest, certain other income, and the excess, if any, of net
short4erm capital gain over net long-term loss), and (b) 90% of the excess of
(i) its tax-exempt interest income less (ii) certain deductions attributable to
that income. Each Fund intends to make sufficient distributions to Shareholders
to meet this requirement. For a discussion of the tax consequences of variable
annuity contracts, refer to the prospectus of the VA or VLI offered by the
Participating Insurance Company. Variable annuity contracts purchased through
insurance company separate accounts provide for the accumulation of all earnings
from interest, dividends, and capital appreciation without current federal
income tax liability for the ownen Depending on the variable annuity contract,
distributions from the contract may be subject to ordinary income tax and, in
addition, on distributions before age 59-1/2, a 10% penalty tax. Only the
portion of a distribution attributable to income on the investment in the
contract is subject to federal income tax. Investors should consult with
competent tax advisers for a more complete discussion of possible tax
consequences in a particular situation.
The Code imposes a non-deductible excise tax on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
"ordinary income" (as defined) for the calendar year plus 98% of their capital
gain net income (as defined) for the 1-year period ending on October31 of such
calendar year. The balance, if any, of such income must be distributed during
the next calendar year. For the foregoing purposes, a Fund is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. If distributions during a calendar year were less
than the required amount, a particular Fund would be subject to a non-deductible
excise tax equal to 4% of the deficiency.
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts held in the Funds. The Code
provides that a variable annuity contract shall not be treated as an annuity
contract for the current or any prior period for which the investments are not,
in accordance with regulations prescribed by the U.S. Treasury Department,
adequately diversified. Disqualification of the variable annuity contract as an
annuity contract would result in immediate imposition of federal income tax on
variable annuity contract owners with respect to earnings allocable to the
contract (including, upon disqualification, accumulated earnings), while the
liability would generally arise prior to the receipt of payments under the
contract. Section 817(h)(2) of the Code is a safe harbor provision which
provides that variable annuity contracts meet the diversification requirements
if, as of the close of each quarter, the underlying assets meet the
diversification sjandards for a regulated investment company and no more than
55% of the total assets consists of cash, cash items, U.S. Government securities
and securities of other regulated investment companies. The U.S. Treasury
Department has issued Regulations (Treas. Reg. 1.817-5), that establish
diversification requirements for the investment portfolios underlying variable
annuity contracts. The Regulations amplify the diversification requirements for
variable annuity contracts set forth in Section 817(h) of the Code and provide
an alternative to the safe harbor provision described above. Under the
Regulations, an investment portfolio will be deemed adequately diversified if:
(1) no more than 55% of the value of the total assets of the portfolio is
represented by any one investment; (2) no more than 70% of such value is
represented by any two investments; (3) no more than 80% of such value is
represented by any three investments; and (4) no more than 90% of such value is
represented by any four investments. For purposes of these Regulations all
securities of the same issuer are treated as a single investment. The
Regulations provide that, in the case of a regulated investment company whose
shares are available to the public only through variable contracts which meet
certain other requirements, the diversification tests are applied by reference
to the underlying assets owned by the regulated investment company rather than
by reference to the shares of the regulated investment company owned under the
annuity contract. Each Fund intends to meet the reguirements for application df
the diversification tests on this look-through basis. The Code provides that for
purposes of determining whether or not the diversification standards imposed on
the underlying assets of variable annuity contracts by Section 817(h) of the
Code have been met, "each United States government agency or instrumentality
shall be treated as a separate issuer.
Each Fund will be managed in such a manner as to comply with the
diversification requirements. It is possible that in order to comply with the
diversification requirements, less desirable investment deci- sions may be made
which would affect the investment pertormance of such Fund.
NET ASSET VALUE
The following information supplements that set forth in each Prospectus
under the the Section entitled "Purchase and Redemption of Shares".
On each Fund business day on which a purchase or redemption order is
received by a Fund and trading in the types of securities in which a Fund
invests might materially affect the value of Fund shares, the per share net
asset value of each such Fund is computed in accordance with the Declaration of
Trust and By-Laws governing each Fund as of the next close of regular trading on
the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern time)
by dividing the value of the Fund's total assets, less its liabilities, by the
total number of its shares then outstanding. A Fund business day is any weekday,
exclusive of national holidays on which the Exchange is closed and Good Friday.
For each Fund, securities for which the primary market is on a domestic or
foreign exchange and over-the-counter securities admitted to trading on the
NASDAQ National List are valued at the last quoted sale or, if no sale, at the
mean of closing bid and asked prices and portfolio bonds are presently valued by
a recognized pricing service when such prices are believed to reflect the fair
value of the security. Over-the-counter securities not included in the NASDAQ
National List for which market quotations are readily available are valued at a
price quoted by one or more brokers. If accurate quotations are not available,
securities will be valued at fair value determined in good faith by the Board of
Trustees.
To the extent that any Fund invests in non-U.S. dollar denominated
securities, the value of all assets and liabilities will be translated into
United States dollars at the mean between the buying and selling rates of the
currency in which such a security is denominated against United States dollars
last quoted by any major bank. If such quotations are not available, the rate of
exchange will be determined in accordance with policies established by the Fund.
The Trustees will monitor, on an ongoing basis, a Fund's method of valuation.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
on each business day in New York. In addition, European or Far Eastern
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in New York and on
which the Fund's net asset value is not calculated. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of the Exchange will not be reflected in a Fund's
calculation of net asset value unless the Trustees deem that the particular
event would materially affect net asset value, in which case an adjustment will
be made. Securities transactions are accounted for on the trade date, the date
the order to buy or sell is executed. Dividend income and other distributions
are recorded on the ex-dividend date, except certain dividends and distributions
from foreign securities which are recorded as soon as the Fund is informed after
the ex-dividend date.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Trust are sold continuously to VA and VLI accounts of
Participating Insurance Companies (See "Shareholders: below). The Trust may
suspend the right of redemption or postpone the date of payment for Shares
during any period when (1) trading on the New York Stock Exchange (the "NYSE")
is restricted by applicable rules and regulations of the SEC, (2) the NYSE is
closed for other than customary weekend and holiday closings, (3) the SEC has by
order permitted such suspension, or (4) an emergency exists as determined by the
SEC.
The Trust may redeem Shares involuntarily if redemption appears appropriate
in light of the Trust's responsibilities under the Investment Company Act of
1940.
GLASS STEAGALL ACT
The Glass-Steagall Act and other banking laws and regulations presently
prohibit banks or non-bank affiliates of member banks of the Federal Reserve
System from sponsoring, organizing or controlling or acting as the principal
underwriter of the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares. Further, they prohibit banks
from issuing, underwriting, or distributing securities in general. Such laws and
regulations do not prohibit such a holding company or affiliate from acting as
investment adviser, administrator, transfer agent or custodian to such an
investment company or from purchasing shares of such a company as agent for and
upon the order of their customer. The Adviser is subject to and in compliance
with such banking laws and regulations. Changes in federal statutes and
regulations relating to the permissible activities of banks, as well as further
judicial or administrative decisions or interpretations of such statutes and
regulations, could prevent the Advisers from continuing to perform such services
for the Trust. If the Adviser was prohibited from acting as investment advisers
to the Funds, it is expected that the Trustees would recommend to the
Shareholders that they approve a new investment adviser selected by the
Trustees. It is not expected that the Shareholders would suffer any adverse
financial consequences (if another adviser with equivalent abilities to the
Adviser is found) as a result of any of these occurrences.
GENERAL INFORMATION ABOUT THE FUNDS
(See also "Other Information - General Information"
in each Fund's Prospectus)
Custodian and Transfer Agent
Cash and securities owned by the Funds of the Trust are held by State
Street Bank and Trust Company ("State Street" or the "Custodian") pursuant to a
Custodian Agreement with the Trust (the "Custodian Agreement"), Under the
Custodian Agreement, State Street (1) maintains a separate account or accounts
in the name of each Fund; (2) makes receipts and disbursements of money on
behalf of each Fund; (3) collects and receives all income and other payments and
distributions on account of the Funds' portfolio securities; (4) responds to
correspondence from security brokers and others relating to its duties; and (5)
makes periodic reports to the Trustees concerning the Trust's operations, may,
at its own expense, open and maintain a sub-custody account or accounts on
behalf of the Trust, provided that State Street shall remain liable for the
performance of all of its duties under the Custodian Agreement, Rules adopted
under the Investment Company Act of 1940 permit the Trust to maintain its
securities and cash in the custody of certain eligible banks and securities
depositories. Boston Financial Data Services, Inc. ("BFDS"), One Heritage Drive,
North Quincy, Massachusetts, a subsidiary of State Street, serves as transfer
agent and dividend disbursing agent for each Fund pursuant to a transfer agency
agreement with the Trust (the "Transfer Agency Agreement. Under the Transfer
Agency Agreement, BFDS has agreed (1) to issue and redeem Shares of the Trust;
(2) to address and mail all communications by the Trust to its Shareholders,
including reports to Shareholders, dividend and distribution notices, and
proxy material for its meetings of Shareholders; (3) to respond to
correspondence or inquiries by Shareholders and others relating to its duties;
(4) to maintain Shareholder accounts and certain sub-accounts; and (5) to make
periodic reports to the Trustees concerning the Trust's operations.
Capitalization and Organization
The Trust is a Massachusetts business trust organized in 1994. The 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. Each Fund may issue an unlimited number
of shares of beneficial interest with a $0.001 par value. 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 the Trust's Declaration of Trust, each Trustee will continue in
office until the termination of the Fund 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
are authorized to reclassify and issue any unissued shares to any number of
additional series without shareholder approval. Accordingly, in the
<PAGE>
future, for reasons such as the desire to establish one or more additional
portfolios of the Trust with different investment objectives, policies or
restrictions, additional series of shares may be created by one or more Funds.
Any issuance of shares of another series or class would be governed by the 1940
Act and the law of the State of Massachusetts. If shares of another series of
the 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 an other specific costs borne by such
additional classes, they will have the same voting and other rights described
for the existing classes of each Fund.
Procedures for calling a shareholders' meeting for the removal of the
Trustees of each Trust, similar to those set forth in Section 16(c) of the 1940
Act will be available to shareholders of each Fund. The rights of the holders of
shares of a series of a Fund may not be modified except by the vote of a
majority of the outstanding shares of such series.
An order has been received from the Securities and Exchange Commission
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 Securities
and Exchange Commission would be required.
PERFORMANCE INFORMATION
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 Securities
and Exchange Commission, the average annual compounded rate of return over the
period that would equate an assumed initial amount invested to the value of such
investment at the end of the period. For purposes of computing total return,
income dividends and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid and the maximum sales charge
applicable to purchases of Fund shares is assumed to have been paid. The Fund
will include performance data for Class A, Class B, Class C and Class Y shares
in any advertisement or information including performance data of the Fund.
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+1)6-1]
cd
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.
<PAGE>
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.
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.
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
<PAGE>
to those of other mutual funds having similar objectives. This comparative
performance would be expressed as a ranking prepared by Lipper Analytical
Services, Inc. or similar independent services monitoring mutual fund
performance. A Fund's performance will be calculated by assuming, to the extent
applicable, reinvestment of all capital gains distributions and income dividends
paid. Any such comparisons may be useful to investors who wish to compare a
Fund's past performance with that of its competitors. Of course, past
performance cannot be a guarantee of future results.
Additional Information
Any shareholder inquiries may be directed to the shareholder's broker
or to each Adviser at the address or telephone number shown on the front cover
of this Statement of Additional Information. This Statement of Additional
Information does not contain all the information set forth in the Registration
Statement filed by the Trusts with the Securities and Exchange Commission under
the Securities Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the Securities and Exchange Commission or may be
examined, without charge, at the offices of the Securities and Exchange
Commission in Washington, D.C.
Independent Accountants
KPMG Peat Marwick, Two Nationwide Plaza, Columbus, Ohio 43215, serves
as the independent public accountants ot the Trust.
Legal Counsel
The law firm of Sullivan & Worcester, 1025 Connecticut Avenue, N.W.,
Washington, D.C. 20036 are counsel to the Trust.
FINANCIAL STATEMENTS
The initial audited balance sheet of the Trust is set forth below.
[TO BE ADDED BY AMENDMENT]
46
<PAGE>
APPENDIX A - NOTE, BOND AND COMMERCIAL PAPER RATINGS
NOTE RATINGS
Moody's Investors Service, Inc.: MIG-1 -- the best quality. MIG-2 --
high quality, with margins of protection ample though not so large as in the
preceding group. MIG-3 -- favorable quality, with all security elements
accounted for, but lacking the undeniable strength of the preceding grades.
Market access for refinancing, in particular, is likely to be less well
established.
Standard & Poor's Ratings Group, Inc.: SP-1 -- Very strong or strong
capacity to pay principal and interest. SP-2 -- Satisfactory capacity to pay
principal and interest.
BOND RATINGS
Moody's Investors Service: Aaa -- judged to be the best quality, carry
the smallest degree of investment risk; Aa -- judged to be of high quality by
all standards; A -- possess many favorable investment attributes and are to be
considered as higher medium grade obligations; Baa -- considered as medium grade
obligations which are neither highly protected nor poorly secured. Moody's
Investors Service also applies numerical indicators, 1, 2 and 3, to rating
categories Aa through Baa. The modifier 1 indicates that the security is in the
higher end of its rating category; the modifier 2 indicates a mid-range ranking;
and 3 indicates a ranking toward the lower end of the category.
Standard & Poor's Ratings Group: AAA -- highest grade obligations,
possesses the ultimate degree of protection as to principal and interest; AA --
also qualify as high grade obligations, and in the majority of instances differ
from AAA issues only in small degree; A -- regarded as upper medium grade, have
considerable investment strength but
<PAGE>
are not entirely free from adverse effects of changes in economic and trade
conditions, interest and principal are regarded as safe; BBB -- regarded as
having adequate capacity to pay interest and repay principal but are more
susceptible than higher rated obligations to the adverse effects of changes in
economic and trade conditions. Standard & Poor's Ratings Group applies
indicators "+", no character, and "-" to the above rating categories AA through
BBB. The indicators show relative standing within the major rating categories.
Duff & Phelps: 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 Investor Service: AAA -- highest credit quality, with an
exceptionally strong ability to pay interest and repay principal; AA -- very
high credit quality, with a 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 BBB -- satisfactory credit quality with adequate ability with
regard to interest and principal, and likely to be affected by adverse changes
in economic conditions and circumstances. The indicators "+" and "-" to the AA,
A and BBB categories indicate the relative position of a credit within those
rating categories.
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 Group: "A" is the highest commercial paper
rating category utilized by Standard & Poor's Ratings Group which uses the
numbers 1+, 1, 2 and 3 to denote relative strength within its "A"
classification.
Duff & Phelps: 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 Investor Service: F-1+ -- denotes exceptionally strong credit
quality given to issues regarded as having strongest degree of assurance for
timely payment; F-1 -- very strong credit quality, 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>
*******************************************************************************
PART C
OTHER INFORMATION
item 24. Financial Statement and Exhibits
(a)Financial Statements
(To be filed by pre-effective amendment.)
(b)Exhibits
(To be filed by subsequent pre-eftective amendment except where
indicated otherwise below)
(1) Registrant's Declaration of Trust Dated June 28, 1994*
(1.1)
(2) Registrant's Bylaws Dated June 28,1994*
(3) None
(4) None
(5.1) Form of Investment Advisory Agreement to be between
each series of Registrant and Evergreen Asset
Management Corp.
(5.2) Sub-Investment Advisory Agreement between Evergreen Asset
Management Corp. and Lieber & Company.
(5) None
(7) None
(8) Custodian Agreement**
(9.1) Transfer and Dividend Disbursing Agent Agreement to be
between Registrant and Boston Financial Data Services,
Inc.**
(9.2) Fund Participation Agreement among Registrant,
Nationwide Life Insurance Company, the Capital
Management Group of First Union National Bank of North
Carolina, Evergreen Asset Management Corp. and
Nationwide Financial Services, Inc.**
(9.3) Form of Administrative Services Agreement between
Registrant and Evergreen Asset Management Corp.
(10) Opinion of Sullivan & Worcester, counsel for Registrant**
(11) Consent of KPMG Peat Marwick, Independent Accountants**
(12) None
(13) None
(14) None
(15) None
(16) None
(17) None
- ---------------
* Previously filed as an Exhibit to Registrant's Registraion Statement on Form
N-1A.
** To be filed by amendment.
Item 25. Persons Controlled by or under Common Control with Registrant
After commencement of the public offering of the Registrant's shares, the
Registrant expects that no person will be directly or indirectly controlled by
or under common control with the Registrant. On the effective date hereof, it is
expected that Nationwide Life Insurance Company will hold all the outstanding
shares of the Registrant.
<PAGE>
Item 26. Number of Holders of Securities
To be provided by subsequent pre-effective amendment.
Item 27. Indemnification
Limitation of Liability and Indemnification provisions for Trustees,
Shareholders, officers, employees and agents of Registrant are set forth in
Article V, Sections 5.1 through 5.3 of the Declaration of Trust. No Trustee,
officer, employee or agent of the Trust shall be subject to any personal
liability whatsoever to any Person other than the Trust or its Shareholders, in
connection with Trust Property or the affairs of the Trust, save only that
arising from bad faith, willful misfeasance, gross negligence or reckless
disregard for his duty to such Person; and all such Persons shall look solely to
the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder. Trustee. officer,
employee or agent, as such, of the Trust is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnity and hold each
Shareholder harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under Section 5.1 of the
Declaration of Trust shall not exclude any other right to which such Shareholder
may be lawfully entitled, nor shall anything herein contained restrict the right
of the Trust to indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.
No Trustee, officer, employee or agent cf the Trust shall be liable to
the Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee
or agent thereof for any action or failure to act (including without limitation
the failure to compel in any way any former or acting Trustee to redress any
breach of trust) except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties.
(a) Subject to the exceptions and limitations contained in paragraph (b) below:
(i) every person who is or has been a Trustee or officer of the Trust
shall be indemnified by the Trust against all liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof:
(ii) the words "claim," "suit" or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' tees, costs, judgments, amounts paid in
settlement, tines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust or the Shareholders by reason of
a final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust:
(iii) in the event of a settlement or other disposition not involving a
final adjudication as provided in paragraphs (b) (i) or (b) (ii) resulting in a
payment by
<PAGE>
a Trustee or officer, unless there has been either a determination that such
Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition
or a reasonable determination. based upon a review of readily available facts
(as opposed to a full trial-type inquiry) that he did not engage in such
conduct:
(A) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(B) by written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Trustee or officer may now or hereafter be entitled, shall
continue as to a Person who has ceased to be such Trustee or officer and shall
inure to the benefit of the heirs, executors and administrators of such Person.
Nothing contained herein shall affect any rights to indemnification to which
personnel other than Trustees and officers may be entitled by contract or
otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding of the character described in paragraph (a) of Section 5.3 of
the Declaration of Trust shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behaif of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under Section 5.3 of the Declaration of Trust,
provided that either:
(i) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the matter)
or an independent legal counsel in a written opinion, shall determine. based
upon a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient ultimately will be
found entitled to indemnification.
As used in Section 5.3 of the Declaration of Trust, a "Disinterested
Trustee" is one (i) who is not an "interested Person" by any rule, regulation or
order of the Commission, and (ii) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or had been pending. See Item 24(b)(1) (Exhibit 1)
above. whose terms and conditions as summarized herein are hereby incorporated
by reference.
Limitation of liability provisions for the Investment Adviser are set
forth in the Investment Advisory Agreement. The Investment Adviser shall not be
liable for any instructions, action or failure to act, or for any loss sustained
by reason of the adoption of any investment policy or the purchase. sale or
retention of any security on the recommendation of the Investment Adviser,
whether or not such recommendation shall have been based upon its own
investigation and research made by any other individual, firm or corporation. If
such recommendation shall have been made and such other individual, firm or
corporation shall have been selected with due care and in good faith; but
nothing herein contained shall be construed to protect the Manager against any
liability to the Trust or its security holders by reason of willful misfeasance.
bad faith or gross negligence in the penformance of its duties or by reason of
its reckless disregard of its obligations and duties under this agreement.
Registrant undertakes that it will comply with the indemnification
provisions of its Declaration of Trust, Investment Advisory Agreement, and any
other agreement to which the Registrant is a party containing indemnification
provisions in accordance with the provisions of Investment Company Act of 1940
Release No.11330, as modified from time to time.
<PAGE>
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the Registrant's Bylaws. 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 the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered. the Reg- istrant 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, 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 Real Estate Equity Trust and Evergreen Fixed-Income Trust, all
registered investment companies. Stephen A. Lieber, Theodore J. Israel, Jr.,
Nola Maddox Falcone, George R. Gaspari and Joseph J. McBrien, 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
Ben Mayo Boddie Raymond A. Bryan, Jr.
Chairman & CEO Chairman & CEO
Boddie-Noell Enterprises, Inc. T.A. Loving Company
P.O. Box 1908 P.O. Drawer 919
Rocky Mount, NC 27802 Goldsboro, NC 27530
John F.A.V. Cecil John W. Copeland
President President
Biltmore Dairy Farms, Inc. Ruddick Corporation
P.O. Box 5355 2000 Two First Union Center
Asheville, NC 28813 Charlotte, NC 28282
John Crosland, Jr. J. William Disher
Chairman of the Board Chairman & President
The Crosland Group, Inc. Lance Incorporated
135 Scaleybark Road P.O. Box 32368
Charlotte, NC 28209 Charlotte, NC 28232
Frank H. Dunn Malcolm E. Everett, III
<PAGE>
Chairman and CEO President
First Union National Bank First Union National Bank
of North Carolina of North Carolina
One First Union Center 310 S. Tryon Street
Charlotte, NC 28288-0006 Charlotte, NC 28288-0156
James F. Goodmon Shelton Gorelick
President & Chief President
Executive Officer SGIC, Inc.
Capitol Broadcasting 741 Kenilworth Ave., Suite 200
Company, Inc. Charlotte, NC 28204
2619 Western Blvd.
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
Daniel W. Mathis Earl N. Phillips, Jr.
Vice Chairman President
First Union National Bank First Factors Corporation
of North Carolina P.O. Box 2730
One First Union Center High Point, NC 27261
Charlotte, NC 28288-0009
J. Gregory Poole, Jr. John P. Rostan, III
Chairman & President Senior Vice President
Gregory Poole Equipment Company Waldensian Bakeries, Inc.
P.O. Box 469 P.O. Box 220
Raleigh, NC 27602 Valdese, NC 28690
Nelson Schwab, III Charles M. Shelton, Sr.
Chairman & CEO Chairman & CEO
Paramount Parks The Shelton Companies, Inc
8720 Red Oak Boulevard, Suite 315 3600 One First Union Center
Charlotte, NC 28217 Charlotte, NC 28202
George Shinn Harley F. Shuford, Jr.
Owner and Chairman President and CEO
Shinn Enterprises, Inc. Shuford Industries
One Hive Drive P.O. Box 608
Charlotte, NC 28217 Hickory, NC 28603
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
EXECUTIVE OFFICERS
James Maynor, President, First Union Mortgage Corporation; Austin
A. Adams, Executive Vice President; Howard L. Arthur, Senior Vice
President; Robert T. Atwood, Executive Vice President and Chief
Financial Officer; Marion A. Cowell, Jr., Executive Vice
President, Secretary and General Counsel; Edward E. Crutchfield,
Jr., Chairman, CEO, First Union Corporation; Frank H. Dunn, Jr.,
Chairman and CEO; Malcolm E. Everett, III, President; John R.
Georgius, President, First Union Corporation; James Hatch, Senior
Vice President and Corporate Controller; Don R. Johnson,
Executive Vice President; Mark Mahoney, Senior Vice President;
Barbara K. Massa, Senior Vice President; Daniel W. Mathis, Vice
Chairman; H. Burt Melton, Executive Vice President; Malcolm T.
Murray, Jr., Executive Vice President; Alvin T. Sale, Executive
Vice President; Louis A. Schmitt, Jr., Executive Vice President;
Ken Stancliff, Senior Vice President and Corporate Treasurer;
Richard K. Wagoner, Executive Vice President and General Fund
<PAGE>
Officers.
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 Underwriter
Not applicable.
Item 30. Location of Accounts and Records
Trust agreements, bylaws and minute books:
Mark B. Koogler
McCutchan, Druen, Rath & Dietrich
One Nationwide Plaza
Columbus, Ohio 43216
Records relating to investment advisory services with respect to the
Limited Market Fund and Total Return Fund:
Evergreen Asset Management Corp.
2500 Westchester Avenue
Purchase, New York 10577
All other Accounts and Records:
James F. Laird
Nationwide Financial Services, Inc.
One Nationwide Plaza
Columbus, OH 43216
Item 31. Management Services
All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to tile a post-effective amendment to this
Registration Statement within four to six months of the effective date of this
Registration Statement which will contain financial statements (which need not
be certified) as of and tor the time period reasonably close or as soon as
practicable to the date of such post-effective amendment.
Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of Registrant's latest annual report to shareholders upon
request and without charge.
Registrant undertakes to call a meeting of Shareholders, at the
request of at least 10% of the Registrant's outstanding shares, forthe purpose
of voting upon the question of removal of a trustee or trustees and to assist in
communications with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 6th day of
December, 1995.
EVERGREEN VARIABLE TRUST (Registrant)
By: /s/ Mark B. Koogler
------------------------------
Mark B. Koogler,
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-Effective Amendment No. 1 to the Registration Statement has been signed
below by the following persons in the capacities and on the dates indicated.
Signatures Title Date
- ----------- ----- ----
/s/Mark B. Koogler
- ------------------------------- President and December 6, 1995
Mark B. Koogler Trustee
/s/James P Laird
- ------------------------------- Vice President and December 6, 1995
James P Laird Treasurer
/s/David E. Simaitis
- ------------------------------- Secretary and December 6, 1995
David E. Simaitis Trustee
/s/ Steven R. Savini
- ------------------------------- Trustee December 6, 1995
Steven R. Savini
by Mark B. Koogler, Attorney in Fact
<PAGE>
