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PROSPECTUS February 20, 1996
EVERGREEN VARIABLE TRUST (Evergreen Tree Logo Appears Here)
EVERGREEN VA FUND
EVERGREEN VA GROWTH AND INCOME FUND
EVERGREEN VA FOUNDATION FUND
The Evergreen Variable 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 10577.
A "Statement of Additional Information" for the Trust dated February
20, 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 (800) 321-9332. 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 U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THESE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
KEEP THIS PROSPECTUS FOR FUTURE REFERENCE
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TABLE OF CONTENTS
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OVERVIEW OF THE FUNDS 2
FINANCIAL HIGHLIGHTS 2
DESCRIPTION OF THE FUNDS 3
Investment Objectives And Policies 3
Investment Practices and Restrictions 5
MANAGEMENT OF THE FUNDS 7
Investment Adviser 7
Sub-Adviser 8
SALE AND REDEMPTION OF SHARES 9
Participating Insurance Companies 9
Purchases 9
Redemptions 9
Dividends 9
Tax Status 10
Effect of Banking Laws 10
GENERAL INFORMATION 10
Custodian, and Transfer and Dividend Paying
Agent 10
Expenses of the Trust 11
Shareholder Rights 11
Description of Shares 11
Performance 11
General 13
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OVERVIEW OF THE FUNDS
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus. See "Description of the
Funds" and "Management of the Funds".
The Investment Adviser to the EVERGREEN VA FUND, EVERGREEN VA FOUNDATION
FUND and 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, the
sixth largest bank holding company 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.
FINANCIAL HIGHLIGHTS
The Evergreen Variable Investment Trust will commence operations on March
1, 1996 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
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's investment objective is fundamental and cannot be changed
without shareholder approval. In addition to the investment policies detailed
below, each Fund may employ certain additional investment strategies which are
discussed in "Investment Practices and Restrictions". There can be no assurance
that the Fund's investment objective will be achieved.
EVERGREEN VA 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
"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.
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 income component of return will be a more significant factor in
their selection. However, the Fund will
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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
Restrictions" 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. Securities not
traded on a national securities exchange are generally traded on a "net" basis
with dealers acting as principals for their own accounts without stated
commissions, although the price of the securities usually includes profits to
the dealers. While the Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available. Also the market for such securities may not be as liquid
as those traded on a national securities exchange.
While income will be a factor in the selection of equity securities, the
Adviser 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.
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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, 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. It is anticipated that
the annual portfolio turnover rate for EVERGREEN VA FUND and EVERGREEN VA GROWTH
& INCOME FUND may exceed 100%. 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.
Illiquid 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
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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 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
vehicles. 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
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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. 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.
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 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. Investment in
Foreign Securities. The Funds may invest in foreign securities. Investments in
foreign securities require consideration of certain factors not normally
associated with investments in securities of U.S. issuers. For example, a change
in the value of any foreign currency relative to the U.S. dollar will result in
a corresponding change in the U.S. dollar value of securities denominated in
that currency. Accordingly, a change in the value of any foreign currency
relative to the U.S. dollar will result in a corresponding change in the U.S.
dollar value of the assets of the Fund denominated or traded in that currency.
If the value of a particular foreign currency falls relative to the U.S. dollar,
the U.S. dollar value of the assets of a Fund denominated in such currency will
also fall. The performance of a Fund will be measured in U.S.
dollars.
Securities markets of foreign countries generally are not subject to the
same degree of regulation as the U.S. markets and may be more volatile and less
liquid. Lack of liquidity may affect a Fund's ability to purchase or sell large
blocks of securities and thus obtain the best price. The lack of uniform
accounting standards and practices among countries impairs the validity of
direct comparisons of valuation measures (such as price/earnings ratios) for
securities in different countries.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
The management of each Fund is supervised by the Trustees of Evergreen
Variable Trust. 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 succeeded on June 30, 1994 to
the advisory business of a corporation with the same name, but under different
ownership, which was organized in 1971. Evergreen Asset, with its predecessors,
has served as investment adviser to the Evergreen mutual funds since 1971.
Evergreen Asset is a wholly-owned subsidiary of First Union National Bank of
North Carolina ("FUNB"). The address of Evergreen Asset is 2500 Westchester
Avenue, Purchase, New York 10577. FUNB is a subsidiary of First Union
Corporation ("First Union"), the sixth largest bank holding company in the
United States. Stephen A. Lieber and Nola Maddox Falcone serve as the chief
investment officers of Evergreen Asset and, along with Theodore J. Israel, Jr.,
were the owners of Evergreen Asset's predecessor and the former general partners
of Lieber & Company, which, as described below, provides certain subadvisory
services to Evergreen Asset in connection with its duties as investment adviser
to the Funds.
First Union is headquartered in Charlotte, North Carolina, and had $94.6
billion in consolidated assets as of December 31, 1995. First Union and its
subsidiaries provide a broad range of financial services to individuals
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and businesses throughout the United 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 all the series of
Evergreen Investment Trust (formerly known as First Union Funds) and certain of
the other Evergreen mutual funds. First Union Brokerage Services, Inc., a
wholly-owned subsidiary of FUNB, is a registered broker-dealer that is
principally engaged in providing retail brokerage services consistent with its
federal banking authorizations. First Union Capital Markets Corp., a
wholly-owned subsidiary of First Union, is a registered broker-dealer
principally engaged in providing, consistent with its federal banking
authorizations, private placement, securities dealing, and underwriting
services.
Evergreen Asset manages each Fund's investments, provides various
administrative services, and supervises each Fund's daily business affairs,
subject to the authority of the Trustees. Evergreen Asset, as investment adviser
to EVERGREEN VA FUND and EVERGREEN VA GROWTH AND INCOME FUND, is entitled to
receive from such Funds an annual fee equal to .95 of 1% of average daily net
assets thereof. 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. These fees are
higher than the rates paid by most other investment companies.
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 LLC, an affiliate of Evergreen Funds Distributor, Inc.,
distributor for the Evergreen group of mutual funds, 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 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 $10.4 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 and its predecessor
since 1969. Mr. Lieber has served as the portfolio manager of Evergreen
Foundation Fund since its inception in January, 1990 and as the portfolio
manager of Evergreen Fund since its inception in 1970. The portfolio manager for
EVERGREEN VA GROWTH AND INCOME FUND is Edmund H. Nicklin, Jr. C.F.A. Mr. Nicklin
has been associated with Evergreen Asset as the manager of Evergreen Growth and
Income Fund since the Fund's inception in October, 1986.
SUB-ADVISER
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 provide that Lieber & Company's research
department and staff will furnish Evergreen Asset with information, investment
recommendations, advice and assistance, and will be generally available for
consultation on 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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<PAGE>
SALE AND REDEMPTION OF SHARES
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 due to the difference of tax treatment and other considerations.
Nevertheless, the Trustees will establish procedures for the purpose of
identifying any irreconcilable material 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 and to qualified pension and retirement
plans. All investments in the Trust are credited to the shareholder's account in
the form of full or fractional 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 or in pension and retirement plan documents. How the Funds
Value Their Shares. The net asset value of shares of a Fund is calculated by
dividing the value of the amount of the Fund's net assets by the number of
outstanding shares. 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 accounts of Participating Insurance Companies redeems shares
to make benefit or surrender payments under the terms of the VA or VLI contract
and qualified pension and retirement plans may redeem shares pursuant to the
provisions of the plan documents. 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
or it's agent. The net asset value per share of each Fund is determined once
daily, as of 4:00 p.m. on each business day the 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 securities 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 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
Commission has by order permitted a suspension of redemption for the protection
of shareholders. DIVIDENDS Dividends. All dividends payable by a Fund are
distributed at least annually to the separate accounts of Participating
Insurance Companies and will be automatically reinvested in additional shares of
such Fund. Dividends and other distributions made by the Funds to such separate
account are taxable, if at all, to the Participating Insurance Companies; they
are not currently taxable to the VA or VLI owners.
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<PAGE>
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 its 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 contract 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.
GENERAL INFORMATION
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.
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<PAGE>
EXPENSES OF THE TRUST
Each Fund bears all expenses of its operations other than those incurred
by Evergreen Asset under its respective Advisory Agreement and Administration
Agreement with the Trust. In particular, the Funds pay investment advisory fees,
administrative fees, custodian fees and expenses, legal, accounting and auditing
fees, 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.
SHAREHOLDER RIGHTS
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 approval by
holders of a majority of the outstanding voting securities, as that term is
defined in the 1940 Act, 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 address 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
11
<PAGE>
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 distributions 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 considering "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 Fund, Evergreen Foundation Fund and Evergreen 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.
AVERAGE ANNUAL TOTAL 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.
<TABLE>
<CAPTION>
1 Year 5 Years 10 Years
Ended Ended Ended
Evergreen Fund 9/30/95 9/30/95 9/30/95
<S> <C> <C> <C>
Class Y 26.79% 18.71% 12.75%
<CAPTION>
1 Year 5 Years 10/15/86
Ended Ended (inception)
Evergreen Growth and Income Fund 12/31/95 12/31/95 to 12/31/95
<S> <C> <C> <C>
Class Y 32.94% 17.25% 13.37%
<CAPTION>
1 Year 5 Years From 1/2/90
Ended Ended (inception)
Evergreen Foundation Fund 12/31/95 12/31/95 to 12/31/95 (1)
<S> <C> <C> <C>
Class Y 29.69% 19.41% 17.17%
</TABLE>
(1) Reflects waiver of advisory fees and reimbursement of other expenses.
Without such waivers and reimbursements, the average annual total return
during this period would have been lower.
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.
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<PAGE>
GENERAL
Independent Accountants. KPMG Peat Marwick LLP, One Mellon Bank Center,
Pittsburgh, Pennsylvania 15219, serves as the independent public accountants of
the Trust. Counsel. Sullivan & Worcester LLP, 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 Declaration 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 Securities and Exchange Commission ("SEC") under the
Securities Act of 1933. Copies of the Registration Statements may be obtained at
a reasonable charge from the SEC or may be examined, without charge, at the
offices of the SEC in Washington, D.C.
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INVESTMENT ADVISER
Evergreen Asset Management Corp., 2500 Westchester Avenue, Purchase, New York
10577
CUSTODIAN & TRANSFER AGENT
State Street Bank and Trust Company, Box 9021, Boston, Massachusetts
02205-9827
LEGAL COUNSEL
Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W., Washington, D.C.
20036 INDEPENDENT AUDITORS KPMG Peat Marwick LLP, One Mellon Bank Center,
Pittsburgh, Pennsylvania 15219 FHL-0534 537769 (2/96)
